Entrepreneurial Entry Research Articles

Public Policy Impacts on Entrepreneurial Entry and Exit: A Real Options Framework

Public Policy Impacts on Entrepreneurial Entry and Exit: A Real Options Framework

The Impact of Social Liberalization on Female Entrepreneurship

Although the impact of institutional change on entrepreneurship is well documented, little is known about how institutional changes influence the creation of high-growth ventures founded by female entrepreneurs. By implementing the difference-in-differences approach, this study examines the impact of a socially liberal policy (i.e., legalization of same-sex marriage) on female entrepreneurship. We show that social liberalization policies may increase the creation of high-growth ventures by female entrepreneurs. We also show that when ethnic minorities are more prevalent, the positive effect of social liberalization on female-founded high-growth ventures is stronger, but that this positive effect might not be driven by necessity entrepreneurship. A supplementary analysis with a funding round level sample shows that after controlling for ventures, founders, and industry characteristics, social liberalization tends to increase the amount of early-stage funding that women entrepreneurs receive. This study extends prominent literature on female entrepreneurial entry and offer practical implications for policymakers by shedding lights on the impact of social liberalization on the entry of women to entrepreneurship. This study also extends the emerging literature examining the effect of an institutional change on certain types of entrepreneurship by showing that an institutional change can foster female-founded high growth ventures.

Mobility Maintenance: Intergenerational Social Mobility and Entrepreneurial Entry

Mobility Maintenance: Intergenerational Social Mobility and Entrepreneurial Entry

When May Age Not be a Barrier to Entrepreneurial Entry of Senior People in Rural Areas

When May Age Not be a Barrier to Entrepreneurial Entry of Senior People in Rural Areas

The impact and effectiveness of China’s entrepreneurship policy for back-home migrant workers

This study aims to estimate the net effect of China’s entrepreneurship policy on back-home migrant workers since 2015. Using survey data from the provinces of; Zhejiang, Henan, and Guizhou with propensity score matching to control selection bias, the study indicates that the overall entrepreneurship policy has a significant positive impact on the probability of entrepreneurial entry. The poverty alleviation effect of the overall policy is greater than its industrial development effect, while the employment effect is not significant. The infrastructure policy’s effect on employment, industrial development, and poverty alleviation is greater than the other policies, and the financial policy’s effect on these three aspects is not significant. This study contributes to the existing literature by addressing a well-defined gap regarding the net effect of entrepreneurship policy on entrepreneurship entry and provides well-supported and plausible explanations for the inconsistencies among previous studies on policy effect indicators. As a practical contribution, this study provides China and other developing economies with compelling empirical evidence to support the design and amendment of entrepreneurship policy at the national level.

Left behind: Partisan identity, stock market participation, and wealth inequality

This paper investigates whether and how opposing partisans differ in their wealth accumulation. Using microdata from a longitudinal U.S. household survey, I document that Democrats are on average 11% less likely than Republicans to participate in the stock market. Moreover, the partisan gap widens sharply, by 13%, under Democratic presidencies, precisely when the stock market returns are substantially higher. This dynamic pattern accounts for more than half of the discrepancy in wealth accumulation between Democrats and Republicans over presidential cycles. A decomposition exercise uncovers two underlying forces in opposite directions: while the partisan gap in stock market participation through directly held investment accounts narrows during Democratic presidencies, the narrowing gap is dominated by the widening partisan gap in stock market participation through retirement accounts during the same periods. I further provide speculative evidence that the widening gap is related to job changes, and in particular, entrepreneurship entry.

A framework for investigating new firm entry: The (limited) overlap between informal-formal and necessity-opportunity entrepreneurship

