The value of an educated population for an individual's entrepreneurship success

Abstract

Human capital obtained through education has been shown to be one of the strongest drivers of entrepreneurship performance. The entrepreneur’s human capital, though, is only one of the input factors into the production process of her venture. In this paper we will analyze to what extent the education levels of other (potential) stakeholders affect the entrepreneur’s performance. The education level of consumers may shape the demand function for an entrepreneur’s output, whereas the education level of employees may affect the entrepreneur’s productivity and thereby shape her supply function. Based on this, we hypothesize that the performance of an entrepreneur is not only affected positively by her own education level but in addition, also by the education level of the population. We find empirical support for this hypothesis using an eight years (1994-2001) panel of labor market participants in the EU-15 countries. An implication of our finding is that entrepreneurship and higher education policies should be considered in tandem with each other.