|
on Entrepreneurship |
| By: | Mark Sanders; Utz Weitzel |
| Abstract: | Entrepreneurship is generally regarded as a force of change, innovation and development in modern economies. Entrepreneurs bring new and better products to markets, restore allocative efficiency through arbitrage and reinvest their profits. However, as Baumol (1990), Mehlum et al. (2003) and Acemoglu (1995) have argued, the same energy and talent can also be allocated to unproductive ends and reduce total welfare. In this paper we present a model that analyzes the allocation of a given entrepreneurial talent over destructive and productive activities. We show that in this model two stable equilibria can emerge. As Baumol (1990) hypothesized, institutions determine the pay-offs to both types of entrepreneurial activity and hence drive this allocation. But we also show that the distribution of initial wealth and entrepreneurial talent plays a decisive role. This analysis provides a different perspective on the importance of high quality institutions in developing countries and sheds light on the situation in conflict and post-conflict countries, where both informal and formal institutions arguably have broken down. Under such circumstances, our analysis shows that micro credits can support the transition to a productive equilibrium, because they help to overcome credit contraints without creating incentives for destructive entrepreneurship. |
| Keywords: | growth, development, entrepreneurship, innovation, occupational choice |
| JEL: | O1 L26 P00 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0936&r=ent |
| By: | Nabamita Dutta (Department of Economics, University of Wisconsin-La Crosse); Sanjukta Roy (Department of Economics, West Virginia University); Russell S. Sobel (Department of Economics, West Virginia University) |
| Abstract: | Entrepreneurship is the main engine of economic growth and prosperity. Previous research has explored both the factors that make individuals more likely to be entrepreneurs and the economic policies that foster entrepreneurial activity. In this paper we explore, for the first time, the relationship between media freedom and entrepreneurial activity. A free press might increase entrepreneurial activity because it increases the flow of ideas and information, leading to both more new discoveries as well as an easier ability for entrepreneurs to market and sell new products and innovations. |
| Keywords: | Entrepreneur; Entrepreneurship; Media Freedom; Institutions |
| JEL: | L26 L82 O43 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:wvu:wpaper:09-12&r=ent |
| By: | Bögenhold, Dieter; Fachinger, Uwe |
| Abstract: | Topic of the paper is the development of professional self-employment during the last decades in Germany. The discussion is divided into a theoretical and an empirical section. The first theoretical part deals with the term entrepreneurship and asks for its overlapping with categories of self-employment and of innovation. Although these terms cover only partially the same meanings, political discourse often equals the slogan to foster entrepreneurship and innovation with an increase of self-employment. The second section of the paper is concerned with concrete investigation of development patterns of occupational self-employment since the beginning of the 1990th until 2006 based upon microcensus data for Germany. First of all, the overall increase of self-employment becomes visible but the principle lines hide further fundamental structural changes. A majority of those „new“ self-employed people belongs into the category of solo-self-employment and micro firms without further employees. An equation of entrepreneurship with innovation activities and in-creasing self-employment ratios falls too short and is problematic with respect to discussion on economic policy needs to increase growth. Differentiation for regions, economic sectors and gender offers a picture which is contradictory and which does not correspond with some causal explanations as found conventionally. |
| Keywords: | self-employment; entrepreneurship; professionals; development; Germany |
| JEL: | J44 J23 R23 |
| Date: | 2009–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19245&r=ent |
| By: | Mendonça, Joana; Grimpe, Christoph |
| Abstract: | The question whether agglomeration externalities arise either from specialization or diversification of economic activity has since long been a major topic in the analysis of factors determining economic growth. In this paper we analyze whether a more specialized or a more diverse skill composition of labor in regions affects the level of new firm entries in general as well as in technology- and knowledge-intensive subsectors. We compare Germany and Portugal which exhibit, though EU member states, different institutional infrastructures for entrepreneurship. Based on a harmonized dataset, our results indicate that the skill composition has different effects on firm entry in the two countries. More specifically, for Portugal the specialization of skills has a positive effect on the level on new firm entry in all sectors. In contrast to this, our results for Germany reveal exactly the opposite effect. These results suggest that both specialization and diversity theories hold, and that the effect thus may depend on other more local and regional factors. -- |
