Entrepreneurial Efforts and Opportunity Costs: Evidence from Twitch Streamers

Wollborn, P., Holder, U., Dornekott, D.

Abstract

In the last decade, there has been substantial growth in the number of individuals deriving income through digital platforms (e.g., Uber, Airbnb, Instagram), including from live streaming platforms. In this context, we examine whether reduced opportunity costs, such as having more free time and being unemployed, affect people’s entrepreneurial efforts, particularly regarding professionalized streaming activity. As such, we use an extensive longitudinal dataset gathered from the live-video streaming service Twitch.tv, and we exploit the changes and restrictions brought about by the COVID-19 pandemic to measure individuals’ responses to having to spend more time at home, also given that some streamers were more affected than others. By comparing newcomers to established streamers, we find that all streamers intensified their efforts during this period and that this effect was particularly strong for streamers who were somewhat but not fully professionalized prior to the pandemic. This is consistent with the view that low opportunity costs are advantageous for starting and professionalizing activities in the platform labor market, that the work is taken up because of a lack of alternatives and, thus, can provide a form of insurance. This especially holds for streamers who had reached a certain threshold pre COVID-19, as performing at this level enabled them to consider further professionalizing their streaming activities. The ex-post analysis of newcomers’ success shows that even when mobility increased beyond pre-lockdown levels and unemployment rates had again fallen strongly, the most successful “newcomer” streamers were able to transform their initial reaction of potentially only income smoothing to a sustainable long-term solution with the potential for further entrepreneurial effort.