Entrepreneurship – MiE


The objectives of this course are manifold :

  • 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 model

In this course students will study the recent theoretical and empirical literature on entrepreneurship and firm formation. Joseph Schumpeter and Frank Knight are usually quoted as having started the area, but they did not provide any formal models to explain entrepreneurs’ behavior. 

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. All students are assigned tasks and readings. In the last week students will conduct a formal debate on two motions.

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. 


  1. Introduction, Managerial Ability
  2. Entrepreneurial Finance — Are entrepreneurs wealth constrained?
  3. Returns to Entrepreneurship
  4. Preferences, decision biases and psychological traits
  5. Academic Entrepreneurship, Entrepreneurial Spawning
  6. Debates : 
    1.  “Entrepreneurs are Born, Not Made”. 
    2. “Let it be resolved that entrepreneurship theory has not been significantly advanced by economists while entrepreneurship theory has been significantly advanced by management scholars ”. 


  1. Managerial Ability
    • Classics
      • Lucas, Robert E., Jr. (1978): “Size distribution of business firms.” Bell Journal of Economics, 9(2):508-523. Times Cited: 3,303
      • 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: 417
      • T Åstebro, J Chen, P Thompson (2011) Stars and misfits: Self-employment and labor market frictions Management Science 57 (11), 1999-2017 Cited: 82
    • 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: 154
  2. Entrepreneurial Finance
    • Surveys
      • Robb, Alicia and David Robinson, (2014) “The Capital Structure Decisions of New Firms,” Review of Financial Studies, 27(1):153-179 http://hdl.handle.net/10.1093/rfs/hhs072 Times Cited: 366
      • 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: 2,237
    • Classics
      • 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: 3,215
      • Stiglitz, Joseph and Andrew Weiss, (June 1981) “CREDIT RATIONING IN MARKETS WITH IMPERFECT INFORMATION” The American Economic Review, 71: 393-410. Times Cited: 16,372
    • Extension and Empirical test
      • 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: 11
      • 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: 159
      • 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: 19
  3. Returns to Entrepreneurship
    • Review
      • Åstebro, T. and J. Chen, (2014) “The Entrepreneurial Earnings Puzzle: Mismeasurement or Real?” Journal of Business Venturing, 29(1): 88-105. Cited : 54
    • Classics
      • 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: 1,740
      • 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: 2,737
    • Empirical tests
      • Astebro, Thomas and Peter Thompson (2011): “Entrepreneurs: Jacks of all Trades or Hobos?” Research Policy   40 (5): 637-649  Times Cited: 199
      • Manso, Gustavo. (2016) "Experimentation and the Returns to Entrepreneurship" Review of Financial Studies vol. 29, pp. 2319-2340 Times Cited: 35
  4. Preferences, decision biases and psychological traits
    • Reviews
      • 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: 64
    • Classic
      • 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: 1,986
    • 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: 23
      • 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.
  5. Academic Entrepreneurship, Entrepreneurship Spawning
    • Reviews
      • 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: 56
      • Parker, S. (2009) “Section 2.6. Entrepreneurial Spawning,” The Economics of Entrepreneurship. Cambridge University Press, page 61-68.
    • Classic
      • 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: 336
    • 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: 180
      • 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: 239
      • Tåg, Joacim, Thomas Åstebro, and Peter Thompson, (2016) “Hierarchies and Entrepreneurship”, European Economic Review, 89, 129-147. Cited: 29
  • Debates
    •  “Entrepreneurs are Born, Not Made”. 
      • 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: 19
      • 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: 105
      • 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. https://doi.org/10.1371/journal.pone.0060542 Cited: 34
      • 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
    • “Let it be resolved that entrepreneurship theory has not been significantly advanced by economists while entrepreneurship theory has been significantly advanced by management scholars ”. 
      • 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.