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The Role of Education in Self–Employment Success in Finland

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  • Aki Kangasharju
  • Sari Pekkala

Abstract

This paper analyzes the effect of self–employed persons’ education on the success of their firms during the economic downturn and upturn of the 1990's. It is found that the business cycle affects the relative closure rates of firms run by self–employed with any level of education. Exit probability is lower for the highly educated during bust, but higher in boom. This is accounted for by two facts. First, running a small firm is argued to be a less attractive choice to wage work, particularly for the highly educated, due to lower earning prospects, less stable stream of earnings, and the cultural tradition of working in large corporations. Second, the highly educated faced a higher outside demand for their labor than did the less educated during economic upturn. Finally, it was found that regardless of the state of aggregate economy, firms run by the highly educated have higher growth probabilities than those run by less educated persons.

Suggested Citation

  • Aki Kangasharju & Sari Pekkala, 2002. "The Role of Education in Self–Employment Success in Finland," Growth and Change, Wiley Blackwell, vol. 33(2), pages 216-237.
    • Handle: RePEc:bla:growch:v:33:y:2002:i:2:p:216-237
    DOI: 10.1111/0017-4815.00188
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    Cited by:

    1. Zoltan J. Acs & Catherine Armington, 2004. "New Firm Survival and Human Capital," Papers on Entrepreneurship, Growth and Public Policy 2004-14, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    2. Fatma El-Hamidi & Cem Baslevent, 2013. "Micro and Small Enterprises (MSEs) in Urban Economies: A Comparative Study of Egypt and Turkey at the Province Level," Working Papers 761, Economic Research Forum, revised Jun 2013.
    3. Fatma El-Hamidi, 2011. "How Do Women Entrepreneurs Perform? Empirical Evidence from Egypt," Working Papers 621, Economic Research Forum, revised 09 Jan 2011.
    4. Juan A. Martínez-Román & Isidoro Romero, 2017. "Determinants of innovativeness in SMEs: disentangling core innovation and technology adoption capabilities," Review of Managerial Science, Springer, vol. 11(3), pages 543-569, July.
    5. Pernilla Andersson Joona, 2018. "How does motherhood affect self-employment performance?," Small Business Economics, Springer, vol. 50(1), pages 29-54, January.
    6. Tasssew Woldehanna & Wolday Amha & Manex B. Yonis, 2018. "Correlates of business survival: empirical evidence on youth-owned micro and small enterprises in Urban Ethiopia," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 8(1), pages 1-26, December.
    7. Ratan J. S. Dheer, 2017. "Cross-national differences in entrepreneurial activity: role of culture and institutional factors," Small Business Economics, Springer, vol. 48(4), pages 813-842, April.
    8. Mika Haapanen & Hannu Tervo, 2009. "Self-employment duration in urban and rural locations," Applied Economics, Taylor & Francis Journals, vol. 41(19), pages 2449-2461.
    9. Besnik A. Krasniqi & Muhamet Mustafa, 2016. "Small firm growth in a post-conflict environment: the role of human capital, institutional quality, and managerial capacities," International Entrepreneurship and Management Journal, Springer, vol. 12(4), pages 1165-1207, December.
    10. Kim, Y. & Gao, F.Y., 2013. "Does family involvement increase business performance? Family-longevity goals’ moderating role in Chinese family firms," Journal of Business Research, Elsevier, vol. 66(2), pages 265-274.
    11. Maliranta, Mika & Nurmi, Satu, 2004. "Analyzing Entrepreneurship with the Finnish Linked Employer-Employee Data (FLEED).Matching and qualitative properties of the data," Discussion Papers 920, The Research Institute of the Finnish Economy.
    12. Karthik Krishnan & Pinshuo Wang, 2019. "The Cost of Financing Education: Can Student Debt Hinder Entrepreneurship?," Management Science, INFORMS, vol. 65(10), pages 4522-4554, October.
    13. Susan Coleman, 2005. "The Impact of Human Capital Measures on Firm Performance: A Comparison by Gender, Race and Ethnicity," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 10(2), pages 38-56, Summer.
    14. Maliranta, Mika & Nurmi, Satu, 2004. "Do Foreign Players Change the Nature of the Game Among Local Entrepreneurs?," Discussion Papers 942, The Research Institute of the Finnish Economy.
    15. Donald R. Williams, 2004. "Effects of Childcare Activities on the Duration of Self–Employment in Europe," Entrepreneurship Theory and Practice, , vol. 28(5), pages 467-486, September.
    16. Millán, José María & Congregado, Emilio & Román, Concepción, 2014. "Persistence in entrepreneurship and its implications for the European entrepreneurial promotion policy," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 83-106.
    17. José María Millán & Emilio Congregado & Concepción Román, 2010. "Determinants of Self-Employment Dynamics and their Implications on Entrepreneurial Policy Effectiveness," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 72, pages 45-76.
    18. José Millán & Emilio Congregado & Concepción Román, 2012. "Determinants of self-employment survival in Europe," Small Business Economics, Springer, vol. 38(2), pages 231-258, February.
    19. Romero, Isidoro & Martínez-Román, Juan A., 2012. "Self-employment and innovation. Exploring the determinants of innovative behavior in small businesses," Research Policy, Elsevier, vol. 41(1), pages 178-189.
    20. Thomas Neumann, 2021. "The impact of entrepreneurship on economic, social and environmental welfare and its determinants: a systematic review," Management Review Quarterly, Springer, vol. 71(3), pages 553-584, July.
    21. Simon Parker & David Storey & Arjen Witteloostuijn, 2010. "What happens to gazelles? The importance of dynamic management strategy," Small Business Economics, Springer, vol. 35(2), pages 203-226, September.
    22. Anu Tokila & Hannu Tervo, 2011. "Regional differences in returns to education for entrepreneurs versus wage earners," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(3), pages 689-710, December.
    23. Hannu Tervo, 2004. "Self-employment dynamics in rural and urban labour markets," ERSA conference papers ersa04p396, European Regional Science Association.

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