If I Were Rich? The Impact of Financial and Human Capital on Becoming a Nascent Entrepreneur

We test the theory that personal financial resources are an important factor in becoming an entrepreneur. Using data from the Panel Study of Entrepreneurial Dynamics (PSED), we examined the role of financial resources (e.g., household income and wealth) and human capital (e.g., education, prior work and entrepreneurial experience, and influence from family/friends) on the decision to become an entrepreneur. We found that financial resources were not significantly associated with becoming a nascent entrepreneur. Several human capital variables, including education, full-time work experience, previous start-up experience, current self-employment, and percentage of relatives who are entrepreneurs were significantly associated with being a nascent entrepreneur. We suggest that viewing the founding of new organizations through a founder’s resources perspective can enhance our understanding of the emergence of new organizations.