Abstract

Purpose of this study is to test a model where employees’ relative wage position and employer’s relative performance affects careers of highly skilled employees in their decision to venture into entrepreneurship and how it differs across highly skilled groups across organizations. The investigation is important since wage is determined not only by the employees’ education and performance, but also by employer performance. Bureaucratic organizations pay premium wage to highly skilled employees, and high performing organizations pay higher premium than low performing ones. This wage premium is recognized as driver of wage inequality. For employees performing above average, the pyramid shape of bureaucratic organizations limits possibilities for career advancement. Faced with limited advancement opportunities, employees might seek alternate career attainment options outside organization, such as entrepreneurship. For employees performing below average, entrepreneurship might represent a more lucrative option. However, in both cases, decisions to enter entrepreneurship is connected to the potential loss of premium wage specific to their employer organization, where high performing organizations are more likely to retain employees than low performing ones.

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