| Keywords: | Entrepreneurship,skill composition,regional analysis,comparative study |
| JEL: | J24 L26 O57 R11 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:09060&r=ent |
| By: | Andrea Weber; Christine Zulehner |
| Abstract: | In this paper we investigate the relationship between females among the first hires of start-up companies and business success. Our results show that firms with female first hires have a higher share of female workers at the end of the first year after entry. Further, we find that firms with female first hires are more successful and stay longer in the market. We conclude that our results support the hypothesis that gender-diversity in leading positions is an advantage for start-up firms. |
| Keywords: | Firm survival, profitability, female employment, discrimination, market test, matched employer-employee data |
| JEL: | J16 J71 L25 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2009_28&r=ent |
| By: | Andrea Weber; Christine Zulehner |
| Abstract: | According to Becker's (1957) famous theory on discrimination, entrepreneurs with a strong prejudice against female workers forgo profits by submitting to their tastes. In a competitive market their firms lack efficiency and are therefore forced to leave. We present new empirical evidence for this prediction by studying the survival of startup firms in a large longitudinal matched employer-employee data set from Austria. Our results show that firms with strong preferences for discrimination, i.e. a low share of female employees relatively to the industry average, have significantly shorter survival rates. This is especially relevant for firms starting out with female shares in the lower tail of the distribution. They exit about 18 months earlier than firms with a median share of females. We see no differences in survival between firms at the top of the female share distribution and at the median, though. We further document that highly discriminatory firms that manage to survive submit to market powers and increase their female workforce over time. |
| Keywords: | Firm survival, profitability, female employment, discrimination, market test, matched employer-employee data |
| JEL: | J16 J71 L25 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0146&r=ent |
| By: | Francesco Columba (Bank of Italy); Leonardo Gambacorta (Bank for International Settlements); Paolo Emilio Mistrulli (Bank of Italy JEL classification: D82, G21, G30, O16) |
| Abstract: | A large body of literature has shown that small firms experience difficulties in accessing the credit market due to informational asymmetries. Banks can overcome these asymmetries through relationship lending, or at least mitigate their effects by asking for collateral. Small firms, especially if they are young, have little collateral and short credit histories, and thus may find it difficult to raise funds from banks. In this paper, we show that even in this case, small firms may improve their borrowing capacity by joining Mutual Guarantee Institutions (MGI). Our empirical analysis shows that small firms affiliated to MGIs pay less for credit compared with similar firms. We obtain this result for interest rates charged on loan contracts which are not backed by mutual guarantees. We then argue that our findings are consistent with the view that MGIs are better at screening and monitoring opaque borrowers than banks are. Thus, banks benefit from the willingness of MGIs to post collateral since this implies that firms are better screened and monitored. |
| Keywords: | credit guarantee schemes, joint liability, microfinance, peer monitoring, small business finance |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_735_09&r=ent |
| By: | Verena Eckl; Michael Rothgang; Friederike Welter |
| Abstract: | In this paper, we evaluate the success of publicly supported business start-ups by comparing the outcomes of various support measures. Our question is: do business starter get what they need? Since we do not know the needs of the founders we analyse (1) who received which kind of support (financial support, individual coaching, general information) and (2) which kind of support is successful for whom with regard to his/her job history (employed, unemployed or being not part of the job market). While start-up measures possibly could aim at different kinds of eff ects, our focus is on the effect on subsequent firm growth. The analysis is based on a survey conducted in 2005. The sample was drawn from a highly heterogeneous population of business start-ups. By using propensity score exact matching for success measurement we try to capture those differences. |
| Keywords: | Business start-ups, public policy, public support, matching |
| JEL: | J23 M13 C14 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0143&r=ent |
| By: | Esteban Jaimovich; Juan Pablo Rud |
