Research highlights

Like most countries, the UK is experiencing rising life expectancy and an ageing population. At the same time, there are growing fears that UK health outcomes are deteriorating. These trends make achieving healthy longevity a key individual, social and economic issue, and have considerable implications for government spending in the years ahead. But how do we age and are we ageing better?

To examine this question, we utilised the English Longitudinal Study of Ageing (ELSA) dataset, covering the period 2002 to 2018. The aim was to understand how frailty develops with age, how this differs across demographic cohorts, whether younger cohorts are ageing better, and the key areas for health policy. The study overall showed good news – we are in general ageing better so that 60-year-olds today, for instance, are less frail than 60-year-olds previously. But it isn’t all good news. First, there is evidence that the rate of improvement is slowing. Secondly the rate of improvement varies enormously across different groups based on region and education. The less your education, income and wealth the less improvement you have seen. The good news is that how we age is malleable. The bad news is that means socio-economic factors are producing increasing divergence in health and longevity.

The study emphasises the potential ability to shape health deficits and the need to exploit this to improve outcomes, particularly given the slowdown in health improvements and substantial inequalities. The breakdown of regional differences also suggests that policies to narrow these differences should focus on achieving greater improvements in mobility and daily-living activities among poorer-performing regions and tackling within-region inequality. The fact that our results suggest there have been only limited improvements in the incidence of age-related diseases and conditions further highlights the importance of better understanding these diseases and the development of potential therapeutics. These findings are crucial as ageing well becomes increasingly important in our society.

Research indicates that humour in the workplace is associated with perceptions of competence and status. One recent survey even found that 91% of executives believe that a sense of humour is important for career advancement. But the role of humour in the context of corporate communication is not well understood. To what extent does it influence corporate outcomes? And can managers’ successful use of humour influence external stakeholders, such as analysts and investors?

We used a sophisticated machine-learning algorithm to analyse audio recordings of public earnings conference calls and identify occurrences of laughter in response to the use of humour. These calls are a key resource for investors and equity analysts, and the performance of company executives during the calls can have an immediate impact on company share price. This study enabled us to identify manager’s successful use of humour. When managers successfully used humour during calls, stock market returns and analyst forecast revisions are more positive. This is mainly due to a muted response to negative earnings news.

The research showed that there is a significant association between humour and immediate stock-market reaction, subsequent analyst behaviour, and future firm performance. The evidence suggests that humour can also soften the disclosure of negative news and signal relatively stronger future firm performance. By identifying humour as an important communication tool that affects conference call outcomes, the study enriches the understanding of corporate disclosure and its economic effects.

There is a large literature on choice freedom in the consumption context, but it tends to assume that choice freedom is a good thing and available to everyone. In reality, however, choice freedom does not always improve wellbeing and whole classes of consumers are unable to take full advantage of marketplace opportunities.

The Journal of Consumer Psychology asked the researchers to review the existing body of work on choice freedom and to examine its relationship with personal and societal wellbeing. The review uses decades of academic research and current societal debates in the popular press to analyse choice freedom through the lens of autonomy and personal control, and to explore the positive and negative effects of choice freedom on wellbeing.

The research addresses important outstanding questions about choice freedom and the wellbeing of individuals and society. For example, how can we reconcile peoples’ desire for choice freedom with their increasing tendency to delegate choices to AI-powered devices? Is the freedom to make a choice perceived as less valuable than the freedom to avoid making a choice? What are the consequences of individual choice freedom on the freedom of others? And does the focus on choice freedom ignore the narrowed options faced by whole classes of consumers, including people of lower socioeconomic status, as well as minorities and vulnerable consumers who are unable to take full advantage of marketplace opportunities?

The article argues that an examination of choice freedom that goes beyond the selection and evaluation of options from a choice set to acknowledge the existence of different types and levels of freedom could open the door to a powerful idea: freedom is not only about discerning an option but about understanding, and even creating, a new one altogether.

While existing research generally assumes that corporate social responsibility (CSR) is seen as universally positive, firms are increasingly being drawn, willingly or unwillingly, into highly polarising social issues, such as gun control, LGBTQ+ rights and abortion. While this can enhance a company’s social responsibility profile, it can also risk alienating certain stakeholders. Despite the importance of this phenomenon, existing work in organisational theory, strategy and economics is largely silent on it and offers little guidance on why, when and how firms should engage with such hot-button issues.

