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Firm Size and the Quality of Entrepreneurs

  • Hvide, Hans K.

    ()

    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

A theory is proposed where the pay policy and size of established firms are determined together with individual workers' entrepreneurship decision. The main results are twofold. First, taking the firm size as given, larger firms tend to have less flexible wages and produce entrepreneurs of higher quality than small firms. Second, making firm size edogenous, we find that stronger property rights makes the optimal firm size larger (and the average quality of entrepreneurs higher). To illustrate the theory, we consider two sources of evidence: data on the quality of entrepreneurs from a survey of Stanford MBA alumnus, and the evolution of firm size in the U.S. Software Industry after a recent strengthening in software patent protection. Both hypotheses receive encouraging support.

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File URL: http://hdl.handle.net/11250/163668
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Paper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2004/9.

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Length: 51 pages
Date of creation: 04 Jun 2004
Date of revision:
Handle: RePEc:hhs:nhhfms:2004_009
Contact details of provider: Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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