ENSAE Paris - École d'ingénieurs pour l'économie, la data science, la finance et l'actuariat

Entrepreneurship - MiE


•    To provide an overview of entrepreneurship research by economists
•    To introduce the student to some famous articles that contains some of the primary
models in entrepreneurship
•    To introduce extensions of these models and current thinking
•    To introduce a few papers with empirical tests of these models

In this course we will study the recent theoretical and empirical literature on entrepreneurship and firm formation. 

All students are assigned tasks and readings as listed in the final table. Each student will present two articles they have read in class.

In the last week students will conduct a formal debate two motions.

This course analyzes some famous papers that primarily use formal models of entrepreneurship. They deal, for example, with the choice of switching into entrepreneurship, the returns to entrepreneurship, and financing of new businesses. These are three major areas of interest in entrepreneurship. A fourth topic more recently developing is regarding preferences and decision-making biases and how these can explain entry. A fifth and very recent topic is whether entrepreneurs are born or made – the “nurture versus nature” argument. 

Entrepreneurship also relates to firm formation, often more extensively analyzed by industrial organization economists and strategy scholars. We will look at one single aspect of this vast literature: spin-offs from firms. We will look at some empirical work trying to test these models and some current extensions of the basic models.
This class meets once a week for 3 hours for 6 weeks. The first half of each lecture will be devoted to students’ presentations. In the second part, the instructor will lecture on the readings. 

The discussions will center around questions that might generate new research ideas (e.g. is the theory robust to alternative, plausible assumptions? How might one test the theory? Hence, you should be thinking about these questions while you are reading the papers and preparing your presentation. 

I expect each student to make a coherent presentation of the paper s/he is assigned. Those students who do not have a paper assigned to present should focus on reading and understanding the review(s) and one of the classics assigned for that week.


Your presentation of a paper is limited in time to 20 minutes. Please send your presentation the evening before it is due to astebro@hec.fr.

When you review an article for presentation to the class, try to focus on the main modelling features (if it is a model-based paper). Many articles need to include existence proofs and detailed derivations, especially if they are not obvious. You should try to understand what is going on, but you also have limited presentation time, so it is not a good idea to go through all the proofs in class. For example, some papers present a main case, and then go on to show that this is true also under many alternative cases. Your fellow students and your Professor are mostly interested in you being able to explain well the main case. Pay attention to the assumptions that are made. Do you find them convincing?  Realize that to write down a model one always need to make assumptions and simplifications of reality. 

It might help you to think of a model as a map: For example, I can easily describe how to walk to my house from the Hacquinere station with a few words. But that “model” is not “realistic.” It does not describe the weather conditions or the cars parked along the road that might affect your walk. But you do not really need that amount of detail to get to my house. It is easy to criticise a model for not being realistic. But the key question is what is necessary to include in order for the model to be useful? In your critique of the paper you should discuss what would happen if an assumption is relaxed or how the authors could have written the model differently.

Grading is based on:
1.    Your active participation in discussing articles: 20%
2.    Your presentations and hand-ins: 60%
3.    Your debate: 20%


We will have two formal debates in the final week. The format of the debate is:
•    1st speaker for 10 minutes
•    1st speaker against 10 minutes
•    2nd speaker for 10 minutes
•    2nd speaker against 10 minutes
•    1st speaker for rebuttal 3 minutes
•    1st speaker against rebuttal 3 minutes
•    2nd speaker for rebuttal 3 minutes
•    2nd speaker against rebuttal 3 minutes

When I mean formal, I mean FORMAL. You have a short period of time, not to be exceeded, and you need to convince the opposition and the audience that you are right and the opposition is wrong, all while being polite. The opposition will come up with counter-arguments and it is your job to argue against those counterarguments as well. If you have ever been part of a debating club or heard a member of your parliament speak, this is what it is about. Written preparation is key for you to win a debate. Please ask me if you are unsure. Presentation material (powerpoint etc) are NOT allowed. This is an oral presentation.


