Entrepreneurship

Abstract

The theory proposed below is that entrepreneurs are jacks-of-all-trades who may not excel inany one skill, but are competent in many. A coherent model of the choice to become anentrepreneur is presented. The primary implication is that individuals with balanced skills aremore likely than others to become entrepreneurs. The model provides implications for theproportion of entrepreneurs by occupation, by income and yields a number of predictions forthe distribution of income by entrepreneurial status. Using a data set of Stanford alumni, thepredictions are tested and found to hold. In particular, by far the most important determinantof entrepreneurship is having background in a large number of different roles. Further,income distribution predictions, e.g., that there are a disproportionate number ofentrepreneurs in the upper tail of the distribution, are borne out.

Keywords: entrepreneurship, occupation choice, diversity, jack-of-all-trades

JEL Classification: J4