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Entrepreneurship: skills and financing

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  • Felipe Balmaceda

    (Diego Portales University)

Abstract

This article analyzes an occupational choice model with risk-averse agents who are heterogeneous in terms of skills and wealth in a setting with financial frictions. We show that high- and middle-wealth individuals endowed with a balanced portfolio of skills upgrade their skills so that the resulting portfolio of skills is more balanced and choose entrepreneurship. In contrast, middle-wealth individuals endowed with an unbalanced portfolio of skills and low-wealth individuals specialize in the skill in which they have an absolute advantage and choose paid employment. Deeper financial development, a more balanced portfolio of skills, lower entrepreneurial risk, and a higher liquidation value for projects result in more entrepreneurship and higher welfare, while wealth redistributions and financial subsidies to entrepreneurs have an ambiguous effect on welfare.

Suggested Citation

  • Felipe Balmaceda, 2018. "Entrepreneurship: skills and financing," Small Business Economics, Springer, vol. 50(4), pages 871-886, April.
    • Handle: RePEc:kap:sbusec:v:50:y:2018:i:4:d:10.1007_s11187-017-9915-1
    DOI: 10.1007/s11187-017-9915-1
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    2. Zhao, Xin & Xu, Yong & Vasa, László & Shahzad, Umer, 2023. "Entrepreneurial ecosystem and urban innovation: Contextual findings in the lens of sustainable development from China," Technological Forecasting and Social Change, Elsevier, vol. 191(C).

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    More about this item

    Keywords

    Entrepreneurship; Paid employment; Multiple skills; Financial development; Wealth; Risk;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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