Week 1 : Introduction

Week 2 Topic: Entrepreneurial Finance -- Are entrepreneurs wealth constrained?

Week 3 Topic: Returns to Entrepreneurship

Week 4 Topic: Preferences, decision biases and psychological traits

Week 5 Topics: Academic Entrepreneurship, Entrepreneurial Spawning

Week 6 First Motion to debate: “Entrepreneurs are Born, Not Made” / Second Motion to debate: “Let it be resolved that entrepreneurship theory has not been significantly advanced by economists while entrepreneurship theory has been significantly advanced by management scholars”. 


Week 1
Introduction. (all citation counts are Google)

Topic: Managerial Ability
Lucas, Robert E., Jr. (1978): “Size distribution of business firms.” Bell Journal of Economics, 9(2):508-523. Times Cited: 3,754
Holmes, Thomas J., and James A. Schmitz, Jr. (1990): “A theory of entrepreneurship and its application to the study of business transfers.” Journal of Political Economy, 98(2):265-294. Times Cited: 457
T Åstebro, J Chen, P Thompson (2011) Stars and misfits: Self-employment and labor market frictions Management Science 57 (11), 1999-2017 Cited: 128
Empirical tests 
Hartog, J., Van Praag, C.M., Van der Sluis, J., 2010. If you are so Smart Why are you not an Entrepreneur? Returns to Cognitive and Social Ability, Entrepreneurs versus Employees. Journal of Management Strategy 19(4), 947-989   Times Cited: 229

Week 2
Topic: Entrepreneurial Finance -- Are entrepreneurs wealth constrained?

Robb, Alicia and David Robinson, (2014) “The Capital Structure Decisions of New Firms,” Review of Financial Studies, 27(1):153-179. Times Cited: 571
Kaplan, SN and Per Strömberg (2003) Financial contracting theory meets the real world: An empirical analysis of venture capital contracts The Review of Economic Studies 70 (2), 281-315 Times Cited: 2,462
Evans, David S., and Boyan Jovanovic (1989): “AN ESTIMATED MODEL OF ENTREPRENEURIAL CHOICE UNDER LIQUIDITY CONSTRAINTS.” Journal of Political Economy, 97(4):808-827. Times Cited: 3,632
Stiglitz, Joseph and Andrew Weiss, (June 1981) “CREDIT RATIONING IN MARKETS WITH IMPERFECT INFORMATION” The American Economic Review, 71: 393-410. Times Cited: 18,556
Extension and Empirical test
Kerr, Sari Pekkala, William R. Kerr, and Ramana Nanda. "House Money and Entrepreneurship." Harvard Business School Working Paper, No. 15-069, February 2015. (Revised July 2015.) Cited: 44
Åstebro T. and Carlos Serrano, (2015) “Business Partners: Complementary Assets, Financing and the Commercialization of Inventions”, Journal of Economics and Management Strategy 24(2), 228-52. Times Cited: 18
 Kerr, William R., Josh Lerner, and Antoinette Schoar. "The Consequences of Entrepreneurial Finance: Evidence from Angel Financings." Review of Financial Studies 27, no. 1 (January 2014): 20–55 Cited: 299

Week 3
Topic: Returns to Entrepreneurship

Åstebro, T. and J. Chen, (2014) “The Entrepreneurial Earnings Puzzle: Mismeasurement or Real?” Journal of Business Venturing, 29(1): 88-105. Cited : 106
Hamilton, B. (2000). " Does entrepreneurship pay? An empirical analysis of the returns to self-employment." Journal of Political Economy 108(3): 604-631. Times Cited: 2,115
Lazear, Edward P., (2005): “Entrepreneurship.” Journal of Labor Economics, 23(4):649-680. Times Cited: 129
Rosen, Sherwin (1981) ”THE ECONOMICS OF SUPERSTARS,” The American Economic Review, 71: 845-858. Times Cited: 3,201
Empirical tests
Astebro, Thomas and Peter Thompson (2011): “Entrepreneurs: Jacks of all Trades or Hobos?” Research Policy   40 (5): 637-649  Times Cited: 263
Manso, Gustavo. (2016) "Experimentation and the Returns to Entrepreneurship" Review of Financial Studies vol. 29, pp. 2319-2340 Times Cited: 93

