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Department of Economics, Copenhagen Business School Working Paper Series, Department of Economics, Copenhagen Business School

No 03-2012:
Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment

Steffen Andersen () and Kasper Meisner Nielsen ()

Abstract: 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

Keywords: entrepreneurship; natural experiments; (follow links to similar papers)

JEL-Codes: L26; (follow links to similar papers)

44 pages, August 1, 2012

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