Skip to main content

Lund University Publications

LUND UNIVERSITY LIBRARIES

Hierarchies and entrepreneurship

Tåg, Joacim LU orcid ; Åstebro, Thomas LU and Thompson, Peter LU (2016) In European Economic Review 89. p.129-147
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 self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for job-switching and they are stronger for entrepreneurship than for self-employment. We discuss two potential explanations for the distinctive hierarchy effect we find. Part of the effect could be to be due to preference... (More)

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 self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for job-switching and they are stronger for entrepreneurship than for self-employment. 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.

(Less)
Please use this url to cite or link to this publication:
author
; and
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Employee mobility, Entrepreneurship, Hierarchy, Rank, Small firm effect, L26, D20, J20, M50
in
European Economic Review
volume
89
pages
19 pages
publisher
Elsevier
external identifiers
  • scopus:84982803718
ISSN
0014-2921
DOI
10.1016/j.euroecorev.2016.06.007
language
English
LU publication?
no
id
560bf390-126c-45de-a039-ae917489a49c
date added to LUP
2020-01-23 15:49:56
date last changed
2025-04-04 14:57:00
@article{560bf390-126c-45de-a039-ae917489a49c,
  abstract     = {{<p>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 self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for job-switching and they are stronger for entrepreneurship than for self-employment. 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.</p>}},
  author       = {{Tåg, Joacim and Åstebro, Thomas and Thompson, Peter}},
  issn         = {{0014-2921}},
  keywords     = {{Employee mobility; Entrepreneurship; Hierarchy; Rank; Small firm effect; L26; D20; J20; M50}},
  language     = {{eng}},
  month        = {{10}},
  pages        = {{129--147}},
  publisher    = {{Elsevier}},
  series       = {{European Economic Review}},
  title        = {{Hierarchies and entrepreneurship}},
  url          = {{http://dx.doi.org/10.1016/j.euroecorev.2016.06.007}},
  doi          = {{10.1016/j.euroecorev.2016.06.007}},
  volume       = {{89}},
  year         = {{2016}},
}