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SBE Lect 2 Part 3: Ch2 & Ch3.1-3.4-SB- The big picture (The genetics…
SBE Lect 2 Part 3: Ch2 & Ch3.1-3.4-SB- The big picture
The genetics of entrepreneurship
Entrepreneurship runs in families
◦ Born with right entrepreneurial traits, or does the “entrepreneurial environment” makes you entrepreneurial?
Heritability
:
◦ How much of the differences in entrepreneurial behavior can be explained by genes?
Nicolaou et al.’s (2008): “Is the tendency to engage in entrepreneurship genetic?”
Basic idea for estimation
:
◦ Compare monozygotic (MZ) and dizygotic (DZ) twins
◦ MZ twins are genetically similar, DZ twins on average only 50% similar
◦ For heritable trait one would expect MZ twins to be more similar than DZ twins
1/15/2019
see slide 12/28 results of the genetic modelling
Born and made
Heritability studies provide implicit evidence for existence of “entrepreneurial traits”
◦ Surprisingly, no role for family environment
◦ Important role for unique environment
◦ Scope for training individuals to be good entrepreneurs
◦ But don’t show which traits are involved (e.g., personality, health, etc.)
Baumol: Effects of entrepreneurship
Unproductive entrepreneurship
(maximize individual (private) but not necessarily social benefits)
◦ Exploiting forms of bureaucracy
◦ E.g. Frivolous litigation: starting lawsuits that, due to their lack of legal
merit, have little to no chance of being won
Destructive entrepreneurship
(maximize individual benefits by letting society suffer)
◦ Bribery, corruption, crime
Productive entrepreneurship
(maximize individual (private) and social benefits)
◦ Cistercian monks creating and maintaining water mills (also for others)
◦ Maximize time available for religious labors
Implications of Baumol’s typology
Entrepreneurs are always with us: it is just that people shift between productive, unproductive or destructive entrepreneurship depending on the nature of incentives they face
What is important is the
‘rules of the game’
(e.g. tax incentives, ease of setting up a business) rather than supply of entrepreneurs
◦ Peru
◦ Policy should focus on
“rules of game”
◦ Soviet Russia