Is a Bit More Experience Bad? The Role of Entrepreneurial Experience on Investment Rate

Abstract

Purpose This study investigates the influence of entrepreneurial experience on small business investment. The purpose of this paper is to examine whether entrepreneurs with more prior start-up experience are better able to identify business opportunities and successfully transform these opportunities into investment projects. Design/methodology/approach The empirical setting in this study is Vietnam. The authors employ a panel data of small businesses (mostly households) from 2005 to 2013, and use a fixed effect method to estimate the regression coefficients. The results are also re-checked using the general method of moments and matching technique. Findings Empirically, it is found that entrepreneurial experience is an important determinant of investment decisions. Specifically, entrepreneurs with one start-up experience make more investments than novice entrepreneurs. However, entrepreneurs with more than one start-up experience do not make more investments than entrepreneurs with one start-up experience. Research limitations/implications This is country-specific research. Further study may employ data from multi-countries to re-test the validity of the hypotheses. Originality/value This study provides a new perspective for analysing the role of entrepreneurial experience on entrepreneurial investments. It shows that prior start-up experience may turn out to be a liability to entrepreneurs since it restricts their ability to identify new opportunities.