Don’t mention the war: The effect of war threat on entrepreneurial activity in the Second Industrial Revolution of Belgium

We examine the impact of war tensions on entrepreneurship in Belgium during the Second Industrial Revolution (1885-1913), focusing on how geopolitical uncertainty influenced the firm creation and capital raised. Our analyses reveal significant declines in both as threats escalated. Utilizing Verdickt's (2020) war threat measure, we show that rising risk aversion suppressed entrepreneurial activity while also controlling for other sources of uncertainty. The results challenge the effectuation theory, demonstrating that perceived opportunities during conflicts were overshadowed by caution.