Business Experience and Start-Up Size: Buying More Lottery Tickets Next Time Around?

25 Pages Posted: 12 Dec 2012

See all articles by Alex Coad

Alex Coad

CENTRUM Catolica Graduate Business School

Julian Frankish

Independent

Paul Nightingale

University of Sussex - Science and Technology Policy Research Unit (SPRU)

Richard Roberts

Independent

David Storey

University of Sussex - School of Business, Management and Economics

Date Written: December 10, 2012

Abstract

This paper explores the determinants of start-up size by focusing on a cohort of 6247 businesses that started trading in 2004, using a unique dataset on customer records at Barclays Bank. In our theoretical model, post-entry growth is treated as a random walk, and start-up size is positively related to survival. In this view, business experience does not have any impact on post-entry growth (since growth is random), but is associated with higher survival if entrepreneurs with prior business experience have a larger start-up size. Quantile regressions show that prior business experience is significantly related with start-up size, as are a number of other variables such as age, education and bank account activity. Quantile treatment effects (QTE) estimates show that business experience leads to a higher start-up size, with the effect of business experience on (log) start-up size being roughly constant across the quantiles. Prior personal business experience leads to an increase in expected start-up size of about 48%. IVQTE estimates are even higher.

Keywords: Start-up size, entrepreneurship, business experience, learning, quantile treatment effects

JEL Classification: L26, L25

Suggested Citation

Coad, Alex and Frankish, Julian and Nightingale, Paul and Roberts, Richard and Storey, David, Business Experience and Start-Up Size: Buying More Lottery Tickets Next Time Around? (December 10, 2012). Available at SSRN: https://ssrn.com/abstract=2187502 or http://dx.doi.org/10.2139/ssrn.2187502

Alex Coad (Contact Author)

CENTRUM Catolica Graduate Business School ( email )

1801 Universitaria Avenue
San Miguel
Lima, Lima Lima32
Peru

Julian Frankish

Independent ( email )

Paul Nightingale

University of Sussex - Science and Technology Policy Research Unit (SPRU) ( email )

Mantell Building
Falmer
Brighton BN1 9RF, East Sussex
United Kingdom

Richard Roberts

Independent ( email )

David Storey

University of Sussex - School of Business, Management and Economics ( email )

Falmer, Brighton BN1 9SL
United Kingdom

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