Entrepreneurs: Jacks of all Trades or Hobos?

Human capital investment theory suggests that entrepreneurs should be generalists, while those who work for others should be specialists; it also predicts higher incomes for entrepreneurs with generalist skills. An alternative view predicts that those with greater taste for variety are more likely to become entrepreneurs and that entrepreneurs will see their incomes decrease with greater skill variety. Data from a survey of 830 independent inventors and 300 individuals from the general population confirm that inventor-entrepreneurs typically have a more varied labor market experience. However, the more varied their experience, the lower their household income. The results support the interpretation that both choice of entrepreneurship and investment in generalist skills are driven by a taste for variety.Entrepreneurship, employment choice, skill, jack-of-all-trades, taste for variety.

Preference for Skew in Lotteries: Evidence from the Laboratory

Using a laboratory experiment we investigate how skew inuences choices under risk. We find that subjects make significantly riskier choices when the distribution of payoffs is positively skewed, these choices being driven in part by the shape of the utility function but also by subjective distortion of probabilities. A utility model with probability distortion calibrated on laboratory data is able to explain why most gamblers in public lotteries buy only a small number of tickets.risk; skew; gambling; lab experiment

Preference for Skew in Lotteries: Evidence from the Laboratory

Using a laboratory experiment we investigate how skew in uences choices under risk. We find that subjects make significantly riskier choices when the distribution of payoffs is positively skewed, these choices being driven in part by the shape of the utility function but also by subjective distortion of probabilities. A utility model with probability distortion calibrated on laboratory data is able to explain why most gamblers in public lotteries buy only a small number of tickets.Risk; Skew; Gambling; Lab Experiment

Specialists and Generalists: Equilibrium Skill Acquisition Decisions in Problem-solving Populations

Many organizations rely on the skills of innovative individuals to create value, including academic and government institutions, think tanks, and knowledge-based firms. Roughly speaking, workers in these fields can be divided into two categories: specialists, who have a deep knowledge of a single area, and generalists, who have knowledge in a wide variety of areas. In this paper, I examine an individual's choice to be a specialist or generalist. My model addresses two questions: first, under what conditions does it make sense for an individual to acquire skills in multiple areas, and second, are the decisions made by individuals optimal from an organizational perspective? I find that when problems are single-dimensional, and disciplinary boundaries are open, all workers will specialize. However, when there are barriers to working on problems in other fields, then there is a tradeoff between the depth of the specialist and the wider scope of problems the generalist has available. When problems are simple, having a wide variety of problems makes it is rational to be a generalist. As these problems become more difficult, though, depth wins out over scope, and workers again tend to specialize. However, that decision is not necessarily socially optimal--on a societal level, we would prefer that some workers remain generalists

Preference for Skew in Lotteries: Evidence from the Laboratory

We use a laboratory experiment to investigate how positive skew influences risky choices. We use a non-parametric method to classify subjects according to risk and skew preferences and to test whether their choices are compatible with expected utility or not. We find that subjects make riskier choices when lotteries display positive skew. Half of the subjects make skew seeking choices and these come roughly in equal proportions from those who violate expected utility axioms and from those who do not. Structural estimation of decision models for the sub-samples defined by our classification shows that probability distortion can explain heterogeneity in behavior

Risk, balanced skills and entrepreneurship

This paper proposes that risk aversion encourages individuals to invest in balanced skill profiles, making them more likely to become entrepreneurs. By not taking this possible linkage into account, previous research has underestimated the impacts of both risk aversion and balanced skills on the likelihood individuals choose entrepreneurship. Data on Dutch university graduates provide an illustration supporting our contention. We raise the possibility that even risk-averse people might be suited to entrepreneurship; and it may also help explain why prior research has generated somewhat mixed evidence about the effects of risk aversion on selection into entrepreneurship

Strategic and natural risk in entrepreneurship: an experimental study

We report on the results of experiments where participants choose between entrepreneurship and an outside option. Entrepreneurs enter a market and then make investment decisions to capture value. Payoffs depend on both strategic risk (i.e. the investments of other entrepreneurs) and natural risk (i.e. luck). Absent natural risk, participants endogenously sort themselves into entrepreneurial and safe types, and returns from the two paths converge. Adding natural risk fundamentally changes these conclusions: Here we observe excessive entry and excessive investment so that entrepreneurs earn systematically less than the outside option. These payoff differences persist even after many repetitions of the task. With a risky outside option, entry further increases and about one-third of entrepreneurs adopt a passive strategy, investing little or nothing. Finally, we examine an environment where an individual must become an entrepreneur but chooses the stakes over which she will compete. Due to under-entry and under-investment in the high stakes setting, the returns gap grows to over 15 percentage points. A two-factor model incorporating loss aversion and love of winning can rationalize these returns patterns

Business experience and start-up size: buying more lottery tickets next time around?

This paper explores the determinants of start-up size by focusing on a cohort of 6247 businesses that started trading in 2004, using a unique dataset on customer records at Barclays Bank. Quantile regressions show that prior business experience is significantly related with start-up size, as are a number of other variables such as age, education and bank account activity. Quantile treatment effects (QTE) estimates show similar results, with the effect of business experience on (log) start-up size being roughly constant across the quantiles. Prior personal business experience leads to an increase in expected start-up size of about 50%. Instrumental variable QTE estimates are even higher, although there are concerns about the validity of the instrument