Understanding the size and profitability of firms: The role of a biological factor

Luigi Guiso, Aldo Rustichini

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

In a large sample of entrepreneurs, 2D:4D (second-to-fourth digit) ratio and managerial performance are studied. Entrepreneurs with lower ratio manage larger firms, manage larger firms when acquire control and experience faster average growth. Firms run by high prenatal testosterone entrepreneurs have lower profitability as measured by return on assets and return on sales. Prenatal testosterone is correlated with elicited measures of entrepreneurial skills, like work effort and optimism and the latter are correlated with firm size. This evidence suggests entrepreneurial ability has a biological component and is consistent with models of the size distribution of firms based on entrepreneurial ability.

Original languageEnglish (US)
Pages (from-to)65-85
Number of pages21
JournalResearch in Economics
Volume72
Issue number1
DOIs
StatePublished - Mar 2018

Keywords

  • Digit ratio
  • Entrepreneurial success
  • Firm size distribution

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