Social Interactions and Entrepreneurial Activity |
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Authors: | Mariassunta Giannetti Andrei Simonov |
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Institution: | Stockholm School of Economics, CEPR, and ECGI P.O. Box 6501 11 383 Stockholm, Sweden; Eli Broad Graduate School of Management Michigan State University and CEPR 315 Eppley Center East Lansing, MI 48824 |
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Abstract: | We show that individuals residing in highly entrepreneurial neighborhoods are more likely to become entrepreneurs and invest more into their own businesses, even though their entrepreneurial profits are lower and their alternative job opportunities more attractive. Our results suggest that peer effects create nonpecuniary benefits from entrepreneurial activity and play an important role in the decision to become an entrepreneur. Alternative explanations, such as entry costs, social learning, and informal credit markets, are not supported by the data. |
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