Thursday, February 7, 2008

What makes a successful entrepreneur?

A Marginal Revolution post linking to a paper from the World Bank analyzing Brazilian entrepreneurs. Cowen highlights some observations in his post but what I found most interesting (and controversial) is the following:

Interestingly, we find that having family and relatives run a business not only increases the probability of a respondent to be an active entrepreneur but also (and to a significantly larger extent) the probability to be a “failed entrepreneur.”

The most striking differences between active and failed entrepreneurs are as follows. Failed entrepreneurs are significantly less risk-taking. Interestingly, they report to have been significantly more often among top 10% in school even though they exhibited the lowest cognitive test scores. The low actual test scores point to the likely overestimation of failed entrepreneurs’ self-reported performance in school.

Overall, the results suggest that social networks play a big role in the decision to become an entrepreneur but not in determining whether entrepreneur will be successful. In contrast, the absence of risk-taking and greed, poor cognitive abilities, and over-evaluation of one’s self seem to be the main reasons to quit entrepreneurship. These results are similar to what we have found in Chinese survey (the data from Russia are not comparable).



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1 comment:

Donat said...

Interesting survey. How can absence of "greed" make you more likely to quit entrepreneurship? I agree about social networks influence on the entrepreneur, same thing happened to me.

Can I introduce you to the Young Entrepreneur Society from the www.YoungEntrepreneurSociety.com? It is and educating yet entertaining documentary.