How Status Disparities Motivate Entrepreneurial Decisions and Reproduce Status Disparities

Abstract

Employee entrepreneurship entails a transition from an employee in one organization to a founder/leader of a new organization. To understand why employees aspire to transition to a leader of their own organization, this study examines how status disparities between the employees and their leader and resultant advantages and disadvantages can influence entrepreneurial motivation. The empirical analysis of entrepreneurship of jazz musicians between 1950 and 2018 suggests that i) the status gap between a leader and an employee and ii) the status distinctiveness of the leader from the collective employees affect the employee’s entrepreneurial decision. Furthermore, I found that the employee entrepreneurs driven by the status disparities are more likely to replicate such disparities when they found the entrepreneurial team. This study proposes a novel explanation of why mobility in social hierarchies can play a critical role in entrepreneurship.