Entrepreneurship turnover and endogenous returns to ability
This paper proposes a model of entrepreneurial turnover highlighting a non-monotone relationship between technological change and ability-biased sorting into entrepreneurial types. Entrepreneurial decisions are examined in a two-stage model under uncertainty in which entrepreneurs decide to abandon a project and start a new venture depending on technological change and on ability. We show that technological change affects the quality distribution of entrepreneurship by increasing the ex-ante number of entrepreneurs undertaking the most efficient projects and decreasing the post-entry number of entrepreneurs of low-quality firms who choose to continue their initial business. A higher rate of technological change is therefore likely to induce a cleansing effect on entrepreneurial activity and to alter the market perception of business creation.
|Date of creation:||2008|
|Date of revision:|
|Publication status:||Published, Economic Modelling, 2008, 25, 4, 585–604|
|Note:||View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00522814/en/|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/|
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