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Entrepreneurship turnover and endogenous returns to ability

  • Patricia Crifo

    (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, Université Catholique de Louvain - Université Catholique de Louvain)

  • Hind Sami

    ()

    (COACTIS - Université Lumière - Lyon II : EA4161 - Université Jean Monnet - Saint-Etienne)

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.

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Paper provided by HAL in its series Post-Print with number halshs-00522814.

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Date of creation: 2008
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Publication status: Published, Economic Modelling, 2008, 25, 4, 585–604
Handle: RePEc:hal:journl:halshs-00522814
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00522814/en/
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