Mirjam van Praag

Explaining Entrepreneurial Intentions by Means of the Theory of Planned Behaviour

– This paper sets out to present a detailed empirical investigation of the entrepreneurial intentions of business students. The authors employ the theory of planned behaviour (TPB), in which intentions are regarded as resulting from attitudes, perceived behavioural control, and subjective norms., – The methodology used was a replication study among samples of undergraduate students of business administration at four different universities (total n=1,225). Five operationalisations of intentions are used as well as a composite measure. Prior to the main study, qualitative research conducted at two other universities (total n=373) was held to operationalise the components of the TPB., – The results show that the two most important variables to explain entrepreneurial intentions are entrepreneurial alertness and the importance attached to financial security., – Various research design features are used that result in better and more detailed explanations of entrepreneurial intentions., – Should one want to stimulate entrepreneurship in educational or training settings, then this papers results provide guidance. Several suggestions are offered on how entrepreneurial alertness can be improved and financial security concerns can be reduced., – The study provides detailed and solid results on entrepreneurial intentions which are positioned in the career literature.

Education and Entrepreneurship Selection and Performance: A Review of the Empirical Literature

This paper provides a review of empirical studies into the impact of formal schooling on entrepreneurship selection and performance in industrial countries. We describe the main effects found in the literature, we explain the variance in results across almost a hundred studies, and we put the empirical results in the context of related economic theory and the much further developed literature in labor economics (studying the rate of return to education among wage employees). Five main conclusions result from this meta-analysis. First, the impact of education on selection into entrepreneurship is insignificant. Second, the effect of education on performance is positive and significant. Third, the return to a marginal year of schooling is 6.1% for an entrepreneur. Fourth, the effect of education on earnings is smaller for entrepreneurs than for employees in Europe, but larger in the USA. Fifth, the returns to schooling in entrepreneurship are higher in the USA than in Europe, higher for females than for males, and lower for non-whites or immigrants. In conclusion, we offer a number of suggestions to move the research frontier in this area of inquiry. The entrepreneurship literature on education can benefit from the technical sophistication used to estimate the returns to schooling for employees.

Why Do Entrepreneurial Parents Have Entrepreneurial Children

We explore the origins of the intergenerational association in entrepreneurship using Swedish adoption data that allow us to quantify the relative importance of prebirth and postbirth factors. We find that parental entrepreneurship increases the probability of children’s entrepreneurship by about 60%. For adoptees, both biological and adoptive parents make significant contributions to this association. These contributions, however, are quite different in size. Postbirth factors account for twice as much as prebirth factors in our decomposition of the intergenerational association in entrepreneurship. We investigate several candidate explanations for this large postbirth factor and present suggestive evidence in favor of role modeling.

The Impact of Gender Diversity on the Performance of Business Teams: Evidence from a Field Experiment

This paper reports on a field experiment conducted to estimate the impact of the share of women in business teams on their performance. Teams consisting of undergraduate students in business studies start up a venture as part of their curriculum. We manipulated the gender composition of teams and assigned students randomly to teams, conditional on their gender. We find that teams with an equal gender mix perform better than male-dominated teams in terms of sales and profits. We explore various mechanisms suggested in the literature to explain this positive effect of gender diversity on performance (including complementarities, learning, monitoring, and conflicts) but find no support for them.

Illegal Entrepreneurship Experience: Does it Make a Difference for Business Performance and Motivation?

Existing studies show a positive relationship between entrepreneurs’ business performance and their conventional human capital as measured by previous business experience and formal education. In this paper, we explore whether illegal entrepreneurship experience (IEE), an unconventional form of human capital, is related to the performance and motivation of ntrepreneurs operating legal businesses in a transition context. Using regression techniques on a sample of 399 private business owners in Lithuania, we find that, in general, IEE is significantly and positively associated with subjective measures of business motivation. Moreover, younger entrepreneurs benefit from their IEE in terms of business performance, indicating that they have been more successful than older entrepreneurs in transferring their IEE to a market oriented setting. In addition, IEE and business performance are positively related for entrepreneurs who started completely new legal businesses. Thus, our research partially supports the notion that prior experience in the black or gray market may signal and provide valuable human capital for legal enterprising.

