Entrepreneurship and the Process of Firms' Entry, Survival and Growth

40 Pages Posted: 12 Dec 2006

See all articles by Enrico Santarelli

Enrico Santarelli

University of Bologna - Department of Economics

Marco Vivarelli

Universita Cattolica del Sacro Cuore, Milano; IZA Institute of Labor Economics

Date Written: December 2006

Abstract

This survey paper aims at critically discussing the recent literature on firm formation and survival and the growth of new-born firms. The basic purpose is to single out the microeconomic entrepreneurial foundations of industrial dynamics (entry and exit) and to characterise the founder's ex-ante features in terms of likely ex-post business performance. The main conclusion is that entry of new firms is heterogeneous with innovative entrepreneurs being found together with passive followers, over-optimist gamblers and even escapees from unemployment. Since founders are heterogeneous and may make "entry mistakes," policy incentives should be highly selective, favouring nascent entrepreneurs endowed with progressive motivation and promising predictors of better business performance. This would lead to the least distortion in the post-entry market selection of efficient entrepreneurs.

Keywords: entrepreneurship, new firm, survival, post-entry performance

JEL Classification: L10, M13

Suggested Citation

Santarelli, Enrico and Vivarelli, Marco, Entrepreneurship and the Process of Firms' Entry, Survival and Growth (December 2006). IZA Discussion Paper No. 2475. Available at SSRN: https://ssrn.com/abstract=950922

Enrico Santarelli

University of Bologna - Department of Economics ( email )

Piazza Scaravilli, 2
I-40126 Bologna
Italy
+39 051 2098487 (Phone)

HOME PAGE: http://www2.dse.unibo.it/santarel

Marco Vivarelli (Contact Author)

Universita Cattolica del Sacro Cuore, Milano ( email )

Largo Gemelli 1
Milano, 20123
Italy

IZA Institute of Labor Economics

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

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