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Early exposure to entrepreneurship & the creation of female entrepreneurs�

Discussion by Kristoph Kleiner

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Fact 1: Women are less likely to enter Entrepreneurship

Assuming there are no difference in entrepreneurial ability across gender, suggests we are losing out on some high-quality female entrepreneurship

Suggests the drivers of entrepreneurial entry are gender-specific

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Fact 2: Women are Less Exposed to Entrepreneurship during Adulthood

Suggests one explanation of the gender gap in entrepreneurship may be exposure during adulthood

However, this is difficult to identify because sorting during adulthood appears endogenous

Instead, there are limited differences in exposure during childhood

Suggests children are not endogenously sorting into exposure

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Result 1: Interactions with a classmate with entrepreneurial parents increase female entrepreneurship

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Result 2: Effects are greatest when the peer is also female, highlighting the importance of the social interaction

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A Decade Plus of Papers on Peers and Entrepreneurship

Bell, A., Chetty, R., Jaravel, X., Petkova, N. and Van Reenen, J., 2019. Who becomes an inventor in America? The importance of exposure to innovation. The Quarterly Journal of Economics, 134(2), pp.647-713.
Bosma, N., Hessels, J., Schutjens, V., Van Praag, M. and Verheul, I., 2012. Entrepreneurship and role models. Journal of economic psychology, 33(2), pp.410-424.
Eesley, C. and Wang, Y., 2017. Social influence in career choice: Evidence from a randomized field experiment on entrepreneurial mentorship. Research policy, 46(3), pp.636-650.
Falck, O., Heblich, S. and Luedemann, E., 2012. Identity and entrepreneurship: do school peers shape entrepreneurial intentions?. Small Business Economics, 39(1), pp.39-59.
Field, E., Jayachandran, S., Pande, R. and Rigol, N., 2016. Friendship at work: Can peer effects catalyze female entrepreneurship?. American Economic Journal: Economic Policy, 8(2), pp.125-53.
Giannetti, M. and Simonov, A., 2009. Social interactions and entrepreneurial activity. Journal of Economics & Management Strategy, 18(3), pp.665-709.
Guiso, L., Pistaferri, L. and Schivardi, F., 2021. Learning entrepreneurship from other entrepreneurs?. Journal of Labor Economics, 39(1), pp.135-191.
Kacperczyk, A.J., 2013. Social influence and entrepreneurship: The effect of university peers on entrepreneurial entry. Organization Science, 24(3), pp.664-683.
Lerner, J. and Malmendier, U., 2013. With a little help from my (random) friends: Success and failure in post-business school entrepreneurship. The Review of Financial Studies, 26(10), pp.2411-2452.
Lindquist, M.J., Sol, J. and Van Praag, M., 2015. Why do entrepreneurial parents have entrepreneurial children?. Journal of Labor Economics, 33(2), pp.269-296.
Markussen, S. and Røed, K., 2017. The gender gap in entrepreneurship–The role of peer effects. Journal of Economic Behavior & Organization, 134, pp.356-373.
Nanda, R. and Sørensen, J.B., 2010. Workplace peers and entrepreneurship. Management science, 56(7), pp.1116-1126.
Rocha, V. and Van Praag, M., 2020. Mind the gap: The role of gender in entrepreneurial career choice and social influence by founders. Strategic Management Journal, 41(5), pp.841-866.
Sorenson, O., 2018. Social networks and the geography of entrepreneurship. Small Business Economics, 51(3), pp.527-537.
Vladasel, T., Lindquist, M.J., Sol, J. and Van Praag, M., 2021. On the origins of entrepreneurship: Evidence from sibling correlations. Journal of business venturing, 36(5), p.106017.

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Why so many papers?

