Entrepreneurship working group.

• Position: Program and Working Group Meetings

The NBER's Working Group on Entrepreneurship met in Cambridge on October 3. Group Director Josh Lerner, of NBER and Harvard University, organized the meeting. These papers were discussed:

Luis Cabral, New York University, and Zhu Wang, Federal Reserve Bank of Kansas City, "Spin-Outs: Theory and Evidence"

Mark Doms, Federal Reserve Bank of San Francisco; Ethan Lewis, Dartmouth College; and Alicia Robb, University of California, Santa Cruz, "Local Labor Market Endowments, New Business Characteristics, and Performance"

Discussant: Bart Hamilton, Washington University

Larry Chavis, University of North Carolina at Chapel Hill; and Leora Klapper and Inessa Love, The World Bank, "Entrepreneurial Finance around the World: The Impact of the Business Environment on Financing Constraints"

James E. Rauch, University of California, San Diego and NBER, "Spinout Entrepreneurship, Crony Capitalism, and Development"

Discussant: Chris Woodruff, University of California, San Diego

Jerry G. Thursby, Georgia Institute of Technology, and Marie C. Thursby, Georgia Institute of Technology and NBER, "Faculty Participation in Licensing: Implications for Research"

Discussant: Lee Fleming, Harvard University

Ola Bengtsson, Cornell University, and Berk A. Sensoy, University of Southern California, "Investor Abilities and Financial Contracting: Evidence from Venture Capital"

Yael V. Hochberg, Northwestern University; Alexander Ljungqvist, New York University; and Annette Vissing-Jorgenson, Northwestern University and NBER, "Informational Hold-Up and Performance Persistence in Private Equity"

Discussant Morten Sorensen, Columbia University and NBER

Cabral and Wang develop a passive learning model of firm entry by spin-off:a firm's employees leave their employer and create a new firm when they learn that they are good entrepreneurs (type I spin-offs), or they learn that their employer's prospects are bad (type II spin-offs). Here, the theory predicts a high correlation between spin-offs and parent exit, especially when the parent is a low-productivity firm. This correlation may correspond to two types of causality: either spin-off causes firm exit (type I spin-offs) or firm exit causes spin-off (type II spin-offs). The authors test and confirm this and other predictions of the model on a unique dataset of the U.S. automobile industry. Finally, they discuss policy implications regarding "covenant not to compete" laws.

It is often asserted that a highly educated workforce...