This study presents a theory to understand when and why companies should take a stance on a contentious issue. The researchers suggest that companies can benefit from taking a stance when the issue is of high public interest, markets are competitive, and the CSR actions are largely symbolic. They introduce the concept of “corporate social counterpositioning,” where rival companies use socio-political polarisation to differentiate themselves by taking opposing stances on a contentious issue.

The paper makes a novel and important contribution to market strategy. Whereas the literature tends to focus on first-mover advantage in terms of being seen to “do the right thing” for ESG reasons, the research highlights optimal second-mover strategy. It shows that, if the issue is sufficiently polarising, an optimal approach can be to adopt a position diametrically opposed to that of the first mover. The paper cites the example in the US of Chick fil-A and Black Rifle Coffee Company, whose respective responses to McDonalds’ and Starbucks’ CSR positioning maximised their profits; suggesting that visibly aligning around polarising issues is better for profits than doing so around non-polarising issues. By distinguishing different issue attributes, the research provides a systematic framework to predict how a firm’s rivals are likely to respond to its CSR efforts, and under what conditions.

A great deal of existing research investigates strategies to alleviate poverty that focus on the economics of financial inclusion. Many such strategies feature the use of smartphones in delivering life-improving information services to poorer consumers but because little is known about how the poor interact with the digital world, much of this research remains untested in a real-world context.

Through a novel app developed to investigate real-time smartphone usage, the researchers identified a hitherto-undetected barrier to digital information access by the poor: data shortages. By analysing over 9.4 million minutes of smartphone usage data from 929 residents of a Mumbai settlement, the study found that, under universally adopted monthly data plans, low-income individuals binge on YouTube and social media, spending 61% of their phone time (data) on entertainment. This results in data shortages and information isolation towards the end of the plan period, which can have a significant impact on users’ capacity to access essential health services and earn income. On the other hand, participants who were randomly assigned to a plan with daily data caps did not face the same data shortages.

The researchers found that pacing access to life-improving information translated into real-life behaviour, such as health-camp attendance, which suggests that daily data-cap plans could expand the effectiveness of smartphone-based interventions increasingly used to reach the poor. The findings have significant implications not only for smartphone users in impoverished communities, but also for telecoms providers. Capped plans are inherently cheaper to provide, so offering them could enable telecoms companies to increase customer value and expand access for low income consumers.

Digital platforms have enabled businesses to access audiences and markets in unprecedented ways, and the “freemium” business model, a blend of a “free” and a “premium” version of a product, has gained considerable traction in the digital space. But does a free version help or hurt sales of the paid-for version, and how should developers design freemium apps to increase conversion rates?

We used a comprehensive dataset on game apps from Apple’s App Store that tracked the launch of both the paid and the free versions of individual apps on a daily basis. We focus on apps that first had a paid version and the date when they launched the free version. That way, we can identify the effect of the launch of the free version on the paid version, that is whether a freemium strategy stimulates or hurts demand for an existing paid version. As we do not observe downloads, we use the number of ratings an app received as a proxy for demand.

We found that, on average, across the many apps we studied, the launch of the free version did not hurt but in fact increased demand for the paid version. Accounting for app-level differences, the launch of the free version led to an 8.9% increase in the daily number of ratings. We also looked in greater detail at the factors that drive tthe success of a freemium app. We find that this hinges on striking the right balance between free and premium features. Developers must ensure that the free version remains useful and engaging while offering a compelling incentive for users to upgrade. There are three main takeaways for digital firms and app developers: a freemium strategy can increase demand for the paid version of a product; strategies are most effective for products that prior users evaluated as moderately good; and to truly benefit from a freemium strategy, firms must ensure a sufficiently large difference between the value consumers receive from the free and the paid versions to induce upgrades. In pursuit of this goal, developers should carefully consider which features should be made available for free.

The worldwide stock of industrial robots has almost tripled in the past decade and is projected to grow at a similar rate or faster over the next 10 years. The extent and rapidity of the progress in automation, including major leaps in artificial-intelligence capabilities, raises several questions with important implications for individuals. Automation is mechanistic by definition – but is it “neutral” in terms of its impact on households with different levels of wealth, or could it amplify inequality? 

We analysed the effect of increased automation on household wealth accumulation and on the underlying mechanisms contributing to its impact. We found that adoption of robots across employees in the same industry significantly increases the unemployment risk of exposed households, and that households facing increased labour-income risk substantially reduce or eliminate their exposure to the stock market. In doing so, they forgo substantial equity returns of up to 4.3% a year. They therefore experience a considerable drop in the growth of their financial wealth, accumulating significantly less wealth relative to their incomes. 

