Ability or Finances as Constraints on Entrepreneurship?: Evidence from Survival Rates in a Natural Experiment

Steffen Andersen, Kasper Meisner Nielsen

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

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.
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.
LanguageEnglish
JournalReview of Financial Studies
Volume25
Issue number12
Pages3684-3710
ISSN0893-9454
DOIs
StatePublished - 2012

Cite this

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abstract = "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.",
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Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment . / Andersen, Steffen; Meisner Nielsen, Kasper .

In: Review of Financial Studies, Vol. 25, No. 12, 2012, p. 3684-3710.

Research output: Contribution to journalJournal articleResearchpeer-review

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AU - Meisner Nielsen,Kasper

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AB - 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.

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DO - 10.1093/rfs/hhs107

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