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Sticking it Out: Entrepreneurial Survival and Liquidity Constraints

Douglas Holtz-Eakin; David Joulfaian1,2; Harvey S. Rosen3,4

1 United States Department of the Treasury · 2 Georgetown University · 3 National Bureau of Economic Research · 4 Ifo Institute for Economic Research

Journal of Political Economy 1994

The authors examine survival rates of entrepreneurial enterprises and their growth, conditional on surviving. Their focus is on whether liquidity constraints increase the likelihood of entrepreneurial failure. The empirical strategy is based on the following logic: If entrepreneurs cannot borrow to attain their profit-maximizing levels of capital, then entrepreneurs with substantial personal financial resources will be more successful than those without. The authors examine the behavior of a group of sole proprietors who received substantial inheritances. The results are consistent with the notion that liquidity constraints exert a noticeable influence on the viability of entrepreneurial enterprises. Copyright 1994 by University of Chicago Press.

DOI
10.1086/261921
Volume
102 (1)
Pages
53-75
Language
en
Export
BibTeX
Sources
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