A second chance for failed entrepreneurs: a good idea?

Abstract

Abstract In this paper, we analyze how previously failed entrepreneurs fare with their current venture in terms of survival compared with novices. While previous studies have focused on the superior learning effects of failure experience, we point to the selection process that takes place before failed entrepreneurs become business owners again. One potential driver of this process is entrepreneurial talent. We find that failed entrepreneurs are less likely to survive with their current venture. This result persists for several subgroups of entrepreneurs, if we consider the number of past failure events, or if we control for the inclination of entrepreneurs to pursue high-risk projects. Overall, our results are consistent with the hypothesis that previously failed entrepreneurs are those with below-average entrepreneurial talent.

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