From Employment to Entrepreneurship

Abstract

Technology is making smaller scale, distributed production more economical, raising global competition and forcing change on traditional firms in mature markets. Change was gradual for decades but accelerated during the last ten or fifteen years as new computing and communications (C&C) technologies helped coordinate production flows, making firms break up and distribute their value chains over markets of subcontractors and changing the work environment of individuals. I investigate the consequences for individuals of the faster creative destruction process that is taking place through the turnover of firms rather than internally within firms. I conclude that labour market risks are changing such that entrepreneurial ability, intellectual flexibility and a capacity to learn efficiently from experience will become competitive advantages for individuals. I also conclude that efficient education may offer a way of countering the ongoing polarization of labour markets and I derive a platform theory of cumulative learning from experience that emphasizes the acquisition of basic skills during early school years. A varied and advanced job environment to learn from is probably the most important factor, sustaining the competitive advantage of the advanced industrial economies. A stylized comparison of the educational and labour market systems suggests that the European systems are at a disadvantage compared to that of the US.