Our findings strongly suggest that the patterns we document in wealth analysis are not simply a product of income or savings effects but are also driven by household behaviour regarding financial risk-taking and investment choices. Moreover, the negative impacts of automation on stock-market participation and wealth accumulation are only true for less-educated households, suggesting that rapid automation could further widen the wealth gap between high- and low-skilled individuals. The research highlights an important mechanism driving the negative effects of increased automation on household wealth accumulation and contributes to the discussion on the economic consequences of its increased use.

Calling someone a hypocrite has remained a common way to criticise them across time, culture and context. Hypocrites are seen as fickle and untrustworthy and allegations of hypocrisy can mean steep reputational costs. But people disagree over who is and is not a hypocrite – few believe themselves or their friends to be such, and pointing out ethical inconsistencies in others often fails to change their beliefs or behaviour. But why is this? In this paper we argue that one reason hypocrisy charges may fail to land is due to differing perceptions of comparability and the extent to which someone’s beliefs or behaviours seem inconsistent across different instances.

Calling someone a hypocrite typically entails invoking a comparison; one meant to highlight internal contradiction and cast moral character into question – yet there is ambiguity about which sorts of comparisons are valid in the first place. Through three experiments, we conceptualised and tested the role of perceived comparability in evaluating hypocrisy. We explored the idea that when people are motivated to attack their enemies, they search for points of comparison in their enemies actions in order to identify inconsistence. Conversely, when they are motivated to defend their allies, they reject the notion that their allies actions are comparable, thereby evading hypocrisy judgments. In essence, people tend to adjust their standards of comparability according to whether they view the person in question favourably or unfavourably.

Real-world morality is rife with complexity and no two situations are exactly alike. Our experiments identify an important role for perceived comparability in moral reasoning and help to explain why hypocrisy charges, despite their venom, might fail to make an impact. When motivated to attack, observers invoke comparisons to illustrate inconsistencies in a person’s beliefs or behaviour across different settings. Conversely, when motivated to defend, observers can delve into the details of scenarios and, because no two situations are perfectly alike, identify differences which justify believing that what might look like hypocrisy is really a case of apples and oranges – a fundamentally unreasonable comparison. This understanding can have broader implications for us in addressing conflicts and fostering more objective and fair assessments of moral behavior. The findings suggest that promoting awareness of perceived comparability and encouraging individuals to critically evaluate their biases could help mitigate disagreements about moral hypocrisy.

For more than 30 years, throughout the developed world, hospitals have been reimbursed for treating patients in a way that includes incentives to keep costs down. This reimbursement scheme, based on patient diagnosis related groups (DRGs), has proved effective, but also has its drawbacks. One problem is known as “cherry picking” – that is, favouring patients with diagnoses that will bring in higher reimbursements for relatively lower costs. A related problem is that efforts to reduce cherry picking are increasing another distortion known as “upcoding” – that is, assigning patients to higher paying DRGs than necessary. 

The researchers develop a theoretical framework based on hospitals’ prevailing reimbursement scheme (with DRGs) that takes into account the presence of cherry picking and upcoding. Unlike previous research, this new model is focused on the interaction between cherry picking and upcoding.

The research casts doubt on the effectiveness of recent efforts to reduce cherry picking incentives. It also shows the hospital market bifurcating into two groups of providers: generalists that treat patients efficiently and specialists that tend to drop expensive patients and underinvest in cost reductions. Finally, a potential solution based on input statistics that consider the distribution of patients treated for each DRG is proposed.

In sum, the researchers’ new model can offer a better understanding of hospital incentives, which can help regulators improve system efficiency for better health and social outcomes. 

The “Big Five” personality types – neuroticism, extraversion, openness, conscientiousness and agreeableness – have long attracted the attentions of academic psychologists and business leaders intent on assembling teams of people to execute their designs in the most efficient way. However, whereas researchers have been able to demonstrate consistent cause-and-effect relationships between the first four of those personality types and team performance, their findings regarding agreeableness have demonstrated a highly variable relationship with team performance.

Using a novel interdisciplinary computational modelling approach based on agent-based modelling (ABM) and genetic algorithms grounded in personality psychology, the researchers used computer simulation to simulate the impact of personality types on groups. The results confirmed many of the things that are already known, such as the fact that extraversion and conscientiousness are always helpful in a group. The researchers then entered a variable for predictability or unpredictability and found that the more unpredictable the environment, the more important agreeableness as a quality becomes: higher average team agreeableness correlates with better performance for uncertain work environments.

