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The Selectiveness of the

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Journal of Small Business Management 2012 50(1), pp. 105–131

The Selectiveness of the Entrepreneurial Process

by Udo Brixy, Rolf Sternberg, and Heiko Stüber

jsbm_346 105..131

This paper focuses on the phase before a firm is founded. Based upon cross-
sectional data from the German section of the Global Entrepreneurship Monitor, the
specific aims of the paper are to shed some light on the selection that takes place
during the entrepreneurial process and to explain empirically the demographic and
cognitive characteristics of (potential) entrepreneurs. The results reveal significant
differences between common determinants of the different phases of the entrepre-
neurial process.

social processes, the entrepreneurial

Introduction
The characteristics of the venture cre-
ation process belong to the most relevant
topics of current nascent entrepreneur-
ship (entrepreneurs that are under way
to start a firm) research (for an overview
see Davidsson 2006). There are two main
reasons why it is important to analyze
the entrepreneurial process. First, if
potentially successful entrepreneurs
drop out at certain thresholds during this
process, the achievable number of new
firms is reduced. Second, like many other
process is selective. Selectivity as such is
nothing to worry about as long as its
results are, for instance, that the indi-
viduals who drop out are those whose
ideas and concepts are not sound
enough. However, it is well known that
selection can be inefficient or even dis-
criminatory. For example, in every
country, males are more likely to become
entrepreneurs (e.g., Bosma and Levie
2010). Therefore, the question arises as
to when discrimination or segregation
takes place: at some threshold during the

Udo Brixy is Senior Researcher in the Department of Regional Labour Markets at the
Institute for Employment Research, Nuremberg, Germany and in the Department of Geography
at the Ludwig-Maximilians University of Munich.
Rolf Sternberg is Full Professor of Economic Geography in the Institute of Economic and
Cultural Geography at the University of Hannover.
Heiko Stüber is Researcher in the Department of Regional Labour Markets and in the
Department of Institutions and Macroeconomic Labour Market Analysis at the Institute for
Employment Research, Nuremberg, Germany, and Ph.D. student at the University of Hohen-
heim, Germany.
Address correspondence to: Udo Brixy, Institute for Employment Research, Regensburger
Str. 104, 90478 Nürnberg, Germany. E-mail: udo.brixy@iab.de.

BRIXY, STERNBERG, AND STÜBER 105

entrepreneurial process or right at the
beginning of the process.
Entrepreneurial thresholds are high
and the challenges to meet of early
phases are quite different from those of
later phases when the business is
founded (Brush and Manolova 2004).
Analyzing the process of becoming an
entrepreneur helps to identify and
understand thresholds and gaps that
might hinder new and promising entre-
preneurs from starting a business and is
therefore of great practical relevance.
Relatively little research has been
published so far that deals with more
than one phase of the entrepreneurial
process. Though later phases of the
entrepreneurship process, especially
from nascent entrepreneurship
onwards, have received increasing
attention from empirical researchers in
the recent past (e.g., Davidsson 2006;
Gartner et al. 2004), in particular the
prenascent phase is still underre-
searched. This is astonishing given the
policy relevance of knowledge about
determinants indicating the transition
from latent nascent entrepreneurship
(very early phase of the entrepreneurial
process when an individual starts to
think about becoming self-employed) to
actual entrepreneurship.
This paper aims to shed light on
some of these determinants. A specific
objective of the paper is to describe and
explain demographic and cognitive
characteristics of entrepreneurs and dif-
ferences between entrepreneurs during
three different phases of the entrepre-
neurial process: latent nascent entrepre-
neurship, nascent entrepreneurship, and
young entrepreneurship. The data are
based upon almost 17,000 cases from
the German data set of the Global
Entrepreneurship Monitor (GEM) for the
years 2002–2006. The value added to
the field of entrepreneurship research is
that several attributes of (potential)
entrepreneurs and their environment
differ statistically significant between
106 JOURNAL OF SMALL BUSINESS MANAGEMENT
the phases of the entrepreneurial
process. In particular, gender and the
microenvironment of the (potential)
founder make a difference. The distinc-
tion between the three aforementioned
phases is of importance for practitio-
ners, for scholars, and for policymakers.
The latter should, when developing
new government support programs
dedicated to start-ups, design programs
for latent nascents different from those
for nascent entrepreneurs as both popu-
lations may react in a specific kind to
government policy incentives. Practitio-
ners who advise nascents or latent
nascents should not ignore the different
perceptions and behaviors of both
groups if they intend to make real
entrepreneurs out of (latent) nascent
entrepreneurs. Finally, scholars in the
field of empirical entrepreneurship
research may assess it as useful to
analyze potential entrepreneurs during
the pre-entry phase not as a homog-
enous population but to distinguish, at
least, between the three phases consid-
ered in this paper.
Stages of the
Entrepreneurial Process
There is no generally accepted defini-
tion of entrepreneurship in the research
community. However, at least two prin-
cipal meanings can be distinguished
(Sternberg and Wennekers 2005). First,
entrepreneurship refers to owning and
managing a business on one’s own
account and at one’s own risk. Its “prac-
titioners” are called entrepreneurs, self-
employed, or business owners. This is
the occupational notion of entrepreneur-
ship. Within this concept of entrepre-
neurship, a dynamic perspective focuses
on the creation of new businesses,
whereas a static perspective relates to
the number of business owners. Second,
entrepreneurship refers to “entrepre-
neurial behavior” in the sense of seizing
an economic opportunity. “Innovator” or
“pioneer” may be considered synonyms
for “entrepreneur” in this sense. This is
the behavioral notion of entrepreneur-
ship. It has a longer history than the
occupational notion (see Hoselitz 1960).
Entrepreneurs in the behavioral sense
need not be business owners; they may
also be “intrapreneurs.”
For the purposes of this paper, we
have combined elements of both under-
standings. We understand entrepreneur-
ship as a combination of some elements
of behavioral entrepreneurship with
aspects of the dynamic perspective of
occupational entrepreneurship, making
new venture creation the hallmark of
entrepreneurship (Gartner 1989). Conse-
quently, we do not equate self-
employment per se with entrepreneur-
ship, but the beginning of self-
employment, that is, the start-up.
Becoming an entrepreneur is usually
quite a long process, from the first
thoughts until eventually starting the
business. The proportion of people who
start a firm differs from country to
country and also varies according to the
methodological approaches.
There are not many empirical studies
available that distinguish between entre-
preneurs in different early phases of the
venture’s history. Though empirical
work on nascent entrepreneurs alone
(see Davidsson 2006; Gartner et al. 2004
for an overview) and young firms alone
(Falck 2007) has increased enormously
in recent years, only few studies have so
far considered latent nascent entrepre-
neurs explicitly (Grilo and Irigoyen 2006;
Grilo and Thurik 2005).
Shane and Venkataraman (2000) and
Davidsson (2006) distinguish between
the discovery phase and the exploitation
phase during the entrepreneurship
process. Though the former has to do
with the very early phases including the
origins of the start-up idea, the latter
refers to the tangible actions associated
with putting this idea into action—for
example, acquiring resources. Grilo and
Thurik (2005) and Grilo and Irigoyen
BRIXY, STERNBERG, AND STÜBER
(2006) used a broad concept of latent
entrepreneurship. It comprises everyone
who would, in principle, prefer to be
self-employed, whether or not they are
actually planning to do so. Thus, the
concept can be placed at an early stage
of the discovery phase. Of course, it
should be stressed that these phases of
the entrepreneurial process must not to
be interpreted as absolutely strict: transi-
tion from one phase to the other is, to a
degree, fluent and case specific. Never-
theless, the phases as such are mean-
while accepted at least as stylized facts in
entrepreneurship research, although
empirically underresearched.
The concepts used here follow the
GEM methodology (Reynolds et al. 2005)
and demand a higher degree of commit-
ment with respect to the desire to become
self-employed. Latent nascent entrepre-
neurs are adults who are planning to start
a business within the next three years.
This is more specific than the concept of
latent entrepreneurship but is neverthe-
less still an intention without any evi-
dence of how concrete this intention
really is. The concept of nascent entrepre-
neurship is more distinct. An individual is
considered a “nascent entrepreneur” if
she has taken some action in the past year
to create a new business and if she
expects to own or to share ownership of
the firm. Young entrepreneurs, on the
other hand, were once nascent entrepre-
neurs and have put their start-up idea into
action in the last three and a half years.
With these concepts, it is possible to gain
a fairly good empirical insight into the
transition from the start-up intention to
the actual start-up. A more precise defini-
tion of the three concepts is given in the
Data and Method section.
Figure 1 shows the sequence of the
entrepreneurial process. The axis shows
the concepts that have already been used
in the literature to measure the number of
people involved in the particular stage of
the process. The idea becomes more and
more concrete from left to right and is
107
 Figure 1
Phases of the Entrepreneurial Process (GEM, Global
Entrepreneurship Monitor)

