Power Law Distributions in Entrepreneurship: Implications for Theory and Research
Journal of Business Venturing 30(5) 696-713 doi:10.1016/j.jbusvent.2015.01.001
18 Pages Posted: 15 Mar 2015
Date Written: January 2, 2015
A long-held assumption in entrepreneurship research is that normal (i.e., Gaussian) distributions characterize variables of interest for both theory and practice. We challenge this assumption by examining more than 12,000 nascent, young, and hyper-growth firms. Results reveal that variables which play central roles in resource-, cognition-, action-, and environment-based entrepreneurship theories exhibit highly skewed power law distributions, where a few outliers account for a disproportionate amount of the distribution's total output. Our results call for the development of new theory to explain and predict the mechanisms that generate these distributions and the outliers therein. We offer a research agenda, including a description of non-traditional methodological approaches, to answer this call.
Keywords: Entrepreneurship, Generative mechanisms, Growth, Outliers, Power law distribution
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