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on Entrepreneurship |
| By: | Norbäck, Pehr-Johan; Persson, Lars |
| Abstract: | We construct a model where an entrepreneur could either innovate for entry or for sale. It is shown that increased product competition tends to increase the relative profitability of innovation for sale relative to entry. Increased competition reduces entrants' and acquirers' profits in a similar fashion, but also reduces the profit of non-acquirers. Therefore, incumbents' valuations of innovations are less negatively affected by increased competition than entrants' profits. This, in turn, implies that the incentive for innovation for sale can increase with increased competition. Finally, we show that a stricter, but not too strict, merger policy tends to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation, without reducing the total rents for innovations too much. |
| Keywords: | Antitrust; Competition; Competition Policy; Entrepreneurs; Innovations |
| JEL: | L13 L40 O31 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6823&r=ent |
| By: | Ximena Peña Parga; Camilo Mondragón-Vélez |
| Abstract: | We characterize entrepreneurship in developing economies through a case study for Colombia. We document self-employment and business ownership since the 1980s; while the relative size of these groups within the labor force is stable across time, they differ significantly in important observable dimensions such as education and business sector. We then study the motivations to become an entrepreneur. First, we analyze the transition into and out of potential forms of entrepreneurship by measuring the flows across occupations, and study the determinants of entry and exit into and out of self-employment and business ownership; there is surprisingly little transition between self-employment and business ownership. Second, we focus on the financial motivations by measuring the differences in earnings of self-employment and business ownership relative to salaried work, at the mean and along the distribution. There is a substantial earnings premium to become a business owner, but it is not financially attractive to become self-employed. The results of this paper suggest that while business ownership is what the literature associates with entrepreneurship, self-employment is basically a subsistence activity. |
| Date: | 2008–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:004672&r=ent |
| By: | Luca Colombo (DISCE, Università Cattolica); Herbert Dawid (Universität Bielefeld) |
| Abstract: | In this paper we examine in a game theoretic framework in how far market conditions facilitating start-up formation positively affect technical change and firms' profits. We consider a model in which R&D efforts of an incumbent firm generate technological know-how embodied in key R&D employees, who might use this know-how to form a start-up. Market conditions, in particular the availability of complementary assets, influence whether new firms are created and determine expected profits for start-up-founders. Easy availability of complementary assets has the direct effect that the generation of start-ups, which leads to the diffusion and duplication of know-how, is fostered. However, incentives of incumbent firms to invest in R&D might be reduced because of the increased danger of knowledge loss through spin-out formation. We fully characterize the effects of an increase in the availability of complementary assets, demonstrating that under certain market conditions the effects on innovative activities and industry profits can be negative. |
| Keywords: | Complementary Assets, Technical Change, R&D Effort, Startup |
| JEL: | L20 M13 O30 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie3:ief0080&r=ent |
| By: | David G. Blanchflower |
| Abstract: | n this paper I examine changes in self-employment that have occurred since the early 1980s in the United States. It is a companion paper to a recent equivalent paper that related to the UK. Data on random samples of approximately twenty million US workers are examined taken from the Basic Monthly files of the CPS (BMCPS), the 2000 Census and the 2006 American Community Survey (ACS). In contrast to the official definition of self-employment which simply counts the numbers of unincorporated self-employed, we also include the incorporated self-employed who are paid wages and salaries. The paper presents evidence on trends in self-employment for the US by race, ethnicity and gender. Evidence is also presented for construction which has self-employment rates roughly double the national rates and where there are strikingly high racial and gender disparities in self-employment rates. The construction sector is also important given the existence of public sector affirmative action programs at the federal, state and local levels directed at firms owned by women and minorities. I document the fact that disparities between the self-employment rates of white men and white women and minorities in construction narrowed in the 1980s, widened during the 1990s after the US Supreme Court's decision in Croson but then narrowed again since 2000 after a number of legal cases, which found such programs constitutional. Despite this substantial disparities remain, particularly in earnings. I also find evidence of discrimination in the small business credit market. Firms owned by minorities in general and blacks in particular are much more likely to have their loans denied and pay higher interest than is the case for white males. This is only partially explained by their lack of creditworthiness and is consistent with a finding of discrimination in the credit market by banks. |
| JEL: | J71 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13972&r=ent |
| By: | Ouidad Yousfi |
| Abstract: | We consider a double moral hazard model with three agents : The entrepreneur, the LBO fund and the bank. The entrepreneur and the LBO fund have to exert efforts in order to improve the productivity of their project ; efforts are not observable. We show that the payment of the bank decreases with the outcome of the project. When the project is not very risky, the entrepreneur and the LBO funds exert first best efforts and they get equal shares of the project outcome. When it is highly risky, they exert second best efforts. Debt gives high powered incentives to the two agents to provide efforts. Moreover, the entrepreneur prefers relying on the bank and the LBO fund to asking the latter for advice and money. When the LBO fund does not invest strictly positive amount into the project, efforts are less efficient than those exerted when all agents provide funds. |
| Keywords: | LBO, double moral hazard, debt, capital structure |
| JEL: | G23 G24 G32 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2008-17&r=ent |