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New Firm Performance: Does the Age of Founders Affect Employment Creation?

Jan de Kok (), Ingrid Verheul () and Abdelfatah Ichou

No H201015, Scales Research Reports from EIM Business and Policy Research

Abstract: The ageing population increasingly becomes a challenge for policy makers. Given the expected changes in the age decomposition of the workforce, it becomes more pressing to understand the nature of the relationship between age and entrepreneurship. More specifically: what are the consequences of an ageing (entrepreneurial) population on entrepreneurial performance? A recent study by EIM investigates the effect of the age of the entrepreneur at start-up on the size of newly started firms. A distinction is made between the decision of entrepreneurs whether or not to become an employer, and the decision of employers to hire a certain number of employees. To examine to which extent age has a direct and/or indirect effect on these two decision, a sample of 849 new firms has been used that survived the first three years after start-up. A first conclusion of the empirical analysis is that it is important to make the distinction between the two decisions: the decision of entrepreneurs whether or not to become an employer depends on other factors than the decision of employers regarding the number of employees. A second conclusion is that age has a negative relationship with the outcome of both decisions, but that these relationships are completely mediated by the mediating variables included in the study. Entrepreneurs who start at older age are less likely to work fulltime in their new venture, are less willing to take risks and have a lower perception of their entrepreneurial skills. Each of these factors has, in turn, a positive impact on the probability of employing personnel. For the number of employees a negative indirect effect of age exists, through the effect of age on the perception of entrepreneurial skills.

New Economics Papers: this item is included in nep-age, nep-ent and nep-sbm
Date: 2010-05-11
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