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Entrepreneurial Enterprises, Endogenous Ownership, and the Limits to Firm Size

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  • Wiggins, Steven N

Abstract

This paper develops a simple model of entrepreneurial enterprises. The analysis differs from traditional work on entrepreneurship by analyzing why entrepreneurial activities are typically conducted in small firms owned by the entrepreneur. The author argues that ownership incentives are an advantage of small firms. When the probability of success of an economic activity becomes small, it becomes costly for large firms to commit to strong incentives and small worker-owned firms emerge. The paper discusses application of the theory to innovation, wild-cat oil exploration, restaurants and retail trade, professional practices, salesmen, and franchising. Copyright 1995 by Oxford University Press.

Suggested Citation

  • Wiggins, Steven N, 1995. "Entrepreneurial Enterprises, Endogenous Ownership, and the Limits to Firm Size," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 54-69, January.
    • Handle: RePEc:oup:ecinqu:v:33:y:1995:i:1:p:54-69
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    Cited by:

    1. Andrin Spescha & Martin Woerter, 2019. "Innovation and firm growth over the business cycle," Industry and Innovation, Taylor & Francis Journals, vol. 26(3), pages 321-347, March.
    2. Walter, Sascha & Heinrichs, Simon & Walter, Achim, 2013. "Hostile Parent Firms and Child Firm Performance," EconStor Preprints 68592, ZBW - Leibniz Information Centre for Economics.
    3. Nils Karlson & Christian Sandström & Karl Wennberg, 2021. "Bureaucrats or Markets in Innovation Policy? – a critique of the entrepreneurial state," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 34(1), pages 81-95, March.
    4. Joern Block & Roy Thurik & Haibo Zhou, 2013. "What turns knowledge into innovative products? The role of entrepreneurship and knowledge spillovers," Journal of Evolutionary Economics, Springer, vol. 23(4), pages 693-718, September.
    5. Jolanda Hessels & José María Millán & Concepción Román, 2015. "The Importance of Being in Control of Business: Work Satisfaction of Employers, Own-account Workers and Employees," Tinbergen Institute Discussion Papers 15-047/VII, Tinbergen Institute.
    6. Muendler, Marc-Andreas & Rauch, James E. & Tocoian, Oana, 2012. "Employee spinoffs and other entrants: Stylized facts from Brazil," International Journal of Industrial Organization, Elsevier, vol. 30(5), pages 447-458.
    7. Daniel Fackler & Claus Schnabel & Alexandra Schmucker, 2016. "Spinoffs in Germany: characteristics, survival, and the role of their parents," Small Business Economics, Springer, vol. 46(1), pages 93-114, January.
    8. Fackler, Daniel & Schnabel, Claus, 2013. "Survival of Spinoffs and Other Startups: First Evidence for the Private Sector in Germany, 1976-2008," IZA Discussion Papers 7542, Institute of Labor Economics (IZA).
    9. Gude, Hardy & Kohn, Karsten & Ullrich, Katrin & Fryges, Helmut & Gottschalk, Sandra & Müller, Kathrin & Niefert, Michaela, 2010. "KfW/ZEW-Gründungspanel 2010: Aufbruch nach dem Sturm. Junge Unternehmen zwischen Investitionsschwäche und Innovationsstrategie," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 161819.
    10. Manuel Portugal Ferreira & Ana Teresa Tavares & William Hesterly & Sungu Armagan, 2006. "Network and firm antecedents of spin-offs: Motherhooding spin-offs," FEP Working Papers 201, Universidade do Porto, Faculdade de Economia do Porto.
    11. Klepper, Steven & Thompson, Peter, 2010. "Disagreements and intra-industry spinoffs," International Journal of Industrial Organization, Elsevier, vol. 28(5), pages 526-538, September.
    12. Wim Naudé, 2008. "Entrepreneurship in Economic Development," WIDER Working Paper Series RP2008-20, World Institute for Development Economic Research (UNU-WIDER).
    13. Michael S. Dahl & Christian R. Østergaard & Bent Dalum, 2010. "Emergence of Regional Clusters: The Role of Spinoffs in the Early Growth Process," Chapters, in: Ron Boschma & Ron Martin (ed.), The Handbook of Evolutionary Economic Geography, chapter 9, Edward Elgar Publishing.
    14. Natarajan Balasubramanian & Mariko Sakakibara, 2021. "Incidence and Performance of Spinouts and Incumbent New Ventures: Role of Selection and Redeployability within Parent Firms," Working Papers 21-27, Center for Economic Studies, U.S. Census Bureau.
    15. Heinrichs, Simon & Walter, Sascha, 2013. "Don’t Step Into Your Parent’s Shoes – How Exploitation and Exploration Affect Spin-out Growth," EconStor Preprints 68591, ZBW - Leibniz Information Centre for Economics.
    16. Helmut Fryges & Bettina Müller & Michaela Niefert, 2014. "Job machine, think tank, or both: what makes corporate spin-offs different?," Small Business Economics, Springer, vol. 43(2), pages 369-391, August.
    17. SHIMIZU, Hiroshi & 清水, 洋 & WAKUTSU, Naohiko, 2017. "Spin-Outs and Patterns of Subsequent Innovation: Technological Development of Laser Diodes in the US and Japan," IIR Working Paper 17-14, Institute of Innovation Research, Hitotsubashi University.
    18. SHIMIZU Hiroshi & WAKUTSU Naohiko, 2024. "SBIR, Startups, and Subsequent Technological Development: Laser diodes in the United States and Japan," Discussion papers 24012, Research Institute of Economy, Trade and Industry (RIETI).
    19. Uras, Burak R., 2016. "Long-Term Investment And Net-Worth Building With Limited Contract Enforcement," Macroeconomic Dynamics, Cambridge University Press, vol. 20(1), pages 276-312, January.
    20. Etziony Amir & Weiss Avi, 2012. "Inviting Competition to Achieve Critical Mass," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-22, June.
    21. Krasteva, Silvana & Sharma, Priyanka & Wagman, Liad, 2015. "The 80/20 rule: Corporate support for innovation by employees," International Journal of Industrial Organization, Elsevier, vol. 38(C), pages 32-43.
    22. Peter Hans Matthews & Andreas Ortmann, 2002. "An Austrian (Mis)Reads Adam Smith: A critique of Rothbard as intellectual historian," Review of Political Economy, Taylor & Francis Journals, vol. 14(3), pages 379-392.

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