chapter 7 Inferring the Unobserved Human Capital of Entrepreneurs

Jean Bonnet, Arnab Bhattacharjee, Régis Renault () and Nicolas Le Pape
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Régis Renault: THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique

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Abstract: The goal of the paper by Bhattacharjee et al. is to study the role of labourmarket characteristics in entrepreneurial choice and its impact on the survivalof newly created firms. Their starting point is that, when starting a newbusiness, an entrepreneur's labor market situation (e.g. employed or not –andwhether or not in the preferred sector-) reflects how his human capital maybe valuated through salaried labor, the alternative for entrepreneurship.Hence, Bhattacharjee and coauthors view the labor market situation precedingentrepreneurship as an indicator of the amount of unobserved human capitalpeople have. More in particular, when an individual sets up a firm in the samesector of experience, this may indicate a high average level of unobservedhuman capital due to a lack of depreciation motive. The authors test thehypothesis that an individual's previous labor market situation affects thepredictive value of observed human capital for surviving as an entrepreneur.The results show that the impact of education on the new firm's survival isindeed most pronounced for firms created by individuals salaried in theirpreferred branch of activity while it is rather limited for other entrepreneurs.

Keywords: Duration Analysis; Entrepreneurship; Labor Market Imperfections; Human Capital; Firm's Survival; Duration Analysis. (search for similar items in EconPapers)
Date: 2006-07
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Published in Prof. Dr. Mirjam van Praag. Entrepreneurship and Human CapitalAmsterdam Center for Entrepreneurship, pp.47-51, 2006

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