We analyse entrepreneurial entry along the dimensions of informal-formal and necessity-opportunity entrepreneurship, distinguishing between them yet considering them jointly. While the dominant view in the literature conflates necessity with informal entry, and opportunity with formal entry, we hypothesise that informal entrepreneurship may be attractive to higher-income individuals as a testing ground for entrepreneurial ideas. We also explain why higher-income individuals may undertake necessity entrepreneurship. We utilise individual Global Entrepreneurship Monitor (GEM) data from Chile (2019–2021), which identifies informal-formal and necessity-opportunity entrepreneurial entry modes, to test hypotheses on the role of individuals´ income in the four types of entrepreneurial entry. We also consider changes in entrepreneurial entry during a crisis and a non-crisis periods. Our results confirm that the patterns in the data are consistent with hypotheses derived from our proposed theoretical framework. Executive summaryEmerging markets economies have very large informal sectors, and their entrepreneurial entry is often motivated by economic necessity rather than by business opportunity. But neither informal nor necessity entrepreneurship are usually expected to generate the positive benefits for growth and development predicted for formal and opportunity entrepreneurship. We argue that the dominant stream in the literature actually conflates informal and necessity entrepreneurship, both of which have been associated with low human and financial capital and productivity. We propose that the appropriate typology is more complex than this because there are examples of successful and dynamic informal firms. This leads us to identify four categories of entrepreneurial entry: informal-necessity (Type 1), formal-opportunity (Type 2), informal-opportunity (Type 3), and formal-necessity (Type 4). While necessity entrepreneurship has typically been associated with low-income individuals, we propose that formal-necessity entrepreneurship may be an entry path for both low- and high-income individuals, though for different reasons. Informal opportunity entry may likewise be an option for people with low-income as well as high-income.We therefore seek to disentangle the analysis of opportunity-necessity and of formal-informal entry and to demonstrate that the two less explored entry modes - informal-opportunity, and formal-necessity - are of considerable theoretical and practical significance in emerging economies. We test our framework in the emerging market economy setting of Chile, one of the more prosperous and open economies in Latin America. We use Global Entrepreneurship Monitor (GEM) data which uniquely for Chile allow us to distinguish between individuals along both the formal-informal and the necessity-opportunity dimensions. On this basis, we distinguish empirically between these four categories of entrepreneurial entry and explain how higher-income individuals may use informal-opportunity entrepreneurial entry as a “seed bed” to test their new business ideas. At the same time, we show that necessity entrepreneurship may be attractive to both lower- and higher-income individuals.We also show that the interplay between individuals´ income groups and four entrepreneurial entry modes is stable over “normal times” versus “crisis periods”. We observe that in response to a crisis, individuals with lower-incomes are likely to engage more in informal-necessity entrepreneurship while opportunity-informal entry by higher-income individuals will decline. These changes represent a more complex adjustment pattern than has been identified for developed economies, where entrepreneurial activity has been found to be countercyclical. Thus, in emerging markets, informal-necessity entrepreneurship plays a stabilizing role for those individuals with a more marginal position in the labor market during the crisis. In contrast, for those individuals who have access to higher household income, all forms of entrepreneurship become a less attractive option. We interpret this as indicating that these individuals have the option to wait for higher return opportunities to re-emerge. This is one of the first papers to explore the impact of the COVID-19 pandemic on entrepreneurship in an emerging market economy.

Digital finance, cultural capital, and entrepreneurial entry

Cultural capital plays a crucial role in influencing entrepreneurial entry, yet the regulatory and supportive role of digital finance in this context remains unclear. Based on Chinese Family Panel Studies (CFPS) and data from the Chinese intangible cultural heritage (ICH) listing, this paper examines the significant regulatory role of digital finance in driving entrepreneurial entry through cultural capital. The research findings indicate that cultural capital represented by the ICH listing, significantly enhances the probability of entrepreneurial entry and the support of digital finance effectively amplifies this promoting effect as validated by multiple robustness tests. Further heterogeneity analysis reveals that the regulatory impact of digital finance support is more pronounced among urban populations, married groups, and individuals with high Internet usage frequency.

Household and entrepreneurial entry: an individual entrepreneurial capital perspective

PurposeHow does the family influence individual entrepreneurial entry? The literature does not provide a satisfactory answer. In this paper, we develop an individual entrepreneurial capital perspective to systematically evaluate the impact of current households on entrepreneurship at both theoretical and empirical levels.Design/methodology/approachBased on the Global Entrepreneurship Monitor (GEM) database from 2010 to 2018, we used logit regression models to examine the relationship between household size and opportunity- and necessity-motivated entrepreneurship.FindingsThe empirical results show that with the expansion of household size, the possibility of opportunity-motivated entrepreneurship shows a trend that first declines and then rises, and the possibility of necessity-motivated entrepreneurship shows an upward trend, suggesting that there are two types of opposing mechanisms that affect the relationship between household and entrepreneurial entry.Practical implicationsFamily households are the starting point of individual growth and provide initial cognitive and social resources for decision-making. For entrepreneurs, it is necessary to make full use of household-based capital and networks to promote entrepreneurial activities. For the government, it is necessary to explore the development and implementation of household-based entrepreneurial policies.Originality/valueThrough analyses of the U-shaped relationship between household size and opportunity-motivated entrepreneurship and the positive relationship with necessity-motivated entrepreneurship, we reveal the relationship between household and entrepreneurship, reconcile the contradictions in the literature and contribute to the two fields of family studies and entrepreneurship.