The study is notable for two main reasons. It is the first time that an ABM has been used to simulate how individuals with different personality traits perform as a team. This is significant because management selection systems have historically not considered agreeableness, and we find that in an uncertain world agreeable members contribute positively to team performance. The findings therefore strongly suggest organisations should be searching for agreeableness in whomever they appoint to managerial positions. The second reason why the findings are important now are the action items coming out of them. In an unpredictable and uncertain world, to be able to predict outcomes using a variable - agreeableness - that’s becoming ever more important is a key insight of the study.

The challenge in launching a successful platform is how to get the flywheel of indirect network effects going. This means entrepreneurs have to (i) understand the different available strategies to do this, and (ii) recognise that these strategies are not independent of each other but can be mixed together to optimise indirect network effects.

To date, research has focused on the large, successful platforms; there are few large-population studies on how to start a platform. To remedy this gap, the researchers compiled evidence on crowdfunding platforms in EU-15 countries over two decades; a population of 788 platforms. The study analysed the strategies the platforms used in order to identify common mixes of strategic choices; documenting not only platforms’ pricing strategies but also their non-pricing strategies.

The research is significant for two main audiences. For platform entrepreneurs, the paper makes a threefold contribution: (i) identifying common mixes of strategic choices; (ii) tracking deviations from these mixes; and (iii) associating choices with platforms’ survival and growth.

For an academic audience, the sheer scale of the empirical investigation –documenting six strategic choices across hundreds of platforms – makes an important contribution to the literature, offering validation and extension of previous work. The results show that crowdfunding type is not a single, standalone choice but rather is associated with a broad mix of (pricing and non-pricing) strategic choices. 

Corporate executives have strong incentives to accurately predict the stock price reactions to news they disclose. This ability is crucial for timing transactions, controlling their firms’ narratives with investors, and understanding the price impact of strategic and operational decisions revealed in their disclosures. However, the extent to which they can do so accurately, especially during periods of market volatility and uncertainty such as the onset of COVID-19, is unknown.

The researchers conducted a field study to provide direct evidence of executives’ accuracy. They recruited over 650 U.S. public company executives to share their predictions of the stock price response to their companies’ second 2020 quarterly reports. The study examined the distribution of these predictions, their short-term accuracy, and how long it took for stock prices to converge to managers’ initial expectations over subsequent weeks and months.

Despite market volatility and uncertainty during the pandemic, executives correctly predicted the direction of stock return in two-thirds of cases. The study also found that executives’ short-window expectation errors predict returns. Following their companies’ reports, executives traded against the market in line with their initial error, and stock prices largely converged to their expectations over the subsequent 100 trading days.  

The results suggest that the more inaccurate their estimates are, the less executives engage in corporate window-dressing, and they do not appear to learn from unexpected price movements. They also suggest that executives have surprisingly good foresight regarding how investors’ beliefs will change after the reports, albeit with a delay. Collectively, the results provide evidence of executives’ superior ability to anticipate how the market prices information in quarterly financial reports, even in periods of extraordinary change.  

Driven by a firm’s unique routines and capabilities, firm-specific human capital (FSHC) is traditionally viewed as a means to deter employee mobility and sustain competitive advantage. This perspective is grounded in human capital theory, which assumes that the labour market can accurately value an individual’s skills and price them appropriately. However, this theory is being challenged by new viewpoints that suggest FSHC may not necessarily constrain mobility. Instead, it could facilitate it, especially where firms are seeking workers who are capable of developing unique skills post-hire. Nonetheless, there is no substantial evidence supporting either stance, largely because it is unrealistic to assume that all labor market participants can value and price an individual’s skills similarly and accurately. This led us to explore how perceived FSHC—FSHC that realistically acknowledges variations in how labour market participants may value and price an individual’s skills—might influence mobility, introducing supply-side factors such as job satisfaction, workplace embeddedness, and a preference for job autonomy.

Our research used surveys from distinct contexts in South Korea and the United States to examine the concept of perceived FSHC. We found this to be linked with very different attitudes and outcomes than those suggested by previous theories. Significantly, we discovered that perceived FSHC can indeed have a positive impact on mobility, contrary to the deterring effects attributed to actual FSHC. This relationship depends partly on the employee’s perceived fit with the firm, evidenced by job satisfaction and embeddedness, and is further amplified when they value autonomy within their role. 