Discovery process Exploitation Entrepreneurial phase

process

Being committed to Start of business

founding a firm

Latent entrepreneurship Latent nascent Nascent Young

(e.g., Grilo and Irigoyen 2006) entrepreneurship entrepreneurship entrepreneurship
(GEM) (GEM) (GEM)

accompanied by a decreasing number of during the start-up process is based

people involved. As is often the case with
social processes, it is difficult to give even
a rough estimate of its average duration.
Some studies (e.g., Reynolds 2007, 2008)
made an effort to identify the date when
someone starts being a nascent entrepre-
neur. So it is asked when the interviewees
first began serious work on the new
venture, first thought about becoming
self-employed, etc. All these questions
share the fundamental idea that a certain
point in time is assumed that can be
remembered by most of the interviewees
as the beginning of the process. We doubt
that this is the case; “serious work,” for
example, can be understood in very dif-
ferent ways.
Theoretical Framework—
The Decision to Start or
Not to Start a Business
from an Individual
Perspective
Our theoretical perspective concern-
ing the determinants of new firm for-
mation and of the specific decisions
upon the distinction made by Sternberg
(2009). He distinguishes between four
categories: the national environment
(e.g., countrywide laws), the regional
environment (e.g., gross domestic
product [GDP]/capita), the microenvi-
ronment (e.g., role models among
friends or family), and the characteris-
tics of the (potential) founder (e.g., age
and gender). As our empirical analysis
is restricted on one country but consid-
ers regions within this country, the role
of the national environment is rather
modest although it should not be
ignored. The following argumentation is
based upon Wagner and Sternberg
(2004) as well as upon a combination
of Ajzen’s theory of planned behavior
(see Ajzen 1991) and Bhave’s (1994)
process model of entrepreneurial
venture creation.
Consider a utility-maximizing person
who has the choice between paid
employment and self-employment. This
person will choose the option self-
employment if the discounted expected
lifetime utility from self-employment

108 JOURNAL OF SMALL BUSINESS MANAGEMENT

(DELUS) is higher than that from paid
employment (DELUP).
( DELU iS ) and ( DELU iP ) are determined
by expected monetary and nonmonetary
returns from self-employment and paid
employment according to the utility
function of the person and the individu-
al’s discount rate. Higher returns lead to
higher values of DELU. Following the
theory of planned behavior, this indi-
vidual’s decision in favor of or against
self-employment depends also from
three partly interdependent causes: the
attitudes toward the behavior (positive
or negative assessment of the conse-
quences of the behavior), the subjective
norm (social pressure), and the per-
ceived behavioral control that “refers to
people’s perception of the ease or diffi-
culty of performing the behavior of inter-
est” (Ajzen 1991, p. 183).
It is important to note that all the
decisions an individual has to make
during the entrepreneurial venture
creation—from opportunity recognition
to organization creation to exchange
stage—influence the length and the
outcome of this process. The entrepre-
neur receives important strategic and/or
operational feedbacks in the sense of
Bhave (1994) not only from potential
customers but also from members of her
personal networks, which may change
the implementation of the start-up inten-
tion significantly.
The expected returns from both types
of employment depend on variables
related to the individual i (demographic
variables and cognitive ones), summa-
rized in the vector xi, and on variables
related to the region j she lives in, col-
lected in the vector yj:
DELU iS = DELU iS ( xi, y j ) and
DELU iP = DELU iP ( xi, y j ) . (1)
For the empirical analysis, it is neces-
sary to clearly define the regions (e.g.,
via administrative boundaries).
BRIXY, STERNBERG, AND STÜBER
A rational individual will consider
each region j (j = 1, . . . ,k) and, given
his individual characteristics, attitudes,
and microenvironment, compute
DELU iS and DELU iP for all k regions
taking the costs of moving to a region
into account. She will choose the region
with the maximum among these 2k
values. Given high monetary and non-
monetary costs of migration, this often
means that a person will stay in the
region she lives in. The latter is an
empirically well-proved assumption not
only for founders of start-ups in
Germany. Entrepreneurship is a particu-
lar regional or local phenomenon
because people usually start businesses
where they were born, have worked, or
already reside (Haug 1995). Therefore,
a region rather than a nation seems to
be a better unit for understanding
the most proximate factors affecting
entrepreneurship (cf. Stam 2007). Due
to this “geographic inertia” (Sorenson
and Audia 2000) and the spatial immo-
bility of most entrepreneurs and their
start-ups (Malecki 1997), such start-
ups are in theory elements of the
regionally endogenous development
potential.
The expected monetary and nonmon-
etary returns from both types of
employment, the utility function, and
the discount rate of an individual are
unknown to an observer. Therefore, we
cannot test directly whether an indi-
vidual or regional characteristic—say,
age of a person or population density
in a region—has a positive impact on
DELU. If, however, DELU iS is greater
than DELU iP, according to the theoreti-
cal framework, a person will choose to
become an entrepreneur, and this deci-
sion is observable. In our empirical
model, we will investigate the influence
of xi and yj on the probability that a
person becomes an entrepreneur at
all—either as a latent nascent entrepre-
neur, a nascent entrepreneurs, or as a
young entrepreneur.
109

