Entry Barriers and Nonprofit Founding Rates: An Examination of the Milwaukee Voucher School Population

Abstract In this study we examine how formal barriers to entry correlate with levels and changes in the founding rate of new voucher schools in Milwaukee. Drawing from a unique dataset covering founding attempts and successful foundlings of voucher schools since the early 1990s we show how formal institutions regulating entrepreneurial efforts have an impact on both attempts and success rates. For example, our analysis indicates that the removal of the non-sectarian school requirement led to an increase in entrepreneurial attempts. Likewise, we find that erecting of institutional barriers in the form of a formal third party approval process, proved to have an impactful effect on the founding success rate of new voucher schools. Our research also illuminate how a majority of entrepreneurial attempts, about 70 percent in the case of the new voucher schools in Milwaukee, fail somewhere between the stage of entrepreneur intent and actual establishment of the organization.