Alexander S. Kritikos

Personality Characteristics and the Decision to Become and Stay Self-Employed

This paper systematically investigates whether different kinds of personality characteristics influence entrepreneurial development. On the basis of a large, representative household panel survey, we examine the extent to which the Big Five traits and further personality characteristics, which are more specifically related to entrepreneurial tasks, influence entry into self-employment and survival of self-employed persons in Germany. The empirical analysis reveals that among the specific characteristics in particular risk attitudes and locus of control have strong effects on entry and survival. With respect to the Big Five approach, in particular the traits openness to experience and extraversion and to a lower extent agreeableness and neuroticism help to explain entrepreneurial development. The explanatory power of the Big Five is comparable to one of the most prominent determinants of entrepreneurship - education - and approximately three times larger than parental self-employment.

Business cycles, unemployment and entrepreneurial entry—evidence from Germany

We investigate whether people are more willing to become self-employed during boom periods or during recessions and to what extent business cycles or unemployment levels influence entries into entrepreneurship. Our analysis for Germany reveals that there is a positive relationship between unemployment rates and start-up activities. Moreover, new business formation is higher during recessions than in boom periods. This implies that new business formation is counter-cyclical. When disentangling periods of low and high unemployment we find that the effect of unemployment on new business formation is only statistically significant if the level of unemployment is below the trend, indicating a low unemployment retain effect.

Why did self-employment increase so strongly in Germany?

Germany experienced a unique rise in the level of self-employment in the first two decades following unification. Applying the nonlinear Blinder–Oaxaca decomposition technique, we find that the main factors driving these changes in the overall level of self-employment are demographic developments, the shift towards service sector employment and a larger share of population holding a tertiary degree. While these factors explain most of the development in self-employment with employees and the overall level of self-employment in West Germany, their explanatory power is much lower for the stronger increase in solo self-employment and in self-employment in former socialist East Germany.