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Entrepreneurial Competition and Its Impact on the Aggregate Economy

Author

Listed:
  • Katsuya Takii

    (Associate Professor, Osaka School of International Public Policy, Osaka University)

Abstract

This paper models entrepreneurship as the entrepreneur's information processing activity in order to predict changes in demand and reallocate resources. The results show that allocative efficiency---and therefore aggregate productivity---increases through intensified competition by entrepreneurs grasping at opportunities. This fierce competition leads to price reductions that result in the improvement of measured aggregate productivity. The price reduction also forces relatively less able entrepreneurs to become workers. As resources are then dealt with only by relatively talented entrepreneurs, this selection effect also increases aggregate productivity. The paper also discusses how the selection effect influences the distribution of firm size.

Suggested Citation

  • Katsuya Takii, 2008. "Entrepreneurial Competition and Its Impact on the Aggregate Economy," OSIPP Discussion Paper 08E010, Osaka School of International Public Policy, Osaka University.
    • Handle: RePEc:osp:wpaper:08e010
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    References listed on IDEAS

    as
    1. Casson, Mark, 2005. "Entrepreneurship and the theory of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 327-348, October.
    2. David Thesmar & Mathias Thoenig, 2000. "Creative Destruction and Firm Organization Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1201-1237.
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    5. Katsuya Takii, 2011. "Entrepreneurial Efficiency: Theory," The Japanese Economic Review, Japanese Economic Association, vol. 62(2), pages 196-214, June.
    6. Takii, Katsuya, 2008. "Fiscal policy and entrepreneurship," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 592-608, March.
    7. Katsuya Takii, 2004. "The Value of Adaptability," Industrial Organization 0406004, University Library of Munich, Germany.
    8. Scott Shane, 2000. "Prior Knowledge and the Discovery of Entrepreneurial Opportunities," Organization Science, INFORMS, vol. 11(4), pages 448-469, August.
    9. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January.
    10. Takii, Katsuya, 2007. "The value of adaptability--Through the analysis of a firm's prediction ability," Journal of Economics and Business, Elsevier, vol. 59(2), pages 144-162.
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    14. Marcus Asplund & Volker Nocke, 2003. "Firm Turnover in Imperfectly Competitive Markets," PIER Working Paper Archive 03-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    15. Marcus Asplund & Volker Nocke, 2006. "Firm Turnover in Imperfectly Competitive Markets -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(2), pages 295-327.
    16. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-846, September.
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    2. Jean-Paul Chavas, 2011. "On the microeconomics of diversification under learning," Journal of Economics, Springer, vol. 104(1), pages 25-47, September.
    3. Mohammad Zarei, 2017. "Entrepreneurial Tournaments: Towards Disclosing the Rivalry Process Among Corporate Entrepreneurs," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 13(2), pages 33-57.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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