How do parental leave policies affect mothers’ decisions to become entrepreneurs?

Research published in the Journal of Management Studies provides new insights on how parental leave policies, involving their time and money components, might affect whether mothers start a new business.

Contrary to the common belief that generous parental leave discourages entrepreneurship, the study finds that offering more time off through parental leave can promote mothers’ entrepreneurship.

In two complementary studies, the researchers found that the duration of parental leave—yet not the amount of money paid—seems to shape mothers’ entrepreneurial activity. The first study analyzed two major policy reforms in Germany. A 2001 reform that shortened the duration of parental leave reduced the odds of mothers becoming self-employed, whereas a 2007 reform that increased the money paid during parental leave had no significant effect. The second study, in which mothers or soon-to-be mothers rated the likelihood of becoming self-employed along various hypothetical scenarios that manipulated both the time and money components of parental leave, provided further support that the duration (but not the financial support) of parental leave significantly influences the perceived likelihood of becoming self-employed.

Additional analyses suggested that the money component of parental leave still matters for some groups. Money affects the likelihood of becoming an entrepreneur particularly among middle-class mothers who are heavily burdened with household responsibilities.

“After childbirth, giving mothers time to think and reflect will increase their likelihood of becoming self-employed,” said first author Pomme Theunissen, PhD, of Maastricht University.

URL upon publication: https://onlinelibrary.wiley.com/doi/10.1111/joms.13215

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