Week 4
Topic: Preferences, decision biases and psychological traits

Astebro, T., Herz, H., Nanda, R., and R. Weber (2014) “Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics,” Journal of Economic Perspectives, 28(3): 49-70. Cited: 141
Kihlstrom, Richard E., and Jean-Jacques Laffont (1979): “General equilibrium entrepreneurial theory of firm formation based on risk aversion.” Journal of Political Economy, 87(4):719-748. Times Cited: 2,017
Extensions, New Ideas and Empirical tests
Luís Santos-Pinto and Michele Dell’Era (2017) A General Equilibrium Theory of Occupational Choice under Optimistic Expectations, Working paper HEC Lausanne.
Astebro, Thomas, Jose Mata and Luis Santos-Pinto (2015) “Skewness Seeking: Risk Loving, Optimism or Overweighting of Small Probabilities?” Theory and Decision, 78(2), 189-208. Cited: 39
David de Meza, Christopher Dawson, Andrew Henley, G Reza Arabsheibani 2018. Curb your enthusiasm: optimistic entrepreneurs earn less, European Economic Review, 111, 53-69.
Hamilton, Barton H. and Papageorge, Nicholas W. and Pande, Nidhi, The Right Stuff? Personality and Entrepreneurship (September 2018). NBER Working Paper No. w25006.
Heger, Stephanie A. & Papageorge, Nicholas W., 2018. We should totally open a restaurant: How optimism and overconfidence affect beliefs, Journal of Economic Psychology, vol. 67(C), 177-190.

Week 5
Topics: Academic Entrepreneurship, Entrepreneurial Spawning

Astebro, Thomas and Navid Bazzazian, (2011) “Universities, Entrepreneurship and Local Economic Development” in Fritsch, M. (ed.) Handbook of Research on Entrepreneurship and Regional Development, Edward Elgar, Times Cited: 88
Parker, S. (2009) “Section 2.6. Entrepreneurial Spawning,” The Economics of Entrepreneurship. Cambridge University Press, page 61-68. Times Cited: 1,259
Anton, James J., and Dennis A. Yao (1995): “START-UPS, SPIN-OFFS, AND INTERNAL PROJECTS” Journal of Law, Economics, and Organization, 11:362-378. Times Cited: 349
Extensions, New Ideas and Empirical tests
Klepper, Steven , and Peter Thompson (2007): Disagreements and intra-industry spinoffs. International Journal of Industrial Organization, 28(5): 526-538 Times Cited: 231
Elfenbein, Hamilton and Zenger (2010): The Small Firm Effect and the Entrepreneurial Spawning of Scientists and Engineers. Management Science   56(4): 659-681   Times Cited: 322
Tåg, Joacim, Thomas Åstebro, and Peter Thompson, (2016) “Hierarchies and Entrepreneurship”, European Economic Review, 89, 129-147. Cited: 29

Week 6
First Motion to debate: “Entrepreneurs are Born, Not Made”.
Readings both for and against this motion.

Koellinger, P. et al. (2010). Genome-wide association studies in economics and entrepreneurship research: promises and limitations Small Bus Econ (2010) 35:1–18 Cited: 26
Lindquist, Matthew J. and Sol, Joeri and van Praag, Mirjam, (2017). Why do entrepreneurial parents have entrepreneurial children? Journal of Labor Economics 33 (2), 269-296. Times cited: 233
van der Loos MJHM, Rietveld CA, Eklund N, Koellinger PD, Rivadeneira F, Abecasis GR, et al. (2013) The Molecular Genetic Architecture of Self-Employment. PLoS ONE 8(4): e60542. Cited: 41
Nicolau, Nicos, Scott Shane, (2009) Can Genetic Factors Influence the Likelihood of Engaging in Entrepreneurial Activity? Journal of Business Venturing, 24, 1-22. Cited: 117
Nicolau, Nicos, Scott Shane, Lynn Sherkas, Janice Hunkin and Tim Spector (2008) Is the Tendency to Engage in Entrepreneurship Genetic? Management Science, 54(1) 167-79. Cited: 285
Nicolau, Nicos, Scott Shane, Lynn Sherkas and Tim Spector (2009) Opportunity Recognition and the Tendency to be an Entrepreneur, Organizational Behavior and Human Decision Processes, 110: 108-117. Cited: 65
White, R.E., S. Thornhill, and Elizabeth Hampson (2006) Entrepreneurs and evolutionary biology: The Relationship between Testosterone and New Venture Creation, Organizational Behavior and Human Decision Processes 100: 21-34. Cited: 149

