L5

Question 1

Sumarize “Entrepreneurial Spawning: Public corporations and the genesis of new ventures, 1986 to 1999” (Gompers, Lerner and Scharfstein)

Answer 1

Both small and big firms lead to entrepreneurial spawning = leaving employment to start company
But employees from small, entrepreneurial firms are more likely

Question 2

Traits of a young firm according to (Gompers, Lerner and Scharfstein) that lead to more entrepreneurs

Answer 2

Focus on one technology and idea
Human capital = entrepreneurial exposure
Social network
Selection on risk

Question 3

Traits of big firm according to (Gompers, Lerner and Scharfstein)

Answer 3

Diversified
Focus premium = everything that falls out of focus business is not interesting
Mayopia = path dependence, keep doing what has been successful before, unwilling to change
Inertia =Uncapable to change and respond to radical innovation

Question 4

sumarize “The small firm effect” (Elfenbein)

Answer 4

Small firm effect shows that scientist and engineers from small firms are more likely than people from big firms to become entrepreneurs, because of selection and treatment effects

Question 5

Explain the performance neutral and enhancing factors for employees to become entrepreneurs (Elfenbein)

Answer 5

Performance neutral
Selection - preference sorting (individuals with preference for independant work or risk chose small firms and later entrepreneurial acitivity)
Treatment - opportunity cost (lower pay in small firms)
Performance enhancing
Selection - ability sorting (small firms more directly link pay to performance and therefore high-ability employees select small firms to earn more -> later entrepreneurs to earn even more)
Treatment - Small firms have less specialization and therefore employees have more variation in skills -> easier to discover opportunities and have more success in entrepreneurship