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Necessity entrepreneurship, financial literacy and business performance: evidence from an international survey

Author

Listed:
  • Melanie Koch

    (Oesterreichische Nationalbank)

  • Marco Langiulli

    (Bank of Italy)

Abstract

While opportunity entrepreneurs open a business because they see an opportunity, necessity entrepreneurs struggle to find another way to earn (enough) money. Using novel survey data from four different countries, we explore the differences in financial literacy and business performance between necessity and opportunity entrepreneurs. The survey allows us to construct a broad measure of financial literacy relating to the business realm. We find that necessity entrepreneurs have a significantly lower level of financial literacy in all countries. Decomposition techniques show that these differences can hardly be explained by differences in age, gender or education. Necessity businesses also weathered the COVID-19 pandemic worse than opportunity businesses did. In most countries, the financial literacy gap is related to this difference in business performance.

Suggested Citation

  • Melanie Koch & Marco Langiulli, 2025. "Necessity entrepreneurship, financial literacy and business performance: evidence from an international survey," Questioni di Economia e Finanza (Occasional Papers) 936, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_936_25
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    More about this item

    Keywords

    financial literacy; financial education; entrepreneurship; micro entrepreneurs;
    All these keywords.

    JEL classification:

    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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