Working Paper Series
Hierarchies and Entrepreneurship
(), Thomas Åstebro and Peter Thompson
Abstract: We establish a correlation between the hierarchical
structure of a firm and the likelihood of business creation among its
former employees, using a sample of 16 million observations of Swedish
workers and a novel proxy for hierarchies based on occupation data.
Conditional on firm size and many other variables, employees in firms with
more layers are less likely to enter entrepreneurship, to become
selfemployed, and to switch to another employer. The effects of layers are
much stronger for business creation than for jobswitching and they are
stronger for entrepreneurship than for selfemployment. We discuss two
potential explanations for the distinctive hierarchy effect we find. Part
of the effect could be to be due to preference sorting by employees, and
part due to employees in firms with fewer layers having a broader range of
skills. One test showing that the probability of entrepreneurship increases
with their prior rank in an organization is consistent with ability sorting
and inconsistent with preference sorting.
Keywords: Entrepreneurship; Employee mobility; Hierarchy; Rank; Small firm effect; (follow links to similar papers)
JEL-Codes: D20; J20; L26; M50; (follow links to similar papers)
46 pages, February 13, 2013, Revised November 28, 2016
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- This paper is published as:
Tåg, Joacim, Thomas Åstebro and Peter Thompson, (2016), 'Hierarchies and Entrepreneurship', European Economic Review, Vol. 89, pages 129-147
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