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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.

Publication information

Original languageEnglish
Place of PublicationFrederiksberg
PublisherDepartment of Economics, Copenhagen Business School
Number of pages43
StatePublished - 2012
SeriesWorking paper
Number3 2012

ID: 35648790