Abstract

Of the 27 million plus operating firms identified by the U.S. Census Bureau in 2010, 79% operate alone or in some capacity without any paid employees. This study lays the foundation for an investigation of the transition from being self-employed to becoming a firm (Parker, 2006; Carroll et. al, 2000) as an important component of the creation of jobs in the economy. In this study, we frame the first-time hiring by the smallest of businesses, the “one person enterprise” (OPE) as a “Becoming an Employer Problem” (BEP), which they must solve to succeed. We draw on Coase’s (1937) Theory of the Firm, which suggests a firm exists only after it has employees, and Penrose’s (1959) Theory of the Growth of the Firm, which suggests human resources are a critical asset to the firm as it grows. Little research has attempted to understand why the smallest businesses do not grow, hire employees, or create jobs as job creation has not often been used as an important dependent variable (Ireland, Retzel & Webb, 2005).

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