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Transitions to Entrepreneurship and Industry-Specific Barriers

  • Lofstrom, Magnus

    ()

    (Public Policy Institute of California)

  • Bates, Timothy

    ()

    (Wayne State University, Detroit)

  • Parker, Simon C.

    ()

    (Western University, Canada)

Drivers of entrepreneurial entry are investigated in this study by examining how entry into small-business ownership is shaped by industry-specific constraints. The human- and financial-capital endowments of potential entrepreneurs entering firms in various industries are shown to differ profoundly, depending on the type of venture entered. The educational credentials of highly educated potential entrepreneurs, in particular, predict avoidance of small-firm ownership in some industries as well as attraction to others. Recognizing that individuals choose an industry sector jointly with their decision to enter entrepreneurship, we find that the conventional practice of conflating different industry types in empirical analyses of transitions to entrepreneurship generates misleading findings about the determinants of entrepreneurship.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6103.

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Length: 46 pages
Date of creation: Nov 2011
Date of revision:
Publication status: published as 'Why are some people more likely to become small-businesses owners than others: Entrepreneurship entry and industry-specific barriers' in: Journal of Business Venturing, 2013, [Online First]
Handle: RePEc:iza:izadps:dp6103
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  1. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
  2. Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-59, November.
  3. Bates, Timothy, 1995. "Self-employment entry across industry groups," Journal of Business Venturing, Elsevier, vol. 10(2), pages 143-156, March.
  4. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
  5. Josep-Maria Arauzo-Carod & Agustí Segarra-Blasco, 2005. "The Determinants of Entry are not Independent of Start-up Size: Some Evidence from Spanish Manufacturing," Review of Industrial Organization, Springer, vol. 27(2), pages 147-165, 09.
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