Under Review/Working Papers (selected)
Minority Entrepreneurship and Opportunities within Established Firms
R&R at Organization Science
(with Tiantian Yang)
Extending research on racial inequality from wage employment to entrepreneurship, this study documents how persistent barriers to minority founders lead to their adaptive behaviors and enhanced aspirations in pursuing startup opportunities. In particular, we argue that discrimination against black founders and the resulted lower chances of success in founding a new business will raise the relative appeal of alternative opportunities for blacks, compelling them to pursue entrepreneurial routes that increase their access to resources and minimize discrimination. Analyzing a longitudinal dataset that tracks a representative sample of American entrepreneurs for six years, we found supportive evidence that Blacks, relative to Whites, are more likely to seek startup opportunities within their employer organization than founding a new business on their own. Blacks’ tendency to favor internal routes is more amplified in states with stronger discrimination or fewer entrepreneurial opportunities. Probing into the mechanisms, we found that blacks pursuing internal route of entrepreneurship have higher growth aspirations and make more attempts at seeking resources, suggesting that these disadvantaged individuals perceive internal startup opportunities as more resource abundant and more financially promising. Together these results provide novel evidence on the supply-side mechanisms that affect racial minorities’ pursuit of entrepreneurship, bringing to light a new set of phenomena for investigation by race and entrepreneurship scholars.
Discrimination and Entrepreneurship
with Giovanni Valentini and Raffaele Conti (authors listed alphabetically)
This study revisits the well-established claim that institutions sanctioning discrimination spur entrepreneurial entry. We propose that the effect of such institutions on entrepreneurship depends crucially on whether discrimination originates on the demand or the supply side of the entrepreneurial process. The benefits of antidiscrimination institutions in the context of entry are usually based on the study of demand-side discrimination, or bias that arises when prospective entrepreneurs face discrimination by key resource providers for a new venture (i.e., investors, banks, prospective employers). We hypothesize the opposite effect on the supply side, or when prospective entrepreneurs face discrimination in paid employment. Using evidence from the enactment of LGBT employment antidiscrimination laws, we show that laws to reduce employer discrimination deter entry into entrepreneurship because they increase the appeal of paid employment relative to entrepreneurship. Despite the reduction in the rates of entrepreneurship, however, new ventures’ growth orientation increases because antidiscrimination institutions motivate the pursuit of higher-potential opportunities.
Wage Inequality and Entrepreneurship: The Role of Incumbent Firms
with Francesco Castellaneta and Raffaele Conti (authors listed alphabetically)
Using an exogenous variation in threat of startup entry, we develop and test a theory of wage inequality in regions with lower barriers to entry and therefore higher levels of entrepreneurship. Researchers have argued that startup entry increases inequality of pay in a labor market because new ventures lead to higher pay dispersion between and within startup firms. We propose an alternative explanation for the relationship between startup entry and wage inequality: increases in pay dispersion within incumbent firms. Wage inequality increases following startup entry because incumbents respond to threats imposed by startups in the local market by reallocating rents among their own workers. We exploit a natural experiment provided by an entry deregulation reform in Portugal, and its effect on wage inequality in those municipalities where it was enacted. Using a difference-in-differences methodology we find that, following the entry deregulation reform, wage inequality significantly increased. We further show that startups’ entry leads incumbents to reallocate rents from bottom-level workers to top-level workers. This Matthew effect, whereby “rich get richer” and “poor get poorer,” contributes to higher variance in pay within a labor market. Finally, our findings indicate that earnings within incumbents account for a larger share of the increase in income inequality than do earnings within startups.
Career Antecedents of Female Entrepreneurship
with Tiantian Yang and Lucia Naldi
The need to resolve work-family conflict has long been considered a central motive for women’s pursuit of atypical careers, such as entrepreneurship. Combining insights from the motherhood penalty literature and career mobility research, we uncover a new mechanism driving female entrepreneurship: diminishing advancement options due to motherhood discrimination. Based on our theory, we predict that women will disproportionately launch a new business in effort to further their advancement, when work conditions diminish their further career progression. By contrast, we expect women will disproportionately sort into self-employment in efforts to reconcile work-life conflict, when work conditions increase job strain. We test our arguments using matched employer-employee data from Sweden (1990-2016) and the Swedish Work Environment Survey. We find that motherhood has a positive effect on women’s likelihood of founding a new organization, and that such tendency is more pronounced when women are employed in occupations with a greater motherhood earnings penalty. We further show that motherhood earnings penalty amplifies the effect of motherhood on founding a new organization, but not on self-employment. By contrast, greater work-family conflict intensifies the relationship between motherhood and self-employment, but not business founding. Overall, this study sheds light on the different antecedents of female entrepreneurship and contributes to the understanding of when women pursue irregular and atypical careers, such as entrepreneurship.
