Entrepreneurship in Equilibrium ¤

@inproceedings{Gromb2001EntrepreneurshipIE,
  title={Entrepreneurship in Equilibrium ¤},
  author={Denis Gromb and CEPR David Scharfstein},
  year={2001}
}
This paper compares the financing of new ventures in start-ups (entrepreneurship) and in established firms (intrapreneurship). Intrapreneurship allows established firms to use information on failed intrapreneurs to redeploy them into other jobs. By contrast, failed entrepreneurs must seek other jobs in an imperfectly informed external labor market. While this is ex-post inefficient, it provides entrepreneurs with high-powered incentives ex ante. We show that two types of equilibria can arise… CONTINUE READING
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