Hypothesis on the
Factors that Affect the
Selection during the
Entrepreneurial Process
The existing literature on entrepre-
neurial phases is dominated by
approaches based upon the entrepreneur
herself.
In recent years, this literature has
undergone a fundamental shift away from
person-oriented empirical work to
context-related work.1 Even within
the person-oriented entrepreneurship
research, a trend away from pure demo-
graphic characteristics like gender and
age to cognitive, affective, and attitude-
related aspects cannot be overlooked.
Freytag and Thurik (2007) give a compre-
hensive overview of approaches that try
to investigate the relationship between
latent and actual entrepreneurship.
Gender and age are two of the most
popular variables in empirical studies on
the determinants of the individual deci-
sion as to whether or not to become an
entrepreneur (e.g., Carter and Brush
2004; Reynolds et al. 2004). It is widely
acknowledged that females are less
likely to be entrepreneurs (see, e.g.,
Bosma and Levie 2010). According to
Wagner (2007), this difference is mainly
caused by their attitudes toward the will-
ingness to take risks. Using GEM data on
28 countries, Arenius and Minniti (2005)
emphasize that whereas perceptual vari-
ables are important to distinguish
between entrepreneurs and nonentrepre-
neurs, there are only negligible differ-
ences between entrepreneurs of the two
sexes. In Germany, the differences
between entrepreneurs and nonentrepre-
neurs are striking as well, but neverthe-
1
Considering, for example, the founder’s networks or the regional environment in which she
lives, see, for example, the comments on the relevance of social proximity for entrepreneurial
activities by Boschma (2005) and Sternberg (2007).
110 JOURNAL OF SMALL BUSINESS MANAGEMENT
less a remarkable variation between
males and females remains (see Table a1
in the Appendix).
Davidsson (2006) points out that
whereas the underrepresentation of
females among nascent entrepreneurs is
very well documented, there is no con-
sistent evidence of further discrimination
once they are in the process of becoming
an entrepreneur. The above-mentioned
reasons why women are less likely to try
to found a firm suggest a very early dis-
crimination or segregation. To gain a
deeper insight into the differences, sepa-
rate estimations were conducted for
males and females. Our hypotheses 1
and 2 are the following:
H1a: Already latent nascent entrepre-
neurs are less likely to be female.
H1b: The likelihood of being female does
not differ between nascent entrepre-
neurs and young entrepreneurs.
As for the age effect, empirical studies
show a clear result: age has a negative or
curvilinear effect on the probability of
becoming a nascent entrepreneur, with a
clear peak in the group aged between 25
and 34 (Bosma and Levie 2010; Delmar
and Davidsson 2000; Reynolds 1997).
Concerning the age of nascent entrepre-
neurs, it is a stylized fact that 35- to
44-year-olds are most likely to set up
their own firm (Lévesque and Minniti
2006). Age is often used as a proxy for
experience, although the two factors are
arguably not synonymous. This is none-
theless common practice as real mea-
sures of experience are scarce. Besides
the advantage of experience, people
between 35 and 44 often have more
money at their disposal and therefore
fewer difficulties in raising capital. On
the other hand, they tend to be more
risk-averse than younger people, a fact
that offsets the influence of age and
experience (Parker 2004, p. 70). This
leads us to the following hypothesis:
H2: Entrepreneurs in all three stages are
more likely to be younger than 45
years old.
Key factors leading to the successful
exploitation of venture ideas include spe-
cific and/or general human capital and
cognitive characteristics, both from a
theoretical perspective and from empiri-
cal evidence. In a recent study of nascent
entrepreneurs in Germany and the Neth-
erlands, Brixy and Hessels (2010)
analyze follow-up interviews of nascent
entrepreneurs one year after the initial
screening interview. They show that dif-
ferent forms of human capital have a
substantial influence on the start-up
probability of nascent entrepreneurs.
According to Blanchflower (2000) and
Blanchflower and Oswald (2007), self-
employment in the United States and
Canada is highest at both tails of the
education distribution, whereas in the
United Kingdom the low skilled are less
likely to be self-employed. Results for
Germany show a pattern like that in the
United Kingdom: nascent entrepreneurs
are more highly educated on average
than the adult population as a whole
(Lückgen et al. 2006; Wagner and Stern-
berg 2004). Parker (2004) points out that
the outcome of variables concerning the
formal qualification level tends to be
positive in cross-section analysis.
However, he acknowledges the fact that
the skills that make a successful entre-
preneur are not necessarily associated
with formal qualifications. As Lazear
(2005, p. 676) points out, entrepreneurs
are more often the “jack of all trades”
type. This means that they need not “nec-
essarily [be] superb at anything, entre-
BRIXY, STERNBERG, AND STÜBER
preneurs have to be sufficiently skilled in
a variety of areas.” This is in line with
Davidsson (2006), who states that in
many studies a positive influence of edu-
cation can be found for the propensity to
be a nascent entrepreneur; but that with
regard to making progress in the entre-
preneurial process indicators of specific
human capital rather than general
human capital are important. Neverthe-
less, although this is certainly true,
highly qualified people often have other
opportunities on the labor market and
are less likely to be “necessity entrepre-
neurs,” a group that is especially large in
Germany (Brixy, Hundt, and Sternberg
2010; Sternberg, Brixy, and Hundt 2007).
Yet Wagner (2008) reports a lower pro-
pensity of the highly qualified to be
nascent entrepreneurs, relative to
medium educational levels.
However, these results should not be
misinterpreted. Though a high educa-
tional level may indeed be (statistically)
unimportant for the successful exploita-
tion of venture ideas—this might be due
to the availability of other more attractive
employment opportunities—it does not
necessarily mean that a good education
is not of advantage for the entrepreneur-
ial process per se (Davidsson 2006;
Gimeno et al. 1997).
Thus, the following hypotheses are
proposed:
H3a: Medium and high education levels
raise the propensity to be a latent
nascent entrepreneur.
H3b: The involvement of highly educated
individuals decreases during the
process.
Examining motivations and percep-
tions, Arenius and Minniti (2005) show
that nascent entrepreneurs, young entre-
preneurs, and more established entrepre-
neurs are much more likely to respond
affirmatively to questions about percep-
tual variables than respondents who are
111
not active in starting or managing a busi-
ness. They also show significant differ-
ences between young entrepreneurs and
nascent entrepreneurs in terms of oppor-
tunity perception (more positive for
nascent entrepreneurs), but no differ-
ences between the entrepreneurial stages
for confidence in one’s skills or fear of
failure and knowing other entrepre-
neurs. Using 2001 GEM data for 18 coun-
tries, Koellinger, Minniti, and Schade
(2007) confirm this result but show that
the confidence associated with one’s
own skills and ability declines as more
experienced entrepreneurs are
considered—thus, differences occur
between the phases of the entrepreneur-
ial process. Thus, the following hypoth-
eses are proposed:
H4: The willingness to trust one’s skills
and to take risks is higher for entre-
preneurs in all three stages compared
with nonentrepreneurs.
Factors regarding the regional envi-
ronment gained in importance more
recently when scholars tried to explain
an individual’s propensity to start a firm
or to explain a firm’s growth.2 Most of
these research activities, however, do not
explicitly cover the process character of
entrepreneurship but are based upon
cross-sectional entrepreneurship data
and meso- or even macrolevel data for
the independent regional variables (see
Falck 2007; Fritsch, Brixy, and Falck
2006 for rare exceptions). The empirical
evidence is clear for most of the regions
and countries studied: irrespective of dif-
ferences embodied in the individual
herself, there are strong regional impacts
on an individual’s propensity to start a
firm. Feldman (2001) goes even further
2
See Audretsch and Fritsch (2002), Bade and Nerlinger (1999), Brixy and Grotz (2007), Falck
(2007), Fritsch and Mueller (2004), Fritsch and Schmude (2006), and Sternberg and Rocha
(2007) on German regions or Acs and Armington (2004), Braunerhjelm and Borgmann (2004),
and Bosma (2009) for regions in other countries.
112 JOURNAL OF SMALL BUSINESS MANAGEMENT
and argues that entrepreneurship is pri-
marily a “regional event.”
There is a general problem in relating
regional or macro-evidence to personal
(micro) decisions. For example, espe-
cially in Germany becoming unemployed
is a stimulus to become self-employed
(Bergmann and Sternberg 2007; Stern-
berg, Brixy, and Hundt 2007). On the
macroscale, the regional unemployment
rate, however, is more or less an indica-
tor of regional economic performance.
Therefore, it makes a big difference on
which scale the variable “unemploy-
ment” is considered in the model. In our
model, we could only use the regional
unemployment rate, as individual infor-
mation is not asked for in a consistent
way between different years of GEM.
Rising regional unemployment is
accompanied by declining demand,
which reduces the prospects for newly
founded firms. Therefore, we try to
exclude this part of the explanation by
also including the development of the
regional GDP per head. That leads us to
the following hypotheses:
H5a: Growing regional unemployment
increases entrepreneurial activity.
H5b: A growing GDP per head increases
entrepreneurial activity.
Data and Method
Ideally, the entrepreneurial process is
analyzed using panel data. In this case, it
would be possible to analyze the reasons
for attrition between the different stages.
This is of particular importance for time-
variant variables that can change during
the process at the individual level, such
as education. Though we accept Davids-
son’s (2006) argument that panel studies
 Table 1
The Number of Interviews of the German Global
Entrepreneurship Monitor (GEM) (2002–2006) Used in
the Estimations
Total Latent Nascent Nascent Young Nonentrepreneurs
Interviews Entrepreneurs Entrepreneurs Entrepreneurs
Used

