Self-Employment: Opportunity Pursuit for the Haves or Survival Strategy for the Have-nots

by Yan Cui

Institution: University of Cincinnati
Department: Arts and Sciences : Sociology
Degree: MA
Year: 2009
Keywords: Sociology; unincorporated/incorporated; Self-Employment; relative income; self-employed not incorporated; unincorporated self-employed; income; unincorporated self-employment
Record ID: 1851270
Full text PDF: http://rave.ohiolink.edu/etdc/view?acc_num=ucin1242186244


In a free market economy, entrepreneurship plays a central role in economic growth. There is a unanimous agreement that entrepreneurship creates new economic entities, promotes new markets and innovations, and introduces new goods and services. However, scholars disagree on the issue that why people start their own businesses in the first place. The objective of this study is to investigate the impact of various socioeconomic indices on the probability of becoming self-employed. It sheds some light on who the new entrepreneurs are—the haves who start their own businesses as a career option to pursue more opportunities (opportunity pursuit theory), or the have-nots who use self-employment as a default to deal with economic hardship (survival strategy theory). Using 2005 and 2006 Current Population Survey (CPS) data, this study applies multinomial regression analysis to examine 20,571 respondents’ socioeconomic indices and their employment status, either as being self-employed (unincorporated/incorporated) or as being employed workers. By examining explanatory variables in the model, including prior employment experience and occupation-related variables, this study reveals that the self-employed should not be treated as a homogenous category. People who are in incorporated self-employment often fall in the category of the haves (i.e., higher earnings and professional status), which fits the opportunity pursuit theory; the unincorporated self-employed is in general associated with lower income and longer period of unemployment, which fits the survival strategy theory. Possible explanations are presented, and related policy implications are discussed.