With a Little Help from My (Random) Friends: Success and Failure in Post-Business School Entrepreneurship
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.
We would like to thank a number of Harvard Business School officials and faculty who made this project possible, including Lynda Applegate, Angela Crispi, Lee Gross, Jim Heskett, Elizabeth Karpati, Jana Kierstaad, Joe Lassiter, Bill Sahlman, Coral Sullivan, and especially Mike Roberts, Toni Wegner, and Sarah Woolverton. Daniel Littlejohn-Carrillo, Lori Santikian, Rui Tang, Astha Tharpa, and especially Geraldine Kim and Rui Xu provided excellent research assistance. Helpful comments were provided by seminar participants at the American Finance Association meetings, Boston College, Harvard, MIT, the National Bureau of Economic Research, the University of Southern California, and Yale. Harvard Business School's Division of Research and the National Science Foundation provided financial support. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Josh Lerner & Ulrike Malmendier, 2013. "With a Little Help from My (Random) Friends: Success and Failure in Post-Business School Entrepreneurship," Review of Financial Studies, Society for Financial Studies, vol. 26(10), pages 2411-2452. citation courtesy of