PEER EFFECT AND ENTREPRENEURSHIP: EMPIRICAL ESSAYS ON THE EFFECT OF CLASSMATES ON THE PROPENSITY TO ENDEAVOR
Peer effect. Network Analysis. Entrepreneurship. Instrumental Variable.
The school experience provides a unique socio-cultural exchange in which individuals share experiences and behaviors with those around them, being influenced directly by their social context (Falck, Heblich & Luedemann, 2012). From a perspective on career decision making, the literature points out that entrepreneurial peers can influence an individual to start a venture because of the coexistence with employers can provide the flourishment of entrepreneurial skills as well as sharing of business opportunities (Kacperczyc, 2013, Field, Jayachandran, Pande & Rigol, 2015). The educational environment provides social interaction between individuals at a stage prior to their entry into the labor market, with the career decision being potentially associated with peer social influence (Markussen and Roed, 2017). Thus, this dissertation aimed to estimate the peer effect on the decision to become an entrepreneur. Therefore, two methodological designs were used. The first one was conducted through the Two-Stage Probit Regression model. Data was collected at Instituto Federal de Tecnologia do Grande do Norte, and the sample was composed of 10,889 students from an Institute of Technology and the data collected covers the period from 2001 to 2010. The variable dependent on this modeling is categorical, being assigned the value 1 if the individual has become an entrepreneur. As a variable of interest, the fraction of entrepreneurs in the classroom of the individual "i" was used at a time "t". Variables related to the personal, social and economic factors of the individual were used as controls. The results of the first essay shown that having entrepreneurial classmates positively affects the propensity to become an entrepreneur. The second essay of this dissertation had a methodological approach based on Network Analysis (Jackson, 2010) to estimate who in fact are the peers of an individual. To this end, 287 students of Instituto Federal de Tecnologia do Rio Grande do Norte were surveyed by a questionnaire composed of 47 questions distributed among the dimensions of interaction with Peers, Entrepreneurial Intention, Personal Attitudes, Subjective Norm, Control Behavioral Perceived, Fear of Failure, and Risk Aversion. The methodological design applied 2SLS regression and IV Probit methods. In order to estimate who potential entrepreneurs in the sample are, Entrepreneurial Index of Liñán and Chen (2009), composed by 5 questions measured on a scale of 1 to 10 on the entrepreneurial intentions of the individual, was applied. Due to the sample was composed by students, the instrumental variable “profession of the individual's parents” were used to capture the propensity to entrepreneurship, being considered entrepreneurs those who have at least an entrepreneurial parent (Lindquist et al., 2015; Markussen and Roed, 2017). The variable of interest is the geodesic path of the network, considering the least distance from the individual i to an individual who has an entrepreneurial parent. The sample consisted of 287 students from a campus of Instituto Federal de Tecnologia do Rio Grande do Norte. 2SLS and IV Probit regressions were used to identify peer effect on Entrepreneurial intention. The dependent variable was the Entrepreneurial Entrepreneurship Index of Liñán and Chen (2009), composed of 5 questions measured on a scale from 1 to 10 on the individual's entrepreneurial intentions. The variable of interest was the geodesic path of the network, considering the smallest distance from an individual "i" to an individual "j" who possesses an entrepreneurial parent. We used a series of control variables that cover personal, social, behavioral characteristics and entrepreneurial traits of the individual. Furthermore, the second essay found out that having entrepreneurial friends provides a larger effect in entrepreneurial intentions than the impact of the fraction of entrepreneurs per class, bringing empirical evidence that the connections between individuals rather than mere belonging to a group should be considered to estimate peer effect.