Networking Increases the Probability of Women’s Start-Ups in EMDEs

In emerging markets and developing economies (EMDEs), entrepreneurship and self-employment, particularly among women, play a pivotal role as a means of livelihood. Unfortunately, the share of women participating in these activities is significantly lower compared to men, which has a negative effect on both the development of these countries and gender equality. Usual programs that support women’s entrepreneurship are costly. We aim to explore the role of social networks for the entrepreneurial entry of women in EMDEs, as women can ‘help themselves’ through their development and activation. Our results, using GEM data for 53 low- and middle-income countries for the period 2011–2018, revealed that an entrepreneur on the women’s social network increases the probability of their entrepreneurial entry by 3.3 percentage points. Our results also suggest that social networks represent an important source of information that enhances the determination of women to take advantage of good business opportunities, increases the positive effect of self-assessed start-up skills on entrepreneurial entry, and raises awareness of business risks. Based on these results (confirmed by robustness and causality checks), we can recommend supporting networking between entrepreneurs and women by targeted policy measures.

Social Media Levels the Playing Field of Entrepreneurial Entry for Disadvantaged Populations

Social Media Levels the Playing Field of Entrepreneurial Entry for Disadvantaged Populations

BROAD-BASED BLACK ECONOMIC EMPOWERMENT POLICY AND ENTREPRENEURSHIP IN SOUTH AFRICA

This article examines the effects of the Broad-based Black Economic Empowerment (BBBEE) policy on black entrepreneurship in South Africa. The BBBEE policy is a legal framework aimed at addressing historical inequalities by promoting equal opportunities and encouraging the participation of black individuals in the economy. The policy highlights include increased access to funding for previously marginalized groups to start and grow their businesses, improved market access to encourage large businesses to partner with small businesses owned by previously marginalized groups, and increased skills and development. Using the policy as a quasi-natural experiment, the study adopts a difference-in-difference estimation technique contrasting periods before and after implementation and measuring its effectiveness on black entrepreneurial entry. Results from the analysis indicate that the policy was ineffective in improving black entrepreneurship in South Africa.

Students' assumptions of Entrepreneurs’ performance: The paradox of excess entry and missed opportunity

Most variables in entrepreneurship are not distributed normally. Instead, they are characterized by positive skew and heavy tails featuring influential outliers. Yet, this fundamental asymmetry in entrepreneurial endeavors is rarely discussed in entrepreneurship education, which often oscillates between highlighting everyday entrepreneurs and high-growth ‘unicorn’ startups while overlooking the distributional context for these extremes. Therefore, this paper explores whether students accurately comprehend the non-normality that pervades entrepreneurship. We conducted two studies wherein undergraduate business students at a large, public university in the Midwest US estimated entrepreneurial performance. We elicited students' estimates of the range of performance exhibited by entrepreneurs using a real-world vignette and performance data for an online learning platform. By providing empirical evidence that students may carry largely inaccurate assumptions of performance distributions, this paper highlights the paradoxical risks of excess entrepreneurial entry on the one hand and missed opportunity on the other.

Does Child Labor during Adolescence Impact Entrepreneurial Entry?

Does Child Labor during Adolescence Impact Entrepreneurial Entry?

Family and Female Entrepreneurial Entry: Moderating Effects of Perceptions and Institutions

Family and Female Entrepreneurial Entry: Moderating Effects of Perceptions and Institutions

Uncertainty and Immigrant Entrepreneurship: Evidence from Brexit

Immigrant entrepreneurs are a major driver of economic growth, and their decisions about where to locate can greatly affect the entrepreneurial ecosystem of a country. Meanwhile, increasingly uncertain immigration environments might discourage immigrants from establishing new ventures in host countries. This paper exploits the unexpected result of the Brexit referendum to investigate the relationship between immigration uncertainty and the entry of immigrant-founded ventures of different quality. We propose a model of immigrant entrepreneurial entry and introduce a new measure of venture quality at founding. We find that a surge in uncertainty decreases the growth rate of new immigrant-founded firms by 3.2%. The reliance on other immigrant actors exacerbates the negative effect that uncertainty has on entry. Moreover, low- and high-quality firms are the most affected, while the effect for medium-quality firms is negligible. Back-of-the-envelope calculations suggest that Brexit discouraged the entry of around 620 low-quality and 250 high-quality firms. Our model suggests that whereas founders of low-quality ventures might decide to take up employment, founders of high-quality ventures might be better off establishing their companies in another country. History: This paper has been accepted for the Organization Science Special Issue on Migration and Organizations. Funding: C. Acosta thanks EAFIT’s internal funding for research projects. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2021.16011 .

