New Firm Creation and Failure: A Matching Approach

We propose that the rate of creation and failure of new firm start-ups can be modelled as a search and matching process, as in labor market matching models. Deriving an "entrepreneurial" Beveridge curve, we show that a successful start-up depends on the efficiency with which entrepreneurial ability is matched with business opportunity, and outline a number of possible applications of this matching approach to assist in formalizing the economics of entrepreneurship.