From Pre-Firm to Firm: How Influence among Potential Employees Affects Entrepreneurial Decision

This paper examines a pre-firm environment where agents who are potentially to become employees of a firm exert influence over one another. I argue that the manner in which they do so and the level of information an entrepreneur has on the agents' influence affects what is the most and least desirable situation for the latter. In examining this issue I take a network-theoretic approach based on the DeGroot (1974) model of learning in a network. The most and least desirable networks for the entrepreneur under each scenario are examined; the results are simple and depend directly on the ability of the entrepreneur to exert informed control over the influential agents.