A new Swedish study demonstrates that industry mobility is not inherently good—an important implication for the fast-moving labor markets of the knowledge economy.
“Knowledge-based” theories of entrepreneurship argue that business or technical knowledge is transmitted through employees moving from firm to firm. If true, this would mean that labor mobility leads to successful businesses because entrepreneurs are well served by their work experience in many different industries and environments. Researchers Frederiksen, Wennberg and Balachandran contradict this view of mobility in the labor market.
The researchers analyzed 11 years’ worth of data on Swedish companies to study the effect of job mobility on workers’ likelihood of founding a new firm and on the performance of those new firms. They reasoned that if mobility leads to gaining knowledge and skills and also to entrepreneurship, then entrepreneurs with a varied job background should be more successful.
In fact, previous mobility did not predict an entrepreneur’s performance, which suggests mobility doesn’t indicate valuable experience.
The researchers offered some alternative explanations for the relationship between mobility and entrepreneurship:
- Some restless individuals choose freedom over stability, often bouncing from job to job. Entrepreneurship is a natural career choice for them.
- Some workers might want job stability but find themselves in an industry where none exists. Since they cannot accrue seniority and experience, they are not giving up much stability by founding their own companies.
Neither kind of person would necessarily bring specialized knowledge to their business ventures.
The data shows that mobility is desirable for some workers, but professional instability for others. Whether workers are mobile because they’re unsatisfied or unsatisfied because they’re mobile, they are likely to become entrepreneurs. But a mobile job market doesn’t necessarily prepare them for success.
Read a working paper version of the study here.
Contributed by Emily Lever