Once bitten, twice shy? The performance of entrepreneurial restarts
AbstractThe aim of this paper is to analyze the effect of entrepreneurial experience on firm growth. According to the human capital theory, individuals who have higher ?human capital? are more successful than others. Entrepreneurial experience is a kind of human capital and, therefore, should affect firm performance positively. In reality, however, not all types of experience indicate enhanced knowledge alone. Bad experience, here the experience of failure, might equally be a signal for entrepreneurial weakness and, thus, an argument for exercising restraint in possible further business ventures. The ambiguous effects of this failure experience on firm success necessitate an in-depth analysis of the issue. Therefore, this paper contains an empirical comparison of firms involving experienced entrepreneurs and novice firms. The analysis shows that entrepreneurial experience affects firm growth positively. Accounting for failure experience separately reveals a negative effect. Interpreting this finding in combination with other control measures indicates that failed entrepreneurs indeed behave more cautiously regarding firm growth. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 06-83.
Date of creation: 2006
Date of revision:
Business Failure; Firm Growth; Entrepreneurial experience;
Find related papers by JEL classification:
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- 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-2007-04-14 (All new papers)
- NEP-BEC-2007-04-14 (Business Economics)
- NEP-CSE-2007-04-14 (Economics of Strategic Management)
- NEP-ENT-2007-04-14 (Entrepreneurship)
- NEP-HRM-2007-04-14 (Human Capital & Human Resource Management)
- NEP-KNM-2007-04-14 (Knowledge Management & Knowledge Economy)
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