Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 970: Experience and Entrepreneurship: A Career Transition Perspective

Christopher I. Rider , Peter Thompson , Aleksandra Kacperczyk and Joacim Tåg ()
Additional contact information
Christopher I. Rider: Goizueta Business School, Postal: Emory University
Peter Thompson: Goizueta Business School, Postal: Emory University
Aleksandra Kacperczyk: Sloan School of Management, Postal: Massachusetts Institute of Technology
Joacim Tåg: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: We cast entrepreneurship as one of three career choices – remaining with one’s employer, changing employers, or engaging in entrepreneurship – and theorize how the likelihood of entrepreneurship evolves over one’s career. We empirically demonstrate an inverted U-shaped relationship between accumulated experience and entrepreneurship across various industries and jobs. Despite detailed career history data and job displacement shocks that eliminate the current employer choice, we highlight the difficulty of inferring the mechanism underlying the observed relationship. These analyses motivate a formal career transitions model in which employer-specific and general skills accumulate with experience but potential employers observe only total skill. The upshot of our model is that entrepreneurial career transitions vary with two relative costs: (1) to an individual of forming a business and (2) to a potential employer of utilizing the individual’s employer-specific skills. We discuss how this model contributes new insights into entrepreneurial careers.

Keywords: Entrepreneurship; Employee mobility; Experience

JEL-codes: D20; J20; L26; M50

58 pages, First version: August 6, 2013. Revised: October 2, 2018.

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