Working Paper: CEPR ID: DP5290
Authors: Luigi Guiso; Fabiano Schivardi
Abstract: Is entrepreneurial talent entirely innate or do people learn to become entrepreneurs? We extend Lucas's (1978) model of entrepreneurship to allow for the possibility that entrepreneurial talents may be acquired by watching other entrepreneurs in action. This model implies that areas with a greater number of firms have higher average firm productivity. We confirm this prediction using Italian firm level data. We show that the endogenous accumulation of entrepreneurial talents is a more convincing explanation for clusters of firms than heterogeneous entry costs. The evidence supports the role of learning even after controlling for other potential sources of local externalities. We also find that other specific implications of the learning mechanism are confirmed by the data.
Keywords: agglomeration economies; clustering; entrepreneurship; learning
JEL Codes: D24; D62; J23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| learning model predicts positive correlation between share of entrepreneurs and TFP (O49) | contrast with startup cost model predictions (D25) |
| higher number of firms (L19) | greater average firm productivity (L25) |
| higher number of firms (L19) | greater entrepreneurial ability (P12) |
| learning opportunities (J24) | greater entrepreneurial ability (P12) |
| greater entrepreneurial ability (P12) | higher profits later in careers (D25) |