Push and Pull Drivers of Youth Self-Employment in the European Union: The Moderating Influence of Youth Transition Regimes and Varieties of Capitalism

Perceived as a fundamental ‘driver of entrepreneurship and job creation’, self-employment is viewed as an important potential contributor economic dynamism and job growth in Europe (European Union 2010). With the potential to facilitate job creation, skills development and the participation of the unemployed and the disadvantaged in society, policies targeted at promoting self-employment have been given a prominent role in policies targeted at the EU’s post-crisis employment recovery (Europa, 2014). 

The primary theory development around start-up and entrepreneurial motivations has been to classify motivations into categories of ‘push’ and ‘pull’ factors (Hakim, 1989; McClelland et al., 2005; Schjoedt and Shaver, 2007; Segal et al., 2005). Push factors are characterised by personal or external factors (including caring responsibilities or a poor economic climate and high unemployment), and often have negative connotations. Alternatively, pull factors are those that draw people to start businesses – such as seeing an opportunity (Hakim, 1989). In general, pull factors have been found to be more prevalent than push factors (Segal et al., 2005; Shinnar and Young, 2008).  This is significant because start-ups motivated by push factors have been found to be less successful (financially) than than those built upon pull factors (Amit and Muller, 1995).

Four key drivers of entrepreneurial motivations can be found in the literature. First, a desire for independence (and related factors such as autonomy and greater control) and is generally regarded to be a pull factor. Second, monetary motivations are also another important factor and have been linked to pull factors. Unemployment, redundancy and a lack of job or career opportunities are regarded as key push factors. Finally, family-related motivations (e.g., family obligations, a desire for work-life balance) have also been found to be important motivators, especially for women, and are often regarded as push factors.  How economic and institutional contexts motivate young people to become self-employed is not well understood, however. The motivational influences are likely to be critical for whether self-employment is sustainable, especially in an environment of economic recovery.  This paper will examine how the motivations for young people to become self-employed are influenced by the theoretical lenses of Youth Transition Regimes (Walther and Pohl, 2005) and the Varieties of Capitalism (Hall and Soskice, 2001).

Youth Transition Regimes (YTR) examines the relationship between socio-economic, institutional and individual dimensions and the influence of  cultural dimension of what is held to be normal, acceptable and legitimate in a given context (Walther and Pohl 2005, pp.38). In addition to welfare systems, several transition mechanisms for young people from school to work is posited. These include:  ‘Education (selectivity and stratification)’, ‘Training (standardisation and company based  schools)’, ‘Labour market entrance’, ‘Mechanisms of doing gender’, ‘Explanations of and policies against youth unemployment’, ‘Concepts of youth and disadvantage’, and ‘Policies of dealing with ethnic minorities and migration’ (Walther and Pohl 2005, pp. 39). These influencers are used to formulate four clusters of transition typologies: the ‘Universalistic’, the ‘Liberal’, the ‘Employment-centred’ and the ‘Sub-protective’ (Walther and Pohl, 2005; Walther, 2006). A further regime, the ‘Post-socialist’ has been identified albeit it is not as well defined as the others (Walther and Pohl, 2005; Walther, 2006).

Under the Varieties of Capitalism (VoC), ‘a firm-centred political economy’ (Hall and Soskice 2001, pp. 6) is adopted in which institutional similarities and differences among developed economies are grouped by two classifications i.e. liberal market economies and coordinated market economies (Hall and Soskice, 2001). As an approach to the political economy, a relational view of the firm is adopted in which firms ‘as actors’ seek ‘to develop and exploit core competencies (Hall and Soskice 2001, pp. 6). Emphasis is placed on five spheres ‘in which firms must develop relationships to resolve coordination problems central to their core competencies’ (Hall and Soskice 2001, pp.6). 

Under the liberal market economy, the coordination of firm activities is contextualised by hierarchies and competition (Hall and Soskice, 2001).  Market relations are denoted ‘by the arm’s length exchange of goods or services in a context of competition and formal contracting’ (Hall and Soskice 2001, pp. 8). A firm’s willingness to supply and demand goods or services is contingent on market price signals (Hall and Soskice, 2001).  Under the coordinated market economy, the coordination of firm activities is contextualised by non-market relationships of ‘more extensive relational or incomplete contracting, network monitoring based on the exchange of private, information inside networks’ (Hall and Soskice 2001, pp. 8) with collaboration remaining very much at the crux of this economy (Hall and Soskice, 2001). 

Neither of these theories have been previously applied to better understand self-employment and, in particular, the factors that motivate self-employment. This paper helps to fill this gap. The potential moderating role of the contexts of Youth Transition Regimes (Walther and Pohl, 2005) and the Varieties of Capitalism (Hall and Soskice, 2001) on push and pull factors motivating young people to become self-employed within the EU will be examined.   

The key research objectives of the paper are as follows:

1. To examine how push and pull factor motivate young people to become self-employed.
2. To examine how Youth Transition Regimes influence the relative importance of push and pull factors for young people to become self-employed.
3. To examine how Varieties of Capitalism influence the relative importance of push and pull factors for young people to become self-employed.

Particular emphasis will be given to how the crisis in the EU has influenced these factors and how recovery may influence the sustainability of youth self-employment in the future.

An exploratory study of young self-employed people in Ireland will be used to provide initial findings for the questions posited. The data analysed are from two sources: 1. a pilot survey of young self-employed and those planning to become self-employed collected at a “Start-Up Weekend”; and 2. Initial findings from semi-structured interviews with young people who have started businesses in the cultural and creative industries and the information and communications industries (ICT).