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

John M. Barrios; Yael V. Hochberg; Hanyi Yi

doi:10.1016/j.jfineco.2021.12.011

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

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

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › peer-review

27 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 language	English (US)
Pages (from-to)	22-43
Number of pages	22
Journal	Journal of Financial Economics
Volume	144
Issue number	1
DOIs	https://doi.org/10.1016/j.jfineco.2021.12.011
State	Published - Apr 2022

Funding

Toni Whited was the editor for this article. We thank the editor, an anonymous referee, Rustam Abuzov, Jonathan Bonham, Bruce Carlin, Florian Ederer, Alex Frankel, Jorge Guzman, Danielle Li, Hong Luo, Song Ma, Gustav Martinsson, David Robinson, Scott Stern, Joachim Tag, Toni Whited, and workshop participants at UC Berkeley, Yale University, MIT, Rice University, NBER Entrepreneurship Program meetings, and the KWC Conference on Entrepreneurial Finance for helpful conversations, comments and suggestions. Esther Bailey and Yupeng Liu provided excellent research assistance. We are grateful to the Startup Cartography Project and Jorge Guzman for providing data used in this project. All errors are our own. Barrios gratefully acknowledges the support of the Stigler Center and the Centel Foundation/Robert P. Reuss Fund at the University of Chicago Booth School of Business.

Keywords

Entrepreneurial risk
Entrepreneurship
Gig economy
New business formation
Rideshare

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics
Strategy and Management

Access to Document

10.1016/j.jfineco.2021.12.011

Cite this

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title = "Launching with a parachute: The gig economy and new business formation",

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.",

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

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Keywords

ASJC Scopus subject areas

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