Explaining entrepreneurial performance of solo self-employed from a motivational perspective

Small Business Economics, Aug 2019

This paper investigates the relationship between start-up motivation (opportunity versus necessity) and entrepreneurial performance of an important subset of entrepreneurs, viz., the solo self-employed. We use a unique individual-level panel data set of solo self-employed in the Netherlands (2010–2011) and construct three separate measures derived from the literature to identify necessity-driven solo self-employment. Using annual turnover as measure of entrepreneurial performance, we consistently find that necessity-driven solo self-employed perform worse than opportunity-driven solo self-employed. Still, only a low proportion of necessity solo self-employment may be considered precarious employment, suggesting necessity entrepreneurship is not so worrisome as sometimes assumed. In general, our findings suggest that the borderline between necessity and opportunity entrepreneurship in developed economies may be less clear-cut than previously assumed.

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Explaining entrepreneurial performance of solo self-employed from a motivational perspective

Small Business Economics pp 1–14 | Cite as Explaining entrepreneurial performance of solo self-employed from a motivational perspective AuthorsAuthors and affiliations Nardo de VriesWerner LiebregtsAndré van Stel Open Access Article First Online: 16 August 2019 149 Downloads Abstract This paper investigates the relationship between start-up motivation (opportunity versus necessity) and entrepreneurial performance of an important subset of entrepreneurs, viz., the solo self-employed. We use a unique individual-level panel data set of solo self-employed in the Netherlands (2010–2011) and construct three separate measures derived from the literature to identify necessity-driven solo self-employment. Using annual turnover as measure of entrepreneurial performance, we consistently find that necessity-driven solo self-employed perform worse than opportunity-driven solo self-employed. Still, only a low proportion of necessity solo self-employment may be considered precarious employment, suggesting necessity entrepreneurship is not so worrisome as sometimes assumed. In general, our findings suggest that the borderline between necessity and opportunity entrepreneurship in developed economies may be less clear-cut than previously assumed. KeywordsSolo self-employed Nature of opportunity Entrepreneurship Performance Start-up motivations  Electronic supplementary material The online version of this article ( https://doi.org/10.1007/s11187-019-00244-8) contains supplementary material, which is available to authorized users. JEL classificationJ24 L25 L26 C33  1 Introduction Since the 1980s, many European Union member countries have witnessed an increase in the share of self-employed in the labor force (Luber and Leicht 2000; Cieslik and Van Stel 2014; Fritsch et al. 2015). This trend is almost entirely explained by an increase in the number of solo self-employed while the share of self-employed with personnel remained relatively stable (OECD 2000; Rapelli 2012; Kitching 2015). In modern economies, many solo self-employed contribute greatly to economic prosperity by enabling client firms to operate in a more flexible and cost-reducing manner and also by introducing innovations to their client firms (Burke 20112012; Burke and Cowling 2015). However, self-employment is also often viewed as relatively less productive, making a limited contribution to the economy (Román et al. 2011; Henrekson and Sanandaji 2014; Mason and Brown 2014; Stam 2014). These different views on the importance of solo self-employment reflect the huge heterogeneity among self-employed workers in modern economies (CRSE 2017). An important source of this heterogeneity concerns the start-up motivations of the self-employed (Block and Sandner 2009; Fossen and Büttner 2013). Reynolds et al. (2002) were the first to introduce the concept of opportunity and necessity entrepreneurs based on opposing motives for starting a business. Opportunity entrepreneurs start a new venture to exploit a unique business opportunity, whereas necessity entrepreneurs start a firm because it is the best option available. This distinction comes down to the extent of voluntariness in the decision to become self-employed. It is often assumed that necessity-driven self-employed display less entrepreneurial capabilities and perform worse than their opportunity-driven counterparts. Although this assumption is mainly based on macro-level data and outcomes (e.g., Acs and Varga 2005), empirical evidence at the micro level is now becoming increasingly available. In particular, although opportunity entrepreneurs are typically found to perform better than necessity entrepreneurs (Block and Wagner 2010; Van Stel et al. 2018), the difference is found to be either weak (as in Baptista et al. 2014) or non-robust to the inclusion of human capital measures in regressions explaining entrepreneurial performance (as in Block and Sandner 2009). The present paper investigates whether the start-up motivation influences entrepreneurial performance of solo self-employed workers. An important element of our analysis will be to explore how many necessity solo self-employed still earn enough to make a living. Even if necessity solo self-employed earn less than their opportunity counterparts, if most of them still can make a decent living, policy concerns about the marginality of a big group in the labor market may be overstated. By comparing annual turnover of necessity solo self-employed to national low-income standards and the Dutch “at-risk-of-poverty-threshold,” we evaluate the extent of precariousness among necessity solo self-employed in the Netherlands. Our paper contributes to extant literature in several ways. First, this is the first study that, both theoretically and empirically, distinguishes between start-up motivations in the particular context of solo self-employment. Although the literature on necessity and opportunity entrepreneurship is increasing rapid (...truncated)


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Nardo de Vries, Werner Liebregts, André van Stel. Explaining entrepreneurial performance of solo self-employed from a motivational perspective, Small Business Economics, 2019, pp. 1-14, DOI: 10.1007/s11187-019-00244-8