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

Steffen Andersen, Kasper Meisner Nielsen

Research output: Working paperResearch

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

Cite this

Andersen, S., & Meisner Nielsen, K. (2012). Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment. Frederiksberg: Department of Economics, Copenhagen Business School. Working paper, No. 3 2012
Andersen, Steffen ; Meisner Nielsen, Kasper. / Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment. Frederiksberg : Department of Economics, Copenhagen Business School, 2012. (Working paper; No. 3 2012).
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Andersen, S & Meisner Nielsen, K 2012 'Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment' Department of Economics, Copenhagen Business School, Frederiksberg.

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

Frederiksberg : Department of Economics, Copenhagen Business School, 2012.

Research output: Working paperResearch

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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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Andersen S, Meisner Nielsen K. Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment. Frederiksberg: Department of Economics, Copenhagen Business School. 2012.