Who Starts New Firms? - Preliminary Explorations of Firms-in-Gestation

Posted: 17 Nov 2009

See all articles by Paul D. Reynolds

Paul D. Reynolds

Florida International University, Eugenio Pino & Family Global Entrepreneurship Center

Date Written: 1997

Abstract

Presents preliminary analysis of a pilot research program in development, that uses a new survey research technique to investigate the factors that lead individuals to start firms. It seeks to analyze data about the gestation process that precedes firm creation. Previous models are found not to be very successful for prediction and are at odds with the unique combinations of events leading to firm formation reported in personal accounts.Describes the data issues, such as the treatment of self-employment as small business ownership or entrepreneurship. A sample of nascent U.S. entrepreneurs was developed from the 1993 University of Michigan Survey of Consumers. Statistically significant differences associated with prevalence of nascent entrepreneurs were identified. The Automatic Interaction Detection (AID) technique is used to identify the major combinations among multiple independent variables affecting the decision to start a firm. The analysis indicates the significance of two variables relating to new-firm startup: unemployment and personal liquidity. Results indicate most efforts to start firms are not begun by the unemployed. The amount of variance explained by increased personal liquidity is modest. The AID technique has identified unique situations where participation in startups is increased. Concludes that participation in the entrepreneurial process is a major activity in the U.S. workforce, and is concentrated among young adults. The process leading to startups reflects personal, life course, and contextual variables that fall into a small number of well-defined groups. (TNM)

Keywords: Experimental/primary research, Individual traits, Financing, Strategic planning, Behavior (individual), Management decisions, Startups, Nascent entrepreneurs, Self-employment

Suggested Citation

Reynolds, Paul D., Who Starts New Firms? - Preliminary Explorations of Firms-in-Gestation (1997). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship. Available at SSRN: https://ssrn.com/abstract=1507560

Paul D. Reynolds (Contact Author)

Florida International University, Eugenio Pino & Family Global Entrepreneurship Center ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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