Bureaucracy, work organization, and the transition to entrepreneurship

Empirical studies have often established a negative relationship between the size of a firm where an individual is employed and the probability of that individual subsequently founding a business. This literature suggests that size captures work organization—particularly bureaucracy—and that bureaucracy affects the transition to entrepreneurship. However, many studies find that firm size is a poor proxy of work organization and, therefore, calls for empirical research exploring the link between specific measures of work organization and the transition to entrepreneurship. We create a measure of work organization from survey data—ranging from bureaucracy to adhocracy. We then combine this with longitudinal matched employer–employee register data and investigate different types of entrepreneurial transitions for individuals triggered by a mass worker displacement event. We find that work organization significantly affects several measures of transition, with possible implications for the policies and institutional settings that condition firms’ organization of work.