Who Becomes a Business Owner in High-inequality Regimes? The Conditioning Effect of Economic Inequality on the Impact of Individual Educational and Financial Endowment on Entrepreneurship

Abstract

Research has shown that individual educational and financial endowments are key indicators of their potential for entrepreneurial entry and success. At the same time, scholars have shown that economic inequality undermines educational development while increasing financial precarity. Yet, we know little about the extent to which economic inequality may condition how education and income affect an individual’s entrepreneurial experience. In this article, we present a mixed-effect analysis using data from 50 countries that shows that economic inequality diminishes the importance of an individual’s education and income on entrepreneurial entry. This effect is larger for higher education and income individuals than those in the bottom of the educational and income strata. In addition, inequality increases the likelihood that an individual would undertake entrepreneurial activities as a last resort, particularly individuals in low-education strata. These results suggest that under high-inequality regimes, entrepreneurship may be a sign of economic insecurity and inefficiency, and highlight the need for scholars to pay greater attention to understanding the structural forces that facilitate entrepreneurship development.