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Unpublished papers

wth Paul Windrum ansd Michelle Haynes

March 2014

Modular encapsulation provides new features without altering the number of the core modules that make up a complex product, or their functionality. This innovation strategy has not been considered in the mirroring literature. Using a dataset of prices and product features for 1,816 professional cameras sold between 1955 and 1974, we apply data envelope analysis (DEA) to test the strategic significance of lens and body encapsulation by proprietary automated exposure (AE) systems. We find that the professional camera market was modular between 1955 and 1960, dominated by German specialist body and specialist lens manufacturers. Market structure changed due to the success of innovative Japanese start-ups, particularly integrated body and lens manufacturers who, from 1961, successfully developed proprietary AE systems that offered users novel features. The success of these Japanese integrated manufacturing firms broke the mirror between product architecture and industry architecture.​

Entrepreneurial Couples

wth Michael Dhal and Mirjam van Praag

February 2014

We study possible motivations for co-entrepenurial couples to start up a joint firm, using a sample of 1,069 Danish couples that established a joint enterprise between 2001 and 2010. We compare their pre-entry characteristics, firm performance and post-dissolution private and financial outcomes with a selected set of comparable firms and couples. We find evidence that couples often establish a business together because one spouse – most commonly the female – has limited outside opportunities in the labor market. However, the financial benefits for each of the spouses, and especially the female, are larger in co-entrepreneurial firms, both during the life of the business and post-dissolution. The start-up of co-entrepreneurial firms seems therefore a sound investment in the human capital of both spouses as well as in the reduction of income inequality in the household. We find no evidence of non-pecuniary benefits or costs of co-entrepreneurship

with Li-Wei Chen

This version: Fenruary 2014 

Lazear’s Jack-of-all trades theory suggests that individuals with balanced skills are more likely to become entrepreneurs, and that balanced skills can be accumulated by studying a varied curriculum, working in a variety of functions, and working for a variety of employers. We reexamine the theory using a matched case-control sample, constructed from a professional networking website, that controls for unobserved heterogeneity in employer and job characteristics. Our sample consists of 325 founders currently in the venture capital and private equity industry along with 1,571 matched controls who had previously worked in a similar job in the same company and around the same time as the founder. We find no evidence that skill balance influences the rate of entry into entrepreneurship.

Experience and Entrepreneurship​

with Chris Rider Aleksandra Kacperczyk, and Joacim Tag

This version: March 2014 

We document in two very different datasets an inverted U-shaped relationship between work experience and entrepreneurship among movers. The first dataset consists of 1,248 U.S. lawyers who were forced to seek alternative employment after the sudden dissolutions of their employers. The second consists of almost seven million observations on Swedish workers, where job separation is predominantly unrelated to job destruction. Our empirical results are consistent with a model of stochastic accumulation of employer-specific and transferable skills, where the mix between the two is not fully observable to outside parties.  ​ 

Hierarchies, the Small Firm Effect, and Entrepreneurship. Evidence from Swedish Microdata​

with Joacim Tag and Thomas Astebro

June 2013 

We explore whether the tendency for smaller firms to have fewer hierarchical layers explains the well-documented inverse correlation betw​een fi​rm size and the rate at which employees become business owners. Our analysis is based on a Swedish matched employer-employee dataset. Conditional on firm size, employees in firms with more layers are less likely to enter entrepreneurship, to become self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for job-switching and they are stronger for entrepreneurship than for self-employment. However, hierarchies constitute only a partial explanation of the small firm effect.  Potential explanations for the effects of layers are examined. Par​t of the effect appears to be due to preference sorting by employees, and part due to employees in firms with fewer layers having a broader range of skills.


with Jing Chen 

May 2013 

We study some causes and consequences of the replacement of founder-CEOs by non-owner managers in a sample of 4,172 Danish single-founder startups. In contrast to the extant literature on VC-financed firms, replacements among firms in our sample are more likely among the worst- and best-performing firms, and replacement is not unambiguously associated with better subsequent performance. Firms that replaced the founder as CEO were much more likely to fail, but the surviving firms among them grew considerably faster. We also analyze pre-founding and post-turnover earnings and occupational choices of founders who rescinded operating control of their firms. Founders with pre-founding income in the tails of the distribution are more likely to be replaced as CEOs. Although subsequent founder income is increasing in the performance of their firms, those that left good firms​ were no more likely than others to found another business. Our results are consistent with the notion that founder-CEO replacement is driven in part by mismatches between business quality and founder ability​


Promotion and Employee Spinoffs

with Christopher Rider

January 2012

We construct a simple dynamic model of promotion and spinoff formation that sheds some light on why the empirical relationships between spinoff formation, tenure and performance vary so widely across different settings. A supervisor must learn over time about the employee’s aptitude for work at a more senior level and decide whether to promote him. The employee balances the benefits of waiting for promotion against immediate departure to form a spinoff. By means of a number of approximations to the pair of interrelated optimal stopping problems that our model gives rise to, we are able to characterize the effects of parameter changes on the likelihood and timing of promotion and spinoff formation.


Necessity and Opportunity Entrepreneurs through the Business Cycle

April 2011

We construct a simple model of occupational choice among agents with differing abilities. The fraction of agents creating new businesses who are low ability rises during recessions. Thus, cohorts born during recessions are on average lower quality: their businesses yield lower initial earnings, grow more slowly, and are more likely to fail. We show that, because of their effects on the ability distribution of business founders, short-lived recessions can have long-term consequences for the quality of a cohort of firms.


May 2008

This paper presents an explicit model of the entrepreneur’s role in organizing the work undertaken by employees. The model assumes that agents vary in their ability to carry out this task, and so in one sense the model is a special case of Lucas’ [Bell Journal of Economics, 9, pp. 508-523, (1978)] span of control framework. However, the model also relates ability to risk. As in Kihlstrom and Laffont [Journal of Political Economy, 87, pp. 719-748 (1979)], the entrepreneur bears all risk. But while Kihlstrom and Laffont assume the entrepreneur bears all risk and show that as a consequence the least risk averse become entrepreneurs, in the present model all agents are risk neutral but entrepreneurs bear all risk as an equilibrium outcome. The model is used to study the consequences of firm growth driven by entrepreneurial learning or by rising demand.


Papers not intended for publication


with Ali C. Karayalcin

September 2010

Contributing Paper for chapter 5 of the 2011 ISDR Global Assessment Report on Disaster Risk Re​duction, United Nations International Strategy for Disaster Reduction Secretariat, Geneva.


August 2010

This report provides estimates of three distinct concepts of Florida International University’s economic contribution to Miami-Dade County and to the state of Florida. The economic contributions reported are based on the university's scale of operations at a single point in time, Fall 2009. Section 2 constructs estimates of the monetary value of the human capital produced as a result of the educational services that FIU provides. Section 3 provides a measure of the amount of regional economic activity that is associated with FIU’s operations, and the expenditure of its alumni and students; I call this measure FIU’s economic size. Finally, Section 4 reports estimates of the traditional measure of the net economic impact of FIU, which measures the difference between the regional output that exists with FIU and the output that we would expect if FIU did not exist.


The Iron and Steel Shipbuilding Data Set, 1825-1914: ​Sources, Coverage, and Coding Decisions​

August 2008

This article is a supporting document to the paper "Selection and Firm Survival. Evidence from the Shipb​uilding Industry, 1825-1914" [Review of Economics and Statistics, 87(1):26-36, February 2005], and is not intended for publication. The article provides a basic description of data sources, coverage and limitations, along with coding decisions made for the purposes of statistical analysis. ​