October 8, 2015
Entrepreneurship professor Saurav Pathak’s paper published in Human Relations
Assistant professor of entrepreneurship Saurav Pathak, along with co-authors Emanuel Xavier-Oliveira and Andre O. Laplume of Michigan Technological University, recently had their research published in the journal Human Relations.
Their study, "What motivates entrepreneurial entry under economic inequality? The role of human and financial capital," provides novel insights into the moderating effects that economic inequality may have on the distinct roles that human and financial capital play on different types of entrepreneurship.
The research was based on a multilevel analysis of nearly 120,000 observations across 31 countries between 2001 and 2008. They found that as inequality increases, both forms of capital become weaker deterrents of entry into necessity entrepreneurship, whereas for opportunity entrepreneurship, only financial capital becomes a stronger predictor of entry. They also show that, regardless of inequality levels, both human and financial capital exhibit decreasing marginal returns on the likelihood of entry into necessity entrepreneurship, and that in the case of opportunity entrepreneurship, financial capital exhibits increasing marginal returns. However, inequality does impact the magnitude of marginal returns.
Additionally, their statistical analysis provides quantitative support to extant literature arguing that higher levels of economic inequality foster both types of entrepreneurship albeit having a stronger impact on necessity entrepreneurship, and that human and financial capital have distinct effects on entry into necessity versus opportunity entrepreneurship.
"All of these findings have pertinent policy implications," Saurav said. "They shed light on the underresearched role of inequality on entrepreneurship."