Working Paper: NBER ID: w21775
Authors: Luigi Guiso; Luigi Pistaferri; Fabiano Schivardi
Abstract: We document that individuals who grew up in areas with high density of firms are more likely, as adults, to become entrepreneurs, controlling for the density of firms in their current location. Conditional on becoming entrepreneurs, the same individuals are also more likely to be successful entrepreneurs, as measured by business income or firm productivity. Strikingly, firm density at entrepreneur’s young age is more important than current firm density for business performance. These results are not driven by better access to external finance or intergenerational occupation choices. They are instead consistent with entrepreneurial capabilities being at least partly learnable through social contacts. In keeping with this interpretation, we find that entrepreneurs who at the age of 18 lived in areas with a higher firm density tend to adopt better managerial practices (enhancing productivity) later in life.
Keywords: Entrepreneurship; Social Learning; Firm Density; Managerial Practices
JEL Codes: J24; M13; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Early exposure to entrepreneurial environments (ED) (L26) | likelihood of becoming an entrepreneur (L26) |
| Higher ED at learning age (I21) | higher income from businesses for entrepreneurs (P12) |
| Higher ED at age 18 (I24) | better managerial practices (M54) |
| Higher ED (I29) | productivity later in life (J24) |
| ED (I20) | certain entrepreneurial traits (risk aversion, innovation capacity) (L26) |