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Firm Size and the Quality of Entrepreneurs

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Author Info
Hvide, Hans K. () (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

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Abstract

A theory is proposed where the pay policy and size of established firms are determined together with individual workers' entrepreneurship decision. The main results are twofold. First, taking the firm size as given, larger firms tend to have less flexible wages and produce entrepreneurs of higher quality than small firms. Second, making firm size edogenous, we find that stronger property rights makes the optimal firm size larger (and the average quality of entrepreneurs higher). To illustrate the theory, we consider two sources of evidence: data on the quality of entrepreneurs from a survey of Stanford MBA alumnus, and the evolution of firm size in the U.S. Software Industry after a recent strengthening in software patent protection. Both hypotheses receive encouraging support.

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Publisher Info
Paper provided by Department of Finance and Management Science, Norwegian School of Economics and Business Administration in its series Discussion Papers with number 2004/9.

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Length: 51 pages
Date of creation: 04 Jun 2004
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Handle: RePEc:hhs:nhhfms:2004_009

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Postal: NHH, Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
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Fax: +47 55 95 96 50
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Web page: http://www.nhh.no/for/
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Related research
Keywords: Entrepreneurship; Innovation; IPP; Private benefits; Property Rights; Spin-offs; Start-ups;

Find related papers by JEL classification:
L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  2. Raghuram G. Rajan & Luigi Zingales, 2001. "The Firm As A Dedicated Hierarchy: A Theory Of The Origins And Growth Of Firms," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 805-851, August. [Downloadable!] (restricted)
    Other versions:
  3. Beck, Thorsten & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2003. "Financial and legal institutions and firm size," Policy Research Working Paper Series 2997, The World Bank. [Downloadable!]
  4. Desai, Hemang & Jain, Prem C., 1999. "Firm performance and focus: long-run stock market performance following spinoffs," Journal of Financial Economics, Elsevier, vol. 54(1), pages 75-101, October. [Downloadable!] (restricted)
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    Other versions:
  6. William M. Gentry & R. Glenn Hubbard, 2000. "Entrepreneurship and Household Saving," NBER Working Papers 7894, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March. [Downloadable!] (restricted)
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    Other versions:
  9. Aghion, Philippe & Tirole, Jean, 1994. "The Management of Innovation," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1185-1209, November. [Downloadable!] (restricted)
  10. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June. [Downloadable!] (restricted)
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    Other versions:
  14. Paul Oyer & Scott Schaefer, 2004. "Why Do Some Firms Give Stock Options to All Employees?: An Empirical Examination of Alternative Theories," NBER Working Papers 10222, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Robert Hunt & James Bessen, 2004. "The software patent experiment," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 22-32. [Downloadable!]
  16. Raghuram G. Rajan & Luigi Zingales, 1998. "Power In A Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 387-432, May. [Downloadable!] (restricted)
    Other versions:
  17. Veld, Chris & Veld-Merkoulova, Yulia V., 2004. "Do spin-offs really create value? The European case," Journal of Banking & Finance, Elsevier, vol. 28(5), pages 1111-1135, May. [Downloadable!] (restricted)
    Other versions:
  18. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
    Other versions:
  19. Beck, Thorsten & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Financial and legal constraints to firm growth - Does size matter?," Policy Research Working Paper Series 2784, The World Bank. [Downloadable!]
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    Other versions:
  22. Steven J. Davis & John Haltiwanger, 1995. "Employer Size and The Wage Structure in U.S. Manufacturing," NBER Working Papers 5393, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  23. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matthias Benz, . "Entrepreneurship as a non-profit-seeking activity," IEW - Working Papers iewwp243, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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