Forged in the Heat of Battle: New Organizations as Business Incubators

Tiantian Yang, Duke, Sociology
(paper by Tiantian Yang, Duke University; Howard Aldrich, University of North Carolina-Chapel Hill; Frederic Delmar, Lund University) Freeman’s (1986) provocative idea that entrepreneurs arise from existing organizations and are thus organizational products represented a watershed moment in research on entrepreneurship. His path-breaking idea called attention to the intersection of organizations and entrepreneurship, spurring scholars to investigate how organizations differ in their employees’ propensities to leave and launch new businesses (Audia and Rider 2005, Brittain and Freeman 1980, Sørensen and Fassiotto 2011). In our paper, we build on previous research by examining the organizational conditions under which employees who exit wage labor jobs subsequently create their own businesses, in a national context which many scholars view as particularly unfavorable to entrepreneurship: Sweden (Andersson and Klepper 2013, Delmar and Davidsson 2000, Henrekson 2005, Lerner and Ta ̊g 2013). In the process, we illuminate the importance of taking national institutional context into account in understanding conditions facilitating or impeding entrepreneurship generated by existing firms within a country. To conduct a rigorous analysis of the causal mechanisms of entrepreneurial spawning in organizations, we adopt a research design that permits us to effectively address the remaining endogeneity bias that may arise from individuals’ self-selection after taking into account the contextual mechanisms that affect sorting. We use data from the Longitudinal Integration Database for Health Insurance and Labor Market Studies (LISA) in Sweden that tracks every employee and every organization in the private sector from 1989 to 2002. Rich information about the complete career histories of individuals and their employing organizations allows us to apply a Shrinkage/Empirical Bayes method to effectively address the endogeneity bias that may arise from individuals’ self-selection even if information about individuals’ self-selection is incomplete. We believe that a theoretical framework with a clearer conceptualization of the institutional context and a rigorous analysis will enable us to more thoroughly investigate the causal effects of organizational context, and deepen our understanding of how social conditions affect individuals’ entry into entrepreneurship.
March, 30 2015 | 12:30 - 14:00 | Gross Hall 230E

Return to seminar series