Serial entrepreneurship, learning by doing and self-selection

 The topic of entrepreneurial learning has been nurturing a growing debate in the midst of both scholars and policymakers over the most recent years. 

Entrepreneurs are believed to accumulate unique knowledge and skills by creating and running new ventures, and by establishing networks with suppliers, customers and other business-owners. 

All this know-how accumulated through experience is believed to make serial entrepreneurs more able to run successful ventures than novice (ie inexperienced) entrepreneurs. Nevertheless, if on the one hand, the lack of suitable data has prevented in-depth empirical analyses about entrepreneurial learning, on the other hand more recent empirical studies addressing these issues have been finding limited support for entrepreneurial learning hypotheses. 

While the significance of learning by doing remains a question, a new debate has been emerging regarding the potential selection bias associated with the re-entry of individuals into entrepreneurship. In fact, do entrepreneurs really learn with their past experience or are those who try again a selected sample of higher-than-average ability entrepreneurs? Whether their outperformance comes from learning by doing or self-selection according to their own innate ability thus remains a pertinent query.

This paper thus contributes to this debate by using a large longitudinal matched employer-employee dataset that allows us to track individuals and their entrepreneurial experiences over time. We evaluated how previous entrepreneurial experience impacts on serial entrepreneurs’ persistence in the second business, exploring a novel empirical strategy based on continuous time duration models that take into account selection bias issues.

Our results seem to confirm that serial entrepreneurs are not a random sample of individuals. Instead, they possess some unobserved characteristics that not only make them more likely to try again as entrepreneurs, as also reduce their exit rates in their second entrepreneurial experience. After correcting this bias in their selection process, the cumulative experience as business-owners exerts no significant effect on their survival in the second business.

Besides, the comparative advantages associated with industry-specific experience are found to be overestimated when ignoring self-selection problems. In short, our study does not offer support for the widespread expectations related to significant entrepreneurial learning. While part of the performance shown by serial entrepreneurs may result from the entrepreneurial knowledge acquired in the previous business –especially when the second entrepreneurial try occurs in the same industry –, learning by doing effects seem to be much less important than self-selection effects. Innate entrepreneurial ability seems to play an essential, and possibly dominant, effect.