SPRU Electronic Working Paper Number 203 Business Experience and Start-up Size: Buying More Lottery Tickets Next Time Around? 1 Business Experience and Start-up Size: Buying More Lottery Tickets Next Time Around? 1

Alex Coad, Julian Frankish, Paul Nightingale, Richard Roberts, David Storey, Alex Coad, Julian Frankish, Paul Nightingale, Richard Roberts, David Storey, Barclays Bank
2012 unpublished
This paper explores the determinants of start-up size by focusing on a cohort of 6247 businesses that started trading in 2004, using a unique dataset on customer records at Barclays Bank. In our theoretical model, post-entry growth is treated as a random walk, and start-up size is positively related to survival. In this view, business experience does not have any impact on post-entry growth (since growth is random), but is associated with higher survival if entrepreneurs with prior business
more » ... prior business experience have a larger start-up size. Quantile regressions show that prior business experience is significantly related with start-up size, as are a number of other variables such as age, education and bank account activity. Quantile treatment effects (QTE) estimates show that business experience leads to a higher start-up size, with the effect of business experience on (log) start-up size being roughly constant across the quantiles. Prior personal business experience leads to an increase in expected start-up size of about 48%. IVQTE estimates are even higher.
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