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Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment

Author

Listed:
  • Andersen, Steffen

    (Department of Economics, Copenhagen Business School)

  • Nielsen, Kasper Meisner

    (Department of Finance, Hong Kong University of Science and Technology)

Abstract

We use a natural experiment in Denmark to test the hypothesis that aspiring entrepreneurs face financial constraints because of low entrepreneurial quality. We identify 304 constrained entrepreneurs who start a business after receiving windfall wealth and examine the performance of these marginal entrepreneurs. We find that constrained entrepreneurs have significantly lower survival rates and lower profits when compared with a matched sample of unconstrained entrepreneurs. These results are consistent with the hypothesis that the marginal entrepreneur is of low quality

Suggested Citation

  • Andersen, Steffen & Nielsen, Kasper Meisner, 2012. "Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment," Working Papers 03-2012, Copenhagen Business School, Department of Economics.
    • Handle: RePEc:hhs:cbsnow:2012_003
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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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