NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

With a Little Help from My (Random) Friends: Success and Failure in Post-Business School Entrepreneurship

Josh Lerner, Ulrike Malmendier

NBER Working Paper No. 16918
Issued in March 2011
NBER Program(s):   CF   LS   PR

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.

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Document Object Identifier (DOI): 10.3386/w16918

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