The Individual-Opportunity Nexus
Chapter 6: Industry Differences in Entrepreneurial Activity
People do not make decisions to exploit entrepreneurial opportunities in a vacuum. Rather, they are influenced by the industry context in which they operate. As a result, two people with the same individual characteristics, both psychological and otherwise, will make very different decisions about founding a firm if the first one finds herself in an industry that favors opportunity exploitation through firm formation while the other finds herself in a industry context that hinders opportunity exploitation through firm formation. In this chapter, I review the effects of the industry context on the decision to exploit entrepreneurial opportunities through firm formation. DO INDUSTRY DIFFERENCES IN FIRM FORMATION EXIST? Are people more likely to exploit entrepreneurial opportunities by creating new firms in some industries than in others? The answer to this question appears to be yes. Many researchers have shown that the propensity for people to engage in opportunity exploitation through new firm formation differs significantly across industries. For example, Taylor (1996) used data from the British Household Panel Survey to show that people employed in agriculture, construction, distribution or finance were more likely to make the transition to self employment than people employed in other industries. This tendency toward greater exploitation of entrepreneurial opportunities by creating new firms in some industries as compared to others means that the distribution of industries in a particular geographic area influences the tendency of people in that area to exploit entrepreneurial opportunities. Several authors have demonstrated this point. Using data from the 1980 US Census,...
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