with Li-Wei Chen
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
Hierarchies, the Small Firm Effect, and Entrepreneurship. Evidence from Swedish Microdata
with Chris Rider Aleksandra Kacperczyk, and Joacim Tag
We document in two very
different datasets in 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 over 7.5 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.
with Joacim Tag and Thomas Astebro
explore whether the tendency for smaller firms to have fewer hierarchical layers explains the well-documented inverse correlation between firm 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. Part 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
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
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
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.
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
Contributing Paper for chapter 5 of the 2011 ISDR Global Assessment Report on Disaster Risk Reduction, United Nations International Strategy for Disaster Reduction Secretariat, Geneva.
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
This article is a supporting document to the paper "Selection and Firm Survival. Evidence from the Shipbuilding 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.