Schooling, capital contraints and entrepreneurial performance: The endogenous triangle

Simon Parker, Mirjam van Praag

Research output: Contribution to journalArticle

125 Citations (Scopus)

Abstract

We estimate the impact of schooling and capital constraints at the time of startup on the performance of Dutch entrepreneurial ventures, taking into account the potential endogeneity and interdependence of these variables. Instrumental variable estimates indicate that a 1 percentage point relaxation of capital constraints increases entrepreneurs' gross business incomes by 3.9% on average. Education enhances entrepreneurs' performance both directly—with a rate of return of 13.7%—and indirectly, because each extra year of schooling decreases capital constraints by 1.18 percentage points. The indirect effect of education on entrepreneurs' performance is estimated to be 3.0–4.6%.
Original languageEnglish
Pages (from-to)416-431
JournalJournal of Business & Economic Statistics
Volume24
Issue number4
DOIs
Publication statusPublished - 2006

Keywords

  • entrepreneurship
  • financial constraints
  • human capital

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