In a joint paper with Michael Wyrwich (University of Groningen) and Michael Stützer (DHBW Mannheim) Rolf Sternberg elaborates on the effects of failed entrepreneurial role models on other potential entrepreneurs in German regions. Published in the Journal of Economic Geography (Oxford University Press) as an Open Access article this empirical paper uses primarily data from the Global Entrepreneurship Monitor (GEM). It is based upon logit regressions and clusters the standard errors on the district level in order to control for spatial autocorrelation and heteroscedasticity.
As previous studies have shown, entrepreneurial role models influence decisions to start firms. This effect is even stronger if peers and observers live in the same region. However, most studies remain silent about the role of entrepreneurial failure for the direction of role modeling. Failed role models can trigger a deterrence of entrepreneurship in others of the same region. The authors hypothesize that observing successful entrepreneurs reduces fear of failure, while observing business failure increases fear of failure. By using data on regional entries and exits, they find considerable support for their hypothesis and contribute to literature on regional entrepreneurship.
