Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2006-10-11 Number: 06-089/3 Author-Name: Simon C. Parker Author-Email: s.c.parker@durham.ac.uk Author-Workplace-Name: Durham University Author-Name: C. Mirjam van Praag Author-Email: c.m.vanpraag@uva.nl Author-Workplace-Name: Universiteit van Amsterdam Title: The Entrepreneur's Mode of Entry: Business Takeover or New Venture Start? Abstract: We analyse the decision to become an entrepreneur by either taking over an established business or starting a new venture from scratch. A model is developed which predicts how several individual- and firm-specific characteristics influence entrepreneurs' entry mode. The new venture creation mode is associated with higher levels of schooling and wealth, whereas managerial experience, new venture start-up capital requirements and risk promote the takeover mode. Entrepreneurs whose parents run a family firm are predicted to invest the least in schooling, since schooling reduces search costs and these individuals have the lowest probability of needing to search for a business opportunity outside their family. A sample of data on entrepreneurs from the Netherlands provides broad support for the theory; implications for policy-makers concerned about the survival of family firms lacking within-family successors are discussed.

This discussion paper was published in the Journal of Business Venturing (2012, 27(1) 31-46. Classification-JEL: J24; L26; M13 Keywords: entrepreneurship; human capital; business takeover; venture start up; family firm File-Url: https://papers.tinbergen.nl/06089.pdf File-Format: application/pdf File-Size: 286216 bytes Handle: RePEc:tin:wpaper:20060089