Why Are Some People More Likely to Become Small-Businesses Owners than Others: Entrepreneurship Entry and Industry-Specific Barriers
59 Pages Posted: 14 Mar 2018
Date Written: January 24, 2014
We classify industries using measures of entry barriers and proceed to investigate how determinants of entry vary in high- as opposed to low-barrier fields. The wealth and educational background characteristics potential entrepreneurs possess, we found, predispose them to make distinctly different industry choices, both because of the differing rewards available to them and the very different entry barriers they face. The characteristics of potential entrants, in other words, draw them toward some industries and away from others.
The top 2 quintiles of the personal wealth distribution consistently predict entry into high-barrier lines of business. Thus, across a wide range of the distribution, wealth appears to alleviate borrowing constraints, facilitating entry into high-barrier lines of business. College-education level strongly predicts entry into high-barrier industries, yet the opposite outcome describes low-barrier fields. College graduates positively select into industries where entry barriers elevate the expected earnings of firm ownership, while steering clear of low-remuneration fields. We conclude that industry context heavily shapes impacts of entrant resource endowments on entrepreneurial entry choices.
Keywords: entrepreneurship entry, entry barriers
JEL Classification: J24, L26, M13
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