Returns to Entrepreneurial Experience over the Business Cycle

Abstract

In this paper, I explore business cycle-related dynamics in differences in exit decisions between serial and novice entrepreneurs. Using time-series geographic variation in eco- nomic conditions, I examine how businesses founded by serial and novice entrepreneurs differentially respond to changes in average state personal income, alternative employ- ment options, and home values. Weibull survival model estimates indicate that serial entrepreneurs are more likely to endure declines in aggregate income and credit avail- ability, but are relatively more likely to go out of business as slack increases in the labor market (increases in unemployment rate). In the second part of the paper, I provide evidence that these dynamics are driven by differences in business strategies and the use of financial resources.