Approximately 80-90 percent of new firms ultimately fail. The tendency is to think of this failure as wasteful. We, however, examine whether there are economic benefits to offset the waste. We characterize three potential mechanisms through which excess entry affects market structure, firm...

Entrepreneurship is valued in part because it stimulates Schumpeter’s gale of creative destruction. A popular view, reinforced by recent empirical work on regulatory reform, is that regulation inhibits entrepreneurship and innovation. However dismantling regulation is ill-advised, since...

This paper examines whether declining research productivity can be explained by fishing out—is the production of new knowledge decreasing in the level of existing knowledge? We estimate the knowledge production function for U.S. firms and find instead that knowledge production is increasing in...

The Herfindahl-Hirschman Index (HHI) is one of the more commonly used measures in the Strategy and Economics literatures. While its principal uses are measuring market concentration or firm diversification, it has been extended beyond that. One concern with the measure is that an infinite set of...