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Fall 2008 ECO 6939
The Economics of Entrepreneurship and Young Firms
Peter Thompson
Thursdays, 9:30 - 12:15, GC 279A
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In this course we will study the recent theoretical and empirical literature on entrepreneurship, firm formation, and the performance of young firms. This class meets once a week for a double session. The first half of each lecture will be devoted to discussing the previous weeks readings. In the second part, I will lecture on the next week's reading. 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? can the empirical work be done better? would the empirical results hold in different samples?). Hence, you should be thinking about these questions while you are reading the papers. Following up on the questions will often entail you looking at additional papers that I have not assigned. Grading is based on three assignments: 1. Your active participation in discussion: 25%; 2. A written research proposal, about 5,000 words: 35%; 3. Oral presentation of your research proposal, about 30 minutes: 15%; 4. A final exam, 25%. |
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Part A. Entrepreneurship and New Firm Formation |
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Week 1/2 - Lecture, August 28; Discussion, Sep 4. Topic: Introduction 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. Geroski, Paul A. (1995): “What do we know about entry?” International Journal of Industrial Organization, 13(4):421-440.
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Week 2/3 - Lecture Sep 4; Discussion, Sep 11. Topic: Managerial ability and risk tolerance Lucas, Robert E., Jr. (1978): “On the size distribution of business firms.” Bell Journal of Economics, 9(2):508-523. Kihlstrom, Richard E., and Jean-Jacques Laffont (1979): “A general equilibrium entrepreneurial theory of firm formation based on risk aversion.” Journal of Political Economy, 87(4):719-748. Thompson, Peter (2007): "Entrepreneurs, small business management, and the organization of work. FIU working paper.
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Week 3/4 - Lecture Sep 11; Discussion Sep 18. Topic: Are entrepreneurs wealth constrained? Evans, David S., and Boyan Jovanovic (1989): “An estimated model of entrepreneurial choice under liquidity constraints.” Journal of Political Economy, 97(4):808-827. Nanda, Ramana (2008): "Cost of external finance and selection into entrepreneurship." HBS Working Paper 08-047, Harvard Business School.
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Week 4/5 - Lecture Sep 18; Discussion Sep 25. Topic: Innovation and entrepreneurship 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. Kortum, Samuel, and Josh Lerner (2000): "Assessing the contribution of venture capital to innovation." RAND Journal of Economics, 31(4): 674–692. |
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Week 5/6 - Lecture Sep 25; Discussion Oct 2 Topic: Jacks of all trades; stars, and misfits Lazear, Edward P., (2002): “Entrepreneurship.” Journal of Labor Economics, 23(4):649-680. Ohyama, Atsushi (2007): “Entrepreneurship and advanced technical knowledge.” Working paper, SUNY Buffalo.
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Week 6/7 - Lecture Oct 2; Discussion Oct 9 Topic: Overconfidence and entrepreneurship Bernardo, Antonio, and Ivo Welch (2001): “On the evolution of overconfidence and entrepreneurship.” Journal of Economics & Management Strategy, 10:301-30. Landier, Augustin, and David Thesmar (2006): “Financial contracting with optimistic entrepreneurs: theory and evidence.” Review of Financial Studies, forthcoming.
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Week 7/8 - Lecture Oct 9; Discussion Oct 16. Topic: Entrepreneurship and spinoffs Anton, James J., and Dennis A. Yao (1995): “Start-ups, spin-offs, and internal projects.” Journal of Law, Economics, and Organization, 11:362-378. Amador, Manuel, and Augustin Landier (2003): "Entrepreneurial pressure and Innovation." Working paper. Klepper, Steven , and Peter Thompson (2007): Intra-industry Spinoffs . Working Paper.
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Part B. The Performance of Young Firms and Industries |
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Week 8/9 - Lecture Oct 16; Discussion Oct 23. Topic: The persistence of founding conditions Klepper, Steven (2002): "The capabilities of new firms and the evolution of the US automobile industry." Industrial and Corporate Change, 11(4):645-666. Jovanovic, Boyan, and Peter Rouseau (2001): “Vintage organization capital.” NBER working paper no. 8166.
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Week 9/10 - Lecture Oct 23; Discussion Oct 30. Topic: Firm age and growth Jovanovic, Boyan (1982): “Selection and the evolution of industry.” Econometrica, 50(7):649-670. (read only sections 1-3). Cooley, Thomas F. and Vincenzo Quadrini (2001): “Financial markets and firm dynamics.” American Economic Review, 91(5):1287-1310. Klepper, Steven, and Peter Thompson (2007): “Submarkets and the evolution of market structure.” Rand Journal of Economics, 37(4):862-888.
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Week 10/11 - Lecture Oct 30; Discussion Nov 6. Topic: Learning by doing Thompson, Peter (2008): "Learning by doing." Working paper 08-06, Florida International University
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Week 11/12 - Lecture Nov 6; Discussion Nov 13. Topic: Industry shakeouts Jovanovic, Boyan, and Glenn MacDonald (1994): “The life cycle of a competitive industry.” Journal of Political Economy, 102:322–47. Klepper, Steven, and Simons, Kenneth L. (2000): “The making of an oligopoly: Firm survival and technological change in the evolution of the U.S. tire industry.” Journal of Political Economy, 108:728–60. |
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Week 12/13 - Lecture Nov 13; Discussion Nov 20. Topic: Industry clusters Franco, April F., and Matthew F. Mitchell “Covenants not to compete, labor mobility, and industry dynamics,” Journal of Economics and Management Strategy, forthcoming. Sorenson, Olav, and Pino G. Audia (2000): “The social structure of entrepreneurial activity: Geographic concentration of footwear production in the U.S., 1940-1989.” American Journal of Sociology, 106:424-461. |
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Part C. Presentation of Research Proposals |
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Week 14 - Dec 4 Topic: Student Presentations
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| Final Exam Week - 8 -13 December |