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New Firm Performance: Does the Age of Founders Affect Employment Creation?

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  • Jan de Kok
  • Ingrid Verheul
  • Abdelfatah Ichou

Abstract

The ageing population increasingly becomes a challenge for policy makers. Given the expected changes in the age decomposition of the workforce, it becomes more pressing to understand the nature of the relationship between age and entrepreneurship. More specifically: what are the consequences of an ageing (entrepreneurial) population on entrepreneurial performance? A recent study by EIM investigates the effect of the age of the entrepreneur at start-up on the size of newly started firms. A distinction is made between the decision of entrepreneurs whether or not to become an employer, and the decision of employers to hire a certain number of employees. To examine to which extent age has a direct and/or indirect effect on these two decision, a sample of 849 new firms has been used that survived the first three years after start-up. A first conclusion of the empirical analysis is that it is important to make the distinction between the two decisions: the decision of entrepreneurs whether or not to become an employer depends on other factors than the decision of employers regarding the number of employees. A second conclusion is that age has a negative relationship with the outcome of both decisions, but that these relationships are completely mediated by the mediating variables included in the study. Entrepreneurs who start at older age are less likely to work fulltime in their new venture, are less willing to take risks and have a lower perception of their entrepreneurial skills. Each of these factors has, in turn, a positive impact on the probability of employing personnel. For the number of employees a negative indirect effect of age exists, through the effect of age on the perception of entrepreneurial skills.

Suggested Citation

  • Jan de Kok & Ingrid Verheul & Abdelfatah Ichou, 2010. "New Firm Performance: Does the Age of Founders Affect Employment Creation?," Scales Research Reports H201015, EIM Business and Policy Research.
  • Handle: RePEc:eim:papers:h201015
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    File URL: http://www.entrepreneurship-sme.eu/pdf-ez/H201015.pdf
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    References listed on IDEAS

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    1. Werner Bönte & Oliver Falck & Stephan Heblich, 2007. "Demography and Innovative Entrepreneurship," Jena Economic Research Papers 2007-084, Friedrich-Schiller-University Jena.
    2. F. van Es & D. J. van Vuuren, 2011. "A decomposition of the growth in self-employment," Applied Economics Letters, Taylor & Francis Journals, vol. 18(17), pages 1665-1669.
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    Cited by:

    1. André van Stel & Sander Wennekers & Jolanda Hessels & Chantal Hartog, 2011. "Global Entrepreneurship Monitor 2010 The Netherlands," Scales Research Reports A201108, EIM Business and Policy Research.
    2. repec:gam:jsoctx:v:8:y:2018:i:2:p:31-:d:146585 is not listed on IDEAS
    3. Teemu Kautonen & Simon Down & Maria Minniti, 2014. "Ageing and entrepreneurial preferences," Small Business Economics, Springer, vol. 42(3), pages 579-594, March.
    4. Harms, Rainer & Luck, Florian & Kraus, Sascha & Walsh, Steven, 2014. "On the motivational drivers of gray entrepreneurship: An exploratory study," Technological Forecasting and Social Change, Elsevier, vol. 89(C), pages 358-365.
    5. Kautonen, Teemu & Kibler, Ewald & Minniti, Maria, 2017. "Late-career entrepreneurship, income and quality of life," Journal of Business Venturing, Elsevier, vol. 32(3), pages 318-333.
    6. Abdelfatah Ichou, 2010. "Modelling the Determinants of Job Creation: Microeconometric Models Accounting for Latent Entrepreneurial Ability," Scales Research Reports H201018, EIM Business and Policy Research.
    7. Wyrwich, Michael, 2013. "Can socioeconomic heritage produce a lost generation with regard to entrepreneurship?," Journal of Business Venturing, Elsevier, vol. 28(5), pages 667-682.

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