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ENTREPRENEURIAL ENTERPRISES, ENDOGENOUS OWNERSHIP, AND THE LIMITS TO FIRM SIZE
Author(s) -
WIGGINS STEVEN N.
Publication year - 1995
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1995.tb01846.x
Subject(s) - incentive , commit , entrepreneurship , industrial organization , work (physics) , business , economics , microeconomics , finance , mechanical engineering , database , computer science , engineering
This paper develops a simple model of entrepreneurial enterprises. The analysis differs from traditional work on entrepreneurship by analyzing why entrepreneurial activities are typically conducted in small firms owned by the entrepreneur. I argue that ownership incentives are an advantage of small firms. When the probability of success of an economic activity becomes small, if becomes costly for large firms to commit to strong incentives, and small worker‐owned firms emerge. The paper discusses application of the theory to innovation, wild‐cat oil exploration, restaurants and retail trade, professional practices, salesmen, and franchising.