Testing the ‘Residential Rootedness’ Hypothesis of Self-Employment for Germany and the UK

Abstract

Testing the 'Residential Rootedness'-Hypothesis of Self-Employment for Germany and the UKBased on the notion that entrepreneurship is a 'local event', the literature argues that selfemployed workers and entrepreneurs are 'rooted' in place. This paper tests the 'residential rootedness'-hypothesis of self-employment by examining for Germany and the UK whether the self-employed are less likely to move or migrate than employees. Using longitudinal data from the German Socio-economic Panel Study (SOEP) and the British Household Panel Survey (BHPS) and accounting for transitions in employment status we found little evidence that the self-employed in Germany and the UK are more rooted in place than employees. Firstly, the self-employed are not less likely to move or migrate over the period 2001-08. Secondly, those who are currently self-employed are also not more likely to have remained in the same place over a period of three years (2008-06 and 2005-03) as compared to those who are currently employed. Thirdly, those who are continuously self-employed are not less likely to have moved or migrated over a 3-period than those in continuous paid employment. Fourthly, in contrast to the prevalent 'residential rootedness'-hypothesis in economic geography and regional studies, we found that the entry into and the exit from selfemployment are associated with internal migration.JEL Classification: D22, J61, J62, L26

Moving Shop: Residential and Business Relocation by the Highly Educated Self-employed

“…It seems that a firm is kept close to the residential location in order to give flexibility in the spatial trade-offs that need to be made to accommodate the additional economic activities, which are likely to be in given locations. This is in line with Reuschke & Van Ham (2013) who argue that women particularly use self-employment, and the consequent place of business, as a way to juggle work and family responsibilities. The flexibility offered by self-employment seems to be used to solve the locational puzzle.…”

“…Particularly in smaller firms, the owner is an integral part of the firm (Stam, 2007) and can actively pursue residential preferences even if this results in additional costs for the firm. Offering support for this idea, Reuschke & Van Ham (2013) show that selfemployed people are no less migratory than those in waged employment. Although they do not address firm location, this does suggest that other considerations may be important in migration decisions.…”

“…Usually, firm relocation decisions are analysed from the firm perspective rather than from the perspective of owners and their residential preferences. A notable exception is Reuschke & Van Ham (2013) who address long-distance migration by the self-employed. However, they do not consider the relocation of businesses per se, but rather of their owners.…”

Interregional migration of business owners: who moves and how does moving affect firm performance?

“…In contrast, since many owners are highly dependent on location-specific capital, such as local networks and familiarity with local markets, a very low migration propensity might also be expected (DaVanzo & Morrison, 1981;Michelacci & Silva, 2007). Reuschke and van Ham (2013) conducted an empirical study for the UK and Germany and did not find distinct migration propensities for self-employed and wage employed, not lending clear support to either view. Part of the contrasting evidence can be attributed to the fact that previous research has been hampered by a lack of appropriate data, restricting investigations on 'migration' of business owners to shortdistance relocations, making it difficult to identify the role of the firm.…”

The willingness to intervene in problematic neighbourhood situations: A comparison of local entrepreneurs and (un‐)employed residents

“…We note that these views do not reflect the modern neighbourhood economy in residential areas where large numbers of solo entrepreneurs and free lancers are active in small‐scale business services, often operating from home and facilitated by ICT (Mason et al . ; Risselada & Folmer ; Reuschke & Van Ham ). Although most of these rather invisible local businesses offer no opportunity for crime, its local entrepreneurs are home‐bound and as such do have extra ‘eyes on the street’.…”