Michael Pelz

2016

In a recent paper Crawford et al. (2015) have challenged the very-deeply embedded assumption of normal (i.e. Gaussian) distributions in entrepreneurship by statistically testing 49 variables of interest. Their findings that entrepreneurial variables should be assumed to follow a Power law (PL) distribution unless proven otherwise, calls for the development of new theories, that hit the target of PL distributions. In order to meet the need, this paper provides one of the first steps towards new theory development in entrepreneurship. The developed theories explain how the PL distribution of the variables Venture Debt and Number of Employees can emerge and therefore theoretically motivate the underlying generative mechanisms preferential attachment and multiplicative processes that yield PL distributions. Further, this paper offers a more-in-depth statistical analysis of the variables. This analysis contains a statistical comparison between the heavy-tailed alternative distributions. Its results provide support for the PL hypothesis of the observed variables and legitimize the development of theories based on generative mechanisms that yield PL distribution.