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JOURNAL OF MANAGEMENT POLICY AND PRACTICE
Opportunity and Necessity Entrepreneurship: Local
Unemployment and the Small Firm Effect
Author(s): Fatma Deli
Citation: Fatma Deli, (2011) "Opportunity and Necessity Entrepreneurship: Local
Unemployment and the Small Firm Effect," Journal of Management Policy and Practice, Vol. 12, Iss. 4, pp. 38 - 57
Article Type: Research paper
Publisher: North American Business Press
Abstract:
Low-ability entrants to self-employment are “necessity entrepreneurs” forced into self-employment by adverse circumstances, while high-ability entrants are opportunity entrepreneurs attracted by a promising idea. Effects of local unemployment rates on the propensity of low-ability and high-ability workers to transition into self-employment are tested using two samples from the PSID. The results show a positive correlation between local unemployment rates and entry into self-employment for low-ability workers, but not for high-ability workers. Including firm-size to eliminate possible distortions in the results indicates that the positive association between unemployment and self-employment among low-ability workers is in fact driven by the effect of employer size. Moreover, a negative association between unemployment and self-employment among high-ability workers is observed.
