Scandinavian Working Papers in Business Administration
JIBS Working Papers,
Jönköping International Business School
No 2010-3: Entrepreneurship, Windfall Gains and Financial Constraints: Evidence from Germany
Dorothea Schäfer, Oleksandr Talavera and Charlie Weir
Additional contact information
Dorothea Schäfer: Jönköping International Business School (JIBS) and DIW Berlin, Postal: JIBS, P.O. Box 1026, SE-551 11 Jönköping
Oleksandr Talavera: University of East Anglia
Charlie Weir: Aberdeen Business School
Abstract: We investigate the link between the propensity to become an entrepreneur and exogenous release from nancial constraints in Germany. This is de ned in terms of the movement from employment to self employment on receipt of a nancial windfall. A theoretical framework developing Evans and Jovanovic (1989) is set up and tested with panel data from German households. The results show that nancial constraints do exist given that individuals are more likely to start a personal business after receiving a windfall gain. The value of windfall gains has a signi cant but non linear e ect on the decision to become self employed. The data reveal that di erences in ability and income a ect the change in employment status. We also report that there is no evidence that becoming self employed involves the anticipation of windfall gains.
Keywords: Entrepreneurship; windfall gains; nancial constraints
24 pages, November 17, 2010
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