Various theories have been advanced for why employees leave incumbent firms to found firms in the same industry, which we call spinoffs. We review the accumulating evidence about spinoffs in various high-tech industries, highlighting the central role often played by disagreements. Because...

We construct a model of industry evolution in which the central force for change is the creation and destruction of submarkets. Firms expand when they are able to exploit new opportunities that arrive in the form of submarkets; they contract and ultimately exit when the submarkets in which they...

We construct a simple model of occupational choice among agents with differing abilities. The fraction of agents creating new businesses who are low ability rises during recessions. Thus, cohorts born during recessions are on average lower quality: their businesses yield lower initial earnings,...

This paper describes a version of Lucas’ span of control model, in which managers of younger and smaller firms are less able than managers of older firms to provide precise instructions to employees. Employees differ in their propensity to follow instructions, and those least likely to follow...

Recent evidence has shown that entrants into self-employment are disproportionately drawn from the tails of the earnings and ability distributions. This observation is explained by a multi-task model of occupational choice in which frictions in the labor market induces mismatches between firms...

Most existing models of employee spinoffs assume they are driven by a desire to implement new ideas. However, history is replete with examples of spinoffs that were launched to continue with old ideas that their parents were in the process of abandoning. We develop a model of technology choice...

Using a large, individual-level wage data set, we examine the impact of a major technological innovation — the development of powerful and economical steam engines — on skill demand and the wage structure among the merchant marine. Our data reveal a complex range of responses to the new...

Human capital investment theory suggests that entrepreneurs should be generalists, while those who work for others should be specialists; it also predicts higher incomes for entrepreneurs with generalist skills. An alternative view predicts that those with greater taste for variety are more...

Jaffe, Trajtenberg and Henderson (Quarterly Journal of Economics, 108(3):577-98, 1993) developed a matching method to study the geography of knowledge spillovers using patent citations, and found that knowledge spillovers are strongly localized. Their method matches each citing patent to a...

This paper produces new estimates of the rate of organizational forgetting in the well-known case study of US wartime ship production. I show that estimation is easily colored by problems of unobserved product heterogeneity and sensitivity to specification of the learning curve. Using data...