Does parental socio-economic status matter for the success of start-ups of first-time founders? Evidence from Germany
Keywords:
First-time founder, social mobility, start-ups
Abstract
The aim of this paper is to establish the influence of parental socio-economic status on profitability and growth of first-time founders in Germany. Semi-structured interviews were conducted with 20 first-time founders to establish their socio-economic status, parental influence on their success as founders, and the impact of parental socio-economic status on their financial success. The main findings showed that the majority of participants believed that high socio-economic status of parents had a significant positive effect on the financial success of new start-ups, although those from lower socio-economic backgrounds could also succeed. The characteristics of unequal social status were often expressed and the status of German as a nation with low social mobility confirmed. However, the extent to which financial support and context networks supported founders from high socio-economic status families was difficult to ascertain as founders were often unwilling to admit its actual influence. In contrast, the parental influences on values and positive attributes relating to their success were more freely discussed. Based on the revenues and valuation of the start-up companies, two trends for first time founder success were identified: the most successful founders had parents with high socio-economic status; some very successful founders demonstrated high social mobility, which is contrary to the existing data that social mobility in German is very low.
References
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[3] Bryman, A. (2016). Social Research Methods. Oxford: Oxford University Press.
[4] Buttner, E., & Rosen. B. (1988). Bank Loan Officers’ Perceptions of the Characteristics of Men, Women, and Successful Entrepreneurs. Journal of Business Venturing, 3, 249-58. doi: 10.1016/0883-9026(88)90018-3
[5] Cardella, G., Sanchez, B., & Garcia, J. (2020). Entrepreneurship and Family Role: A Systematic Review of a Growing Research. Frontiers in Psychology, 10, 2939. doi: 10.3389/fpsyg.2019.02939
[6] Cedefop (2018). Germany: start-ups - a driving force for growth and competition. Retrieved from: https://www.cedefop.europa.eu/en/news-and-press/news/germany-s-driving-force-growth-and-competition
[7] FFM (2020). Female Founders Monitor. Google for Startups/Deutsche Startups eV. Retrieved from: https://accelerate.withgoogle.com/stories/how-google-for-startups-aims-to-level-the-playing-field-for-female-founders
[8] Fritsch, M., & Rusakova, A. (2012). Self-employment after socialism: Intergenerational links, entrepreneurial values, and human capital. Berlin: Deutsches Institut für Wirtschaftsforschung (DIW), SOEP papers on Multidisciplinary Panel Data Research, No. 456.
[9] Gartner, W. (1989). “Who is an entrepreneur?” is the wrong question. Entrepreneurship Theory & Practice, 12(4), 11-32. doi: 10.1177/104225878801200401
[10] GEM. (2021). How GEM Defines Entrepreneurship. London: Global Entrepreneurship Research Association. Retrieved from: https://www.gemconsortium.org/wiki/1149
[11] Greve, A., & Salaff, J. (2003). Social networks and entrepreneurship. Entrepreneurship, Theory and Practice, 28 (1), 1-22. doi: 10.1111/1540-8520.00029
[12] Gulati, R. (2019). The soul of a start-up: companies can sustain their entrepreneurial energy even as they grow. Harvard Business Review, 97(4), 84-92.
[13] Hollingshead, A. (2011). Four factor index of social status. Yale Journal of Psychology, 8, 21-52.
[14] Jarman, J., & Lambert, P. (2018). Exploring Social Inequality in the 21st Century: New Approaches, New Tools, and Policy Opportunities. Abingdon: Routledge.
[15] Katz, B., Du Preez, N., & Schutte, C. (2010). Definition and Role of Innovation Strategy. In SAIIE conference proceedings, 60-74. Retrieved from: https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=2532048e182c03acdfff1b29232af3579a0620a1.
[16] L Luger, M. I., & Koo, J. (2005). Defining and tracking business start-ups. Small Business Economics, 24(1), 17-28. doi: 10.1007/s11187-005-8598-1
[17] Marks, G. (2021). Entrepreneurs are great, but it’s mom and dad who gave them their start. United Kingdom: The Guardian. Retrieved from: https://www.theguardian.com/business/2021/jan/31/small-business-entrepreneurs-success-parents
[18] Mayring, P. (2014). Qualitative content analysis: theoretical basic procedures and software solution. Retrieved from: https://www.ssoar.info/ssoar/bitstream/handle/document/39517/ssoar-2014-mayring-Qualitative_content_analysis_theoretical_foundation.pdf
[19] Minaev (2021). Startup Statistics (2021): 35 Facts and Trends You Must Know. Retrieved from: https://firstsiteguide.com/startup-stats/
[20] Navarro-Carrillo, G., Alonso-Ferres, M., Moya, M., & Valor-Segura, I. (2020). Socioeconomic Status and Psychological Well-Being: Revisiting the Role of Subjective Socioeconomic Status. Frontiers in Psychology, 11, 1303. doi: 10.3389/fpsyg.2020.01303
[21] OECD (2018). A Broken Social Elevator? How to Promote Social Mobility. Paris: Organisation for Economic Cooperation and Development.
