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In this note a short introduction to the project "Employment
Effects of Entrepreneurs" is presented. First, we describe the
purpose of the project; second, we present the background; third,
we briefly describe the three papers that constitute the output of
the project, and fourth, we discuss two important qualifications
for the understanding of the contributions and results established
in the project.
What are the characteristics of jobs in entrepreneurial firms as
compared to jobs in incumbent firms? Even though this question has
been addressed by many researchers before us, we provide new
evidence to the field since we measure the entrepreneur as the
organic new firm. In the literature, the majority of studies have
focused on entrepreneurs as measured by small or new firms. By
organic new firms, we mean new firms that are not the result of
restructurings or organizing existing or additional activities in a
formally new firm. Moreover, we distinguish entrepreneurial firms
by different types and distinguish between growing and declining
industry-region clusters. Our results differ from the findings in
the existing literature. Specifically, we find that compared to
incumbents, entrepreneurial firms have higher total factor
productivity, are more skill intensive, and pay higher wages. The
differences are more pronounced in growing clusters. Moreover, the
results show important differences between different types of
entrepreneurial firms. Specifically, spin-offs are found to enjoy
the largest productivity advantage. The wage and skill premiums at
the firm level disappear at the job level, as larger incumbents are
both more skill intensive and pay higher wages than smaller
incumbents.
We study whether entrepreneurial spinoffs are important drivers of
industry dynamics. More precisely, we investigate whether the
quality of jobs in spinoff entrepreneurs are higher than for other
entrepreneurs. We distinguish spinoff firms by different types and
distinguish between growing and declining industry-region clusters.
We find that spinoffs on average have higher wages, are more skill
intensive, have higher sales per worker and are more productive
than non-spinoff entrepreneurial firms. The differences are more
pronounced in growing clusters. The results even hold when we
control for worker heterogeneity and industry and region clusters
characteristics. An important feature of the analysis is that we
measure the entrepreneur as the organic new firm. By organic new
firm, we mean new firms that are not the result of restructurings
or organising existing or additional activities in a formally new
firm.
We extend earlier analyses of the job creation of start-ups vs.
established firms by taking into consideration the educational
content of the jobs created and destroyed. We define
education-specific measures of job creation and job destruction at
the firm level, and we use these to construct a measure of "surplus
job creation" defined as jobs created on top of any simultaneous
destruction of similar jobs in incumbent firms in the same region
and industry. Using Danish employer-employee data from 2002-7,
which identify the start-ups and which cover almost the entire
private sector, these measures allow us to provide a more nuanced
assessment of the role of entrepreneurial firms in the job-creation
process than previous studies. Our findings show that while
start-ups are responsible for the entire overall net job creation,
incumbents account for more than a third of net job creation within
high-skilled jobs. Moreover, start-ups "only" create around half of
the surplus jobs, and even less of the high-skilled surplus jobs.
Finally, our approach allows us to characterize and identify
differences across industries, educational groups and regions.
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