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A Gap for Me: Entrepreneurs and Entry Author info | Abstract | Publisher info | Download info | Related research | Statistics Volker Nocke () (Department of Economics, University of Pennsylvania)
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We present a theory of entrepreneurial entry and exit decisions. Knowing their own managerial talent, entrepreneurs decide which market to enter, where markets differ in size. We obtain a striking sorting result: each entrant in a large market is more efficient than any entrepreneur in a smaller market. The result obtains since competition is endogenously more intense in larger markets. The sorting and price competition effects imply that the number of entrants (and hence product variety) may actually be smaller in larger markets. In the stochastic dynamic extension of the model, we show that the churning rate of entrepreneurs is higher in larger markets.
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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number
03-019.
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Length: 30 pages
Date of creation: 30 Jun 2003Date of revision:
Handle: RePEc:pen:papers:03-019Contact details of provider: Postal: 3718 Locust Walk, Philadelphia, PA 19104 Phone: 215-898-9992 Fax: 215-573-2378 Email: Web page: http://www.econ.upenn.edu/Centers/pier More information through EDIRC
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Keywords: entrepreneurship entry exit firm turnover industry dynamics Other versions of this item:
Find related papers by JEL classification: L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
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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.: Volker Nocke, 2000.
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Hopenhayn, Hugo A, 1992.
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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.)
Adelheid Holl, 2007.
"Production Subcontracting and Location ,"
Working Papers
2007-17, FEDEA.
[Downloadable!]
Other versions: Marcus Asplund & Volker Nocke, 2003.
"Firm Turnover in Imperfectly Competitive Markets ,"
PIER Working Paper Archive
03-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
[Downloadable!]
Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2004.
"Spatial Wage Disparities: Sorting Matters! ,"
CEPR Discussion Papers
4240, C.E.P.R. Discussion Papers.
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Stephen Yeaple, 2008.
"Firm Heterogeneity and the Structure of U.S. Multinational Activity: An Empirical Analysis ,"
NBER Working Papers
14072, National Bureau of Economic Research, Inc.
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