Illegal Entrepreneurship Experience: Does it Make a Difference for Business Performance and Motivation?

28 Pages Posted: 26 Sep 2004 Last revised: 8 Nov 2014

See all articles by Ruta Aidis

Ruta Aidis

University College London; University of Amsterdam - Faculty of Economics and Business (FEB)

Mirjam van Praag

University of Amsterdam - Department of Economics; Copenhagen Business School; Tinbergen Institute; IZA Institute of Labor Economics

Date Written: September 1, 2004

Abstract

Existing studies show a positive relationship between entrepreneurs’ business performance and their conventional human capital as measured by previous business experience and formal education. In this paper, we explore whether illegal entrepreneurship experience (IEE), an unconventional form of human capital, is related to the performance and motivation of ntrepreneurs operating legal businesses in a transition context. Using regression techniques on a sample of 399 private business owners in Lithuania, we find that, in general, IEE is significantly and positively associated with subjective measures of business motivation. Moreover, younger entrepreneurs benefit from their IEE in terms of business performance, indicating that they have been more successful than older entrepreneurs in transferring their IEE to a market oriented setting. In addition, IEE and business performance are positively related for entrepreneurs who started completely new legal businesses. Thus, our research partially supports the notion that prior experience in the black or gray market may signal and provide valuable human capital for legal enterprising.

Keywords: Entrepreneurship, Human capital, Illegal entrepreneurship, Transition economy

JEL Classification: J21, J23, J24, J49, L25, M13, O17, P31

Suggested Citation

Aidis, Ruta and van Praag, Mirjam and van Praag, Mirjam, Illegal Entrepreneurship Experience: Does it Make a Difference for Business Performance and Motivation? (September 1, 2004). Journal of Business Venturing, Vol. 22, No. 2, 2007, pp. 283-310, Available at SSRN: https://ssrn.com/abstract=595341 or http://dx.doi.org/10.2139/ssrn.595341

Ruta Aidis (Contact Author)

University College London ( email )

Gower Street
London
United Kingdom

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+ 31 20 525 4011 (Phone)
+ 31 20 525 4254 (Fax)

Mirjam Van Praag

Copenhagen Business School ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4096 (Phone)
+31 20 525 4182 (Fax)

Tinbergen Institute

Gustav Mahlerlaan
Amsterdam
Netherlands

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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