Firm-size wage differentials in the Netherlands

An unsolved problem in modern labor economics is the positive relation between the size of the firm in which a worker is employed and his wage. One line of research that has been developed quite recently in this field is the application of endogenous switching regression models. In this paper we utilize such a model to investigate firm-size wage differentials in the Netherlands. The principal findings are that larger firms pay higher returns on schooling whereas smaller firms tend to reward IQ. Combined with the finding that high IQ-workers are sorted into the largest firms, the results are consistent with a model of job screening. Furthermore, we find that employed sons of self-employed fathers are more likely to work in small firms and that wage prospects for all types of workers are indeed most favorable in larger firms.

Ethnic Diversity and Team Performance: A Field Experiment

One of the most salient and relevant dimensions of team heterogeneity is ethnicity. We measure the causal impact of ethnic diversity on the performance of business teams using a randomized field experiment. We follow 550 students who set up 45 real companies as part of their curriculum in an international business program in the Netherlands. We exploit the fact that companies are set up in realistic though similar circumstances and that we, as outside researchers, had the unique opportunity to exogenously vary the ethnic composition of otherwise randomly composed teams. The student population consists of 55% students with a non-Dutch ethnicity from 53 different countries of origin. We find that a moderate level of ethnic diversity has no effect on team performance in terms of business outcomes (sales, profits and profits per share). However, if at least the majority of team members is ethnically diverse, then more ethnic diversity has a positive impact on the performance of teams. In line with theoretical predictions, our data suggest that this positive effect could be related to the more diverse pool of relevant knowledge facilitating (mutual) learning within ethnically diverse teams.

Group Status and Entrepreneurship

Do unfettered markets produce too many or too few entrepreneurs? Two seminal papers [Stiglitz and Weiss (1981) and de Meza and Webb (1987)] obtained ambiguous answers to this question based on different assumptions about the character of information asymmetries in credit markets. The present paper approaches the same question but using a labor market model in which income is determined by ability and individuals derive utility from income and occupational group status. Occupational group status for entrepreneurs depends on the average entrepreneurial income (due to ex post screening by banks), whereas status for wage employees depends on their own income and ability (due to ex ante screening by employers). Thus, individuals create externalities through their occupational choice. It is shown that there can be too many or too few entrepreneurs in equilibrium depending on the marginal returns to ability in entrepreneurship relative to paid employment; this enables the researcher to use independent evidence about occupational marginal returns to identify the relevant equilibrium likely to arise in practice, together with the likely appropriate policy responses. Based on this approach, we suggest that there may be too many (low ability) entrepreneurs in the USA.

Initial capital constraints hinder entrepreneurial venture performance

This article investigates empirically whether and to what extent initial capital constraints hinder entrepreneurial performance once the venture has been started. Prior empirical research in this area could investigate this issue only indirectly by lack of data. The key contribution of this article is that the authors are able—due to their comprehensive data set—to measure the influence of capital constraints more directly. The authors find that initial capital constraints during the start-up phase of business have quite a substantial negative influence on performance as measured by the survival probability of the venture and entrepreneurial earnings. These results appear quite robust.

Wage Structure and the Incentive Effects of Promotions

This paper studies wage structure characteristics and their consequent incentive effects empirically. Based on personnel records and an employee survey, we provide evidence that wages are attached to jobs and that promotions play a dominant role as a wage determinant. Our findings indicate furthermore that a promotion affects both intrinsic and extrinsic motivation significantly, though in two different ways: an expected promotion increases extrinsic motivation whereas intrinsic motivation is highest subsequent to a realized promotion. The relationship between extrinsic motivation and expected promotions implies that promotions have a clear incentive effect, consistent with a key - not yet tested - assumption of the tournament model.