Expert Opinions – Some entrepreneurs are made, not born
06/03/2022
4 min
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Based on an interview with Elisabeth Mueller and on her article “Does skill balancing prepare for entrepreneurship? Testing the underlying assumption of the jack-of-all-trades view” (Applied Economics, 2022), co-written with Lorna Syme.
It makes sense that many entrepreneurs have a broad skill set. They have to build from the ground up with a small or nonexistent staff, so must take on many jobs personally. But is their acquisition of wide-ranging talents a result of innate proclivities or necessity? A new paper suggests a third possibility.
When Apple cofounder Steve Jobs was banging around in his garage, creating his proto multinational corporation, he probably did not imagine that his college calligraphy class would come in handy. Yet this skill saw its application in the Macintosh, a computer that offered varied typefaces, fonts and calligraphy. Not a typical computer nerd, Jobs said, “I always thought of myself as a humanities person as a kid, but I liked electronics.” It was essentially the intersection of the two fields “that makes our hearts sing,” he said.
Jobs is perhaps an extreme example, but many entrepreneurs need a diverse skill set. Stanford researcher Edward P. Lazear formulated what is known as the jack-of-all-trades theory, which theorized that people with a more balanced skill set were more likely to become entrepreneurs — a correlation that has been widely confirmed by other researchers.
Researchers have debated, however, the reasons for the correlation.
“Endowment” vs. “investment”
Some researchers found that entrepreneurs have an innate talent or taste for variety that drives their skill acquisitions (known as the endowment hypothesis), while others found that people who want to become entrepreneurs purposely aim to gain a balanced skill set (the investment hypothesis).
Researchers Lorna Syme and Elisabeth Mueller were interested in a variation of this nature-nurture debate. Using a unique data set, they looked at whether individuals who were obliged by circumstance to change jobs — and to thereby acquire new skills — showed a greater probability of becoming entrepreneurs in the future.
“What we were interested in in this paper was to learn if individuals who were ‘forced’ to acquire a broader skill set through involuntary job change were more likely to become entrepreneurs,” Mueller said.
A unique data set
Previous research on the relationship between balanced skills and entrepreneurship typically examined the number of workers’ prior roles, the number of fields or industries, or the number of functional areas. As the authors point out in their paper, these approaches have two flaws: It is assumed rather than shown that a job change increases a worker’s skill set. The second is that they do not distinguish between voluntary job change (which might indicate a desire to acquire new skills — supporting the endowment hypothesis) and involuntary job change (which tends to support the investment hypothesis — even if the investment was unpremeditated).
The first study to look at involuntary job change in conjunction with a measure of the skills associated with the job change, Syme and Mueller’s research used a survey of German households conducted from 1990 to 2015, which contained information on workers’ employment status, type of occupation and the reason for any job change. This was combined with information from two other German employment surveys that indicated the skill sets associated with each occupation.
The combination of data allowed the researchers to determine when workers had changed employment involuntarily — after being fired or laid off, for example — and what skills they acquired in any new jobs. Self-employment was used as a proxy for entrepreneurship.
Entrepreneurs can be made
Indeed, as the researchers say in their paper, they found a correlation between an increase in skills and the likelihood of becoming an entrepreneur: “An increase in skill set as a result of an involuntary job change increase the likelihood of being self-employed.”
Remarkably, even one additional involuntary job change (with concomitant added skills) more than doubled the probability of future entrepreneurship.
“We show that it is not only voluntary development of a broad skill set that makes people more able to be entrepreneurs, but it is also possible that it comes through involuntary change,” Mueller said in an interview.
In the paper, the authors note that the results “add to the ongoing discussion on whether entrepreneurs are born or made.” They note that “this study suggests that even individuals not predisposed to entrepreneurship can be productively prepared for it,” which may have implications for “entrepreneurship education and promotion programs.”
Practical applications
This research, by showing the importance of a balanced skill set — even when acquired involuntarily — has implications for governments, educational institutions and individuals. As it suggests that entrepreneurship can be, to some degree, taught, governments and educational institutions are encouraged to support the learning of a broad range of skills — not only marketing and finance — in any entrepreneurship programs. Similarly, individuals who hope to become entrepreneurs in the future may benefit from working in a variety of different posts beforehand to gain a broad range of skills.
Methodology
The investigation was based on the 1990 to 2015 German Socio-Economic Panel Study (SOEP), which contains information on workers employment status, job type and reason for any job change. This was combined with data collected in 2006 by the Federal Institute for Vocational Education and Training (BIBB) and the Federal Institute for Occupational Safety and Health (BAuA) on skill sets associated with each occupation.
