chapter  1
24 Pages

Entrepreneurship and post- entry performance: the microeconomic evidence

ByMARCO VIVARELLI

In the textbook view originally put forward by Mansfield (1962), a queue of well-informed potential entrepreneurs is supposed to be waiting outside the market, and the expected level of profit is considered the trigger factor determining entry (see also Orr, 1974; Khemani and Shapiro, 1986). In addition, according to more recent studies in this stream of literature, new firm formation may be triggered not only by profit expectations, but also by other pull factors such as economic growth and high innovative potential (see Acs and Audretsch, 1989a, 1989b; Geroski, 1995). Moreover, again according to a conventional industrial organization (IO) textbook approach, entry can be hindered on the one hand by exogenous entry barriers such as the amount of the initial investment to proxy the MES (see Geroski and Schwalbach, 1991) or the presence of bureaucratic entry regulations (see Djankov et al., 2002; Klapper et al., 2006), and on the other hand by endogenous entry barriers such as R&D and advertising expenditures (see Sutton, 1991; Arauzo-Carod and Segarra-Blasco, 2005). However, the main limitation of the IO approach is that it focuses on market mechanisms and may obscure the decision-making process at the level of the individual7 (see Winter, 1991), thus underestimating the factors behind the entrepreneur’s motivation in starting a new business. Indeed, some twentieth-century authors such as Knight (1921), Schumpeter (1934, 1939) and Oxenfeldt (1943) drew attention to the characteristics of the founder of a new firm. Following their contributions, we are aware that important individual determinants may act as push factors and be related both to environmental circumstances and to the potential founder’s personal characteristics.