Why some nascent entrepreneurs do not seek professional assistance

Abstract

As the high share of failed new businesses shows, the marked success of new firms is still rather low. Hence, enhancing the quality of new firms is an important goal of entrepreneurship support policies. Schemes that give professional assistance to individuals who want to start up a business are a key feature of most developed countries' policies towards improving the performance of new firms. In our sample, only approximately half of nascent entrepreneurs seek professional assistance. Given that assistance is highly subsidized and available to everyone interested in starting up a firm, we ask why certain nascent entrepreneurs do not seek assistance. By using survey data consisting of an initial screening interview and a follow-up interview after 1 year, we are able to show that men and well-educated founders tend to refrain from professional assistance. Notably, those without any experience in the industry of the planned business are more apt not to seek assistance. This finding suggests that cognitive biases such as overconfidence might play a role in explaining the assistance-avoiding behaviour. Policy measures aiming at improving the knowledge of potential entrepreneurs are therefore well advised to target well-educated males in particular.

Keywords:

• nascent entrepreneurs
• start-up assistance
• cognitive biases
• German panel of nascent entrepreneurs

JEL Classification:

• L20
• M13

Notes

¹ Multiple answers are permitted.