Schumpeterian Entrepreneurship

Abstract

Based on recent findings concerning the best performing start-ups, we develop a model of Schumpeterian entrepreneurship in which founders exploit ideas they learned through their employment. The model yields distinctive implications about how labor market experience and earnings at work influence the probability of a worker becoming an entrepreneur, earnings as an entrepreneur relative to paid work, and persistence in entrepreneurship. These implications are tested using data on the earnings of scientists and engineers, which are common founders of high growth start-ups. The sample is pared down to those that worked in and founded businesses related to their education in order to isolate the best candidates for Schumpeterian entrepreneurship.

Keywords: entrepreneurship, scientists and engineers, earnings differentials, self employment

JEL Classification: M13, J31