Small Employers as Origins of Entrepreneurship (Job Market Paper)
Using large-scale administrative data, I find that small employers are important for future entrepreneurship. Within industry and a rich set of controls, workers at smaller employers have a higher likelihood of starting their own firm. Furthermore, the likelihood of a founder starting a successful new firm, measured by growth and survival, is higher if they previously worked at a small, successful employer. These two facts are consistent with learning entrepreneurial human capital at smaller firms and are supported by additional suggestive evidence. First, the longer a worker spends at their smaller employer, the more likely they are to start a successful firm, suggesting that they are learning successful business processes at their employer. Second, new firms are more likely to succeed if they are started in the same narrow industry as the employer, which aligns with learning specific skills. Lastly, founders from small, successful employers are only more likely to succeed if they start high-growth new businesses rather than enter self-employment. Overall, small employers house nascent entrepreneurs and likely provide valuable entrepreneurial learning.