Home / Companies / Start-ups /  Successful start-ups most likely to be led by middle-aged founders

If you think successful start-ups tend to be led by young millennials, think again. A new National Bureau of Economic Research (NBER) study by Pierre Azoulay, professor at the MIT Sloan School of Management, and others shows that successful entrepreneurs are often middle-aged, belying popular expectations and investor belief that young people are more likely to establish successful ventures. The authors analysed the performance of 2.7 million founders in the US over 2007-2014. They found that the more successful firms are likely to have older founders. While the average age of a start-up founder was 41.9 years, it increased to 42.1 for the top 5% successful ones, 43.7 for the top 1% and 45 for the top 0.1%. The ages refer to those at the time of founding.

While the research relates to the US, even in India, successful start-ups tend to be led by older and more experienced professionals, as a January Mint article (The secret sauce behind a successful Indian start-up had shown.

Also read: Age and High-Growth Entrepreneurship

First-generation immigrants created a fourth of all new firms in the US in recent years, despite constituting only 15% of the US workforce, shows a recent NBER paper by Sari Pekkala Kerr, economist at Wellesley College, and William R. Kerr, professor at the Harvard Business School. New firms are defined as those which were created in the five years prior to surveys conducted in 2007 and 2012. The share of immigrant-founded firms was as high as 40% in states such as California and New York. However, immigrant-owned businesses are more likely to have a lower employee count, pay less and offer fewer benefits compared to native-owned businesses. Thus, first-generation immigrant businesses accounted for about 14% of all jobs, despite a much higher share in new businesses (25%). Nonetheless, immigrant entrepreneurs remain an important source of job creation because incremental job growth often happens through newly created firms.

Also read: Immigrant Entrepreneurship in America: Evidence from the Survey of Business Owners 2007 & 2012

Accidental injuries from road traffic accidents accounted for the highest burden of out-of-pocket expenditure in India, according to a study by Srinivas Goli, assistant professor at the Jawaharlal Nehru University (JNU), and co-authors, published in the Economic and Political Weekly. The authors analysed data from a 2014 survey conducted by the National Sample Survey Office for their study. The average expense on treating road injuries turned out to be the costliest after cancer and heart disease. However, due to more widespread occurrence of accidental injuries, they accounted for the highest share (13%) of all expenditure on treatment of different ailments.

Also read: Road Traffic Accidents and Injuries in India

The Pradhan Mantri Jan Dhan Yojana’s (PMJDY’s) success in ensuring financial inclusion appears limited, argue Dipa Sinha, assistant professor of economics at Ambedkar University, and Rohit Azad, assistant professor of economics at JNU, in a new research paper. The authors point out that while there has been a huge increase in the number of accounts opened under this scheme, many of them hold very little balance, or have been lying inoperative. The authors argue that financial inclusion implies access to affordable credit in order to help families smoothen consumption or make timely investments. Seen in this light, PMJDY has failed its mandate. Analysing state-level aggregates, the authors find that there is no relationship between the credit-deposit ratio and accounts opened under PMJDY, meaning that the scheme has not translated into greater access to formal credit. Rather, data from the Reserve Bank of India shows that small borrowers as a share of total bank credit has fallen.

Also read: Can Jan Dhan Yojana Achieve Financial Inclusion?

The Facebook data leakage scandal shows the importance of regulation in the technology sector, without which companies have little incentive to actively safeguard data or care about other negative externalities from their business, argues Gulzar Natarajan, a former civil servant in his blog. Not just companies like Facebook and Google, but the entire sharing and e-commerce economy is built on exploiting a “regulatory arbitrage". The arbitrage arises because regulations related to labour protection, compliance, taxes are often more lax for such companies compared to bricks-and-mortar companies. Natarajan argues for greater regulation and also stress tests of data protection measures at all the major technology firms, something akin to what banks were subjected to in the wake of the global financial crisis.

Also read: Some reflections on the Facebook data leakage

Economics Digest runs weekly, and features interesting reads from the world of economics.

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