Entrepreneurship and the School of Hard Knocks: Evidence from China's Great Famine

Abstract

Many entrepreneurs proclaim proudly to have learned from the School of Hard Knocks rather than business schools. These claims challenge the social value of investments in entrepreneurship education and training. Yet, there is little empirical evidence of the effect of earlier life challenges on subsequent success in entrepreneurship. Here, we exploit geographical differences in the intensity of China's Great Famine, 1959-61, as a quasi-natural experiment to identify the effect of hardship. We find robust evidence of more entrepreneurship in counties that experienced greater hardship during the Famine. We investigate whether the difference is due to selective culling or conditioning of personality, and find evidence of adaptation towards greater risk tolerance.