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The Value of an Educated Population for an Individual's Entrepreneurship Success

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Author Info

  • Jose Maria Millan

    (University of Huelva, Spain)

  • Emilio Congregado

    (University of Huelva, Spain)

  • Concepcion Roman

    (University of Huelva, Spain)

  • Mirjam van Praag

    (University of Amsterdam and University of Copenhagen)

  • Andre van Stel

    (EIM Business and Policy Research, Zoetermeer, the Netherlands)

Abstract

Human capital obtained through education has been shown to be one of the strongest drivers of entrepreneurship performance. The entrepreneur's human capital is, though, only one of the input factors into the production process of her venture. The value of other input factors, such as (knowledge) capital and labor is likely to be affected by the education level of the possible stakeholders in the entrepreneur’s venture. The education distribution of the (local) population may thus shape the supply function of the entrepreneur. Likewise, the demand function faced by the entrepreneur is also likely to be shaped by the taste, sophistication and thus the education level of the population in their role as consumers. In other words, a population with a higher education level may be associated with (i) a working population of higher quality; (ii) more and/or higher quality universities with a positive effect on research and development (R&D) and knowledge spillovers leading to more high tech and innovative ventures; and finally, (iii) a more sophisticated consumer market. Based on this, we formulate the following proposition: The performance of an entrepreneur is not only affected positively by her own education level but in addition, also by the education level of the population. We test this proposition using an eight years (1994-2001) panel of labor market participants in the EU-15 countries from which we select individuals who have been observed as entrepreneurs. We find strong support for a positive relationship between enrolment rates in tertiary education in country j and year t and several measures of the performance of individual entrepreneurs in that same country and year, including survival and the probability that an entrepreneur starts employing personnel and maintains as an employer for a longer period of time. An implication of our novel finding is that entrepreneurship and higher education policies should be considered in tandem with each other.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-066/3.

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Date of creation: 12 Apr 2011
Date of revision: 06 May 2014
Handle: RePEc:dgr:uvatin:20110066

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Keywords: entrepreneurship; performance; survival; personnel; education;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Entrepreneurs need an educated workforce
    by Economic Logician in Economic Logic on 2011-05-23 14:53:00
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Cited by:
  1. Román, Concepción & Congregado, Emilio & Millán, José María, 2013. "Start-up incentives: Entrepreneurship policy or active labour market programme?," Journal of Business Venturing, Elsevier, vol. 28(1), pages 151-175.
  2. André van Stel & José Maria Millán & Concepcion Roman & Ana Millán, 2013. "How does employment protection legislation influence hiring and firing decisions by the smallest firms?," Scales Research Reports, EIM Business and Policy Research H201216, EIM Business and Policy Research.
  3. Teruel Carrizosa, Mercedes & De Wit, Gerrit, 2011. "Determinants of high-growth firms:why do some countries have more high-growth firms than others?," Working Papers 2072/179670, Universitat Rovira i Virgili, Department of Economics.
  4. Emilio Congregado & José María Millán & Concepción Román, 2014. "The emergence of new entrepreneurs in Europe," Economie Internationale, CEPII research center, CEPII research center, issue 138, pages 28–48.
  5. Nicola Gennaioli & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2013. "Human Capital and Regional Development," The Quarterly Journal of Economics, Oxford University Press, vol. 128(1), pages 105-164.
  6. André van Stel & José Maria Millán & Concepcion Roman & Ana Millán, 2014. "Unraveling the relationship between the business cycle and the own-account worker's decision to hire employees," Scales Research Reports, EIM Business and Policy Research H201302, EIM Business and Policy Research.
  7. Millán, José María & Congregado, Emilio & Román, Concepción, 2014. "Persistence in entrepreneurship and its implications for the European entrepreneurial promotion policy," Journal of Policy Modeling, Elsevier, Elsevier, vol. 36(1), pages 83-106.
  8. André van Stel & Sander Wennekers & Jolanda Hessels & Chantal Hartog, 2011. "Global Entrepreneurship Monitor 2010 The Netherlands," Scales Research Reports, EIM Business and Policy Research A201108, EIM Business and Policy Research.

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