Does Career Risk Deter Potential Entrepreneurs?

Joshua D. Gottlieb, Richard R. Townsend, Ting Xu

NBER Working Paper No. 22446
Issued in July 2016, Revised in July 2018
NBER Program(s):Corporate Finance Program, Labor Studies Program, Public Economics Program, Productivity, Innovation, and Entrepreneurship Program

Do potential entrepreneurs remain in wage employment because of concerns that they will face worse job opportunities should their entrepreneurial ventures fail? Using a Canadian reform that extended job-protected leave to one year for women giving birth after a cutoff date, we study whether the option to return to a previous job increases entrepreneurship. A regression discontinuity design reveals that longer job-protected leave increases entrepreneurship by 1.9 percentage points. These entrepreneurs start incorporated businesses that hire employees—in industries where experimentation before entry has low costs and high benefits. The effects are concentrated among those with more human and financial capital.

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Document Object Identifier (DOI): 10.3386/w22446

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