I examine how mass layoffs affect individuals' entrepreneurial trajectories by combining longitudinal career data (Revelio) with WARN notice layoff records. Using a CEM and KNN matching approach, I construct a sample comparing workers affected by mass layoffs to similar unaffected individuals and employ a staggered panel difference-in-difference model.
The initial results indicate that experiencing a layoff significantly increases the likelihood of founding a firm. These ventures founded under employment duress differ in longevity, growth, and other quality characteristics. Similarly, founders of these firms have different experience, education, and demographic characteristics compared to traditional founders. We discuss robustness, limitations, and relevant boundary conditions.
In line with prior literature examining the ‘signaling’ mechanism of layoff outcomes on careers, I examine the interplay of the WARN signal with entrepreneurial action related to options of returning to paid employment, attracting co-founders, and growing the venture. We argue that entrepreneurship may offer a viable way forward for some laid off workers.