Our findings suggest that perceptions of FSHC are quite distinct from actual FSHC. Most importantly, perceived FSHC may lead to turnover as opposed to constraining mobility. This adds to the current research, which mainly focuses on the demand-side arguments about FSHC’s role in mobility. It also addresses the issue of aggregation bias, which tends to overstate the influence of demand-side factors in labour market studies. The recognition that labour market demand is not the sole factor behind mobility emphasizes the need for a more nuanced understanding of the interplay between perceptions and actual skills in the labour market.

The economic impact of private-equity investments on local-government finances is crucial because sound fiscal budgets and local-government spending are critical to economic development and community wellbeing. As of 2022, PE was the largest alternative asset class, with over $4.5 trillion in assets under management (projected to exceed $11 trillion by 2026). Their critical role begs the question how PE firms create value for the broader set of stakeholders beyond PE investors; particularly in relation to the PE industry’s contribution to tax revenues. 

To assess whether lower tax revenues have a wider impact on a government’s public finances through the effect on the available budget, we investigated public spending and debt financing after PE firms buyout companies in the jurisdictions of local governments. We examined over 11,000 deals and data relating to private firms in Europe and showed that target firms’ effective tax rates and total tax expenses decreased by 15% and 13% respectively after PE deals. At the same time, target firms expanded their capital expenditures and firm boundaries, but did not increase employment. Using administrative data on the public finances of German municipalities, we observed that PE buyouts are negatively associated with local governments’ tax revenues and spending; a result likely driven by reduced tax payments of PE firms’ portfolio companies, accompanied by only modest positive spillovers of PE investments on regional economic growth.

The study provides novel evidence on the relationship between PE and local governments; showing that some PE firms create value for their shareholders by cutting tax expenses and that this harms the budgets of local governments. The finding of significant and persistent increases in firms’ tax efficiency after PE buyouts suggests that local governments could miss out on tax revenue. However, the study also shows that companies grow significantly, locally, in a country, and internationally after they get acquired by PE firms. Thus, the findings point the way for future research to pin down the mechanisms through which PE activity affects aggregate economic outcomes and better understand the contribution of PE to tax revenues at the country or global level.

Despite the increased representation of women in leadership positions in recent decades, gender stereotypes hold women in leadership contexts back. This bias is at odds with the core organisational values of equity, fairness and meritocracy. Past research has focused on what women can do to contend with bias (e.g. by speaking up to confront bias directly). We wanted to take a different approach – how could we intervene to reduce decision-makers’ gender bias in leader evaluation and selection?

The paper introduces the concept of mindsets about the universality of leadership potential. A universal mindset captures the belief that most individuals have high leadership potential, while a non-universal mindset captures the belief that only some individuals have high leadership potential.

We tested our hypotheses in five studies with diverse samples and methods. Consistent with our predictions, we found that the universal mindset was associated with less bias against women in evaluations of competence, agency and leadership capability – and as a result in leader selection. The universal mindset was particularly associated with less gender bias when people held stronger gender stereotypes about leadership.

The findings suggest that the belief that most people have leadership potential can challenge the persistent gender bias in the evaluation and selection of potential leaders. This is important for leaders and organizations because it suggests that communicating a universal leadership potential mindset could help to combat persistent and pernicious gender biases.

While some decisions can be automated, many high-stakes decisions follow an ‘expert-in-loop’ structure. Here, an expert decision-maker (e.g. a doctor) receives information or recommendations from an AI tool and decides on a course of action. Hence, the expert may only partially follow the algorithm’s recommendations. Such partial adherence behavior may lead to catastrophic failure, even when the decision-maker seldom deviates from the algorithm. The question is: How can we develop recommendation systems that are safe in the presence of such partial adherence?

We devised a model to account for partial adherence in the context of multi-stage decision-making. On the negative side, we show that deploying an algorithm that ignores the possibility of partial adherence can have a dramatic impact on system performance, and even be worse than having no AI-recommendation at all. On the positive note, our model offers a solution by providing a framework to compute algorithmic recommendations whose performance is resilient in the face of human deviations, hence improving upon both human performance (without any algorithm) and adherence-unaware recommendations. This new framework for “adherence-aware” decision-making provides safe recommendations, with performance guarantees even if the decision-maker only partially follows them.

