The Entrepreneurial Adjustment Process in Disequilibrium

Arbeitspapier

The main contribution of entrepreneurship theory to economics is to provide an account of market performance in disequilibrium but little empirical research has examined firm entry and exit in this context. We redress this by modelling the interrelationship between firm entry and exit in disequilibrium. Introducing a new methodology we investigate whether this interrelationship differs between market ‘undershooting’ (the actual number of firms is below the equilibrium number) and ‘overshooting’ (vice versa). We find that equilibrium-restoring mechanisms are faster in over than in undershoots. The results imply that in undershoots a lack of competition between incumbent firms contributes to restoration of equilibrium (creating room for new-firm entry) while in overshoots competition induced by new firms (in particular strong displacement) helps restore equilibrium.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 09-005/3

Classification and Topics

• Classification: Wirtschaft ; Current Heterodox Approaches: General ; Labor Economics: General ; Industrial Organization: General ; Entrepreneurship
• Subject: entry ; exit ; equilibrium ; industrial organization ; undershooting ; overshooting ; Unternehmensgründung ; Unternehmenserfolg ; Marktaustritt ; Entrepreneurship-Ansatz ; Schätzung ; Einzelhandel ; Niederlande

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Burke, Andrew ; van Stel, André
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/86899
• Last update: 10.03.2025, 11:42 AM CET