“PUSH” AND “PULL” ENTREPRENEURSHIP

Abstract

The adverse selection problem that is created because of asymmetry of information about entrepreneurs' attributes and abilities in turning ideas into viable businesses makes it difficult for venture capitalists or corporate executives to identify would-be successful entrepreneurs in advance. To mitigate this, and the related moral-hazard problem, we focus on an individual's motive to become an entrepreneur in the context of an individual's demographic and personal characteristics. We distinguish between two types of entrepreneurs based on their motivation to engage in entrepreneurial activity: “Push” entrepreneurs are those whose dissatisfaction with their positions, for reasons unrelated to their entrepreneurial characteristics, pushes them to start a venture. “Pull” entrepreneurs are those who are lured by their new venture idea and initiate venture activity because of the attractiveness of the business idea and its personal implications. Statistical analysis of data obtained from a questionnaire we recently mailed to Canadian enterprises reveals that “pull” entrepreneurs are more successful than “push” entrepreneurs.

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