Serial Entrepreneurs More Likely to Succeed in Business

July 25, 2014

Are "serial entrepreneurs" more likely to succeed in business? That is the question Francine Lafontaine and Kathryn Shaw ask in a new study published by the National Bureau for Economic Research.

A serial entrepreneur is a person who repeatedly opens new businesses. The researchers analyzed new businesses to sell goods and services that were started anytime between 1990 and 2011 in the state of Texas, using the duration of the business as a measure of success. The study focused on retail and small service businesses, analyzing 2.3 million new Texas establishments run by 1.7 million different owners. According to the study:

  • Of 2 million business owners, just 25 percent start more than one retail establishment.
  • Once someone becomes an entrepreneur for a second time, they are more likely to become an entrepreneur for a third time, and so on.
  • Serial entrepreneurs are more successful than one-time entrepreneurs; the probability of exiting a business is 7 percent lower for entrepreneurs with prior businesses.

Why is serial entrepreneurship associated with success? The authors note two possibilities. Serial entrepreneurship may increase the likelihood of success because of the transfer of skills from the first business to the next. Or, it may simply be that the serial entrepreneur has the skills that make a business successful. After controlling for talent, Lafontaine and Shaw write, the data suggests that entrepreneurship is a learned skill.

A serial entrepreneur's second business is also more likely to survive if his previous business has closed. The authors conclude that, because most retail owners are small proprietors, it is difficult for them to keep more than one business open at a time.

Source:  Francine Lafontaine and Kathryn Shaw, "Serial Entrepreneurship: Learning by Doing?" National Bureau for Economic Research, July 2014.

 

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