The cynical view: peer effects are important in all environments; we choose to focus on entrepreneurship because:

There are entire business departments focused on entrepreneurship
Entrepreneurship publishes in Management, Economics, and Finance Journals

My view: Peer effects are far more important in entrepreneurship compared to many other outcomes

Argument from my recent work with Isaac Hacamo finds:

Interacting with an Entrepreneurship Major in an MBA program increases your likelihood of entrepreneurship by 1.3 percentage points
Interacting with a Finance Major in an MBA program does not increase your likelihood of entering a finance occupation/industry

This paper finds similar evidence for Engineers

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The Current Limitations of this Literature

Economists studying peer effects in entrepreneurship generally have two options:

Large, rich dataset that is generalizable
Small dataset with forced interactions

Yet, both options are necessary for research on peers and selection into entrepreneurship

A large dataset is necessary because only 5% of workers ever enter
In addition, only 10% of firms ever employ 20 workers and 1% receive VC funding

Forced interactions is necessary because peer networks are highly endogenous as individuals sort into groups based on their interests and abilities

This Paper: Has the ability to identify forced interactions from childhood classrooms for over 800,000 individuals!

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My Main Suggestion for the Authors

I argue the authors benefit from (a) forced social interactions and (b) large dataset

They are effectively using forced interactions

I think they can extend the benefits of the large dataset

Specifically, I think they should do more to evaluate the implications for entrepreneurial quality as this has significant implications for entrepreneurial theory

The authors appear aware this is their contribution

“… Specifically, by ruling out that the marginal woman entering entrepreneurship is less productive than the average man, our analysis is the first to directly show that women's under-representation in entrepreneurship reflects, at least in part, talent misallocation; or, in other words, that the higher occupational barriers facing women preclude some talented entrepreneurs from ever entering this profession. We view this as a central contribution of our paper given that the cost of talent misallocation in entrepreneurship for economic growth are especially high (Murphy et al., 1991).”

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Why focus on entrepreneurial quality?

The central question of entrepreneurship research is whether entry is driven by (a) entrepreneurial quality or (b) something else

If Entrepreneurial Quality (Lucas, 1978): Increasing the proportion of entrepreneurs in the economy will lower average quality, leading to minimal effects on aggregate employment and innovation
If Something Else like Risk Aversion (Kihlstrom and Laffont, 1979): Increasing the proportion of entrepreneurs can also lead to increased aggregate employment and innovation

Distinguishing between these theories requires:

Exogenous shock to entrepreneurial entry
Large sample of entrepreneurs to observe the full distribution of quality
Multiple measures of entrepreneurial quality

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What do Surveys say about the drivers of entrepreneurship?

Recent survey evidence collected with my coauthor Isaac Hacamo
This graph updates a similar survey from Hurst and Puglsey (2011)
Suggests Quality (measured as Unlimited Income Potential) is not a primary driver of entrepreneurship

Instead Flexibility and Enjoyment drive entry

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The Authors Current Findings

Social interactions among female students lead to employer firms

Social interactions among female students lead to long-lasting firms

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Three Additional Tests I suggest to the Authors

To analyze the effects of social interactions on the quality of entrepreneurship, the authors must:

Run regressions on the subset of individuals that enter entrepreneurship.

Otherwise, an increase in high-quality entrepreneurship may be driven by (a) better entrepreneurs, or (b) more entrepreneurs

Include self-employment as a type of entrepreneurship

Otherwise, we are missing a major segment of the distribution. (The authors can try these test both with and w/o self-employment if they prefer.)

Expand far beyond median survival and employment

Past research (including my stuff) focuses on survival and employment due to data limitations. You are not constrained!
For economic growth, we care about highly-successful entrepreneurship: large-scale employment, innovations, IPOs, etc.
If social interactions leads to highly-successful entrepreneurship, you have real macroeconomic implications

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Why place the emphasis on �entrepreneurial quality?

Current Contribution: Exposure to entrepreneurship in childhood leads to entrepreneurship among women with no impact on entrepreneurial quality

Potential Contribution: Exposure to entrepreneurship in childhood leads to entrepreneurship among women while also increasing entrepreneurial quality

This latter result is possible given exposure to entrepreneurship leads to increase vocational schooling
Testing this result is possible by following my prior suggestions

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Thanks for the invitation to discuss and best of luck with the end of the semester!