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Entrepreneurial Enterprises, Endogenous Ownership, and the Limits to Firm Size

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  • Wiggins, Steven N

Abstract

This paper develops a simple model of entrepreneurial enterprises. The analysis differs from traditional work on entrepreneurship by analyzing why entrepreneurial activities are typically conducted in small firms owned by the entrepreneur. The author argues that ownership incentives are an advantage of small firms. When the probability of success of an economic activity becomes small, it becomes costly for large firms to commit to strong incentives and small worker-owned firms emerge. The paper discusses application of the theory to innovation, wild-cat oil exploration, restaurants and retail trade, professional practices, salesmen, and franchising. Copyright 1995 by Oxford University Press.

Suggested Citation

  • Wiggins, Steven N, 1995. "Entrepreneurial Enterprises, Endogenous Ownership, and the Limits to Firm Size," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 54-69, January.
  • Handle: RePEc:oup:ecinqu:v:33:y:1995:i:1:p:54-69
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    References listed on IDEAS

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    Cited by:

    1. Helmut Fryges & Bettina Müller & Michaela Niefert, 2014. "Job machine, think tank, or both: what makes corporate spin-offs different?," Small Business Economics, Springer, vol. 43(2), pages 369-391, August.
    2. Naude, Wim, 2008. "Entrepreneurship in Economic Development," WIDER Working Paper Series 020, World Institute for Development Economic Research (UNU-WIDER).
    3. Joern Block & Roy Thurik & Haibo Zhou, 2013. "What turns knowledge into innovative products? The role of entrepreneurship and knowledge spillovers," Journal of Evolutionary Economics, Springer, vol. 23(4), pages 693-718, September.
    4. SHIMIZU, Hiroshi & WAKUTSU, Naohiko, 2017. "Spin-Outs and Patterns of Subsequent Innovation: Technological Development of Laser Diodes in the US and Japan," IIR Working Paper 17-14, Institute of Innovation Research, Hitotsubashi University.
    5. Michael S. Dahl & Christian R. Østergaard & Bent Dalum, 2010. "Emergence of Regional Clusters: The Role of Spinoffs in the Early Growth Process," Chapters,in: The Handbook of Evolutionary Economic Geography, chapter 9 Edward Elgar Publishing.
    6. Jolanda Hessels & José María Millán & Concepción Román, 2015. "The Importance of Being in Control of Business: Work Satisfaction of Employers, Own-account Workers and Employees," Tinbergen Institute Discussion Papers 15-047/VII, Tinbergen Institute.
    7. Muendler, Marc-Andreas & Rauch, James E. & Tocoian, Oana, 2012. "Employee spinoffs and other entrants: Stylized facts from Brazil," International Journal of Industrial Organization, Elsevier, vol. 30(5), pages 447-458.
    8. Fackler, Daniel & Schnabel, Claus, 2013. "Survival of spinoffs and other startups: First evidence for the private sector in Germany, 1976-2008," Discussion Papers 84, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    9. Daniel Fackler & Claus Schnabel & Alexandra Schmucker, 2016. "Spinoffs in Germany: characteristics, survival, and the role of their parents," Small Business Economics, Springer, pages 93-114.
    10. Etziony Amir & Weiss Avi, 2012. "Inviting Competition to Achieve Critical Mass," Review of Network Economics, De Gruyter, pages 1-22.
    11. Manuel Portugal Ferreira & Ana Teresa Tavares & William Hesterly & Sungu Armagan, 2006. "Network and firm antecedents of spin-offs: Motherhooding spin-offs," FEP Working Papers 201, Universidade do Porto, Faculdade de Economia do Porto.
    12. Krasteva, Silvana & Sharma, Priyanka & Wagman, Liad, 2015. "The 80/20 rule: Corporate support for innovation by employees," International Journal of Industrial Organization, Elsevier, vol. 38(C), pages 32-43.
    13. Klepper, Steven & Thompson, Peter, 2010. "Disagreements and intra-industry spinoffs," International Journal of Industrial Organization, Elsevier, vol. 28(5), pages 526-538, September.

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