Enhancing simulation-based theory development in entrepreneurship through statistical validation

Recent research has called for new theory development because variables in entrepreneurship have been shown to follow power laws. Usually, simulation is used to validate these new theories. However, validation has been insufficient because it fails to provide a quantitative comparison of distribution parameters. This neglect can cause misleading conclusions. To address this insufficiency, we contribute a four-step method: the possible simulation parameter range (PSPR). The fundamental advantage of the method is to compare distribution parameters of both empirical data and simulation results. We demonstrate the method's usefulness with an illustrative example.