Social capital and entrepreneurial activity: A pseudo-panel approach

• We use pseudo-panel data to test the effect of social capital on entrepreneurship.
• Trust both in strangers and in public institutions increases entrepreneurship.
• Parent's emphasizing achievement relative to relations increases entrepreneurship.
• Social norms represented by honesty facilitate entrepreneurship.

This paper uses a pseudo-panel approach at an age-based cohort level to investigate the extent to which social capital accounts for differences in entrepreneurial activities. The findings suggest that trust measured by trust either in strangers or in public institutions facilitates entrepreneurship. We also find that parents’ emphasis on individual achievement relative to interpersonal relations in raising their child is positively associated with entrepreneurship. Evidence suggests that both social norms and networks influence entrepreneurship. These results do not change when we use social capital measured at the national level.