Necessity and Opportunity Entrepreneurs: Characteristics and Earnings Differentials

Abstract

In this paper we discuss necessity and opportunity entrepreneurship. We use panel data to analyze how these two types of entrepreneurs differ in general, and in their ability to discover and exploit entrepreneurial opportunities. We find that the opportunities exploited by opportunity entrepreneurs are generally more profitable than are those exploited by necessity entrepreneurs. We also find that the determinants of success differ to a strong degree. Standard wage equations seem to work better for opportunity than for necessity entrepreneurs. Our findings indicate a need to distinguish between the two groups in entrepreneurship theory and practice.