Essays on Entrepreneurship

This dissertation explores the determinants of successful entrepreneurship and entrepreneurial entry. It consists of three chapters. Chapter 1 estimates the effect of regional concentrations of related industrial firms and business owners\u27 cognitive and non-cognitive traits on their business survival. Using data from the National Longitudinal Survey of Youth 1979 and the County Business Patterns, I find that incorporated businesses that operate in a location where similar businesses are clustered together have a significantly higher chance of survival. However, the effect of location appears to be insignificant for unincorporated businesses. On the other hand, the results show that businesses that are created by risk-loving individuals are more likely to fail regardless of the business formation. Chapter 2 expands the scope of Lazear\u27s Jack-of-all trades (JAT) theory of entrepreneurship in multiple ways. First, a skill diversity measure is divided into five categories to investigate what type of diversified skills particularly motivates individuals to start their own business. Second, the impact of individuals\u27 skill levels, which is often overlooked in literature, is also taken into account. Third, The effects of skill diversity and skill level are estimated separately for job changers and job losers. Using data from the Current Population Survey and O*NET, I find that job changers who have a higher level of non-routine interactive skills are more likely to enter entrepreneurship. On the other hand, job losers are motivated by non-routine analytical skills to start their own business. Moreover, the results imply that skill diversity and skill level are highly correlated, and failing to take skill level into account would contribute to omitted variable bias. Further analysis reveals that these effects of skill diversity and skill level vary by individuals’ educational level. Chapter 3 investigates whether local economies and unemployment insurance (UI) benefits are significant motivations for unemployed workers to start their own businesses. Using data from the Current Population Survey (CPS), I find that a better local economy is more likely to encourage job losers to start their own business. However, the effect is only statistically significant for unemployed individuals who do not have a college degree. Furthermore, the result shows that those individuals are more likely to start a business right after they lose their wage job and right after their UI benefits expire. Those aspects are not significant factors for college-educated job losers to become necessity entrepreneurs