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Once bitten, twice shy? The performance of entrepreneurial restarts

Georg Metzger

No 06-083, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: The aim of this paper is to analyze the effect of entrepreneurial experience on firm growth. According to the human capital theory, individuals who have higher ?human capital? are more successful than others. Entrepreneurial experience is a kind of human capital and, therefore, should affect firm performance positively. In reality, however, not all types of experience indicate enhanced knowledge alone. Bad experience, here the experience of failure, might equally be a signal for entrepreneurial weakness and, thus, an argument for exercising restraint in possible further business ventures. The ambiguous effects of this failure experience on firm success necessitate an in-depth analysis of the issue. Therefore, this paper contains an empirical comparison of firms involving experienced entrepreneurs and novice firms. The analysis shows that entrepreneurial experience affects firm growth positively. Accounting for failure experience separately reveals a negative effect. Interpreting this finding in combination with other control measures indicates that failed entrepreneurs indeed behave more cautiously regarding firm growth.

Keywords: Business Failure; Firm Growth; Entrepreneurial experience (search for similar items in EconPapers)
JEL-codes: G33 J23 M13 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ent, nep-hrm and nep-knm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

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