Edward P. Lazear
Stanford Graduate School of Business; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 760
The theory proposed below is that entrepreneurs are jacks-of-all-trades who may not excel in any one skill, but are competent in many. A coherent model of the choice to become an entrepreneur is presented. The primary implication is that individuals with balanced skills are more likely than others to become entrepreneurs. The model provides implications for the proportion of entrepreneurs by occupation, by income and yields a number of predictions for the distribution of income by entrepreneurial status. Using a data set of Stanford alumni, the predictions are tested and found to hold. In particular, by far the most important determinant of entrepreneurship is having background in a large number of different roles. Further, income distribution predictions, e.g., that there are a disproportionate number of entrepreneurs in the upper tail of the distribution, are borne out.
Number of Pages in PDF File: 56
Keywords: Entrepreneurship, Occupation Choice, Diversity, Jack-of-all-trades
JEL Classification: J4
Date posted: January 10, 2003