Working Paper: NBER ID: w16918
Authors: Josh Lerner; Ulrike Malmendier
Abstract: To what extent do peers affect our occupational choices? This question has been of particular interest in the context of entrepreneurship and policies to create a favorable environment for entry. Such influences, however, are hard to identify empirically. We exploit the assignment of students into business school sections that have varying numbers of classmates with prior entrepreneurial experience. We find that the presence of entrepreneurial peers strongly predicts subsequent entrepreneurship rates of students without an entrepreneurial background, but in a more complex way than the literature has previously suggested: A higher share of entrepreneurial peers leads to lower rather than higher subsequent rates of entrepreneurship. However, the decrease in entrepreneurship is entirely driven by a significant reduction in unsuccessful entrepreneurial ventures. The effect on the rate of successful post-MBA entrepreneurs, instead, is insignificantly positive. In addition, sections with few prior entrepreneurs have a considerably higher variance in their rates of unsuccessful entrepreneurs. The results are consistent with intra-section learning, where the close ties between section-mates lead to insights about the merits of business plans.
Keywords: Entrepreneurship; Peer Effects; Business School; MBA; Entrepreneurial Success
JEL Codes: G24; I23; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher share of entrepreneurial peers (L26) | Lower rates of entrepreneurship among students without prior entrepreneurial backgrounds (L26) |
| Higher share of entrepreneurial peers (L26) | Reduction in unsuccessful entrepreneurial ventures (M13) |
| Higher share of entrepreneurial peers (L26) | Insignificantly positive effect on the rate of successful post-MBA entrepreneurs (M13) |
| Higher share of entrepreneurial peers (L26) | Lower variance in rates of unsuccessful entrepreneurs (L26) |
| Entrepreneurial peers (L26) | Identification of flawed business ideas (D26) |