What is it about?
This study examines the relationship between entrepreneurs' household net worth, and the likelihood their startups will receive financing. Importantly, the authors control for factors such as the quality of the opportunity, and the skill and experience of the entrepreneur.
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Why is it important?
We often assume that in the U.S. market, money will find its way into the hands of skilled entrepreneurs who have good ideas. Unfortunately, we find that people with a low net worth at the start of their entrepreneurial journey are unlikely to receive the financing needed to transform their ideas into a viable business. If the ability to acquire external financing is constrained within the economy, then a quality business idea and individual skill may be less of a determinant of entrepreneurial success than many assume. Entrepreneurship as a path toward upward, socioeconomic mobility will be afforded only to those with sufficient financial endowments at the outset.
Perspectives
Writing this article was a great pleasure. It has co-authors with whom I have had long standing relationships, and it also lead to other papers examining the relationship between inequality and entrepreneurial activity. I am grateful to a group of scholars from around the world (of which there are too many to name) who collaborated for more than a decade to create the rich panel data set that made this study possible -- the Panel Study of Entrepreneurial Dynamics.
Dr Casey J. Frid
Read the Original
This page is a summary of: Low-wealth entrepreneurs and access to external financing, International Journal of Entrepreneurial Behavior & Research, June 2016, Emerald,
DOI: 10.1108/ijebr-08-2015-0173.
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