Understanding the Complex Processes of Business Creation

business creation

The success of a business may be defined in a variety of ways. For some, it’s a matter of being profitable and generating a return on investment. Others find satisfaction in the accomplishment of creating products that help customers solve problems. Praise from satisfied clients can also be an indicator of success, as can overcoming difficult times and finding new strengths that you didn’t know you had.

Many scholars have developed theoretical models to understand why individuals start businesses, identifying personal factors such as the perception of opportunities, self-efficacy and fear of failure (Veciana Reference Veciana1999). Other authors have focused on the context in which entrepreneurs make decisions, arguing that people who create companies are influenced by the environment and the socialization process where they live (Stevenson Reference Stevenson2000; Avolio Alecchi Reference Alecchi2020).

Business creation is a significant driver of economic growth, job creation and adaptation and an important career choice for millions. It is, however, not an easy endeavor. In fact, only about two-fifths of all nascent ventures achieve profitability. Policy makers struggle with the challenge of increasing firm creation while minimizing their social costs.

This article provides insights into the complex processes of business creation by reviewing the best evidence from representative samples of nascent entrepreneurs and pre-profit ventures, focusing on the unique characteristics of those two-fifths that reach profitability. The findings are highly relevant to those considering starting a company, as well as those involved in the start-up process and provide substantial evidence for adjusting public policies to support entrepreneurial activity.