The Entrepreneur's Mode of Entry: Business Takeover or New Venture Start

Simon Parker () and Mirjam Praag

No 2382, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyse the decision to become an entrepreneur by either taking over an established business or starting a new venture from scratch. A model is developed which predicts how several individual- and firm-specific characteristics influence entrepreneurs’ entry mode. The new venture creation mode is associated with higher levels of schooling and wealth, whereas managerial experience, new venture start-up capital requirements and risk promote the takeover mode. Entrepreneurs whose parents run a family firm are predicted to invest the least in schooling, since schooling reduces search costs and these individuals have the lowest probability of needing to search for a business opportunity outside their family. A sample of data on entrepreneurs from the Netherlands provides broad support for the theory; implications for policy-makers concerned about the survival of family firms lacking within-family successors are discussed.

Keywords: human capital; business takeover; entrepreneurship; business entry; venture start-up (search for similar items in EconPapers)
JEL-codes: J24 L26 M13 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2006-10
New Economics Papers: this item is included in nep-bec, nep-ent and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published in: Journal of Business Venturing, 2011, 27 (1), 31-46

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Related works:
Working Paper: The entrepreneur’s mode of entry: Business takeover or new venture start? (2006)
Working Paper: The Entrepreneur's Mode of Entry: Business Takeover or New Venture Start? (2006)
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