Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment

Steffen Andersen and Kasper Meisner Nielsen ()
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Kasper Meisner Nielsen: Department of Finance, Hong Kong University of Science and Technology

No 03-2012, Working Papers from Copenhagen Business School, Department of Economics

Abstract: We use a natural experiment in Denmark to test the hypothesis that aspiring entrepreneurs face financial constraints because of low entrepreneurial quality. We identify 304 constrained entrepreneurs who start a business after receiving windfall wealth and examine the performance of these marginal entrepreneurs. We find that constrained entrepreneurs have significantly lower survival rates and lower profits when compared with a matched sample of unconstrained entrepreneurs. These results are consistent with the hypothesis that the marginal entrepreneur is of low quality

Keywords: entrepreneurship; natural experiments (search for similar items in EconPapers)
JEL-codes: L26 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2012-08-01
New Economics Papers: this item is included in nep-ent
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