The empirical reality of entrepreneurship: How power law distributed outcomes call for new theory and method

Entrepreneurship researchers typically assume that normal (i.e., Gaussian) distributions characterize the outcomes of interest. Our research challenges this assumption by examining a sample of 6,530 firms to uncover the shape of the distribution for two key variables in entrepreneurial firms: number of employees and revenues. Results show highly skewed power law distributions. Future researchers need to recognize the relevance of power laws and extreme outcomes and then search for the underlying generative causes.