[22] Pfluger, F., Bandov, R,, & Miele, C. (2021). Economic Miracle 2.0? Berlin: Roland Berger GmbH.
[23] Pirhadi, H., Soleimanof, S., & Feyzbakhsh, A. (2021). Unpacking entrepreneurial alertness: How character matters for entrepreneurial thinking. Journal of Small Business Management, 1-33. Doi: 10.1080/00472778.2021.1907584
[24] Ries, E., & Hickman, L. (2012). The Lean. London: London School of Economics.
[25] Ritchie, J., & Lewis, J. (2013). Qualitative Research Practice, 2nd ed. Thousand Oaks, CA: Sage.
[26] Ropega, J. (2020). Novice and Habitual Entrepreneurs and External Business Support Exploitation. Interdisciplinary Description of Complex Systems, 18(2-B), 271-85. doi: 10.7906/indecs.18.2.14
[27] Rudnika, J. (2021). Distribution of the founders of startups in Germany until 2019, by age group. Retrieved from: https://de.statista.com/statistik/daten/studie/573534/umfrage/verteilung-der-gruender-von-startups-in-deutschland-nach-altersgruppen/
[28] Schaible, S., Ditsche, J., & Kleipass, U. (2021). Multiplier effects in other industries make the total employment effect four times greater. Munich: Roland Berger. Retrieved from: https://www.rolandberger.com/en/Insights/Publications/Startups-could-create-almost-4-million-jobs-in-Germany-by-2030.html
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[30] Schumpeter, J. (2010). Capitalism, Socialism and Democracy. Abingdon: Routledge.
[31] Simoes, N., Crespo, N., & Moreira, S. (2016). Individual Determinants of Self-Employment Entry: What Do We Really Know?. Journal of Economic Surveys, 30(4), 783-806. doi: 10.1111/joes.12111
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[34] Startupdetector (2022). Alle neuen Startups entdecken - die Startup-Liste von startupdetector. Retrieved from: https://www.startupdetector.de/
[35] Sullivan, D., & Meek, W. 2012. “Gender and entrepreneurship: a review and process model.” Journal of Managerial Psychology, 27 (5):428-458.
[36] Tarling, C., Jones, P., & Murphy, L. (2016). Influence of early exposure to family business experience on developing entrepreneurs. Education & Training, 58 (7/8), 733-50. doi: 10.1108/ET-03-2016-0050
[37] Thebaud, S. (2010). Gender and Entrepreneurship as a Career Choice: Do Self-Assessments of Ability Matter?. Social Psychology Quarterly, 73(3), 288-304. doi: 10.1177/0190272510377882
[38] Tidd, J., & Bessant, J. (2021). Managing Innovation, 7th ed. Hoboken, NJ: Wiley.
[39] Velez-Grajales, V., & Velez-Grajales, R. (2014). Is Entrepreneurship Inherited? A Study Of Intergenerational Social Mobility In Mexico. Latin American Journal of Economics, 51(2), 247-78. doi: 10.7764/LAJE.51.2.247
[40] Villalba, C. (2014). Socioeconomic Status (SES). In Encyclopedia of Quality of Life and Well-Being Research edited by A. Michalos. Dordrecht: Springer.
[41] Wee, C., Lim, W., & Lee, R. (1994). Entrepreneurship: A review with implications for further research. Journal of Small Business and Entrepreneurship, 11(4), 25-49. doi: 10.1080/08276331.1994.10600470
[42] Westerheide, F. (2016). The Difference between Hardware and Software Startups. Retrieved from: https://www.linkedin.com/pulse/difference-between-hardware-software-startups-westerheide.
[43] Zikmund, W., Babin, B., Carr., & Griffin, M. (2013). Business Research Methods (9th International ed.). Canada: South-Western Cengage Learning.
Published
2023-06-23
How to Cite
Roth, A., & Blažková, I. (2023). Does parental socio-economic status matter for the success of start-ups of first-time founders? Evidence from Germany. Review of Applied Socio-Economic Research, 25(1), 66-82. https://doi.org/10.54609/reaser.v25i1.322
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Articles
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