Recent Research: Learning Entrepreneurship from Other Entrepreneurs?

Around the world, entrepreneurship education continues to permeate schools, nonprofits, economic development organizations, and college campuses. At the root of this momentum is a belief that entrepreneurship can be taught to anybody, regardless of their innate skills. This Recent Research article presents new conclusions that suggest individuals can learn entrepreneurship by being exposed to other entrepreneurs. In other words, both nature and nurture contribute to the likelihood one becomes an entrepreneur.

In Learning Entrepreneurship From Other Entrepreneurs, Luigi Guiso and Fabiano Schivardi of the Einaudi Institute for Economics and Finance in Rome, and Luigi Pistaferri from Stanford University, examine the extent to which individuals are able to learn entrepreneurship from other entrepreneurs. Through their analysis, the authors find that people that grew up in Italian provinces with a high density of firms are more likely to choose an entrepreneurial job as an adult, even when accounting for the density of firms in their current location. Furthermore, conditional on becoming entrepreneurs, individuals exposed to an environment of dense firms in their youth also tended to earn higher incomes from business and manage more productive firms. By finding that exposure to firm density at an entrepreneur’s young age is more important than current density for firm performance, the authors’ findings are consistent with the idea that entrepreneurial capabilities are at least partly learnable, and that learnability is a social process.

At the same time, evidence also exists suggesting entrepreneurial skills are transferred from generation to generation. The 2009 book The Economics of Entrepreneurship, by Simon C. Parker, the Director of the Entrepreneurship Cross-Enterprise Leadership Centre at the University of Western Ontario’s Richard Ivey School of Business, shows how economics can contribute to our understanding of entrepreneurship. As cited in Guiso, et al (2015), Parker surveys the entrepreneurship literature and consistently finds that the offspring of entrepreneurs are more likely to become entrepreneurs than the offspring of general employees. Parker rationalizes this through five hypotheses:

1. Inheritance of the family business;
2. Relaxation of liquidity constraints;
3. Learning general entrepreneurial skills;
4. Industry- or firm-specific skills, possibly including access to the business network of parents; and,  
5. Correlated preferences between parents and their offspring, possibly enhanced by role modeling.

In particular, Parker notes evidence supporting the third, fourth, and fifth hypotheses, arguing that entrepreneurship is at least partially transmittable and, possibly, learnable.

Matthew Lindquist, a professor at Stockholm University, along with Joeri Sol and Miriam Van Praag, professors at the Amsterdam School of Economics, expand on this research by asking, Why do Entrepreneurial Parents Have Entrepreneurial Children? In their study, the authors take advantage of a unique dataset of Swedish adoptees that not only includes the occupational status of adoptees and their adoptive parents, but also for their biological parents. Used in conjunction with comparable entrepreneurship data for a large, representative sample of the Swedish population, the authors are able to show that parental entrepreneurship increases the probability of children’s entrepreneurship by approximately 60 percent. For adoptees, both biological and adoptive parents make significant contributions, but to varying degrees. The effect of post-birth factors (adoptive parents) is approximately twice as large as the effect of pre-birth factors (biological parents). This suggests evidence for the fifth hypothesis identified by Parker; that the main underlying mechanism of the parental transmission of entrepreneurship is role modeling.  Ultimately, while biology may have an impact on one’s likelihood of becoming an entrepreneur – their milieu could be considered a more important determining factor.