Launching with a parachute: The gig economy and new business formation

John M. Barrios, Yael V. Hochberg*, Hanyi Yi

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

We utilize the staggered arrival of Uber and Lyft—large sources of on-demand, platform-enabled gig opportunities—in U.S. cities to examine the effect of the arrival of flexible gig work opportunities on new business formation. The introduction of gig opportunities is associated with an increase of ∼5% in the number of new business registrations in the local area, and a correspondingly-sized increase in small business lending to newly registered businesses. Internet searches for entrepreneurship-related keywords increase ∼7%. These effects are strongest in locations where proxies for ex ante economic uncertainty regarding the viability of new businesses are larger. Our findings suggest that the introduction of the gig economy creates fallback opportunities for would-be entrepreneurs that reduce risk and encourage new business formation.

Original languageEnglish (US)
Pages (from-to)22-43
Number of pages22
JournalJournal of Financial Economics
Volume144
Issue number1
DOIs
StatePublished - Apr 2022

Keywords

  • Entrepreneurial risk
  • Entrepreneurship
  • Gig economy
  • New business formation
  • Rideshare

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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