ABSTRACT A society’s allocation of working time to entrepreneurial,
organizational and learning activities is the mainfactor behind
technical change and economic growth. Buildingon Lucas (1978) and Kihlstrom and Laffont (1979), in thispaper I offer evidence that the amount of working time spentby small business owners in entrepreneurial activities affectsthe performance of the business and reveals their entrepreneurialtalent. The intuition is that it is reasonable to allocate
more of our time to those activities where we realize we aremore productive. As actual consumption choices revealconsumer preferences, the varying entrepreneurial content ofthe activities performed is a signal of an individual’s abilityas entrepreneur. The results obtained suggest that the allocationof working time by small business owners: (a) throwslight on their behavioral patterns; (b) is related to the owner’shuman capital and to firm size; and (c) has asignificantcorrelation with business performance. The main finding ofmy analysis, confirming previous studies on this topic, is that
education is an important part of entrepreneurial humancapital. Moreover, the latter is the main factor that can sustainsmall firms’ competitiveness in a globalizing economy.
The entrepreneur is at the same time one of the mostintriguing and one of the most elusive characters in the castthat constitutes the subject of economic analysis (Baumol,
1965, p. 64).
1. Introduction
The use of time is the main determinant ofincome and welfare over an individual’s entirelife. Analogously, a society’s choices on howto allocate time among leisure, education andwork and the distribution of working time in applicationscharacterized by different returns arethe main factors behind technical change andeconomic growth.Individual preferences dictate how much timewe wish to devote to leisure, to improving ourinnate ability through education and training, toworking as an employee or for oneself. Theresulting allocation of time determines the demandand supply for different categories of commodities
and human capital, the returns to variousoccupations and, among the latter, the reward toentrepreneurial human capital, i.e. entrepreneurial
talent.Analytical interest in the entrepreneur and thenature of his reward dates back, at least,1 toSchumpeter (1936) and Knight (1965). Since then,the debate on the social function of entrepreneurs
in market economies and the nature of entrepreneurialtalent hasattracted the interest of manyscholars in different fields.2 The emphasis has
varied across authors and over time, focusingeither on entrepreneurs’ social role or on theirindividual characteristics. More recently, the
theory of endogenous growth has stressed theessential role of entrepreneurship in economicdevelopment (Iyigun and Owen, 1999) and thepossible distortions of inefficient allocationof entrepreneurial talent (Murphy et al., 1991;Baumol, 1990).
Yet, this interest has not translated i
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