ECON 1 Lecture Notes - Lecture 17: Switching Barriers, Motivation, Human Capital
Document Summary
Survival of a firm is enhanced by economic performance but isn"t uniquely determined by it. Where the threshold lies is influenced by human capital characteristics of entrepreneur (= large owner influence so manager influence to counteract is minimal) Explains why, given the same level of performance, some firms exit while others don"t. Broaden opportunity set & raise expected income from alternative employment. Influence performance more than threshold: perform better but don"t necessarily survive more often. General management experiences influence threshold, while neither education nor experience are related. Entrepreneurial skills that have little use outside the venture (e. g. knowledge of customers, suppliers, products. & services within the context of the venture) Influences survival by increasing performance, without raising the threshold. Personal satisfaction the entrepreneur derives from self-employment: motivated by non-economic goals (e. g. satisfaction from autonomy & doing what they like) Lower threshold: accept lower levels of performance to survive.
