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Entrepreneurship turnover and endogenous returns to ability

Author

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  • Patricia Crifo

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, UCL - Université Catholique de Louvain = Catholic University of Louvain)

  • Hind Sami

    (COACTIS - COnception de l'ACTIon en Situation - 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://shs.hal.science/halshs-00522814
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    Cited by:

    1. Yi Sun & Shihui Li & Rui Wang, 2023. "Fintech: from budding to explosion - an overview of the current state of research," Review of Managerial Science, Springer, vol. 17(3), pages 715-755, April.
    2. Veroniek Collewaert, 2012. "Angel Investors’ and Entrepreneurs’ Intentions to Exit Their Ventures: A Conflict Perspective," Entrepreneurship Theory and Practice, , vol. 36(4), pages 753-779, July.
    3. Alexander Berman & Marcelo Cano-Kollmann & Ram Mudambi, 2022. "Innovation and entrepreneurial ecosystems: fintech in the financial services industry," Review of Managerial Science, Springer, vol. 16(1), pages 45-64, January.
    4. 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.
    5. Andrew Burke & Serhiy Lyalkov & Ana Millán & José María Millán & André Stel, 2021. "How do country R&D change the allocation of self-employment across different types?," Small Business Economics, Springer, vol. 56(2), pages 695-721, February.

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