Second Motion to debate: “Let it be resolved that entrepreneurship theory has not been significantly advanced by economists while entrepreneurship theory has been significantly advanced by management scholars”. 
Readings both for and against this motion.
Economists’ view(s) on Entrepreneurship
Parker, Simon C. (2005): "The economics of entrepreneurship: What we know and what we don’t." Foundations and Trends in Entrepreneurship, 1(1):1-54. Times Cited: 191
Geroski, Paul A. (1995): “What do we know about entry?” International Journal of Industrial Organization, 13(4):421-440. Times Cited: 2,228
Management Scholars view(s) on Entrepreneurship
S Venkataraman, SD Sarasvathy, N Dew, WR Forster (2012) Reflections on the 2010 AMR decade award: Whither the promise? Moving forward with entrepreneurship as a science of the artificial Academy of Management Review 37 (1), 21-33  doi: 10.5465/amr.2011.0079 Cited: 281
Shane, SA and S. Venkataraman (2000) The promise of entrepreneurship as a field of research ACADEMY OF MANAGEMENT REVIEW, 25(1): 217-226, Times Cited: 11,072
Hoang, H and B. Antoncic (2003): Network-based research in entrepreneurship - A critical review JOURNAL OF BUSINESS VENTURING, 18(2): 165-187, Times Cited: 2,113
Author(s): Zahra, SA; Sapienza, HJ; Davidsson, P (2006) “Entrepreneurship and dynamic capabilities: A review, model and research agenda JOURNAL OF MANAGEMENT STUDIES, 43(4): 917-955, Times Cited: 2,031

For inspiration (?), please view https://vimeo.com/143745467 and read the resulting paper

Zoltan Acs, Thomas Åstebro, David Audretsch and David Robinson (2016) “Public Policy to Promote Entrepreneurship: A Call to Arms” Small Business Economics 47(1): 35-51. Cited: 151

Additional Topics (if preferred)


Yu, Sandy, How Do Accelerators Impact the Performance of High-Technology Ventures? (August 1, 2016). Available at SSRN: https://ssrn.com/abstract=2503510  

Business plan competitions

Howell, Sabrina, Are New Venture Competitions Useful? (September 2017). NBER Working Paper No. w23874. Available at SSRN: https://ssrn.com/abstract=3046387

Venture lending


Venture capital theory

Arora, Ashish and Fosfuri, Andrea and Rønde, Thomas, Waiting for the Payday? The Market for Startups and the Timing of Entrepreneurial Exit (February 2018). NBER Working Paper No. w24350. Available at SSRN: https://ssrn.com/abstract=3131060  

Trade exit


Location Decisions

Guzman, Jorge, Go West Young Firm: The Value of Entrepreneurial Migration for Startups and Their Founders (May 8, 2018). Columbia Business School Research Paper No. 18-49. Available at SSRN: https://ssrn.com/abstract=3175328 or http://dx.doi.org/10.2139/ssrn.3175328

Trade Secrets and Innovation

Barankay, Iwan and Contigiani, Andrea and Hsu, David H., Trade Secrets and Innovation: Evidence from the 'Inevitable Disclosure' Doctrine (July 2018). CEPR Discussion Paper No. DP13077. Available at SSRN: https://ssrn.com/abstract=3222590