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Journal ArticleDOI

An Estimated Model of Entrepreneurial Choice under Liquidity Constraints

David S. Evans, +1 more
- 01 Aug 1989 - 
- Vol. 97, Iss: 4, pp 808-827
TLDR
The authors show that the data point to liquidity constraints: capital is essential for starting a business, and liquidity constraints tend to exclude those with insufficient funds at their disposal, and a would-be entrepreneur must bear most of the risk inherent in his venture.
Abstract
Is the capital function distinct from the entrepreneurial function in modern economies? Or does a person have to be wealthy before he or she can start a business? Knight and Schumpeter held different views on the answer to this question. Our empirical findings side with Knight: Liquidity constraints bind, and a would-be entrepreneur must bear most of the risk inherent in his venture. The reasoning is roughly this: The data show that wealthier people are more inclined to become entrepreneurs. In principle, this could be so because the wealthy tend to make better entrepreneurs, but the data reject this explanation. Instead, the data point to liquidity constraints: capital is essential for starting a business, and liquidity constraints tend to exclude those with insufficient funds at their disposal.

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Citations
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Journal ArticleDOI

Religion and Entrepreneurship

TL;DR: In this paper, the authors examined the influence of religion on the decision for people to become an entrepreneur and found that both religion and the tradition of the caste system influence entrepreneurship, suggesting a link between religion and economic behavior.
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Entrepreneurs, Professionals, and Growth

TL;DR: In this paper, the authors examine the implications for growth and development of the existence of two types of human capital: entrepreneurial and professional, and show that skill-biased technological progress leads to changes in the composition of aggregate human capital.
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Effect of credit guarantee policy on survival and performance of SMEs in Republic of Korea

TL;DR: In this paper, the authors evaluate the effect of credit guarantee on SMEs at the firm level and conclude that credit guarantee satisfied partially its goal to alleviate SMEs' difficulty in acquiring finance and to stabilize employment.
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The Multiple Effects of Business Planning on New Venture Performance

TL;DR: This article investigated the multiple effects of writing a business plan prior to start-up on new venture performance and found that the impact of business plans depends on the purpose for and circumstances in which they are being used.
Journal ArticleDOI

What makes a region entrepreneurial? Evidence from Britain

TL;DR: In this article, the authors developed a theoretical model of regional self-employment, and estimate the roles of labour market conditions, labour force characteristics, industry composition, and region-specific factors such as entrepreneurial human capital.
References
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Book

The theory of economic development

TL;DR: Buku ini memberikan infmasi tentang aliran melingkar kehidupan ekonomi sebagaimana dikondisikan oleh keadaan tertentu, fenomena fundamental dari pembangunan EKonomi, kredit, laba wirausaha, bunga atas modal, and siklus bisnis as mentioned in this paper.
Posted ContentDOI

Credit Rationing in Markets with Imperfect Information.

TL;DR: In this paper, a model is developed to provide the first theoretical justification for true credit rationing in a loan market, where the amount of the loan and amount of collateral demanded affect the behavior and distribution of borrowers, and interest rates serve as screening devices for evaluating risk.
Book

Risk, Uncertainty and Profit

TL;DR: In Risk, Uncertainty and Profit, Frank Knight explored the riddle of profitability in a competitive market profit should not be possible under competitive conditions, as the entry of new entrepreneurs would drive prices down and nullify margins, however evidence abounds of competitive yet profitable markets as mentioned in this paper.
Posted Content

Competition and Entrepreneurship

TL;DR: Kirzner as discussed by the authors argues that the assumption of perfect knowledge is unrealistic and argues that every market participant is a potential entrepreneur who can exploit a situation, which depends on a lack of perfect information among the market participants.