Entrepreneurship: Origins and returns

We examine the origins and outcome of entrepreneurship on the basis of exceptionally comprehensive Norwegian matched worker–firm–owner data. In contrast to most existing studies, our notion of entrepreneurship not only comprises self-employment, but also employment in partly self-owned limited liability companies. Based on this extended entrepreneurship concept, we find that entrepreneurship tends to be profitable. It also raises income variability, but the most successful quartile gains much more than the least successful quartile loses. Key determinants of the decision to become an entrepreneur are occupational qualifications, family resources, gender, and work environments. Individual unemployment encourages, while aggregate unemployment discourages, entrepreneurship.

Research Highlights
► Entrepreneurship pays.
► Entrepreneurship raises income variability.
► Entrepreneurs in limited liability companies are more successful than self-employed.
► Individual unemployment encourages entrepreneurship.
► Aggregate unemployment discourages entrepreneurship.