Entrepreneurship, Technological Change and Endogenous Returns to Ability

Posted: 7 Mar 2008

See all articles by Patricia Crifo

Patricia Crifo

Ecole Polytechnique, Paris - Laboratoire d'Econometrie; Université Paris X Nanterre - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Hind Sami

University of Lyon - Lyon 2-COACTIS

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.

Keywords: Entrepreneur entry and exit, Technological change, Selection, Stigma

JEL Classification: O33, M13

Suggested Citation

Crifo, Patricia and Sami, Hind, Entrepreneurship, Technological Change and Endogenous Returns to Ability. Economic Modelling, 2008. Available at SSRN: https://ssrn.com/abstract=1103047

Patricia Crifo (Contact Author)

Ecole Polytechnique, Paris - Laboratoire d'Econometrie ( email )

Route de Saclay
Palaiseau, 91128
France

Université Paris X Nanterre - Department of Economics

Nanterre Cedex, 92001
France

Center for Interuniversity Research and Analysis on Organization (CIRANO)

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

Hind Sami

University of Lyon - Lyon 2-COACTIS ( email )

Faculté de Sciences Economiques et de Gestion
16, quai Claude Bernard
Lyon, 69007
France

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