Measuring performance differentials across entrepreneurship types

Abstract

It is increasingly being recognized that different types of entrepreneurs exist with different performance levels and different contributions to the economy. Two common classifications of entrepreneurship types are based on professional status and start-up motive, where independent own-account workers are assumed to perform better than dependent self-employed and opportunity entrepreneurs are assumed to perform better than necessity entrepreneurs. However, these supposed performance differentials are seldomly tested or quantified. Using recent data drawn from the European Working Conditions Survey for the EU-28, we explore self-employment earnings (as an indicator of performance) across these different entrepreneurship types. Our results from OLS and multilevel linear regressions show that dependent self-employed workers are indeed observed to have significantly lower earnings than independent own-account workers, but the difference is only 10%, suggesting that the precarious nature of the dependent self-employed may be overstated in certain policy circles. Regarding start-up motive, our paper highlights the importance of distinguishing the group of entrepreneurs who simultaneously have both opportunity and necessity motives to start a business.