I am currently working on four main areas.
Human capital accumulation and occupational choice
In his model of occupational choice, Lazear (2003) shows that, under certain parametric conditions, individuals with more balanced skills self-select into entrepreneurship whereas individuals who excel in only one skill specialize in it. In that framework, the existence of an equilibrium involving entrepreneurship crucially depends on the market value of entrepreneurial talent. If this parameter falls below a certain threshold, no individual opts for entrepreneurship. We assess the choice between generalist and specialist strategies in an evolutionary game theoretic framework to show that generalist strategies, far from being constrained by parametric conditions, are widespread and robust to evolutionary dynamics.
Decision making under uncertainty
Prediction- and control-based strategies are the two main competing hypotheses of how entrepreneurs deal with uncertainty in theories of entrepreneurship. In an experimental test, we study the conditions under which prediction- and control-based strategies lead subjects to accept bets in ambiguous environments. Individuals who use control methods to mitigate uncertainty are more likely to accept the bet after a favorable outcome compared to those who use predictive methods. These results revert in the presence of unfavorable outcomes. We discuss the implications of our findings for entrepreneurship theory and practice.
The dynamics of competence and confidence
The goal of this project is to develop a dynamic model of entrepreneurial decision-making in a stochastic environment. The model consists of three main elements: (1) competence-confidence regimes, (2) reinforcement learning and (3) stochastic environment. We set out to achieve two objectives through the simulation: a) modeling an entrepreneur’s career as a portfolio of ventures and b) predicting entrepreneurial behavior under alternate regimes of competence and confidence. We simulate a population of entrepreneurs during 25 periods and study the relative impact of competence and confidence upon serial entrepreneurship. Our simulations show that serial entrepreneurship depends more on initial competence and reinforcement in confidence than on initial confidence and reinforcement in competence. Our contribution is twofold. We build theory by integrating the findings and insights from different streams of research in a dynamic set-up and make a methodological contribution by introducing the use of simulations in an area of entrepreneurship research in which empirical evidence is not easily available.
Behavioral Genetics and its contribution to entrepreneurship research
Genetic influences on behavioral and psychological traits are ubiquitous and well established. In particular, they have been shown to affect several measures of entrepreneurial activity. We assess the prospects and contributions of this incipient literature and sharpen the debate by arguing that, in order to explain the heritability of traits involving beliefs, intentions, and, above all, interactions with other individuals, it is advisable to take models of gene-culture evolution into account. Applying this framework, we explain why entrepreneurial behaviors are bound to be frequency-dependent and exhibit relatively high phenotypic plasticity. As a result, we conclude that these traits, even if they are heritable, will be strongly subject to the contingency of environmental forces, thereby exploring methodological implications for entrepreneurship research.
Selected abstracts from published papers
Regional concentration of entrepreneurial activities (Journal of Economic Behavior and Organization)
Empirical evidence indicates that entrepreneurial activities tend to concentrate geographically. Strategic complementarities, knowledge spillovers and network externalities are regarded as the principal sources of such phenomena. Although conspicuous examples point at the presence of positive feedback mechanisms, agglomerations also occur in the absence of these features and in areas of considerably homogeneous economic potential. We build an evolutionary game theoretic model to investigate the conditions under which regions may evolve different rates of entrepreneurship assuming that (i) regions are economically similar, (ii) there is migration between regions, and (iii) individuals are predisposed to imitate others who are economically more successful.
Persistence and Heterogeneity in Entrepreneurship: An Evolutionary Game Theoretic analysis (Journal of Business Venturing)
Studies show that countries exhibit a relatively stable level of entrepreneurial activity. To account for this fact, we adopt an evolutionary game theoretic approach. Based upon the analysis of games that capture essential features of the entrepreneurial phenomenon, we derive conditions under which evolutionary stable equilibria will be played by a population consisting of agents who engage in entrepreneurship and agents who do not. We show that entrepreneurship may persist even without assuming strategic complementarities or group selection. Lastly, we explain how information about equilibrium payoffs to self- and paid - employment could help address the question of whether entrepreneurs differ from other economic agents.Failing firms and successful entrepreneurs: Serial entrepreneurship as a temporal portfolio.
Failing Firms and Successful Entrepreneurs: Serial Entrepreneurship as a Temporal Portfolio
(with Saras D. Sarasvathy and Anil Menon) (Small Business Economics)
Entrepreneurial performance is almost always confounded with firm performance. In this paper we argue for an instrumental view of the firm by formally showing that entrepreneurs can amplify their expected success rates by designing their careers as temporal portfolios that exploit contagion processes embedded in serial entrepreneurship. The advantages to holding concurrent portfolios that exploit heterogeneity are well known. The same advantages may be achieved in the serial context through contagion. Our model exploits an observation due to William Feller on the near equivalence of the two, statistically speaking. It also leads to empirically plausible implications about the size distribution of firms in the economy and illustrates the relevance of considering firms and entrepreneurs as distinct loci of analysis.
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