Negative life events and entrepreneurship

We examine the impact of negative life events on the proclivity for entrepreneurship and whether a person’s locus of control (LoC) can help leverage opportunities arising from negative shocks to become entrepreneurial. We employ 19 waves of data from the Household Income Labour Dynamics Australia (HILDA) survey and focus on 10 different negative life events that occurred in the preceding 12 months. We find that each additional negative shock is associated with a 0.4 percentage point increase in the probability of being self-employed. However, when we separate out the 10 negative life events, there is only consistent evidence that two – major worsening in finances and being fired or made redundant – increase the propensity for entrepreneurship. We find weak evidence that being more internal in LoC provides a buffer against negative shocks. Our findings have important implications for developing policies that seek to address the impact of negative shocks.