Perceptions of Knowledge Transferability and Entrepreneurial Entry: The Role of Firm-Initiated Turnover

Abstract

I examine the understudied effects of perceived non-transferable knowledge on labor market choices after firm-initiated turnover. Using a large, nationally representative dataset, I assess how workers’ perceptions of knowledge transferability, expectations to remain at a firm, and type of turnover experienced correlate with the decision to engage in entrepreneurship. I find that the release of workers with perceived non-transferable knowledge into the external environment through firm-initiated turnover reliably foreshadows entrepreneurship, especially as workers’ prior expectations to continue wage employment at a source firm increases. This finding indicates that beyond necessity, opportunity and financial resources, workers’ self-perceptions of their human capital and unfulfilled career expectations matter to the choice of entrepreneurship. It also suggests that firm-initiated turnover may be a form of knowledge divestiture with important ex-post implications when workers’ perceptions of transferability align with reality