Firm Size and the Quality of Entrepreneurs

44 Pages Posted: 1 Aug 2005

See all articles by Hans K. Hvide

Hans K. Hvide

University of Bergen - Department of Economics; University of Aberdeen - Business School; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Date Written: March 2005

Abstract

Founders of new firms tend to be experienced workers pursuing opportunities related to their previous employment. The paper proposes a simple framework to study the interaction between individual workers' entrepreneurship decision and established firms' effort to keep their best workers and ideas. The main insights are twofold. First, taking the firm size as given, larger firms tend to have less fine-tuned wage setting and produce entrepreneurs of higher quality than smaller firms. Second, making firm size endogenous, stronger property rights protection makes the optimal firm size larger (and the average quality of entrepreneurs higher). I apply these ideas to entrepreneurs' data from a Stanford MBA alumni survey and firm size data from the US software industry.

Keywords: Entrepreneurship, IPP, spin off, start up, property rights, private benefits, software, patents

JEL Classification: G39, J33, J41, J62, K00, L24, L25, M52, M5

Suggested Citation

Hvide, Hans, Firm Size and the Quality of Entrepreneurs (March 2005). CEPR Discussion Paper No. 4979, Available at SSRN: https://ssrn.com/abstract=771953

Hans Hvide (Contact Author)

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

HOME PAGE: http://hans.hvide.googlepages.com/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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