Ride-sharing apps and other easily-accessible gig economy platforms could boost entrepreneurship, according to new research from entrepreneurship researchers at Rice University, Washington University and Boston College.
The researchers studied the effects on entrepreneurship by looking at ride-hailing platforms in major U.S. cities and new business registrations available in the Startup Cartography Project. They also studied Google searches of entrepreneurship in the area.
After the arrival of major ride-hailing platforms in cities, such as Uber and Lyft, there was an increase in business in business registrations of about 5%, and a 7% to 12% increase in entrepreneurship interest, according to the report, which was led by Yael Hochberg, entrepreneurship and finance professor at Rice University and head of its Entrepreneurship Initiative, John Barrios, an assistant professor of accounting at Washington University in St. Louis, and Hanyi Yi, an assistant professor of finance at Boston College.
“Having the option to access gig work in the event of failure or other unpredictable situations appears to have huge value in pushing entrepreneurs to accept the risks associated with starting a new business,” Hochberg said in the release.
Lack of Capital
The research reinforces what other data has established: that one of the key forces holding back new business development is the lack of capital available to entrepreneurs.
Entrepreneurship is notoriously risky. The gig economy – short-term employment, such as contract work or temporarily freelancing may reduce the perception of risk by allowing people to work flexibly around creating their new businesses. Access to the gig economy lessens the risk of entrepreneurship since it provides a flexible back up option for those starting a business, according to the report.
The authors noted that because other sources have reported that Uber and Lyft drivers rarely incorporate and more typically see themselves as employees of the companies, the surge in business registrations was not likely to be coming from people who saw their gigs as actual businesses. The authors noted that the arrival of the ride-hailing platforms is often followed by other platforms, such as those for food delivery, errand running, or package delivery.
The study found that small-business lending to newly registered businesses increased by about 5% after the arrival of gig economy platforms in the local market. This effect was stronger in cities where economic uncertainty was stronger.