Confronting Economic Theory with Empirical Practice
Chapter 6: Survival and Success of Entrepreneurs
The requisite capacity and talent limit the number of competitors for the business of entrepreneurs. Nor is this all: there is always a degree of risk attending such undertakings; however well they may be conducted, there is a chance of failure; the entrepreneur may, without any fault of his own, sink his fortune, and in some measure his character. (Say  1971, p. 331) Introduction An eﬀective government policy to decrease unemployment is to stimulate the number of new businesses. A well-known problem with new businesses is their high dissolution rate. Of every 100 start-ups, only 50 ﬁrms survive the ﬁrst three years. Hence, authorities should not only stimulate business start-ups, but also strive to minimize the number of business dissolutions. It is therefore highly relevant to investigate and understand the individual determinants of business survival. Business survival determinants are not only interesting to authorities. Commercially oriented institutions involved in new businesses, for example banks, might beneﬁt from understanding these determinants as well when the determinants are used for the decision as to which starting enterprises should be supported with a loan. The objective of this chapter is to quantify the person-speciﬁc determinants of survival duration and of success in business. I focus on the personrather than on the business-speciﬁc determinants because I presume that it is the man who makes the diﬀerence: he sets the conditions, the boundaries, the characteristics and, ultimately the value-creating ability of the newly founded ﬁrm. Chandler and Hanks (1994)...
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