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

56 Pages Posted: 4 Apr 2011 Last revised: 25 Mar 2023

See all articles by Josh Lerner

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Private Capital Research Institute

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Date Written: March 2011

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.

Suggested Citation

Lerner, Josh and Malmendier, Ulrike, With a Little Help from My (Random) Friends: Success and Failure in Post-Business School Entrepreneurship (March 2011). NBER Working Paper No. w16918, Available at SSRN: https://ssrn.com/abstract=1801088

Josh Lerner (Contact Author)

Harvard Business School - Finance Unit ( email )

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HOME PAGE: http://www.people.hbs.edu/jlerner/

Harvard University - Entrepreneurial Management Unit

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National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI) ( email )

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Harvard University - Private Capital Research Institute ( email )

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Ulrike Malmendier

University of California, Berkeley - Department of Economics ( email )

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Berkeley, CA 94720-3880
United States
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(510) 642-6615 (Fax)

HOME PAGE: http://www.econ.berkeley.edu/~ulrike/

University of California, Berkeley - Haas School of Business ( email )

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United States

National Bureau of Economic Research (NBER)

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Institute for the Study of Labor (IZA)

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