After the End: Entrepreneurship as a Step on a Career Path
with Mathew Bidwell and Ethan Mollick
(draft available upon request)
Entrepreneurship scholars have commonly focused on antecedents of entrepreneurial entry while paying much less attention to the consequences of entrepreneurial experience. We examine the returns to entrepreneurship, by assessing the earnings ex-founders receive when they re-enter paid employment. Building on the mobility perspective to entrepreneurship, we conceptualize moves from entrepreneurship back to paid employment as career shifts. Casting re-entry into paid employment as a career move, we propose that – like other career moves – entrepreneurship will yield higher returns when experience and skills gained during entrepreneurial spell are closely matched with employer demands. Using the survey-based, career-history data collected on a large sample of alumni of a North American University, we find support for our claims among ex-entrepreneurs who re-enter paid employment. First, we demonstrate that, upon returning to paid employment, ex-founders are more likely than other movers to switch to positions that match entrepreneurial experience: they switch to (a) jobs with more generalist skills; (b) positions of higher-ranked and greater responsibility; and (c) smaller-size employers. Moreover, we find that these career switches are associated with higher payoffs for ex-founders in paid employment. Finally, consistent with skill acquisition, our study offers some evidence that the benefits of finding a match in paid employment are higher for ex-founders whose ventures were successful and reduced for ex-founders whose ventures failed. Our study thus contributes to the entrepreneurship and career studies by developing and evaluating a matching theory of payoffs to entrepreneurship.
When does Entrepreneurship Increase Community Integration?
with Vera Rocha
Previous research has focused on the antecedents of entrepreneurship within communities, but little is known about the consequences of entrepreneurship for the community. Focusing on crime incidence as a key dimension of community disintegration, we propose that regional boosts of entrepreneurial activity benefit communities. Using employer-employee matched data from Portugal between 2002 and 2010 and an exogenous increase in entrepreneurship following a deregulation reform, we find that promoting entrepreneurship reduces crime incidence within the focal communities. We further find that higher participation in the labor market and access to better working conditions within established firms is the key mechanism responsible for this effect. This result is further amplified in communities with higher unemployment rates and greater income inequality, confirming our prediction that entrepreneurship serves as a vehicle to improve the standing of disadvantaged groups.
The Advantages of Complete Performance Feedback: Evidence from Private Equity Backed Buyouts
with F. Castellaneta, Gottschlag, O., and Wright, M.
The Extra-Organizational Determinants of Innovation: Sunshine and Inventors' Performance
(with Chen, Y., Hsu, P-H., Podolski, E., Veeraraghavan, M.)
We propose that extra-organizational factors such as exposure to sunshine are an important driver of innovators’ performance. Prior research highlights the critical role non-pecuniary factors play in influencing inventors’ productivity, yet most of these studies focus on organizational and job attributes and the resulting job satisfaction. We argue, by contrast, that, by triggering positive affective states, sunshine exposure enhances creativity, leading to greater quantity and quality of innovative output. We test our hypotheses using information on every patent granted by the U.S. Patent and Trademark Office from 1976 to 2010, together with information on the sunshine exposure for each inventor. We find evidence suggesting that relative sunshine exposure results in more patents and patents of higher quality. Our results further suggest that greater sunshine exposure leads to patents that are more original, and that build on non-local knowledge and newly-developed technologies. Alternative explanations related to geographical heterogeneity, managerial decisions, migration, and time allocation are not supported. Improved creativity and initiative at work are identified as the mechanisms through extra-organization factors (i.e., sunshine) that stimulate inventor performance. We present novel evidence on the non-pecuniary determinants of inventor productivity and the real effects of positive affect on economies.
Female Entrepreneurship and Alternative Career Routes Inside an Organization