Working Paper: CEPR ID: DP4979
Authors: Hans K. Hvide
Abstract: What determines the quality of entrepreneurs? To address this question, the paper proposes a simple model of the interaction between individual workers? decision to become entrepreneurs and established firms? effort to keep their best workers and ideas. The main prediction from the model is that larger firms produce entrepreneurs of higher quality than smaller firms. I also find that, making firm size endogenous, stronger property rights protection makes the optimal firm size larger. Using novel and unique Norwegian data, I obtain results that are consistent with previous employer size exerting a noticeable influence on entrepreneurial performance. For example, increasing previous employer size from the 25 percent quartile to the 75 percent quartile increases yearly operating returns on assets by 6 percentage points.
Keywords: entrepreneurship; private benefits; property rights; startups
JEL Codes: G39; J33; J41; J62; K00; L24; L25; M52; M54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm size (L25) | entrepreneurial quality (L26) |
| stronger property rights protection (P14) | firm size (L25) |
| firm size (L25) | entrepreneurial performance (L25) |
| stronger property rights protection (P14) | entrepreneurial quality (L26) |