Entrepreneurship turnover and endogenous returns to ability.

Patricia Crifo , H. Sami (1)

1 UMR CNRS 8179

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

Domaines: Economies et finances

Patricia Crifo, H. Sami. Entrepreneurship turnover and endogenous returns to ability.. Economic Modelling, 2008, 25 (4), pp.585-604. ⟨10.1016/j.econmod.2007.10.005⟩. ⟨hal-00260797⟩