Unpacking how entrepreneurs’ mental health shapes innovation and employment

Entrepreneurial firms are usually seen as a major driving force of economic competitiveness and job creation. However, being an entrepreneur is a mentally highly demanding occupation and recent research has identified numerous stressors for entrepreneurs’ mental well-being. Still, up to now, there is a dearth in our understanding of how entrepreneurs’ mental well-being relates to important outcomes of their firms. The core aim of the proposed research is to establish links between entrepreneurs’ mental well-being and (i) their firms’ innovation investments as well as outcomes and (ii) the mental well-being and labor market success of their employees. We aim at generating cross-country evidence from two highly competitive small open economies, Denmark and Switzerland, and shall employ both publicly available register data and web-scraped data, along with qualitative interviews. This is an important contribution, as success with respect to innovation and the attraction and retention of employees are of high managerial importance for entrepreneurs and seen as the core functions of entrepreneurship by economists and policy makers. Previous research in economics, psychology, and entrepreneurship has analyzed antecedents of entrepreneurs’ mental well-being and, to a lesser extent, the consequences of entrepreneurs’ mental health for firm performance. Yet, as studies are scattered across different disciplines and often compartmentalized, with findings highly specific to certain industries or geographic locations, general advice is difficult to imply. In addition, most studies remain correlational in nature and rarely consider dynamic relationships between mental well-being and firm performance. In the present proposal, we suggest three research projects that take economic and managerial perspectives and draw on previous research in psychology, entrepreneurship, and economics. We consider the proposed research of relevance for any owner-managed firm but focus predominantly on recent founders empirically, as many stressors might be of particular relevance in early stages of venturing. In the first project, we propose a mixed method design, comprising of qualitative interviews and a quantitative validation to thoroughly understand the relationship between the resources and stressors for Swiss entrepreneurs’ mental well-being and their innovation investments and outcomes. As knowledge of the relationship between mental health and innovation investment and outcomes is scarce, this will provide important theoretical and empirical insights for the subsequent projects. In the second study, we will use unique linked employer-employee data combined with medical prescription records in Denmark. To come closer to a causal attribution of the effects of entrepreneurs' mental well-being on their firms’ innovation, we will empirically exploit a quasi-experiment, which provided windfall gains to a subset of entrepreneurs. In the third project, we broaden the scope beyond the entrepreneurs themselves and analyze consequences of the entrepreneurs’ mental well-being for the mental well-being and careers of their employees. We argue that in summary these studies will help to deduct well-targeted managerial and policy advice for the knowledge-intensive startup ecosystems and provide answers to the question whether promoting careers in entrepreneurship, for example through entrepreneurship training in universities and schools, has externalities for public health systems.