Investigating the impact of the technological environment on survival chances of employer entrepreneurs

Abstract

Given the big employment losses in the current economic and financial crisis, not only the creation of new jobs is important for economic and social welfare, but also the conservation of existing jobs. In this respect, it is crucial that firms that employ personnel survive. In this article, we investigate the role of the technological environment in determining the survival chances of employer entrepreneurs, defined as owner-managers of firms that employ personnel. We estimate survival models to analyze durations as an employer entrepreneur, using micro-panel data from EU-15 countries drawn from the European Community Household Panel. As indicators for the technological environment, we use a country’s R&D expenditures, a country’s employment share of high-tech and knowledge-intensive sectors, and a country’s number of patent applications to the European Patent Office. We find strong support for a positive relationship between these indicators of the technological environment in country j and year t and survival chances of employer entrepreneurs in that same country and year. Our analysis also suggests that a selection effect may be part of the explanation in the sense that in a more advanced technological environment, relatively more ‘high-quality’ individuals select into entrepreneurship.