Cascading ripples: Contagion effects of entrepreneurial activity on self‐employment attitudes and choices in regional cohorts.

Research Summary: We introduce a contagion model of self‐employment that relates regional cohort self‐employment to individuals' preferences for and decisions toward engaging in entrepreneurial action. We test the predictions of our model via evidence from two studies. Study 1 uses cross‐sectional data from the U.S. General Social Survey (GSS) and examines the correlation between regional cohort self‐employment and individuals' attitudes for self‐employment. Study 2 uses longitudinal data from the Household, Income, and Labour Dynamics in Australia (HILDA) survey and examines the likelihood of transitioning into self‐employment as a function of regional cohort entrepreneurship. Our results provide evidence that individuals who belong to regional cohorts with a greater proportion of entrepreneurs are more likely to express favorable attitudes toward self‐employment and to enter into self‐employment. Managerial Summary: A large literature in the social sciences indicates that people's preferences and actions are influenced by the behaviors of those around them. We find this is true when it comes to entrepreneurship. Specifically, we document that people who live in regions with higher proportions of entrepreneurs are more likely to express favorable attitudes toward self‐employment and are more likely to start new business ventures. This suggests that people embedded in environments where there is a lot of entrepreneurial activity are more likely to "catch the bug" of self‐employment, as they use already‐established entrepreneurs in the region as a roadmap for their own thinking and action. [ABSTRACT FROM AUTHOR]