Understanding the Size and Profitability of Firms: The Role of a Biological Factor

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dc.contributor.author GUISO, Luigi
dc.contributor.author RUSTICHINI, Aldo
dc.date.accessioned 2011-02-07T13:04:43Z
dc.date.available 2011-02-07T13:04:43Z
dc.date.issued 2011-01-01
dc.identifier.issn 1725-6704
dc.identifier.uri http://hdl.handle.net/1814/15642
dc.description We thank for helpful comments Fabiano Schivardi and seminar participants at the European University Institute,the Einaudi Institute for Economics and Finance, University of California Los Angeles, University College London, the conference New directions in applied microeconomics, NYU-Villa la Pietra. en
dc.description.abstract We collect information on prenatal testosterone in a large sample of entrepreneurs by measuring the length of their 2th to 4th fingers in face to face interviews. Entrepreneurs with higher exposure to prenatal testosterone (lower second to fourth digit ratio) manage larger firms, are matched with larger firms when acquire control and experience faster average growth over the years they manage the firm. We also find that prenatal testosterone is correlated with elicited measures of entrepreneurial skills such as ability to stand work, and the latter are correlated with firm size. This evidence suggests entrepreneurial skills have a biological component and is consistent with models of the size distribution of firms based on entrepreneurial ability. However, firms run by high-testosterone entrepreneurs have lower profitability as measured by return on assets. We offer evidence that this is because the same biological factor that enhances entrepreneurial skills also induces empire building preferences, which leads high-testosterone entrepreneurs to target a firm size that exceeds the profit maximizing value. en
dc.description.sponsorship Aldo Rustichini acknowledges financial support of the ESRC grant RES-062-23-1385 en
dc.language.iso en en
dc.relation.ispartofseries EUI ECO en
dc.relation.ispartofseries 2011/01 en
dc.subject Firm size distribution en
dc.subject Entrepreneurial success en
dc.subject Digit ratio en
dc.subject L26 en
dc.subject L21 en
dc.subject L25 en
dc.subject D22 en
dc.title Understanding the Size and Profitability of Firms: The Role of a Biological Factor en
dc.type Working Paper en
dc.neeo.contributor GUISO|Luigi|aut|EUI70005
dc.neeo.contributor RUSTICHINI|Aldo|aut|
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