The entrepreneurial process: Evidence from a nationally representative survey

Research Summary Scholars have traditionally characterized the variation in firm performance as determined by conditions after entry, where the entry decision is a one-shot binary choice determined by cost-benefit analysis. However, recent theoretical work has posited that the entry decision is an outcome of a learning process and that the information acquired during the pre-entry period shapes subsequent performance dynamics. We provide the first systematic data on the pre-entry period using a nationally representative survey. We document the activities that prospective entrants undertake, finding variation according to opportunity costs, prior experience, and confidence levels. Our results suggest the pre-entry period is shaped by a series of choices by prospective entrants as they contemplate entry, further exploration, or ending the entrepreneurial process. Managerial Summary We created and implemented a nationally representative survey on the entrepreneurial activities of Americans. Several interesting findings emerged. First, approximately a third of Americans report having had a business idea in the past 5 years, motivated in the vast majority of cases by lifestyle concerns rather than the pursuit of significant business opportunities. Fewer than half of those who considered starting a business take even the lowest cost steps, like searching the Internet for potential competitors or speaking with a friend. Our findings reveal an entrepreneurial process which involves a significant pre-entry period where prospective entrepreneurs seek to acquire information about the quality of their idea, perform administrative tasks to prepare for launch and encounter frictions that impede their progress.