2002 8,092 441 257 239 7,155

2003 2,566 303 173 164 1,926
2004 2,020 192 121 141 1,566
2005 2,672 274 175 175 2,048
2006 1,588 143 84 78 1,283
Total 16,938 1,353 810 797 13,978

Data source: Adult Population Survey of the GEM, Germany.

like the Panel Study of Entrepreneurial assembled to facilitate cross-national

Dynamics are generally more appropri-
ate for covering the dynamic process of
entrepreneurship, we think that our
concept is a possible alternative in view
of the lack of panel data for Germany so
far. We use cross-sectional data that are
based on different people for each state.
We are therefore unable to disentangle
learning and selection effects and have to
assume that there are no or at least only
minor cohort effects or calendar-time
effects. However, we are still able to gain
valuable empirical insights into the
dynamic aspects of the entrepreneurial
process.
The cross-sectional data of the GEM,
which have been gathered annually since
1999, allow such analyses for Germany.
As important variables were defined dif-
ferently in the early years, we only make
use of data collected from 2002 until
2006. Every year, a random household
telephone sample is drawn and, using
the “last birthday” method, anyone
between 18 and 64 is interviewed. The
computer-aided telephone interviews are
conducted by a professional survey
vendor. Although the data have been
comparisons of the level of national
entrepreneurial activity, by pooling the
data for five successive years, we are
able to generate a large micro-data set on
German entrepreneurship.
As Table 1 shows, it was possible to
use almost 17,000 interviews. We distin-
guish between three different types of
entrepreneurial activity: latent nascent
entrepreneurs, nascent entrepreneurs,
and young entrepreneurs.
Latent nascent entrepreneurs are
adults (18–64 years old) who are plan-
ning to start a business within the next
three years. This is more specific than
the concept of latent entrepreneurship
from Grilo and Irigoyen (2006) but is
nevertheless still an intention without
any evidence of how concrete this inten-
tion really is.
The concept of nascent entrepreneur-
ship is more distinct and it is already well
established in the literature (e.g., Davids-
son 2006; Lückgen et al. 2006; Reynolds
et al. 2004). An individual (18–64 years
of age) is considered a “nascent entre-
preneur” on the basis of three conditions
all of which must be satisfied: first, she

BRIXY, STERNBERG, AND STÜBER 113

has done something—taken some
action—in the past year to create a new
business; second, she expects to own or
to share ownership of the new firm; and,
third, the firm has not yet paid salaries
and wages for more than three months.
Young entrepreneurs, on the other
hand, were once nascent entrepreneurs
and have put their start-up idea into
action in the recent past. They are
defined as follows: in cases where the
firm already exists and the interviewee is
the owner or part-owner and she has
paid salaries and wages for more than
three months but less than three and a
half years, it is classified as a “new busi-
ness” and the individual is classified as a
“young entrepreneur.”3
The states as defined in the GEM are
obviously nonexclusive, which means
that a person can be in more than one
stage. This is by definition the case with
latent nascent entrepreneurs and nascent
entrepreneurs. Nascent entrepreneurs
who want to found a firm within the next
six months also belong, in principle, to
the group of latent nascent entrepreneurs.
The same applies for young entrepre-
neurs who are already planning their next
business. Because the estimated multino-
mial models cannot deal with one person
being in more than one single state, we
decided that young entrepreneurship is
considered over nascent entrepreneur-
ship and nascent entrepreneurship over
latent nascent entrepreneurship. This
ranking follows the idea of the growing
certainty of the three states. The flowchart
(Figure 2) gives the exact definition of the
entrepreneurial phases we used in our
multivariate setting.
Nonentrepreneurs are persons who
state that they never planned or owned a
business and never provided funds for a
3
In literature based upon GEM data the businesses of these young entrepreneurs are often
called “baby businesses.” As this paper focuses on the individuals (and not their businesses) the
term young entrepreneurs seems to be appropriate. However, the definition is the same for
both terms.
114 JOURNAL OF SMALL BUSINESS MANAGEMENT
new business started by someone else.
We also excluded intrapreneurs, persons
who declared to start a business for their
employer and will not own (part of) the
business. Therefore, we tried to avoid
the “holiday makers” trap, as mentioned
by Davidsson (2006).
Besides the questions that are neces-
sary to classify the interviewees into the
four groups, the survey includes ques-
tions about the basic demography, one
question about the household income,
one question about whether the inter-
viewees know someone who has started
a business in the last two years, one
question about how they perceive the
economic situation for setting up a busi-
ness, and one question about the willing-
ness to take risks.
We assign available empirical informa-
tion to three groups of indicators: demo-
graphic characteristics of the (potential)
entrepreneur, cognitive characteristics of
the (potential) entrepreneur, and charac-
teristics of the region where the (poten-
tial) entrepreneur lives. The precise
information about the independent vari-
ables is shown in Table 2. The distribu-
tion of age, gender, and household
income (Tables A2 and A3) as well as the
wording of the questions can be found in
the Appendix.
More methodological details on the
GEM attempt are described by Reynolds
et al. (2005). Davidsson (2006) provides
a valuable assessment of GEM data for
the purpose of research into nascent
entrepreneurship.
The Statistical Model
GEM data are used to estimate multi-
nomial probit models for explaining the
propensity to be a latent nascent entre-
preneur, a nascent entrepreneur, or a
 Figure 2
Flowchart for the Assignment of an Exclusive Entrepreneurial State
Wording of the questions for the assignment of a exclusive entrepreneurial state6

