Paul Oyer, Fred H. Merrill Professor of Economics, Graduate School of Business, Stanford University
Paul Oyer, Fred H. Merrill Professor of Economics, Graduate School of Business, Stanford University
Low Versus High-Potential Entrepreneurship: The Role of IQ and Family Background
Low Versus High-Potential Entrepreneurship: The Role of IQ and Family Background
What drives success of new ventures? Prof. Oyer hypothesizes that, in some industries, success is driven by innovation while, in other industries, it is driven by institutional knowledge, industry experience, and relationships. He argues that “nature human capital” (for example, IQ) will play a relatively large role in innovation while “nurture human capital” (knowledge of a parent’s industry) will have a comparative advantage in more mature areas. We model the decision to become an entrepreneur and what type of venture to start as a function of gifts that affect nature human capital and those that affect nurture human capital. Prof. Oyer examines the implication of the model using data from all new ventures in Norway from 1999-2007. He shows that, as the model predicts, nurture human capital is more valuable to entrepreneurs with less nature human capital and is also more valuable in less innovative industries.