A seminar by Assistant Professor Ting Xu from University of Toronto
Title: Entrepreneurial Spawning from Remote Work (joint with Alan Kwan, Ben Matthies, and Richard Townsend)
Abstract: This paper shows that remote work increases wage workers' transition into entrepreneurship. Using big data on Internet activities, we create a novel firm-level measure of remote work. We show that firms with greater increases in remote work during the pandemic are more likely to see their employees subsequently becoming entrepreneurs. This holds both unconditionally and relative to other types of job turnovers. We establish causality using instrumental variables and panel event study. The spawning response is stronger among younger and more educated employees, and the marginally created businesses are not of low quality. The effect is not driven by employee selection, preference change, or forced turnover. Rather, remote work increases spawning by providing the time and downside protection needed for entrepreneurial experimentation. We calibrate that at least 13.4% of the post-pandemic increase in new firm entry can be attributed to spawning from rising remote work.