Navigating the Intersection of the Gig Economy and Entrepreneurship

In recent years, the gig economy has taken center stage in reshaping the way people work. Flexible hours, low barriers to entry, and the ability to supplement income have made gig work a popular option for millions. But beyond providing temporary income, can gig work encourage entrepreneurial ventures? That’s the central question behind a multi-year project led by Matthew Denes, alongside his colleagues Spyridon Lagaras and Margarita Tsoutsoura.

Their research, funded in part by the Block Center for Technology and Society at Carnegie Mellon University, dives deep into U.S. tax return data to understand how participation in the gig economy might inspire individuals to start their own businesses. Using administrative data from tax returns, the team is exploring how individuals who earn income from gig work go on to create new firms—often drawing from their gig experience to shape their entrepreneurial efforts.

A Closer Look at the Research

Denes' project isn’t just about tracking trends; it’s about uncovering real connections between gig work and entrepreneurship. "Our objective was to see if the gig economy actually encourages people to take that next step into starting their own companies," Denes explains. By accessing a comprehensive dataset from the IRS, the team could analyze gig workers and their entrepreneurial behavior on an unprecedented scale.

The research focuses on individuals receiving Form 1099 income—often associated with gig work like driving for ride-sharing platforms or freelancing. The idea is simple: many gig workers experiment with running their own businesses on a small scale, using the flexibility and low barriers of the gig economy as a testing ground. Eventually, some of them decide to formalize their side hustle into a full-fledged business.

"We were particularly interested in how gig workers transition into entrepreneurship," says Denes. "Are they more likely to take the leap into starting a business, and what types of firms are they creating?"

The Role of Flexibility and Opportunity

The study suggests that gig work provides an environment conducive to entrepreneurship, especially for younger individuals and those with lower incomes. For these groups, gig work offers a relatively low-risk way to experiment with new ideas. "It’s about learning," Denes notes. "The gig economy allows individuals to try out different industries and accumulate experience that could be valuable when starting their own firm."

Interestingly, the pandemic played a significant role in this dynamic. With the rise of remote work and a surge in new firm creation, especially among women, Denes and his team saw an uptick in entrepreneurial activity linked to gig work. Stimulus payments and economic uncertainty led many to explore new avenues, with gig work serving as a bridge to entrepreneurship.

Data, Funding, and the Path Forward

Handling such a vast dataset posed significant challenges, particularly in gaining access to the tax returns necessary for the analysis. "The data we’re working with is enormous," Denes admits. "But having the Block Center’s funding and the resources to hire pre-doctoral research associates allowed us to focus on this project full-time, something that would have been much harder without that support."

The project has already provided key insights into how the gig economy can serve as a gateway to entrepreneurship, but Denes sees even more potential. "There’s so much more we can explore—whether the types of businesses gig workers start differ from those of other entrepreneurs, or how policies might be tailored to encourage more entrepreneurship in the gig economy."

Implications for Policy and the Future

The gig economy is only growing, and as it evolves, so do its implications for entrepreneurship and the labor market. Denes believes this research will have long-term impacts on how policymakers view the gig economy. "The question of how to treat gig workers is still very much up in the air," he says. "There are both positive and negative aspects of the gig economy, but understanding its role in fostering new business creation is crucial."

Denes hopes that his work will help shape future discussions on economic mobility, job creation, and labor policy. "We’re starting to see a clearer picture of how gig work can serve as a pathway to entrepreneurship. As this economy grows, so does the opportunity to use it as a stepping stone for those who might not have had the resources to start a business otherwise."

By shedding light on the intersection of gig work and entrepreneurship, Denes and his team are contributing to a broader understanding of how modern labor markets function—and how they can be harnessed to create new opportunities for economic growth and innovation.