Experimentation and the Returns to Entrepreneurship

34 Pages Posted: 21 Nov 2014 Last revised: 1 Nov 2015

See all articles by Gustavo Manso

Gustavo Manso

University of California, Berkeley - Haas School of Business

Date Written: October 31, 2015

Abstract

Previous studies have argued that entrepreneurs earn less and bear more risk than salaried workers with otherwise similar characteristics. In a simple model of entrepreneurship, I show that estimates of mean and variance of returns to entrepreneurship used by these previous studies are biased, as they are based on cross-sectional data and fail to account for the option value of experimenting with new ideas. Using longitudinal data, I find patterns that are consistent with entrepreneurship as experimentation and returns to entrepreneurship that are more attractive than established by previous research.

Keywords: entrepreneurship, experimentation, real options

JEL Classification: M13, G31

Suggested Citation

Manso, Gustavo, Experimentation and the Returns to Entrepreneurship (October 31, 2015). Available at SSRN: https://ssrn.com/abstract=2527034 or http://dx.doi.org/10.2139/ssrn.2527034

Gustavo Manso (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
335
Abstract Views
4,153
Rank
155,485
PlumX Metrics