q1a: You are, alone or with others, currently the owner of a company you help manage,
self-employed, or selling any goods or services to others.
q1b: Do you personally own all, part, or none of this business?
q1c: What was the first year the founders of the business received wages, profits, or
payments in kind from this business?
q2a: You are, alone or with others, currently trying to start a new business, including any
self-employment or selling any goods or services to others.
q2b: You are, alone or with others, currently trying to start a new business or a new
venture for your employer—an effort that is part of your normal job.
q2c: Over the past 12 months have you done anything to help start a new business, such as
looking for equipment or a location, organizing a start-up team, working on a business
plan, beginning to save money, or any other that would help launch a business?
q2d: Will you personally own all, part, or none of this business?
q2e: Has the new business paid any salaries, wages, or payments in kind, including your
own, for more than three months?
q3a: You are, alone or with others, expecting to start a new business, including any type of
self-employment, within the next three years.
q4a: You are, alone or with others, currently trying to start a new business or a new
venture for your employer—an effort that is part of your normal work.
q4b: You are, alone or with others, currently the owner of a company you help manage,
self-employed, or selling any goods or services to others.
q4c: You have, in the past three years, personally provided funds for a new business
started by someone else, excluding any purchases of stocks or mutual funds.
q4d: You have, in the past 12 month, sold, shut down, discontinued, or quit a business you
owned and managed, any form of self-employed, or selling goods or services to anyone.

6
Our screening for entrepreneurial states differs slightly from the one use by GEM. The GEM
screening is described by Reynolds et al. (2005, pp. 214–215).

BRIXY, STERNBERG, AND STÜBER 115

young entrepreneur or not to be
involved in any kind of entrepreneur-
ship. We estimated robust standard
errors and included dummies for years
(these are not reported in the tables for
better clarity) and clustered for NUTS III
regions (NUTS is the abbreviation for the
French “Nomenclature des Unités Terri-
toriales de Statistique” [Nomenclature of
Territorial Units for Statistics]. This
geocode standard has been developed by
the European Union and it shows the
subdivisions of EU countries for statisti-
cal purposes).4 All of the interviewees
are assigned to a single state: latent
nascent entrepreneurship, nascent entre-
preneurship, young entrepreneurship,
or—the large majority—no entrepreneur-
ship at all.
By comparing the results of our esti-
mates for the three entrepreneurial
stages, we try to determine whether the
influence of the independent variables
varies at different stages during the entre-
preneurial process. For example, educa-
tion might have no influence on the
probability of being interested in starting
a firm—but could be important for those
who do actually set up their own firm.
Results and Discussion
The results (see Tables 3–5) show that
entrepreneurs at all three stages have a
great deal in common compared with
nonentrepreneurs. However, there are
also considerable differences between the
entrepreneurial phases. This result is in
line with the majority of empirical studies
comparing (nascent) entrepreneurs with
the general population (see Davidsson
and Gordon 2009). Many of the differ-
ences already emerge right at the begin-
ning of the entrepreneurial process. So
entrepreneurs differ from nonentrepre-
4
Because we included two regional variables (development of GDP and unemployment) it is
necessary to relax the assumption of independence within groups. We used stata 10 command:
“mprobit . . . , robust.” To calculate the marginal effects we used the command “mfx compute,
predict (. . .).”
116 JOURNAL OF SMALL BUSINESS MANAGEMENT
neurs right from the start. Nevertheless,
the magnitude of the influence of some
variables varies considerably across the
three entrepreneurial stages.
The probability of a woman being an
entrepreneur is lower at every stage but
is especially low for latent nascent entre-
preneurs. Women are still less likely than
men to even think about becoming an
entrepreneur (H1a). However, in later
stages the coefficient is lower than at the
beginning of the process. This is a sign
that, once in the process, women tend to
proceed to start a firm more often than
men, which confirms the results of
Davidsson (2006) as well as Menzies
et al. (2006) who also could not find any
differences across gender regarding the
characteristics and the length of the
start-up process. The likelihood of being
female does hardly differ between
nascent entrepreneurs and young entre-
preneurs (H1b) confirming the results of
Alsos and Ljunggren (1998) that some
gender differences in the entrepreneur-
ship process exist, but not in getting
operational. Our gender-related empiri-
cal result sheds light on an important
new aspect of gender differences and
goes beyond the generally accepted evi-
dence that men are more often engaged
in start-ups than women (see, e.g.,
Delmar and Davidsson 2000). The
reasons for gender differences before
even thinking about becoming an entre-
preneur seem not to be related to the real
life of entrepreneurs but to the female-
specific perceptions of entrepreneurial
activities (Wagner 2007). The origins of
these gender-specific attitudes and per-
ceptions should be searched in far earlier
times of an individual’s life than the con-
crete decision in favor or against starting
a firm. They are associated with the indi-
 Table 2
List of the Independent Variables
Variables Description and Calculation Source

Demographic Characteristics
Age Dummy with five categories: GEM
1: 18–24 (reference group)
2: 25–34
3: 35–44
4: 45–54
5: 55–64
Gender Dummy (female = 1) GEM
Human Capital
Education Dummy with four categories: GEM
1: lower secondary school
(reference)
2: intermediate secondary school
3: upper secondary school
4: university degree
Income Monthly household income in € GEM
Dummy with four classes:
1: <1,000 (reference)
2: 1,000–2,000
3: 2,000–3,000
4: >3,000
Cognitive Characteristics
Fear of failure* Dummy (high/low) high = 1 GEM
Opportunity recognition* Dummy (yes/no) yes = 1 GEM
Social networks* Dummy (yes/no) yes = 1 GEM
Regional Characteristics
Development of GDP Difference of GDP per capita Federal Statistical
2002–2006 (NUTS III-level) Office
Development of Difference of unemployment rate Statistics of the
unemployment 2002–2006 (NUTS III level) Federal Labour
Agency
Control Variables
Interviewee lives in East or Dummy East = 1
West Germany
Year of observation Dummy for each year GEM

*Exact wording of the questions for the cognitive characteristic variables:

• You know someone personally who started a business in the past two years.
• In the next six month there will be good opportunities for starting a business in
the area where you live.
• Fear of failure would prevent you from starting a business.
GDP, gross domestic product; GEM, Global Entrepreneurship Monitor; NUTS III,
Nomenclature des Unités Territoriales de Statistique.

