The Entrepreneur's Mode of Entry: Business Takeover or New Venture Start?

16 Pages Posted: 14 Oct 2006 Last revised: 8 Nov 2014

See all articles by Simon C. Parker

Simon C. Parker

University of Western Ontario; Durham University - Department of Economics and Finance; IZA Institute of Labor Economics

Mirjam van Praag

University of Amsterdam - Department of Economics; Copenhagen Business School; Tinbergen Institute; IZA Institute of Labor Economics

Date Written: October 1, 2006

Abstract

We extend the well-known occupational choice model of entrepreneurship by analyzing the mode of entry. Individuals can become entrepreneurs by taking over established businesses or starting up new ventures from scratch. We argue that the new venture creation mode is associated with higher levels of schooling whereas managerial experience, new venture startup capital requirements and industry level risk promote the takeover mode. A sample of data on entrepreneurs from The Netherlands provides broad support for these hypotheses, and also bears out a prediction that entrepreneurs whose parents run a family firm tend to invest the least in schooling. We go on to discuss the implications for researchers, entrepreneurs and public policy makers.

Keywords: Business start-up, Business takeover, Entrepreneur, Education, Human capital

Suggested Citation

Parker, Simon C. and van Praag, Mirjam, The Entrepreneur's Mode of Entry: Business Takeover or New Venture Start? (October 1, 2006). Journal of Business Venturing, Vol. 27, No. 1, 2012, pp. 31-46. Available at SSRN: https://ssrn.com/abstract=937260 or http://dx.doi.org/10.2139/ssrn.937260

Simon C. Parker (Contact Author)

University of Western Ontario ( email )

1151 Richmond Street
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Durham University - Department of Economics and Finance ( email )

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Durham DH1 3HY
United Kingdom
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IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Mirjam Van Praag

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4096 (Phone)
+31 20 525 4182 (Fax)

Copenhagen Business School ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Tinbergen Institute

Gustav Mahlerlaan
Amsterdam
Netherlands

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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