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

Luigi Guiso, Aldo Rustichini

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


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
Issue number1
StatePublished - Mar 2018

Bibliographical note

Funding Information:
We thank for helpful comments Ola Bengtsson, Jonathan Goldberg, Fabiano Schivardi and seminar participants at the European University Institute,the Einaudi Institute for Economics and Finance, IZA, University of California Los Angeles, University College London, University of Essex, the conference New directions in applied microeconomics, NYU-Villa la Pietra, the conference and the workshop on Entrepreneurship, firm growth and ownership change, IFN Stockholm. Aldo Rustichini acknowledges financial support of the ESRC grant RES-062-23-1385.

Publisher Copyright:
© 2017 University of Venice


  • Digit ratio
  • Entrepreneurial success
  • Firm size distribution


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