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

Steffen Andersen; Kasper Meisner Nielsen

doi:10.1093/rfs/hhs107

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

Steffen Andersen¹; Kasper Meisner Nielsen²

¹ Copenhagen Business School · ² Hong Kong University of Science and Technology

Review of Financial Studies 2012 open access

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.

DOI: 10.1093/rfs/hhs107
Volume: 25 (12)
Pages: 3684-3710
Language: en
Export: BibTeX
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