Understanding the Entrepreneurial Process

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Transcript of Understanding the Entrepreneurial Process

  • 1.
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    21 October 2009 Research Seminar Mercatus Center George Mason University Arlington, VA Understanding the Entrepreneurial Process: Tracking New Firm Creation with the PSED [Panel Study of Entrepreneurial Dynamics] Paul D. Reynolds George Mason University [pauldavidsonreynolds@gmail.com]
  • 2.
    • Where do new businesses come from?
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  • 3. Why care about new firms?
    • Provide half of all net new job creation
    • Contribution to improved sector productivity
    • Major source of economic innovation
    • Associated with economic growth
    • Significant work career option for many
    • Mechanism for immigrant social integration
    • Universal route for upward social mobility
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  • 4.
    • New firm creation is clearly a critical feature of advanced market economies!
    • What United States data sets might be available to explore the important features and causal mechanisms involved in new firm creation?
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  • 5.
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    Conception Gestation process Firm Birth Educational preparation Work career entry Disengagement, retirement Firm life course Human Labor Force Business Population 1,2,3,5,6,7,8,9,10,14,16,18,19,20,22,24 [21] [23] [6] [4,11,12,13,15,17] [26] [25] Firm B Job 2 Job 3 Job n Job 1 Firm A Firm C [22] Fig 4.4, pg 68, from Haltiwanger, J., L. Lynch, & C. Mackie (Eds) (2007) Understanding Business Dynamics . Washington, DC: The National Academies Press.
  • 6. Where can one find:
    • Cohorts of nascent entrepreneurs and nascent enterprises
    • Longitudinal data that begins with firm conception and tracks start-up efforts until a new firm has been established
    • Data that is fully documented and in the public domain [http://www.psed.isr.umich.edu]
    • Representative samples to facilitate extrapolation to the entire US population of nascent entrepreneurs and nascent enterprises
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  • 7. The U.S. Panel Study of Entrepreneurial Dynamics Datasets
    • PSED I
      • Initial screening of 63,000 in 1998-2000
      • Tracked 830 nascent entrepreneurs/enterprises over 4 years
      • Sponsored by Entrepreneurial Research Consortium and the Kauffman Foundation
    • PSED II
      • Initial screening of 34,000 in 2005-2006
      • Tracking 1,214 nascent entrepreneurs/enterprises
      • Waves A, B & C data [0, 12, 24 month] available
      • Major support from the Kauffman Foundation, supplemental support from SBA Office of Advocacy
      • Wave D [36 month] now completed [NSF support]
      • Wave E & F [48,60 month] in process [NSF support]
    • Unique national resource providing descriptions of the fundamental aspects of the firm creation process
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  • 8. Central Assumption:
    • People start businesses, not
      • Market characteristics
      • Macro-economic conditions
      • Regional, geographic attributes
      • National R & D intensity
      • Presence of opportunities
      • Availability of financing
      • Positive entrepreneurial climate
      • Social networks
      • Speeches by politicians
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  • 9. Primary Objective
    • Who gets involved?
    • What do they do?
    • What is the outcome?
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  • 10. CONCEPTUAL MODEL The Start-up Process
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    Adult Population Business Firm Population Growth Persist Quit Firm Birth Social, Political, Economic Context ? NE NI ? Start-up Processes ? NE = NASCENT ENTREPRENEURS NI = NASCENT INTRAPRENEURS GEM PSED PSED
  • 11. Data collection procedure
    • Large scale screening to locate candidate nascent entrepreneurs
      • Completed by a commercial market research firm
      • Based on a representative household sample
      • Captures nascent enterprises long before they are included in business registries
    • Detailed interviews to identify active nascent entrepreneurs and gather information on what they are doing
      • Completed by U Michigan Institute for Social Research
    • Follow-up interviews to determine the outcomes of their efforts
      • Completed by U Michigan Institute for Social Research
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  • 15.
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    Outcome Date
  • 16.
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  • 17. OUTCOME VARIABLE
    • Status at end of 6 years
      • 32 % New firm in place
      • 68 % No new firm in place
        • 33 % Active start-up continues
        • 35 % Start-up terminated
    • What factors, prior to the 6 year outcome, are associated with new firm creation?
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  • 18. Consider 100+ Independent Variables
    • Who they are
    • What they are like
    • Their personal, cognitive strategies
    • Their perceptions and attitudes
    • The context of the start-up
    • HAS LIMITED IMPACT
    • Shift emphasis to what they do!
      • Consider difference in level
      • Consider differences in emphasis
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  • 19. Major findings: Process
    • Level of Activity
      • New firms and quits most active
      • Continuing start-ups less active
    • Duration
      • From one month to decades
      • Median time start-up, 18-24 months
      • Median