2016

Hierarchies and Entrepreneurship

Reprint No. 2016:44

Author(s): Joacim Tåg, Thomas Åstebro and Peter ThompsonYear: 2016 Title: European Economic Review Volume (No.): 89 (October) Pages: 129–147
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Preliminary version


We establish a correlation between the hierarchical structure of a firm and the likelihood of business creation among its former employees, using a sample of 16 million observations of Swedish workers and a novel proxy for hierarchies based on occupation data. Conditional on firm size and many other variables, employees in firms with more layers are less likely to enter entrepreneurship, to become self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for job-switching and they are stronger for entrepreneurship than for self-employment. We discuss two potential explanations for the distinctive hierarchy effect we find. Part of the effect could be to be due to preference sorting by employees, and part due to employees in firms with fewer layers having a broader range of skills. One test showing that the probability of entrepreneurship increases with their prior rank in an organization is consistent with ability sorting and inconsistent with preference sorting.


Reference:
Tåg, Joacim, Thomas Åstebro och Peter Thompson (2016), "Hierarchies and Entrepreneurship". European Economic Review 89(October), 129–147.

Joacim Tåg

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Ph: +46 8 665 4524
joacim.tag@ifn.se

Thomas Åstebro

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Ph: +33 1 39677483
astebro@hec.fr

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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