BRIXY, STERNBERG, AND STÜBER 117

 Table 3

118
Estimates of the Propensity to Be a Latent Nascent Entrepreneur, a Nascent
Entrepreneur, or a Young Entrepreneur (Multinomial Probit Results)
Latent Nascent Nascent Young
Entrepreneurs Entrepreneurs Entrepreneurs

dy/dx p > |z| dy/dx p > |z| dy/dx p > |z|

Age: (reference: age 18–24)

25–34* -0.008 0.242 0.009 0.122 0.028 0.000
35–44* -0.018 0.001 0.012 0.026 0.025 0.000
45–54* -0.030 0.000 0.004 0.402 0.017 0.014
55–64* -0.057 0.000 -0.020 0.000 -0.014 0.001
Education: (reference: lower secondary school)
Intermediate secondary school* 0.005 0.362 0.006 0.141 -0.004 0.255
Upper secondary school* 0.016 0.012 0.011 0.020 0.007 0.090
University degree* 0.022 0.001 0.013 0.007 0.012 0.008
Monthly income in €: (reference: <1,000)
1,000–2,000* -0.027 0.000 -0.007 0.145 0.001 0.804
2,000–3,000* -0.030 0.000 -0.008 0.083 0.005 0.440
>3,000* -0.025 0.001 -0.006 0.246 0.019 0.004
Gender (reference: male)* -0.018 0.000 -0.011 0.000 -0.013 0.000
Development GDP/pc (ln) 2002–2004 0.611 0.475 -0.763 0.338 -0.713 0.238
Development unemployment 2002–2006 0.970 0.007 0.058 0.817 0.049 0.825
East Germany* 0.008 0.290 0.003 0.531 0.004 0.213
Fear of failure (high = 1)* -0.054 0.000 -0.036 0.000 -0.041 0.000

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Opportunity recognition (yes = 1)* 0.043 0.000 0.036 0.000 0.020 0.000
Social networks (yes = 1)* 0.062 0.000 0.046 0.000 0.035 0.000

Notes: The estimation method is multinomial probit; standard errors are robust; *dy/dx is for discrete change of dummy variable from 0 to 1 dummies
for years included but not shown for better readability.
Wald chi2: 2,821.29; Number of individuals: 15,286; Count R2: 0.821; e(chi2): 0.000; Number of clusters (NUTS III): 386; Adj. count R2: 0.001.
GDP, gross domestic product; NUTS III, Nomenclature des Unités Territoriales de Statistique; pc, per capita.
 Table 4
Females: Estimates of the Propensity to Be a Latent Nascent Entrepreneur, a Nascent
Entrepreneur, or a Young Entrepreneur (Multinomial Probit Results)
Latent Nascent Nascent Entrepreneurs Young Entrepreneurs
Entrepreneurs

dy/dx p > |z| dy/dx p > |z| dy/dx p > |z|

Age: (reference: age 18–24)

25–34* 0.001 0.893 0.001 0.981 0.039 0.002
35–44* -0.003 0.762 0.009 0.127 0.028 0.002
45–54* -0.017 0.014 0.002 0.734 0.024 0.014
55–64* -0.045 0.000 -0.017 0.000 -0.007 0.198
Education: (reference: lower secondary school)
Intermediate secondary school* 0.006 0.364 0.005 0.241 -0.004 0.232
Upper secondary school* 0.017 0.017 0.008 0.087 0.006 0.177
University degree* 0.021 0.018 0.010 0.074 0.009 0.089
Monthly income in €: (reference: < 1,000)
1,000–2,000* -0.012 0.123 0.000 0.997 -0.003 0.508
2,000–3,000* -0.014 0.057 -0.001 0.879 0.003 0.566
>3,000* -0.007 0.405 -0.002 0.649 0.010 0.134
Development GDP/pc (ln) 2002–2004 -1.077 0.399 -1.176 0.168 -0.074 0.909

BRIXY, STERNBERG, AND STÜBER

Development unemployment 2002–2006 0.951 0.020 0.120 0.662 -0.244 0.272
East Germany* 0.012 0.200 0.001 0.743 -0.009 0.001
Fear of failure (high = 1)* -0.049 0.000 -0.029 0.000 -0.026 0.000
Opportunity recognition (yes = 1)* 0.048 0.000 0.042 0.000 0.016 0.000
Social networks (yes = 1)* 0.052 0.000 0.033 0.000 0.024 0.000

Notes: The estimation method is multinomial probit; standard errors are robust; *dy/dx is for discrete change of dummy variable from 0 to 1 dummies
for years included but not shown for better readability.
Wald chi2: 1,477.62; Number of individuals: 8,024; Count R2: 0.869; e(chi2): 0.000; Number of clusters (NUTS III): 386: Adj. count R2: 0.001.
GDP, gross domestic product; NUTS III, Nomenclature des Unités Territoriales de Statistique; pc, per capita.

119
120
Table 5
Males: Estimates of the Propensity to Be a Latent Nascent Entrepreneur, a Nascent
Entrepreneur, or a Young Entrepreneur (Multinomial Probit Results)
Latent Nascent Nascent Young
Entrepreneurs Entrepreneurs Entrepreneurs

dy/dx p > |z| dy/dx p > |z| dy/dx p > |z|

Age: (reference: age 18–24)

25–34* -0.020 0.101 0.020 0.055 0.022 0.043
35–44* -0.039 0.000 0.014 0.122 0.025 0.017
45–54* -0.045 0.000 0.007 0.425 0.014 0.195
55–64* -0.071 0.000 -0.024 0.001 -0.022 0.005
Education: (reference: lower secondary school)
Intermediate secondary school* 0.003 0.733 0.008 0.313 -0.004 0.567
Upper secondary school* 0.014 0.187 0.013 0.110 0.007 0.300
University degree* 0.023 0.049 0.017 0.035 0.015 0.044
Monthly income in €: (reference: <1,000)
1,000–2,000* -0.046 0.000 -0.017 0.028 0.009 0.421
2,000–3,000* -0.050 0.000 -0.019 0.022 0.043 0.701
>3,000* -0.050 0.000 -0.011 0.181 0.030 0.010
Development GDP/pc 2002–2004 2.972 0.073 0.147 0.918 -1.891 0.202
Development unemployment 2002–2006 0.940 0.144 -0.089 0.820 0.518 0.216
East Germany* 0.000 0.982 0.004 0.617 0.005 0.510
Fear of failure (high = 1)* -0.058 0.000 -0.044 0.000 -0.060 0.000

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Opportunity recognition (yes = 1)* 0.038 0.000 0.032 0.000 0.026 0.000
Social networks (yes = 1)* 0.073 0.000 0.060 0.000 0.049 0.000