Reconciling theories on why employees of small firms are more likely to become entrepreneurs

Abstract A common finding in the literature on heterogeneity in entrepreneurial entry is that workers of small firms relative to large firms are more likely to become entrepreneurs (i.e., the “small firm effect”). Researchers disagree, however, on how to interpret this relationship, and in which contexts. A traditional argument is that work experience in small firms facilitates the acquisition of knowledge relevant to entrepreneurship, which, in turn, facilitates transitions into entrepreneurship. An alternative explanation argues that, at least in technical domains, the small firm effect derives from the potential for large firms to better integrate ideas internally (i.e., intrapreneurship). We inform this debate by leveraging a unique, nationally representative survey that provides rich details about the emergence of entrepreneurial ideas and their potential implementation inside vs. outside of firms. Consistent with the former explanation of the small firm effect, for the average worker, we find strong evidence that small firms (relative to large firms) are better at providing an environment that facilitates transitions to entrepreneurship. However, we also find that technical workers are more likely to attempt to implement ideas in larger firms relative to non-tech workers. Our results thus imply that while the traditional mechanism drives the small firm effect for non-tech workers, both mechanisms contribute to the effect for the tech workers, thus helping to reconcile competing explanations in prior studies. In addition to unpacking the drivers of the small firm effect, our study has broader implications for the recent discussion on the drivers of entrepreneurial dynamism.

NATIONAL CULTURE AND GENDER GAPS IN ENTREPRENEURIAL ENTRY IN DEVELOPING COUNTRIES

This study analyzes the effects of national cultural practices on gender gaps in entrepreneurial entry in developing countries. We conducted a multilevel analysis based on Global Entrepreneurship Monitor (GEM) and Global Leadership and Organizational Behavior Effectiveness (GLOBE) data from 22 countries for 2013–2017. Our findings suggest that while women are less likely than men to create a new business, they are much less likely to enter opportunity-based entrepreneurship. Moreover, we find that cultural practices of gender egalitarianism have a positive moderating effect on gender gaps when it comes to entry into both total and opportunity-based entrepreneurship. By contrast, our results show that cultural practices of assertiveness and power distance increase gender gaps in entry into both total and opportunity-based entrepreneurship. Policy makers should implement policies that promote women’s access to the necessary resources and improve the visibility of successful female entrepreneurs to change the perception of entrepreneurship as a masculine activity.

IFRS Adoptions on Entrepreneurship Entry and Entrepreneurship Exit: The Nigeria Experience From 2006-2017

This study investigated pre and post IFRS adoption on entrepreneurship entry and entrepreneurship exit from 2006-2017 using stacked data from annual financial statement of quoted companies. Data for the study were obtained from secondary sources and analysed using graphical and table presentation on Eview9 statistical package. Data for the work were drawn from samples of 72 observations Nigeria stock exchange statistical Bulletins. The descriptive statistics revealed high benefits of the Post instead of the Pre IFRS adoption which favours entrepreneurship entry and elimination entrepreneurship exist. Therefore, overall the relevance of reporting method using IFRS is credible in short-run and long-run relationship between employed variables favours the Post IFRS adoption on entrepreneurial entry, while discouraging entrepreneurial exit. Thus, there are correlations between the variables to predict the future trend on entrepreneurship entry in the long-run and short-run. In conclusion, it can be notices that with the non-current asset, current asset, total asset performed well, most especially the profit after tax in the mean descriptive statistics on post IFRS adoption. It is therefore recommended that quoted enterprise should put in place a system that would allow the enterprise prto epare its detailed annual financial statements to boost sustainability in the entrepreneurship entry. This will enables the reduction of entrepreneurship existing on enterprise winding up and closure by practicing IFRS adoptions in macro and micro enterprises.

Returnee entrepreneurial entry decisions among forced and voluntary returnees in Ethiopia: A comparative study

ABSTRACT Returnee entrepreneurship has become an important topic of interest due both to the increasing number of return migrants and the particular nature of their entrepreneurial activities. In some cases, such as in Taiwan, China, and Israel, voluntary returnees have made a significant impact on their home country’s economic development. However, some expatriates are forced to return due to rapid changes in the political and economic situations of their host countries. We compare and examine these two different cohorts in Ethiopia to understand what attributes are transportable and facilitate entrepreneurship, as well as barriers for the two different groups. Scholarly understanding of what drives returnee entrepreneurial entry decisions remains limited, even more so regarding sub-Sahara Africa. Using the mixed embeddedness perspective, this paper aims to unveil the multi-level drivers of returnee entrepreneurial entry decisions by comparing forced and voluntary returnees to Ethiopia. Based on in-depth interviews with 25 returnees, abductively, the findings indicate the interactive influence of personal and interpersonal factors, simultaneous engagement, and opportunity promise on returnee entrepreneurial entry decisions. Specifically, for the voluntary returnees, childhood aspirations, altruistic desire, simultaneous engagement, and nostalgia, coupled with migration capital and opportunity promise influence their business entry decisions. For the forced returnees, lack of options, regrets about migration, preconceptions, tacit capital, and government support drive their entry decisions. We discuss how these factors are contingent on migrants’ pre-, post-, and during-migration conditions in facilitating returnee entrepreneurship. We also illuminate the distinctive differences between forced and voluntary returnees. Implications for theory and practice are indicated.