Previous work on human adherence to algorithmic recommendations mostly focused on examining the reasons why humans deviate (e.g., information asymmetry, algorithmic aversion), to understand the impact of partial adherence, and propose solutions to increase human adherence. This research takes a complementary approach, by taking the partial adherence phenomenon as an input and proposing to adjust the algorithmic recommendations instead of the human behaviour. Unlike other approaches, this model is agnostic to the reasons behind partial adherence. Using a framework to enhance AI recommendations by accounting for human deviations promises more robust and effective decision-making in expert-in-the-loop systems.

Women are under-represented in top management positions – such as in executive posts, entrepreneurship and science. A common explanation is that they exit talent pipelines at a faster rate than men. We also know that when men and women go after the same opportunity, and are rejected, women are much less likely than men to reapply for a similar position in the future. The challenge here is to understand the implications that this phenomenon will have for diversity in the long run.

Using a novel combination of formal mathematical modelling, with data from executive hiring, crowdfunding and patent applications, the researchers investigated long-term diversity outcomes and simulated the results of various scenarios. The model challenged the popular and obvious assumption that because women are not reapplying for opportunities, there will be fewer women in the pipeline in the long run. They found this only to be true in certain settings, and not even relevant in others. The results of the model helped them to scrutinise a popular intervention for lessening the gender gap: increasing the number of women in the application pool.

The results of the study were surprising. They suggest that convincing more women to reapply can actually backfire, as it can lead to higher rejection rates with fewer women in the application process in the long run. And in a sex bias analysis, they found that even unbiased rejection rates can yield large segregation effects. For a more effective approach to reducing gender disparities, lowering the rejection rate is paramount; and both for men and women. Surprisingly, this type of gender-neutral policy will result in increased diversity. This model plays a crucial role in evaluating diversity policies and opens up new avenues of research on women’s under-representation in the economy.

Corporations report spending $4 billion a year on lobbying, which pales in comparison to the trillions of dollars on public-policy interventions or government contracts. Given that firms spend so little comparatively, is corporate lobbying economically irrelevant? Despite the existing literature on the subject, little is known about the financial effects of corporate lobbying or the relationship between the financial and economic consequences of corporate lobbying. Some scholars argue we should “follow the money”, because allowing firms to “buy” policies implies large, rich firms can extract enormous rents from politics. Other scholars ignore corporate lobbying, because the sums involved are small. The challenge was to try to show the political-risk premium associated with lobbying to determine whether we should, indeed, follow the money trail when it comes to lobbying.

We designed a model that captured the interaction between financial and real markets to evaluate the real impact of the political-risk premium. This was measured by the difference between the stock returns of high- and low-lobbying firms. The model found an annual 6% to 8% return premium for stocks of high-lobbying firms, which compensated investors for political risk.

The model predicts that if investors ceased seeking compensation for political risk, R&D investment would increase by 6% and the innovation rate would increase by 0.4%. So, the risk-premium costs of lobbying are quantitatively and economically important, even if the resources “wasted” on lobbying seem objectively small.

The study shows that the political risk-premium cost associated with lobbying deserves greater attention, and that the real and financial effects of corporate lobbying are closely related. Since firms lobby to maximise their value, financial returns drive political competition. At the same time, political competition affects the industry dynamics of risk, increases firms’ opportunity cost of capital and reduces their incentives to make other investments. In other words: follow the money!

The idea that working mothers leave their lucrative careers to gain more time with their families is a dominant narrative in the employment field, and women’s desire to resolve career-family conflict is often considered the main reason why they pursue entrepreneurship. This study explored an additional motivation driving female entrepreneurship: the motherhood penalty in the form of reduced earnings prospects that working mothers experience as a result of employer discrimination.

The researchers used matched employer and employee data from Sweden covering the entire working population – including details of occupation, pay and child status – to compare women who had children versus those who did not in the same organisation and doing the same job. Using this dataset, they were able to examine career mobility and in particular distinguish new-venture founding from self-employment. This enabled them to determine how many women turned to entrepreneurship after motherhood.  

The study found that reduced earnings opportunities in wage employment due to motherhood status is a key factor driving female entrepreneurship. Moreover, the larger the “earning penalty” (wage discrimination) that mothers experienced in the workplace, the more likely they were to leave their employer and start their own business. The findings also found that this response by mothers to wage discrimination is more pronounced for women in high-paying or managerial positions, given the higher opportunity cost of staying in wage work and the higher potential payoffs from entrepreneurship. By shedding light on the drivers of female entrepreneurship, the study contributes to a more thorough understanding of what motivates women to pursue irregular and atypical careers, such as entrepreneurship and the workplace wage discrimination impelling their choices.