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Social Capital Access and Entrepreneurship

Author

Listed:
  • Stefan Bauernschuster

    (Ifo Institute for Economic Research - Ifo Institute for Economic Research)

  • Oliver Falck

    (Ifo Institute for Economic Research - Ifo Institute for Economic Research)

  • Stephan Heblich

    (Division of Economics - University of Stirling)

Abstract

We investigate the effect of social capital access on entrepreneurship. Social capital helps entrepreneurs to overcome resource constraints. This is especially important in small communities where we often see a lack of market-oriented institutions such as venture capital firms. Entrepreneurs gain access to social capital via club memberships. Combining differences in the number of individual club memberships with differences in the importance of social capital across communities, we identify a causal small community mark-up effect of individual club memberships on entrepreneurship. Assuming that unobserved heterogeneity that might influence both the individual's selection into clubs and the occupational choice to be an entrepreneur is independent of community size, we find that the effect of club membership on the propensity to be an entrepreneur is 2.6 percentage points larger in small communities than in large communities. Robustness tests support the validity of our identifying assumption and results.

Suggested Citation

  • Stefan Bauernschuster & Oliver Falck & Stephan Heblich, 2010. "Social Capital Access and Entrepreneurship," Post-Print hal-00911835, HAL.
    • Handle: RePEc:hal:journl:hal-00911835
    DOI: 10.1016/j.jebo.2010.09.014
    Note: View the original document on HAL open archive server: https://hal.science/hal-00911835
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