Allocation of entrepreneurial attention

Abstract Limited attention has been recognized by many economists as a scarce resource to be allocated among a given number of alternative uses. However, limited entrepreneurial attention is allocated between improving current operations and innovating new products, which increases the number of current operations and perhaps the demands on the entrepreneur's attention. The allocation of entrepreneurial attention thus endogenizes the number of uses to which attention can be allocated and the opportunity cost of attention. This allocation has implications for the relationships between innovation, firm size and monopoly profits, between firm size and firm growth and the organization of the firm.

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