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The Value of Entrepreneurial Failures: Experimentation and Career Concerns

TitleThe Value of Entrepreneurial Failures: Experimentation and Career Concerns
Publication TypeWorking Paper
AuthorCanidio A, Legros P
Year of Publication2013
Abstract

We study career paths in and out of entrepreneurship. We assume that entrepreneurs have more freedom than workers over their own task allocation, and therefore can experiment: they can work on tasks that are likely to fail but provide valuable learning about future task allocation. Entrepreneurial failures are rewarded by the labor market when the entrepreneur experimented. The amount of experimentation occurring within firms determines the amount of experimentation done by entrepreneurs, the treatment of entrepreneurial failures by the labor market, and the probability of entrepreneurial success following an entrepreneurial failure. We show that there are two regimes, one where entrepreneurial failures are rewarded by the labor market (corresponding to the empirical evidence available for the US) and the other where entrepreneurial failures are punished by the labor market (corresponding to the empirical evidence available for continental Europe).

JEL classification: D83, J24, J62, L26, M13.

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The Value of Failures 1 by plegros

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