Why are some people more likely to become small-businesses owners than others: Entrepreneurship entry and industry-specific barriers |
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Authors: | Magnus Lofstrom Timothy Bates Simon C. Parker |
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Affiliation: | 1. Public Policy Institute of California and IZA, 500 Washington Street, San Francisco, CA 94111, United States;2. Wayne State University, 204 Cherokee Road, Asheville, NC 28804, United States;3. University of Western Ontario, Canada;4. IZA, Germany |
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Abstract: | Why are some individuals more likely to become owners of small businesses than others? We classify industries using measures of entry barriers and proceed to investigate how determinants of entry vary in high- as opposed to low-barrier fields. Claims that neither financial-capital constraints nor the educational backgrounds of aspiring small-business owners predict the likelihood of small-business entry are investigated in this context. These claims of irrelevance, we find, are inconsistent with the facts. The wealth and educational background characteristics potential entrepreneurs possess predispose them to make distinctly different industry choices, both because of the differing rewards available to them and the very different entry barriers they face. The characteristics of potential entrants, in other words, draw them toward some industries and away from others. |
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Keywords: | J24 L26 M13 |
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