The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By

The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By

Language: English

Pages: 224

ISBN: 0300158564

Format: PDF / Kindle (mobi) / ePub

There are far more entrepreneurs than most people realize. But the failure rate of new businesses is disappointingly high, and the economic impact of most of them disappointingly low, suggesting that enthusiastic would-be entrepreneurs and their investors all too often operate under a false set of assumptions.


This book shows that the reality of entrepreneurship is decidedly different from the myths that have come to surround it. Scott Shane, a leading expert in entrepreneurial activity in the United States and other countries, draws on the data from extensive research to provide accurate, useful information about who becomes an entrepreneur and why, how businesses are started, which factors lead to success, and which predict a likely failure.


The Illusions of Entrepreneurship is an essential resource for everyone who has dreamed of starting a new business, for investors in start-ups, for policy makers attempting to facilitate the formation and survival of new businesses, and for researchers interested in the economic impact of entrepreneurial activity. Scott Shane offers research-based answers to these questions and many others:

·        Why do people start businesses?

·        What industries are popular for start-ups?

·        How many jobs do new businesses create?

·        How do entrepreneurs finance their start-ups?

·        What makes some locations and some countries more entrepreneurial than others?

·        What are the characteristics of the typical entrepreneur?

·        How well does the typical start-up perform?

·        What strategies contribute to the survival and profitability of new businesses over time?


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innovative, more persistent, more honorable, more optimistic, more resourceful, and more achievement oriented than the rest of us. The myth of entrepreneurship associates “good” characteristics with entrepreneurs and more modest characteristics with the rest of us, so we think entrepreneurs are “better than average” people. But are these myths accurate? To answer this question, consider the following thought experiment: Suppose you have two friends, Joe and Tom. They are very similar. Both are

unemployed who become entrepreneurs might be better off as entrepreneurs than they were as unemployed people, but they aren’t likely to be high-performing entrepreneurs. Policy makers should take this information into consideration when considering the value of programs to turn the unemployed into entrepreneurs. Busted Myths and Key Realities 45. All industries are not equal; the industry in which a start-up operates has a large effect on its performance. 46. Success as an entrepreneur is not

entrepreneurs work fewer hours per day on their new businesses than male entrepreneurs, which is what we would expect if they are less motivated to create high performing businesses. Not only do female entrepreneurs have lower profit and sales targets for their businesses, but research by Dr. Brian Headd of the Office of Advocacy at the U.S. Small Business Administration shows that they also are more likely to view a failed new start-up as “successful.”35 Because the average female entrepreneur

Self-Employment Success,” Journal of Business Venturing 9, no. 2 (1994): 141–56; Z. Lin, G. Picot, and J. Compton, “The Entry and Exit Dynamics of Self-Employment in Canada,” Small Business Economics 15 (2000): 105–25; M. Taylor, “Earnings, Independence or Unemployment: Why Become Self-Employed?” Oxford Bulletin of Economics and Statistics 58, no. 2 (1996): 253–66; B. Schiller and P. Crewson, “Entrepreneurial Origins: A Longitudinal Study,” Economic Inquiry 35, no. 3 (1997): 523–31; D. Evans and

Wyoming. San Francisco comes in at number 121 out of 394, with about 40 percent the per capita business formation rate of Laramie.31 And who is ahead of San Francisco on this list? Some not-very-often-thought-of centers of entrepreneurship, including Bozeman, Montana; Farmington, New Mexico; Rock Springs, Wyoming; Rapid City, South Dakota; Pikesville, Kentucky; Laredo, Texas; Brunswick, Georgia; Newark, New Jersey; Anchorage, Alaska; and Enid, Oklahoma.32 San Jose, California, that epicenter of

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