Do Entrepreneurial Goals Matter? Resource Allocation in New Owner-Managed Firms
AbstractThis paper focuses on how entrepreneurial goals affect the resource allocation of new firm owners. It connects research in psychology and management that examines the core motivations of entrepreneurs with research in economics that models the behavior of owner-managers as utility-maximizing rather than profit-maximizing. We hypothesize that new owners with nonmonetary goals allocate their resources differently than do owners with monetary goals and that the differences are meaningful in size. To test these hypotheses, we estimate firm level equations based on economic theories of factor demand that show how input quantities depend on owner goals. Data come from a national survey of new U.S. business owners. We find owner goals have both a statistically and substantively significant effect on resource allocation for new firms. Owners with nonmonetary goals put in more of their own and family hours rather than hiring outside employees. Implications for research and policy are discussed.
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Bibliographic InfoPaper provided by Department of Economics, Temple University in its series DETU Working Papers with number 1203.
Date of creation: Sep 2012
Date of revision:
Entrepreneurship; Small Business; New Firms; Owner Goals; Resource Allocation;
Find related papers by JEL classification:
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation
- M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Social Responsibility
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-BEC-2012-10-13 (Business Economics)
- NEP-CSE-2012-10-13 (Economics of Strategic Management)
- NEP-ENT-2012-10-13 (Entrepreneurship)
- NEP-HME-2012-10-13 (Heterodox Microeconomics)
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