Entrepreneurship as Experimentation
William Kerr (),
Ramana Nanda () and
Matthew Rhodes-Kropf ()
Journal of Economic Perspectives, 2014, vol. 28, issue 3, 25-48
Entrepreneurship research is on the rise but many questions about the fundamental nature of entrepreneurship still exist. We argue that entrepreneurship is about experimentation; the probabilities of success are low, extremely skewed, and unknowable until an investment is made. At a macro level, experimentation by new firms underlies the Schumpeterian notion of creative destruction. However, at a micro level, investment and continuation decisions are not always made in a competitive Darwinian contest. Instead, a few investors make decisions that are impacted by incentive, agency, and coordination problems, often before a new idea even has a chance to compete in a market. We contend that costs and constraints on the ability to experiment alter the type of organizational form surrounding innovation and influence when innovation is more likely to occur. These factors not only govern how much experimentation is undertaken in the economy, but also the trajectory of experimentation, with potentially very deep economic consequences.
JEL-codes: G24 J23 L26 M13 O31 (search for similar items in EconPapers)
Note: DOI: 10.1257/jep.28.3.25
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (61) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to AEA members and institutional subscribers.
Working Paper: Entrepreneurship as Experimentation (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:28:y:2014:i:3:p:25-48
Ordering information: This journal article can be ordered from
Access Statistics for this article
Journal of Economic Perspectives is currently edited by Enrico Moretti
More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().