Notes: The estimation method is multinomial probit; standard errors are robust; *dy/dx is for discrete change of dummy variable from 0 to 1 dummies
for years included but not shown for better readability.
Wald chi2: 1,423.14; Number of individuals: 7,262; Count R2: 0.770; e(chi2): 0.000; Number of clusters (NUTS III): 384; Adj. count R2: 0.004.
GDP, gross domestic product; NUTS III, Nomenclature des Unités Territoriales de Statistique; pc, per capita.
vidual’s socialization and education in
very early days, especially during child-
hood. Thus, theoretical or empirical
models, like ours, just considering the
start-up decision of adults by gender are
not able to detect such early reasons.
Another plausible reason for the fact that
women are less frequently engaged in
the very early entrepreneurship phases
may be related to the different motiva-
tions for starting a firm between men and
women. Manolova, Brush, and Edelman
(2008) show that men are motivated by
financial gain, self-realization, and
autonomy, whereas women, in addition
to the aforementioned motivations,
expect status. Given the fact that the
status of founders (different from the
status of established entrepreneurs) still
is not the best in many countries (see
Bosma and Levie 2010 for the assessment
of entrepreneurship as a desirable career
choice in 54 GEM countries), it is reason-
able why women less often try to start
their own firm.
The age of latent entrepreneurs differs
remarkably from that of individuals
engaged in later phases of entrepreneur-
ship. Latent entrepreneurs are particu-
larly young—from 35 onwards the
likelihood of being a latent nascent
entrepreneur is significantly lower than
for those aged between 18 and 24. The
likelihood of being involved in nascent
entrepreneurship or young entrepre-
neurship on the other hand is highest for
individuals aged between 25 and 44. This
is in line with the results for other non-
German empirical studies that show a
higher engagement in nascent entrepre-
neurship for those between 25 and 34
years (see Delmar and Davidsson 2000)
and with studies on Germany revealing
the above-average age of German entre-
preneurs compared with other countries
(Brixy, Hundt, and Sternberg 2010). For
all kinds of entrepreneurship, however,
the likelihood of being an entrepreneur
is lowest for those aged 55 and above
(H2). This shows that at the beginning of
BRIXY, STERNBERG, AND STÜBER
their career, many people think about
becoming self-employed and they are
most likely to actually start a business
between 24 and 45.
In line with our expectations, medially
and highly educated individuals are
more likely to found a business. Interest-
ingly, the influence of education is
greater for men than for women. Educa-
tion has the largest effect for latent
nascent entrepreneurs, thus right at the
beginning of the entrepreneurial
process. In other words, highly educated
individuals are more likely to found a
business, but even more likely to just
think about being self-employed (H3a).
This observation for Germany differs
from the situation in Norway where edu-
cation predicts the nascent entrepreneur
status but not the previous intention to
start a firm (see Rotefoss and Kolvereid
2005). The decreasing involvement of
highly educated individuals in the
process is a sign of selection, as they in
particular have attractive alternatives as
employees (H3b).
We included three variables to provide
information about cognitive characteris-
tics and attitudes: “fear of failure,”
“opportunity recognition,” and “social
networks.” Each of them has a substantial
impact, but it differs in size at each entre-
preneurial stage. The fear that a business
might not be successful is much lower for
all stages than it is for nonentrepreneurs
(H4). This confirms the results of Arenius
and Minniti (2005). However, we observe
that confidence grows between latent
nascent entrepreneurship and later
phases of the entrepreneurial process. It
can be assumed that this is partly a selec-
tion process, so those with less confi-
dence might be more likely to give up
early. On the other hand, individuals
might also become more confident as
their plan becomes more definite. One
remarkable outcome is that women are
more optimistic at every stage. As overall
women are less confident (see Table A1),
this looks like a selection effect: a priori
121
only very confident women decide to
become self-employed.
The recognition of opportunities is
greater among the latent nascent
entrepreneurs and nascent entrepreneurs
and is considerably smaller among
young entrepreneurs. Obviously, per-
ceived market opportunity is associated
with the intensity and concreteness of
start-up activity (see Edelman and
Yli-Renko 2007 for a similar argumenta-
tion). This can be interpreted as a kind of
disillusionment as not all of the new
firms can be expected to fulfill the entre-
preneurs’ expectations. At the same time,
this might also be a result of a more
realistic assessment of the real business
world the young entrepreneurs have
already been acquainted with, different
from the nascents and the latent nascent
entrepreneurs.
The impact of knowing someone per-
sonally who has recently started her own
business (social networks) declines from
stage to stage. Again, this is a sign that
role models are important for the likeli-
hood of considering becoming self-
employed oneself. At later stages of the
process, more experienced entrepre-
neurs or consultants may replace the role
models.
In the literature, empirical results on
the function of role models for the entre-
preneurial process are contradictory:
though Carter et al. (2003) show that
nascent entrepreneurs are less motivated
by role models than the general popula-
tion, Delmar and Davidsson (2000)
reveal that those with role models are
more likely to engage in entrepreneur-
ship. Both studies, however, do not
focus on data for Germany.
Of course, knowing (or not knowing)
an entrepreneur can also be interpreted
as an indicator for the social embedded-
ness of the individual (see Cantner and
Stützer 2010) that may play a pivotal role
(Davidsson and Honig 2003) during the
entrepreneurial process. In that sense,
our results seem to be comprehensible:
122 JOURNAL OF SMALL BUSINESS MANAGEMENT
the more concrete the start-up activities
is, the less relevant becomes the impact
of such role models as the nascent entre-
preneurs have to trust on his own activi-
ties and competencies. During the
entrepreneurship process, the decreasing
impact of (entrepreneurial) role models
may be compensated by the increasing
impact of entrepreneurial control belief
and entrepreneurial self-efficacy. Though
the concept of entrepreneurial control
belief can directly be related to the
theory of planned behavior developed
by Ajzen (1991), Rauch and Frese (2007)
in their meta-analysis have shown the
strong and positive association between
entrepreneurial behavior and self-
efficacy. Both characteristics should be
more common among latent nascents
(than among the general population) and
even more common among nascent
entrepreneurs.
With regard to income, it is remark-
able that, when controlling for educa-
tion, those who are planning to become
self-employed earn less than comparable
nonentrepreneurs. This is significant for
latent nascent entrepreneurs and—to a
lesser degree—for nascent entrepreneurs
too. Whereas those who are already
young entrepreneurs have significantly
more often at least €3,000 at their dis-
posal per month. Without panel data, it is
not possible to ascertain whether this is
an expression of a selection that favors
those with really profitable concepts or
whether it is actually the effect of becom-
ing self-employed.
The relatively low incomes of latent
entrepreneurs in particular are an indica-
tion that low incomes drive people to
plan their own businesses. Higher
opportunity costs do indeed have a nega-
tive influence on the likelihood of
becoming self-employed. However, the
question as to the reasons for their rela-
tively lower income remains unan-
swered. Obviously, the market for
dependent employment does not value
their abilities and qualifications suffi-
ciently. According to Lazear (2005) and
Wagner (2003), employees benefit from
being highly specialized, whereas entre-
preneurs have a balanced profile pattern
and do especially well if their qualifica-
tions are broader, following a “jack of all
trades” pattern. A further explanation
could be that young people who are
planning to set up a business are more
often still in some form of education, for
example, writing a thesis or studying for
other qualifications that are not covered
by the qualification variable. This pre-
vents them from earning much at the
moment, but anticipation would pay off
in the future. In regions with growing
GDP per head, people more often plan
to set up a firm, but this does not apply
for young entrepreneurs. This, too, could
be an indication of special selection such
that entrepreneurs more often give up if
they find attractive alternative employ-
ment in their vicinity. The differences are
more pronounced for males than for
females. This is presumably a base effect
because of the well-known wage dis-
crimination of females in dependent
employment.
Covering the regional environment
with only two variables is only a first step
given the complex nature of a region and
its numerous potential and interrelated
influences on entrepreneurial activity.
Entrepreneurship as a “regional event”
(Feldman 2001) is a rather complicated
phenomenon (see Sternberg 2009 for an
overview). From both regional variables,
development of regional GDP per person
and development of the unemployment
rate, only a rise in regional unemploy-
ment has an influence on the probability
of being a latent nascent entrepreneur.
Evidently, the likelihood of thinking
5
The relatively high coefficient of both regional variables should not be misconceived: the
scaling of these variables is quite different from the others (mostly dummies). The beta
coefficient of the mentioned positive overall influence on becoming a latent nascent entrepre-
neur is only 0.009.
BRIXY, STERNBERG, AND STÜBER
about becoming self-employed rises with
declining chances on the labor market.5
However, it is still questionable if
regionally specific determinants of entre-
preneurial activity can be explained suf-
ficiently precisely by variables
aggregated on regions. As Sternberg and
Wagner (2005) show with probit analy-
ses of 10 representative German regions,
it is possible to demonstrate the regional
influence on start-up rates in principle,
but it is not possible to demonstrate the
significant influence of individual
regional determinants. The reason is that
the latter had an actual influence only in
some, but not sufficient, regions. To
prevent erroneous interpretations, there
is a regional influence, but it is the result
of different (i.e., regionally specific)
causes from one region to the next. A
summary of the results is shown in
Table 6.
Conclusions
Even though entrepreneurs differ
remarkably from nonentrepreneurs in
general, our results give evidence of self-
selection processes and learning pro-
cesses during the three entrepreneurial
phases analyzed. Most of these selections
were identified just at the beginning of
the entrepreneurial process.
In our empirical model, we included
variables covering three scales: personal
characteristics, microenvironment, and
the regional environment. The results
clearly suggest that especially the
microenvironment has a big influence on
the desire to become self-employed.
Especially the gender gap is a factor
where politics is required. Women often
do not even think of becoming self-
employed, but those who do decide to
123
 Table 6
Major Results of Empirical Research Questions
Hypotheses Latent Nascent Nascent Young
Entrepreneurs Entrepreneurs Entrepreneurs

