Entrepreneurial skills and workers’ wages in small firms

Entrepreneurial skills and workers’ wages in small firms This paper contributes to the understanding of how small firms are organized and managed. It tests an entrepreneur-worker matching model in small entrepreneurial firms. The model contemplates the existence of complementarities between workers’ and entrepreneur’s skills. Using a Portuguese longitudinal matched employer–employee dataset for the period 1995–2003, the empirical analysis provides descriptive results consistent with the matching model: skill stratification—entrepreneurs are more skilled than workers; scale effects—more skilled entrepreneurs run larger firms, though limited by the restriction on firm size; and positive sorting—more skilled entrepreneurs matched with more skilled workers. The estimation of wage regressions shows that the higher the level of education and experience of the entrepreneur, the higher the wage premium for workers. Results suggest that workers’ wages reflect the value of the match with entrepreneur’s skills. Thus, entrepreneurial skills have an impact not only on job creation, but also on the quality of jobs created. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Entrepreneurial skills and workers’ wages in small firms

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Publisher
Springer Journals
Copyright
Copyright © 2012 by Springer Science+Business Media New York
Subject
Economics / Management Science; Management/Business for Professionals; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-012-9463-7
Publisher site
See Article on Publisher Site

Abstract

This paper contributes to the understanding of how small firms are organized and managed. It tests an entrepreneur-worker matching model in small entrepreneurial firms. The model contemplates the existence of complementarities between workers’ and entrepreneur’s skills. Using a Portuguese longitudinal matched employer–employee dataset for the period 1995–2003, the empirical analysis provides descriptive results consistent with the matching model: skill stratification—entrepreneurs are more skilled than workers; scale effects—more skilled entrepreneurs run larger firms, though limited by the restriction on firm size; and positive sorting—more skilled entrepreneurs matched with more skilled workers. The estimation of wage regressions shows that the higher the level of education and experience of the entrepreneur, the higher the wage premium for workers. Results suggest that workers’ wages reflect the value of the match with entrepreneur’s skills. Thus, entrepreneurial skills have an impact not only on job creation, but also on the quality of jobs created.

Journal

Small Business EconomicsSpringer Journals

Published: Dec 8, 2012

References

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