Failing Firms And Successful Entrepreneurs: Serial Entrepreneurship As A Simple Machine


A detailed review of four literatures, namely, (1) Industrial organization, (2) Population ecology, (3) Labor and micro economics, and (4) Entrepreneurship, suggests that entrepreneurial performance is almost always confounded with firm performance. Serial entrepreneurial experience is at best seen as one of the inputs into 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 (as compared to firm success rates) by exploiting 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 sound implications about the size distribution of firms in the economy and suggests more nuanced approaches toward future research. For example, both failed firms and successful ones entail useful learning effects and path dependencies in the careers of serial entrepreneurs.

Journal or Publication:
Management Science
Authors:
Saras Sarasvathy
Anil menon
Tags:
Status:
publish
Year Published
2002
Relevant Principles:
Pilot-in-the-Plane (Control vs. Predict)
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