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Entrepreneurship turnover and endogenous returns to ability

Author

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  • Patricia Crifo

    (Department of Economics, Ecole Polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique, UCL - Université Catholique de Louvain)

  • Hind Sami

    () (COACTIS - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet [Saint-Étienne])

Abstract

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.

Suggested Citation

  • Patricia Crifo & Hind Sami, 2008. "Entrepreneurship turnover and endogenous returns to ability," Post-Print halshs-00522814, HAL.
  • Handle: RePEc:hal:journl:halshs-00522814
    DOI: 10.1016/j.econmod.2007.10.005
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00522814
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    Cited by:

    1. André Stel & José Millán & Concepción Román, 2014. "Investigating the impact of the technological environment on survival chances of employer entrepreneurs," Small Business Economics, Springer, vol. 43(4), pages 839-855, December.

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