Social Interactions and Entrepreneurial Activity

52 Pages Posted: 25 Mar 2003 Last revised: 23 Jun 2009

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Andrei Simonov

Michigan State University - Eli Broad Graduate School of Management; Gaidar Institute for Economic Policy; Centre for Economic Policy Research (CEPR); SITE

Multiple version iconThere are 3 versions of this paper

Date Written: June 25, 2008

Abstract

We show that individuals residing in highly entrepreneurial neighborhoods are more likely to become entrepreneurs and invest more in their own businesses, even though their entrepreneurial profits are lower and their alternative job opportunities more attractive. These findings are robust to the inclusion of local labor market fixed effects, neighborhood fixed effects, extensive controls, and the use of instruments for neighborhood entrepreneurial activity. Our results suggest that peer effects create non-pecuniary benefits from entrepreneurial activity and play an important role in the decision to become an entrepreneur. Alternative explanations, such as entry costs, social learning, and informal credit markets, do not find support in the data.

Keywords: Private benefits, peer effects, social norms, social learning

JEL Classification: M13, G31, J24, Z13, R12

Suggested Citation

Giannetti, Mariassunta and Simonov, Andrei, Social Interactions and Entrepreneurial Activity (June 25, 2008). Available at SSRN: https://ssrn.com/abstract=370180 or http://dx.doi.org/10.2139/ssrn.370180

Mariassunta Giannetti (Contact Author)

Stockholm School of Economics ( email )

P.O. Box 6501
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SE-113 83 Stockholm
Sweden
+46 8 736 9607 (Phone)
+46 8 312 327 (Fax)

HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Andrei Simonov

Michigan State University - Eli Broad Graduate School of Management ( email )

645 N. Shaw Lane, 321 Eppley Center
East Lansing, MI 48824-1122
United States

HOME PAGE: http://www.andreisimonov.com

Gaidar Institute for Economic Policy ( email )

3-5 Gazetny Lane
Moscow, 125009
Russia

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

SITE ( email )

P.O. Box 6501
S-113 83 Stockholm, 11383
Sweden

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