Abstract
New technologies emerge and translate into economic growth through the team effort of inventors, entrepreneurs, and production workers. This paper provides a unified life-cycle framework to characterize how society determines the population split across these three groups and connects the relationship between entrepreneurs and inventors to economic growth. We proceed by linking detailed micro-data from Denmark on individual entrepreneurs, inventors, workers, and firms to a novel quantitative endogenous growth model on occupational sorting and matching between inventors and entrepreneurs. Empirically, we find that while parental exposure is a key determinant of entrepreneurship, sorting into inventing occupations is primarily determined by education and IQ. Entrepreneurs with higher ability, as proxied by IQ, hire more inventors, hire inventors of higher ability, create more innovative firms and grow faster. We build the quantitative model based on this evidence and use it to characterize how entrepreneurs and inventors stimulate economic growth. Individuals self-select into different occupations and entrepreneurship depending on their characteristics (e.g., parental background, IQ, preferences) and entrepreneurs assemble teams in order to innovate and grow firms. The model highlights the importance of assortative matching between talented entrepreneurs and inventors for the rise of successful firms. In addition to matching the data, the model admits various counterfactuals to study the underlying mechanics of entrepreneurs and inventors. We find that the assortative matching between entrepreneurs and R&D workers explains 7% of economic growth and 14% of firm growth, indicating the importance of matching the right team early in the firm.
The seminar will be held in room 1249 (12th floor) at Eilert Sundts Hus. The address is Moltke Moes vei 31.