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With a Little Help from My (Random) Friends: Success and Failure in Post-Business School Entrepreneurship

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  • Josh Lerner
  • Ulrike Malmendier

Abstract

To what extent do peers affect our occupational choices? This question has been of particular interest in the context of entrepreneurship and policies to create a favorable environment for entry. Such influences, however, are hard to identify empirically. We exploit the assignment of students into business school sections that have varying numbers of classmates with prior entrepreneurial experience. We find that the presence of entrepreneurial peers strongly predicts subsequent entrepreneurship rates of students without an entrepreneurial background, but in a more complex way than the literature has previously suggested: A higher share of entrepreneurial peers leads to lower rather than higher subsequent rates of entrepreneurship. However, the decrease in entrepreneurship is entirely driven by a significant reduction in unsuccessful entrepreneurial ventures. The effect on the rate of successful post-MBA entrepreneurs, instead, is insignificantly positive. In addition, sections with few prior entrepreneurs have a considerably higher variance in their rates of unsuccessful entrepreneurs. The results are consistent with intra-section learning, where the close ties between section-mates lead to insights about the merits of business plans.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16918.

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Date of creation: Mar 2011
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Handle: RePEc:nbr:nberwo:16918

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  1. Mariassunta Giannetti & Andrei Simonov, 2009. "Social Interactions and Entrepreneurial Activity," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(3), pages 665-709, 09.
  2. Paul Gompers & Anna Kovner & Josh Lerner & David Scharfstein, 2005. "Venture Capital Investment Cycles: The Impact of Public Markets," NBER Working Papers 11385, National Bureau of Economic Research, Inc.
  3. Landier, Augustin & Thesmar, David, 2003. "Financial Contracting with Optimistic Entrepreneurs: Theory and Evidence," CEPR Discussion Papers 3971, C.E.P.R. Discussion Papers.
  4. De Meza, D. & Southey, C., 1995. "The Borrower's Curse: Optimism, Finance and Enterpreneurship," Discussion Papers 9502, Exeter University, Department of Economics.
  5. Parker,Simon C., 2004. "The Economics of Self-Employment and Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521828130.
  6. Ramana Nanda & Jesper B. Sørensen, 2010. "Workplace Peers and Entrepreneurship," Management Science, INFORMS, vol. 56(7), pages 1116-1126, July.
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