The entrepreneurial process: Evidence from a nationally representative survey

Research Summary Scholars have traditionally characterized the variation in firm performance as determined by conditions after entry, where the entry decision is a one‐shot binary choice determined by cost–benefit analysis. However, recent theoretical work has posited that the entry decision is an outcome of a learning process and that the information acquired during the pre‐entry period shapes subsequent performance dynamics. We provide the first systematic data on the pre‐entry period using a nationally representative survey. We document the activities that prospective entrants undertake, finding variation according to opportunity costs, prior experience, and confidence levels. Our results suggest the pre‐entry period is shaped by a series of choices by prospective entrants as they contemplate entry, further exploration, or ending the entrepreneurial process. Managerial Summary We created and implemented a nationally representative survey on the entrepreneurial activities of Americans. Several interesting findings emerged. First, approximately a third of Americans report having had a business idea in the past 5 years, motivated in the vast majority of cases by lifestyle concerns rather than the pursuit of significant business opportunities. Fewer than half of those who considered starting a business take even the lowest cost steps, like searching the Internet for potential competitors or speaking with a friend. Our findings reveal an entrepreneurial process which involves a significant pre‐entry period where prospective entrepreneurs seek to acquire information about the quality of their idea, perform administrative tasks to prepare for launch and encounter frictions that impede their progress.