The Entrepreneur's Mode of Entry: Business Takeover or New Venture Start?
AbstractWe 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.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-089/3.
Date of creation: 11 Oct 2006
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entrepreneurship; human capital; business takeover; venture start up; family firm;
Other versions of this item:
- Simon C. Parker & C. Mirjam van Praag, 2006. "The entrepreneur’s mode of entry: Business takeover or new venture start?," Papers on Entrepreneurship, Growth and Public Policy 2006-26, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
- Parker, Simon C. & van Praag, Mirjam, 2006. "The Entrepreneur's Mode of Entry: Business Takeover or New Venture Start," IZA Discussion Papers 2382, Institute for the Study of Labor (IZA).
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-ENT-2006-11-18 (Entrepreneurship)
- NEP-HRM-2006-11-18 (Human Capital & Human Resource Management)
- NEP-TID-2006-11-18 (Technology & Industrial Dynamics)
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