AprimerinEntrepreneurship

A i i E t hi
Chapter1.5:Entrepreneurship theory

Prof.Dr.UlrichKaiser
Department of BusinessAdministration
Departmentof Business Administration
Universityof Zurich

FallSemester2012
Chapter1.5:Entrepreneurshiptheory
TableofContents

I. Lazears (2005)Jackofalltradestheory
II
II. F b l (2004)Oringtheory
Fabels (2004) O i th

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 0/hc/oec.html
Chapter1.5:Entrepreneurshiptheory
I.Lazears (2005)Jackofalltradestheory

www.uzh.ch/about//portrait//dies/2010
http://w
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Chapter1.5:Entrepreneurshiptheory
I.Lazears (2005)Jackofalltradestheory

Jackofalltrades(masterofnone)
http://www youtube com/watch?v VNsjjYRgjc
http://www.youtube.com/watch?v=_VNsjjYRgjc

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Chapter1.5:Entrepreneurshiptheory
I.Lazears (2005)Jackofalltradestheory

Entrepreneursmaintask:manageresources;putpeopletogether
and combine them with physical capital and ideas to produce
andcombinethemwithphysicalcapitalandideastoproduce
productorprocessinnovations

Entrepreneursmustknowaboutmanydifferentareas

Entrepreneursneedallabilities;theweakestabilitydetermines
d ll b l h k bl d
income

Entrepreneurswithabalancedskillprofilebecomeentrepreneurs

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Chapter1.5:Entrepreneurshiptheory
I.Lazears (2005)Jackofalltradestheory
Individualsareendowedwitharangeofskills
I di id l d d ith f kill
Skillprofilesdifferbetweenindividuals(generalists/specialists)
Generalists(jacksofalltrades)becomeentrepreneurs;theyneed
toassembleproductionfactorsandneed knowledgeinalarge
numberofareas
b f
Individualswhobecomeentrepreneursinvestinseveralskills
Implicitassumption:alltaskshavetobeperformedbyoneperson

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Chapter1.5:Entrepreneurshiptheory
I.Lazears (2005)Jackofalltradestheory
Entrepreneurmustfulfillmanydifferenttasks

Assumption:constantreturnstoscaleandsymmetry
Assumption: constant returns to scale and symmetry

Skillendowment:x1,x2;jointdensityg(x1,x2)

Entrepreneurialchoice:

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Chapter1.5:Entrepreneurshiptheory
I.Lazears (2005)Jackofalltradestheory

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Chapter1.5:Entrepreneurshiptheory
I.Lazears (2005)Jackofalltradestheory
Probabilityofbecominganentrepreneur: P[Eship] =

P[ Eship ] P[ Eship ]
> 0; =

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Chapter1.5:Entrepreneurshiptheory
I.Lazears (2005)Jackofalltradestheory
Results:
1. Individualswithmorebalancedskillsetsaremorelikelyto
becomeentrepreneurs.
2. Thesupplyofentrepreneursissmallerforproduction
processes that require a higher number of independent skills
processesthatrequireahighernumberofindependentskills.
3. Individualswhobecomeentrepreneursshouldhaveamore
p gy g
balancedhumancapitalinvestmentstrategyonaveragethan
thosewhobecomespecialists.

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Chapter1.5:Entrepreneurshiptheory
I.Fabels (2004)Oringtheory

Challenger_eexplosion.jpgg
wikipedia.orgg/wiki/File:C
http://en.w
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Chapter1.5:Entrepreneurshiptheory
I.Fabels (2004)Oringtheory

1092326
http://de.wikipedia.org/w/index.php?title=Datei:O
p=20051221
ring_colleection.jpg&fiiletimestamp
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Chapter1.5:Entrepreneurshiptheory
I.Fabels (2004)Oringtheory
Differentabilitiesaresuppliedbydifferentindividualswith
differentabilities
Thequalitywithwhichataskisfulfilledisessential.
Ifagroupmemberfailstofulfillhertask,theentireprojectfails
Implications:
Teamsarehomogenouswrt.ability
g y
Themoreabletheteam,thelargeritis
Themoreabletheteam,themorepercapitacapitalisused
The more able the team the more per capita capital is used

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Chapter1.5:Entrepreneurshiptheory
I.Fabels (2004)Oringtheory
Knowledgeofdifferentpersons(specialists)necessary
But:eachadditionalpersonisadditionalsourceofriskoutputhas
no market value if someone malperforms
nomarketvalueifsomeonemalperforms
Inequilibrium:homogenousteamswrt.ability;reason:impactof
replacement with slightly higher skilled the greater the higher
replacementwithslightlyhigherskilledthegreaterthehigher
averageabilityofotherteammembers

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Chapter1.5:Entrepreneurshiptheory
I.Fabels (2004)Oringtheory

Production function:

Property:
Property:

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Chapter1.5:Entrepreneurshiptheory
I.Fabels (2004)Oringtheory

:
k

:
n

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Chapter1.5:Entrepreneurshiptheory
I.Fabels (2004)Oringtheory

Implications:
1. Allteam members with sameabilities inequilibrium
2. Themore able team,the more capital perhead
3. Themore able the team the higher capital requirements
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Chapter1.5:Entrepreneurshiptheory
References:
Fabel,Oliver(2004),SpinoffsofEntrepreneurialFirms:AnORing
Approach,JournalofInstitutionalandTheoreticalEconomics,vol.
160 416 438
160,416438.
Kremer,Michael(1993),TheORingTheoryofEconomicDevelopment,
TheQuarterlyJournalofEconomcis,vol.108,no.3,551575.
Q y , , ,
Lazear,EdwardP.(2004),BalancedSkillsandEntrepreneurship,
AmericanEconomicReviewPapersandProceedings,94(2),208211.
Lazear,EdwardP.(2005),Entrepreneurship,JournalofLabor
Economics,vol.23,no.4,649680.

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