NBER

Frank Fossen

Department of Economics
University of Nevada, Reno
1664 N. Virginia Street
Reno, NV 89557-0030

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Nevada, Reno

NBER Working Papers and Publications

October 2019Defining Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation
with Robert W. Fairlie: w26377
A proposed explanation for why business creation is often found to increase in recessions is that there are two components to entrepreneurship – “opportunity” and “necessity” – the latter of which is mostly counter-cyclical. Although there is some agreement on the conceptual distinction between these two factors driving entrepreneurship, there is little consensus in the literature on empirical definitions. The goal of this paper is to propose an operational definition of opportunity versus necessity entrepreneurship based on the entrepreneur’s prior work status (i.e. based on previous unemployment) that is straightforward, based on objective information, and empirically feasible using many large, nationally representative datasets. We then explore the validity of the definitions with theor...

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