Differences in the educational paths of entrepreneurs and employees

Abstract

This paper examines whether individuals who become either entrepreneurs or employees follow systematically different educational paths to a given educational level. Following Lazear's jack-of-all-trades theory, we expect that entrepreneurs aim at a balanced set of different skills-that is, they combine academic and vocational skills-while employees specialize in one skill. This means that entrepreneurs follow educational paths that combine different types of education, while employees follow same-type paths while climbing up the educational ladder. We use the Swiss Labor Force Survey to test our hypothesis. Our empirical findings are in line with Lazear's theory and indicate that individuals who change between different types of education and acquire a more balanced set of skills are more likely to become entrepreneurs. Thus, the permeability of a country-specific educational system is one crucial determinant of entrepreneurship.

Are the Self-Employed Really Jacks-of-All-Trades? Testing the Assumptions and Implications of Lazear's Theory of Entrepreneurship with German Data

“…Testing the implications of Lazear's (2004Lazear's ( , 2005) theory, we find that an individual's probability of being an entrepreneur is only higher the larger his number of changes of profession if he is solo self-employed (but not if he employs other workers), and that there is no clear and robust relationship between the number of different kinds of professional training and the probability of being self-employed. In contrast to the majority of previous studies for Germany (see, e.g., Wagner 2003, 2006, Backes-Gellner/Moog 2008 and for other countries (see, e.g., Lazear 2004, 2005, Elfenbein et al 2010, Backes-Gellner et al 2010, Hsieh et al 2011, Åstebro/Thompson 2011 our results thus provide only very limited support for the idea that human capital investment patterns should differ between those who become self-employed and those who end up in paid employment. This implies either that broader and less specialized skill sets are not decisive for becoming self-employed (which would be partly consistent with our results of testing the assumptions) or that modeling human capital investment patterns via changes of professions and different kinds of professional training (as done in this and previous studies) is not appropriate.…”

“…Another distinction, which is more important for our analysis, can be made between 6 See also Backes-Gellner et al (2010) who derive and discuss various definitions of entrepreneurship from Lazear (2005), including self-employment with and without other employees. 7 Note that our data set does not include apprentices and that we exclude helping family members and freelance collaborators from our analysis since they are neither entrepreneurial nor typical employees.…”

“…Lazear's (2004Lazear's ( , 2005 theory of entrepreneurship, which is at odds with the popular impression that (successful) entrepreneurs are technical specialists, has started an empirical literature attempting to test whether entrepreneurs are really jacks-of-alltrades. By and large, this hypothesis has found some support in a number of international studies that estimated the probability of becoming self-employed for various countries and groups of employees, ranging from Stanford alumni (Lazear 2004(Lazear , 2005 and Dutch university graduates (Hsieh et al 2011) over Canadian inventors (Åstebro/Thompson 2011) and U.S. scientists and engineers (Elfenbein et al 2010) to employees in Switzerland (Backes-Gellner et al 2010). Partial exceptions are the Finnish study by Hyytinen/Ilmakunnas (2007), where varied work experience affects entrepreneurial aspirations and transitions to entrepreneurship differently, the study for Italy by Silva (2007) whose results are sensitive to the use of crosssectional or panel data, and the analysis by Hartog et al (2010) with U.S. panel data, where a more balanced skill set does not affect the probability of becoming selfemployed but positively affects the income of the self-employed.…”

Invention Quality and Entrepreneurial Earnings: The Role of Prior Employment Variety

“…Others have used different measures of occupational variety when testing the jack-of-all-trades theory. For example, variety in formal educational background (Backes-Gellner et al, 2010), the coefficient of variation in performance on items of a cognitive skills test taken when young (Hartog et al, 2010), the number of functional areas worked in (Stuetzer et al, 2012), and the variation in the number of different topics studied as an MBA (Lazear, 2005). These alternative measures produce less consistent results.…”

“…Our data set consists of a sample of 770 Canadian independent inventor-entrepreneurs (i.e., those that commercialize their 1. Others have studied an individual's educational variety and its impact on the willingness (Backes-Gellner, Tuor, & Wettstein, 2010) and probability (Lazear, 2005;Silva, 2007) to become an entrepreneur; the variety in cognitive abilities and the influence on entrepreneurial entry and earnings (Hartog, Van Praag, & Van der Sluis, 2010); and the impact of the number of functional areas worked in on the progress in the venture creation process (Stuetzer, Obschonka, & Schmitt-Rodermund, 2012). Further, Bublitz and Noseleit (2014) find that the number of expert skills currently used on the job positively affects earnings, both as an employee and as an entrepreneur, but that can be due to unobserved ability and does not capture the variety in skills obtained from prior employment experiences.…”