Competitiveness of entrepreneurs and salaried workers

Abstract

We measure the willingness to compete of entrepreneurs and salaried workers in an experiment. Participants can choose between a piece-rate and a tournament scheme either in private or in public. We find that in the private condition entrepreneurs are less competitive than salaried workers, but that in the public condition this ordering is reversed. Survey data suggest that perceived norms of appropriate behavior, along with beliefs about the instrumental value of competitiveness for professional success, can explain why entrepreneurs are more competitive when decisions are publicly observable. We also find that the latter condition improves the quality of experimental decisions.