Entrepreneurship and the process of firms' entry, survival and growth

This survey article aims at critically discussing the recent literature on firm formation and survival and the growth of new-born firms. The basic purpose is to single out the microeconomic entrepreneurial foundations of industrial dynamics (entry and exit) and to characterise the founder's ex - ante features in terms of likely ex-post business performance. The main conclusion is that entry of new firms is heterogeneous with innovative entrepreneurs being found together with passive followers, over-optimist gamblers and even escapees from unemployment. Since founders are heterogeneous and may make “entry mistakes, ” policy incentives should be highly selective, favouring nascent entrepreneurs endowed with progressive motivation and promising predictors of better business performance. This would lead to the least distortion in the post-entry market selection of efficient entrepreneurs.