A Theory of Entrepreneurship and Its Application to the Study of Business Transfers

We formalize a view of entrepreneurship in the spirit of Theodore W. Schultz. In this view, entrepreneurs are those individuals who respond to the opportunities for creating new products (and the like) that arise because of technological progress, for example. The theory has implications for entry and exit, specialization of labor, and business transfers. These business transfers correspond to, among other things, individuals changing jobs an sales of firms. Transfers are seen as a mechanism facilitating division of labor. We also discuss evidence on business transfers that occur through sales of firms.