Entrepreneurship and the discipline of external finance
By: Ramana Nanda
Contributors: Harvard Business School
Series: Working paper / Harvard Business School -- 11-098; Working paper (Harvard Business School) -- 11-098.
Publisher: Harvard Business School
Published: 2011
Place of publication: [Boston]
Language: eng
Number of pages: 28
Description: I confirm the finding that the propensity to start a new firm rises sharply among those in the top five percentiles of personal wealth. This pattern is more pronounced for entrants in less capital intensive sectors. Prior to entry, founders in this group earn about 6% less compared to those who stay in paid employment. Their firms are more likely to fail early and conditional on survival, less likely to be make money. This pattern is only true for the most-wealthy individuals, and is attenuated for wealthy individuals starting firms in capital intensive industries. Taken together, these findings suggest that the spike in entry at the top end of the wealth distribution is driven by low-ability individuals who can afford to start (and sometimes continue running) weaker firms because they do not face the discipline of external finance.
Notes: "March 2011"--Publisher's website.

"May 2010" -- added t.p.

Originally published as: Cost of external finance and selection into entrepreneurship. c2008, 08-047.

Revision published as: Entrepreneurship and the discipline of external finance. c2009.

Includes bibliographical references.