%0 Report %A Parker, Simon C. %T A Selection-Based Theory of the Transition from Employment to Entrepreneurship: The Role of Employer Size %D 2006 %8 2006 Apr %I Institute of Labor Economics (IZA) %C Bonn %7 IZA Discussion Paper %N 2071 %U https://www.iza.org/index.php/publications/dp2071 %X A simple occupational choice model is used to predict that entrepreneurs who found new firms are more likely to work for small than for large firms prior to start-up. The mechanism underlying the result is heterogeneous risk aversion. The model also predicts a positive association between new firm formation and previous self-employment experience. These predictions accord with previous empirical findings, but notably self-selection rather than productivity effects can explain them. %K entrepreneurship %K occupational choice %K firm size