Backed by the State: Social Protection and Starting Businesses in Knowledge-Intensive Industries

Abstract

Our research investigates how state-sponsored social protection is associated with undertaking the initial steps to start businesses in knowledge-intensive sectors. We define social protection as policies to protect individuals against economic risk. Although research generally shows a negative link between coordinated market economies and business creation, we highlight conditions when social protection may actually have positive consequences on entrepreneurial action. Specifically, these policies can encourage individuals to develop specific skills, which can be used by those who start businesses to pursue opportunities in knowledge-intensive sectors. Findings from a cross-national sample of individuals starting businesses in 16 advanced industrialized countries are consistent with this claim. We also find that educational attainment moderates this positive direct relationship. Our study is one of the first that provides new explanations for how welfare states can actually promote certain types of entrepreneurial action in highly coordinated economies by orienting their economic activity toward a system of highly skilled and productive labor.

Citation

Kim, P.H., Lee, C.-S. and Reynolds, P.D. (2012), "Backed by the State: Social Protection and Starting Businesses in Knowledge-Intensive Industries", Corbett, A.C. and Katz, J.A. (Ed.) Entrepreneurial Action (Advances in Entrepreneurship, Firm Emergence and Growth, Vol. 14), Emerald Group Publishing Limited, Leeds, pp. 25-62. https://doi.org/10.1108/S1074-7540(2012)0000014005