This paper evaluates the productivity impacts and the subsequent adjustment costs associated with hiring different knowledge workers. I focus on the difference between hiring former entrepreneurs, employees who change jobs, and unemployed individuals. I am the first to evaluate the direct impact that hiring former entrepreneurs has on firm productivity and the heterogenous adjustment costs associated with the different types of new hires. I find no difference between the first-year adjustment costs of entrepreneurs and those of regular-wage employees. Hiring former entrepreneurs is a way to increase productivity after the first year of employment only if the former entrepreneurs are from the highest end of the ability distribution.

We introduce a new measure of human capital, defined as employees' former involvement in entrepreneurship. Such entrepreneurial human capital (EHC) complements traditional human capital measures accumulated through work experience and education. Using detailed longitudinal register data, we track the previous years of entrepreneurial experience for the population of employees in Swedish private sector firms. We provide evidence that higher EHC among employees is associated with significantly higher levels of firm productivity. The baseline result implies that a 10 % increase in employees being former entrepreneurs increases firm-level productivity by 3.9 %. Additionally, we provide evidence that heterogeneity in employees' previous entrepreneurial experience (e.g., the reason for entering and exiting entrepreneurship, type of venture, length of entrepreneurial experiences, and relatedness of technology) influences the impact of EHC on productivity. The results are shown to be robust to various estimation techniques, alternative definitions of EHC, and other performance measures.

This paper empirically estimates how referrals mitigate the risk associated with hiring formerly self-employed individuals. We do this by comparing the networks and entry wages for two groups of new hires: those who exit self-employment to become wage-employed and those who change employers as wage employees, i.e., job changers. Referrals are defined as coworker ties through which the new hire and an incumbent worker share a common employment history before their current employment. We use longitudinal Swedish register-based data to evaluate the entry wages of the two groups of new hires for the years between 2010 and 2013. The results show that having coworker ties is associated with 2.9% higher entry wages and that this network premium is uniform across the formerly self-employed and job changers. However, the new hires from self-employment have consistently lower entry wages than the job changers, even if the exiting self-employed have coworker ties.

Wage employment is the most commonly observed type of employment after a spell of entrepreneurship. The purpose of this paper is to investigate the effects of having been an entrepreneur on earnings after individuals exit. The question is how the entrepreneurship spell influences their value in the labor market? Based on a theoretical framework and earlier literature, our specific interest lies in how these outcomes interact with education level and the nature of the entrepreneurial venture. To investigate this question, we use longitudinal register data on firms and individuals in Sweden. The empirical strategy builds on matching techniques and estimations of earnings equations in a difference-in-differences framework with heterogenous treatment years. We provide evidence that there exists an earnings penalty when highly educated entrepreneurs return to wage employment. This effect is persistent throughout the time period that we observe. For individuals with lower educational attainment, we find no or weak evidence of a wage penalty. Our results suggest that the wage penalty for highly educated individuals operates through the depreciation of specific specialized skills valuable in wage employment.

We show how the type of alcohol consumed is related to the type of entrepreneurship present for economies in Europe. We differentiate between beer-, wine-, and spirit-drinking countries and distinguish between productive, unproductive, and destructive entrepreneurship. The underlying links do not emerge from drinking per se but rather the drinking habits and taste for beverage types capture deep cultural features and cultural similarities amongst the countries. Societies that prefer to drink beer are closer to each other culturally than those which prefer drinking wine or spirits. Therefore, the taste for alcohol type is merely an instrument in explaining cultural and institutional differences across entrepreneurship. Broadly speaking, beer-drinking countries are characterized by higher shares of productive entrepreneurship, wine-drinking countries with unproductive entrepreneurship, and spirit-drinking countries with destructive entrepreneurship. We discuss mechanisms in which the results are found and highlight a new research agenda, emphasizing the potential role of epigenetics. 

In line with the theory of creative destruction, industries where incumbent firms generate high profits will attract entry, which should drive down profits. This disciplinary effect of entry implies that profits above the norm should not exist in the long run. Factors that affect entry—such as entry regulations—could affect this profits convergence process. Using an unbalanced panel of firm- and country-level data for approximately 13,000 firms in 33 countries between 2005 and 2013, we examine the profit dynamics of incumbent firms in the context of entry and entry regulations.

In recent decades, public policies have been implemented to encourage individuals to become entrepreneurs. However, the individual and social benefits of such policies when some of these individuals eventually leave entrepreneurship are unclear. The purpose of this thesis is to empirically assess the productivity effects arising from the labor market experience of entrepreneurship, measured as self-employment, in subsequent wage employment.

This thesis consists of an introductory chapter and four independent papers. The four papers evaluate the consequences of the self-employment experience either for the individuals’ wages or for firm productivity when firms hire such individuals. All the papers compare the self-employment experience relative to wage employment.

The first paper estimates how individuals’ earnings are influenced in post-entrepreneurship careers when they return to wage employment. The findings suggest that former entrepreneurs suffer large earnings losses, especially in the first year as employees, and for the higher educated, these losses persist even after seven years in employment. The second paper studies the role of professional ties in entry wages when finding employment after self-employment. The results show that even when using former coworker ties in the hiring process, the former self-employed, except for those who have ties with incumbent employees when they had their own firm, earn significantly lower entry wages.

The third paper evaluates the productivity effects of different labor flows, with an emphasis on hiring former entrepreneurs. The paper finds that new hires who come from entrepreneurship, in general, are just as productive as those employees hired from another firm but are more productive than those coming from unemployment. The fourth paper analyzes how having employees with former entrepreneurship experience is related to firm productivity. The results show that having more former entrepreneurs as employees in a firm increases performance.