Firm creation is often a vital source of job growth and a key player in propagating demand shocks in an economy. Sometimes, a talented individual creates something new that disrupts existing organizations; these are called Schumpeterian entrepreneurs. Others, called Kirznerian entrepreneurs, discover previously unnoticed profit opportunities. This second entrepreneurial type has gained traction as being a poignant driver in economic growth, and the attention of academics who seek to explore if there are certain characteristics that make founders more likely to fall in this group of opportunity-driven entrepreneurs.
Skilled Human Capital and Better Access to Financing Make More Responsive Entrepreneurs
After analyzing demand shocks and the subsequent firm creation response in the local Brazilian economy, Bernstein, Colonnekki, Malacrino, and McQuade have suggested that the entrepreneurs who are more responsive to new opportunities do in fact possess very distinct characteristics. Among the exact same municipalities, entrepreneurial response was largely driven by skilled individuals who were younger. (This measure was looking at responsiveness in startup activity, and not the company’s likelihood to scale or stay in business, however.)
According to the authors, those who are responding to profit opportunities are often young, but more importantly, they are also skilled, and educated. Within the younger population, entrepreneurial responsiveness was significantly more likely to occur if the entrepreneur had a high school diploma. Additionally, an individual was 52 times more likely to be responsive if they had been previously employed in non-routine and cognitive occupations. Greater access to higher education and job opportunity may indicate that responsiveness in the younger population has to do with the socioeconomic background of the region that they live in.
The study also found that across all measures, regions with better access to finance have stronger responsiveness.
Contributed by Marisa Galvez.
“Who Creates New Firms When Local Opportunities Arise?” Stanford Graduate School of Business. To access the full article, please click here.