Abstract
We investigate how individual factors moderate the impact of bankruptcy exemption levels—that is, the amount of wealth individuals can keep in case of bankruptcy—on entry into self-employment. Conceptually, we combine Prospect Theory’s axiom of diminishing sensitivity with insights from research on entrepreneurial failure. We hypothesize that individuals who face higher financial, social, or psychological costs because of bankruptcy will be less sensitive to higher exemption levels than will those who face lower costs across these dimensions. Our empirical results, which are based on a quasi-natural experiment in the United States, support our theoretical predictions.
Original language | English |
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Pages (from-to) | 1522-1549 |
Number of pages | 28 |
Journal | Entrepreneurship: Theory and Practice |
Volume | 45 |
Issue number | 6 |
DOIs | |
Publication status | Published - Nov 2021 |
Bibliographical note
Funding Information:We would like to thank the editor Karl Wennberg and the anonymus reviewers for their highly constructive comments throughout the review process. We also thank Jörn Block, Katrin Burmeister-Lamp, Sandra Gottschalk, and Vera Rocha for their valuable comments and suggestions on earlier versions of the manuscript. The author(s) received no financial support for the research, authorship, and/or publication of this article.
Publisher Copyright:
© The Author(s) 2021.