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 firm creation and capital raised by new firms. Our analyses reveal significant declines in both as threats escalated. Utilising a text-based war threat measure and controlling for other sources of uncertainty, we document that rising risk aversion suppressed entrepreneurial activity. The results challenge the effectuation theory, demonstrating that perceived opportunities during conflicts were overshadowed by caution.