Business Experience and Start-Up Size: Buying More Lottery Tickets Next Time Around?
25 Pages Posted: 12 Dec 2012
Date Written: December 10, 2012
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
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