Are corporate affiliations conducive to nascent entrepreneurship?

Abstract

Founding an entrepreneurial venture does not comprise a dichotomous choice between market entry and non-entry; instead, a wide variety of entrepreneurial strategies are available to the nascent entrepreneur. Using data from the second Panel Study of Entrepreneurial Dynamics (PSED II), a representative sample of nascent entrepreneurial activity in the United States, this study documents that nascent entrepreneurs generally choose between founding an independent new venture and following a type of corporate-affiliated entrepreneurial strategy (CAES), such as a franchise, spin-off, or similar approach. The success of this decision is contingent upon entrepreneurs’ stock of human capital. Relevant industry experiences tend to reduce the likelihood of an entrepreneur employing a CAES, while managerial experience and previous start-up experience increases the probability. Overall, those nascent entrepreneurs who follow a CAES are more likely to achieve a first positive cash-flow; this highlights the benefits of corporate affiliations in the field of new venture founding.