Are Entrepreneurs Born Or Made?

A new NBER working paper explores this and many other questions (abstract; emphasis added):

Smart and Illicit: Who Becomes an Entrepreneur and Does it Pay?
Ross Levine, Yona Rubinstein

We disaggregate the self-employed into incorporated and unincorporated to distinguish between “entrepreneurs” and other business owners. The incorporated self-employed have a distinct combination of cognitive, noncognitive, and family traits. Besides coming from higher-income families with better-educated mothers, the incorporated—as teenagers—scored higher on learning aptitude tests, had greater self-esteem, and engaged in more aggressive, illicit, risk-taking activities. The combination of “smarts” and “aggressive/illicit/risk-taking” tendencies as a youth accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. In contrast to a large literature, we also find that entrepreneurs earn much more per hour than their salaried counterparts.

Are Entrepreneurs Born Or Made?

A new NBER working paper explores this and many other questions (abstract; emphasis added):

Smart and Illicit: Who Becomes an Entrepreneur and Does it Pay?
Ross Levine, Yona Rubinstein

We disaggregate the self-employed into incorporated and unincorporated to distinguish between “entrepreneurs” and other business owners. The incorporated self-employed have a distinct combination of cognitive, noncognitive, and family traits. Besides coming from higher-income families with better-educated mothers, the incorporated—as teenagers—scored higher on learning aptitude tests, had greater self-esteem, and engaged in more aggressive, illicit, risk-taking activities. The combination of “smarts” and “aggressive/illicit/risk-taking” tendencies as a youth accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. In contrast to a large literature, we also find that entrepreneurs earn much more per hour than their salaried counterparts.

Reforming Bankruptcy Laws

I’ve always felt that the legal provisions for bankruptcy in Malaysia are too punitive. Seems like I have some company (excerpt):

...If the borrower or the guarantor (who is equally liable) has a debt of RM30,000 or more and has not been repaying that loan, the financial institution or creditor can institute bankruptcy proceedings to get their money back.

And it is tough being a bankrupt. When a person is declared a bankrupt, their existing bank accounts will be deactivated. This means they cannot withdraw money, open a new account or use their existing account unless they get permission from the Director-General of Insolvency (DGI). Their assets will be frozen and sold off to pay the debtors; they are unable to get new loans or travel overseas (unless they get written permission from the DGI) and can only use a credit of up to RM1,000 on an existing credit card. Their standing in society is damaged and they can forget about any political ambitions as they would not be allowed to stand for elections.

According to Rembau MP and Umno Youth chief Khairy Jamaluddin, who has been pushing for a review of the Bankruptcy Law to give people a second chance, Malaysia has one of the most stringent bankruptcy laws in the world...

Economics For Entrepreneurs

A Professor of Entrepreneurial Studies thinks microeconomics should be inflicted on would-be business leaders (excerpt):

More Dismal Science for Would-Be Entrepreneurs
By Scott Shane

Teaching entrepreneurship is a growth business for U.S. business schools. The number of the nation’s undergraduate entrepreneurship programs grew 15.3 percent from 2007 to 2011, while the number of master’s programs increased 19.1 percent, according to the Association to Advance Collegiate Schools of Business.

Much of the curriculum in these programs focuses on evaluating one’s entrepreneurial potential, understanding the process of starting a business, writing business plans and financial statements, and raising money. While providing this information helps many students, my experience as an educator and investor has convinced me that entrepreneurship programs would do well to expose their students to more microeconomics.

Developing Entrepreneurs: What’s Working, What’s Not

After watching the ongoing drama and tragedy in Japan this past week, it’s hard to focus on purely local concerns. It’s fairly obvious there’s been an enormous amount of damage to the country and the human toll is likely to be horrific. There’s also going to be a lot of repercussions around the region, not least with respect to disaster recovery and the future of nuclear energy.

But the Japanese are a resilient and industrious people, and I’m confident they’ll overcome this crisis, as they have many another in the past. Japan in the post-Meiji restoration era is a case in point: making the transformation from an isolationist, largely agrarian economy into a full-fledged industrial world power in under two generations is an incredible national achievement.

Which provides me a sideways segue into today’s topic – entrepreneurship. We’ve got a lot of programs here in Malaysia to help entrepreneurs, from financial to marketing to educational assistance. There’s no shortage of government programs or money being thrown at developing entrepreneurs – yet we’re hardly known as a hotbed of entrepreneurial activity. So the question is: what’s holding back entrepreneurial development in Malaysia?