Abstract

We explore whether a lack of wealth constrains individuals from starting businesses by measuring startup rates and the early performance of new ventures in the U.S. economy across different wealth percentiles. Theoretically, wealthy individuals can start new ventures more easily than less wealthy individuals by assigning their wealth as collateral to access credit markets (Acs, 2008). However, research on wealth and entrepreneurial entry provides mixed results. Some studies find that a lack of wealth deters entry (Evans and Jovanovic, 1989; Fairlie, 1999) whereas other studies find that this relationship applies only to the wealthiest 5 percent (Hurst and Lusardi, 2004). The possibility that wealth acts as a constraint is an important issue as it suggests that poorer nascent entrepreneurs are more likely to abandon their startup efforts. This study also provides insight into job creation by nascent entrepreneurs from different wealth percentiles, making important contributions toward our understanding of inequality and entrepreneurship.

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