If control of their firms allows entrepreneurs to derive private benefits, it also allows other controlling parties … and analyze entrepreneurs' financing strategy between the two. We find that, in all strict Nash Equilibria, entrepreneurs … who value private benefits more choose banks while the rest choose venture capital. Thus, bank-financed entrepreneurs …

jobs. Instead, failed entrepreneurs must seek other jobs in an imperfectly informed external labour market. While this is … ex-post inefficient, it provides entrepreneurs with high-powered incentives ex ante. We show that two types of equilibria … can arise (and sometimes coexist). In a low (high) entrepreneurship equilibrium, the market for failed entrepreneurs is …

more such innovations by entrepreneurs. Consequently, a venture capital market implies that more innovations are created …

competition and foreign direct investment discourage entry and stimulate exit of domestic entrepreneurs. These results are in line … with theoretical occupational choice models that predict foreign direct investment would crowd out domestic entrepreneurs …