Business Startups: An analysis of selection and post-startup performance

This paper investigates how the pre-startup circumstances surrounding an entrepreneur, during the time when he or she decides to start a business, affects the post-startup performance.

Based on the original dataset, sample selection models are estimated connecting nascent entrepreneurs’ selection of a startup with actual entrepreneurs’ performance post-startup.

The results of this paper confirm that the individual attributes of nascent entrepreneurs, which make it easier (difficult) to decide to start a business, have a tendency to worsen (improve) the performance post-startup. There also seems to be a trade-off between the easiness of a startup and the performance in general post-startup. This suggests that there exists a large number of ‘push type entrepreneurs,’ who were virtually forced to start up a business due to factors such as restructuring or bankruptcy of a former office, rather than the ‘pull type entrepreneurs,’ who independently decide on a startup for promising business opportunities. Moreover, from a policy perspective, this suggests consulting and advice services geared toward teaching nascent entrepreneurs how to succeed are more important than policies to augment the number of new startup firms.