H1a Already latent nascent Support — —

entrepreneurs are less
likely to be female.
H1b The likelihood of being — Support Support
female does not differ
between nascent
entrepreneurs and young
entrepreneurs.
H2 Entrepreneurs in all three Support Support Support
stages are more likely to
be younger than 45 years
old.
H3a Medium and high education Support — —
levels raise the propensity
to be a latent nascent
entrepreneur.
H3b The involvement of highly — Support Support
educated individuals
decreases during the
process.
H4 The willingness to trust Support Support Support
one’s skills and to take
risks is higher for
entrepreneurs in all three
stages compared with
nonentrepreneurs.
H5a Growing regional Support No support No support
unemployment increases
entrepreneurial activity.
H5b A growing GDP per head No support No support No support
increases entrepreneurial
activity.

—: test not possible/not tested; GDP, gross domestic product.

start a firm do so with greater confidence
than men. Although there are already
special schemes for supporting start-ups
by women, we have the impression that
these are scheduled too late and that
self-employment as an alternative to
dependent employment must reach
women—and men—earlier in their lives.
This is substantiated by the very young
age of latent nascent entrepreneurs. We
therefore support the idea of introducing
a basic entrepreneurial education as a
topic at schools (Schröder and Schmitt-
Rodermund 2006). As our results show,
role models are an important stimulus to
think about becoming an entrepreneur.

124 JOURNAL OF SMALL BUSINESS MANAGEMENT

 Variables reflecting the microenviron-
ment have a very significant influence on
the decision to become self-employed.
First of all, it is a person’s attitude or
mindset. Here too, education might help
to reduce the “fear of failure,” as long as
this fear is exaggerated, because well-
informed individuals are better able to
judge the risks. On the other hand, for
some groups of entrepreneurs with small
businesses, it might be worth consider-
ing offering some basic social security.
A further point is that even though the
highly qualified are more likely to start a
business, there is evidence that they
often drop out at an early stage. The
reasons for this are unclear, but the
opportunity costs are likely to play a
role. Given the fact that growth-oriented
entrepreneurship has been high on the
agenda of both national and regional
policymakers (Fischer and Reuber 2003),
it is important to identify the reasons
why many highly qualified individuals
drop out of the entrepreneurial process.
Moreover, the conditions of the
regional labor markets play a role. Rising
levels of unemployment lead to growing
interest in self-employment. This might
be a typically German effect because self-
employment as a way out of unemploy-
ment is very much promoted.
We interpret our results as a step on
the way to reduce the significant
research gap in terms of microdata-based
empirical analyses of the entrepreneurial
process. The value added to the field of
entrepreneurship research is that several
attributes of nascent entrepreneurs as
well as latent nascents and their environ-
ment differ between some of the phases
of the entrepreneurial process. In par-
ticular, this is true for gender and for the
microenvironment of the (potential)
founder. Policymakers should consider
this when they develop new government
support programs dedicated to start-ups
or wannabe start-ups. Practitioners who
advise nascents or latent nascents should
treat nascents and latent nascents as spe-
BRIXY, STERNBERG, AND STÜBER
cific populations with different percep-
tions and behaviors. Entrepreneurship
scholars may state that potential entre-
preneurs during the pre-entry phase are
anything else than a homogenous group
but worth to be separated at least into
nascents and latent nascents.
Further research should make use of
panel data to be more able to tackle the
problem of changing attitudes and dispo-
sition of entrepreneurs during the
process on the individual level.
However, these types of databases are
rather costly and time-consuming, so that
so far only few have been developed
(Reynolds 2007; van Gelderen, Thurik,
and Bosma 2005). Others are under
construction (Reynolds and Curtain
Forthcoming). The authors are under
way to set up such a database for
Germany, using the screening interviews
of the GEM as a starting point (Brixy and
Sternberg 2010).
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Appendix

Table A1
Attitudes, Percentage in Favor
Fear of Opportunity Social
Failure1 Recognition2 Networks3

Male Female Male Female Male Female

Latent Nascent Entrepreneurs 28.1 29.8 31.6 30.8 68.1 57.8

Nascent Entrepreneurs 19.9 26.6 36.5 37.8 76.5 65.4
Young Entrepreneurs 14.8 21.6 36.2 27.9 75.7 64.1
Nonentrepreneurs 50.0 59.1 17.7 11.0 38.2 27.0

1
Percentage yes: fear of failure would prevent you from starting a business.
2
Percentage yes: in the next six months there will be good opportunities for starting
a business in the area where you live.
3
Percentage yes: you know someone personally who has started a business in the
past two years.
Data source: Adult Population Survey of the Global Entrepreneurship Monitor,
pooled data for Germany 2002–2006, n = 16,938.

Table A2
Distribution of Gender and Age According to the
Four Phases of the Entrepreneurial Process as
Percentages (Unweighted)
Gender Age

Male Female <24 25–34 35–44 45–54 55–64

Latent Nascent 59.8 40.3 20.0 24.3 29.3 17.5 9.0

Entrepreneurs
Nascent Entrepreneurs 62.4 37.6 11.4 22.5 34.2 22.3 9.7
Young Entrepreneurs 64.8 35.2 8.9 24.0 35.6 22.9 8.6
Nonentrepreneurs 42.4 57.6 12.1 15.7 26.8 23.0 22.4

Data source: Adult Population Survey of the Global Entrepreneurship Monitor,

pooled data for Germany 2002–2006, n = 16,938.

130 JOURNAL OF SMALL BUSINESS MANAGEMENT

 Table A3
Distribution of Household Income According to the
Four Phases of the Entrepreneurial Process in
Percentages (Unweighted)
Monthly Income in €

<1,000 1,000 < 2,000 2,000–3,000 >3,000

Latent Nascent Entrepreneurs 13.0 26.1 26.8 34.1

Nascent Entrepreneurs 9.4 24.9 28.2 37.6
Young Entrepreneurs 5.9 20.5 26.0 47.6
Nonentrepreneurs 10.3 31.8 31.0 26.9

Data source: Adult Population Survey of the Global Entrepreneurship Monitor,

pooled data for Germany 2002–2006, n = 16,938.

BRIXY, STERNBERG, AND STÜBER 131

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