| Abstract: | We propose an occupational choice model in which the quality of the state bureaucracy influences aggregate output and the level of entrepreneurial activity through its participation in the labour market. Skilled agents differ in terms of their public service motivation: if agents with low public mission become bureaucrats, they will use their position to rent seek, by employing an excessive number of unskilled workers. This generates an upwards pressure on wages, which lowers profits and deters entrepreneurship. A better equilibrium results when public service motivated agents self-select into the state bureaucracy, since they exert high effort and employ a limited number of workers. The model also shows that the working class might optimally choose to vote for an inefficient public sector. We provide evidence supporting the mechanism in our model by confronting some of its main predictions to a variety of data sources. |
| Keywords: | Occupational Choice, Public Service Motivation, Political Economy |
| JEL: | O10 J24 H11 H83 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:118&r=ent |
| By: | A. SEGHERS; S. MANIGART; T. VANACKER |
| Abstract: | This paper examines how entrepreneurs’ human and social capital influence their knowledge of finance alternatives. For this purpose, we use survey data from 125 Belgian start-ups. Results demonstrate that entrepreneurs with a business education and entrepreneurs with experience in accountancy or finance have a broader knowledge of finance alternatives. Having a strong network in the financial community further enhances the knowledge of finance alternatives. However, more generic human capital has almost no impact on the knowledge of finance alternatives. Overall, this study demonstrates how not only supply-side factors, but also demand-side factors may constrain entrepreneurs in their search for finance. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:09/617&r=ent |
| By: | George Norman; Lynn Pepall; Dan Richards |
| Abstract: | We develop a model of innovation in which entrepreneurs develop a new (differentiated) product market that is subsequently exploited by a well-established firm that "stretches" its brand to enter a new market as "fast second". In this setting, there is a positive externality to the pioneering efforts of the intitial entrants that may well increase with the number of such entrants. We develop a model that exhibits this externality and use it to evaluate the design of patent policy--specifically patent breadth--with a view to encouraging the optimal amount of initial entry. |
| Keywords: | fast second, product differentiation, contestability |
| JEL: | L5 O25 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:tuf:tuftec:0745&r=ent |
| By: | Emanuel Shachmurove (Emanuel Shachmurove, Esq.); Yochanan Shachmurove (Department of Economics, University of Pennsylvania) |
| Abstract: | This paper examines venture capital investment activity in the United States during the period 1995 to the first quarter 2009, taking into consideration both location and industry sector. The research question is whether industry and region are important factors in determining venture capital investment. Furthermore, the paper explores the effects of macroeconomic variables on investment activity. Consequently, the venture capital data are augmented by Gross Domestic Product (GDP), Federal Funds Rate, three, five and ten year interest rates. By examining long term trends, the effect of the current economic crisis on venture capital investment may be better understood. |
| Keywords: | Venture Capital; Economic Geography; Location; Biotechnology; Business Products and Services; Computers and Peripherals; Consumer Products and Services; Electronics and Instrumentation; Financial Services; Healthcare Services; Industrial and Energy; Information Technology Services; Media and Entertainment; Medical Devices and Equipment; Networking and Equipment; Retailing and Distribution; Semiconductors; Software; Telecommunications |
| JEL: | C12 D81 D92 E22 G12 G24 G3 M13 M21 O16 O3 |
| Date: | 2009–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:09-042&r=ent |
| By: | Thorsten V. Braun (University of Augsburg, Department of Economics); Sebastian Krispin (University of Augsburg, Department of Economics); Erik E. Lehmann (University of Augsburg, Department of Economics) |
| Abstract: | Gaining access to technologies, competencies, and knowledge is observed as one of the major motives for corporate mergers and acquisitions. In this paper we show that a knowledge-based firm’s probability of being a takeover target is influenced by whether relevant specific human capital aimed for in acquisitions is directly accumulated within a specific firm or is bound to its founder or manager owner. We analyze the incentive effects of different arrangements of ownership in a firm’s assets in the spirit of the Grossman-Hart-Moore incomplete contracts theory of the firm. This approach highlights the organizational significance of ownership of complementary assets. In a small theoretical model we assume that the entrepreneur’s specific human capital, as measured by the patents they own, and the physical assets of their firm are productive only when used together. Our results show that it is not worthwhile for an acquirer to purchase the alienable assets of this firm due to weakened incentives for the initial owner. Regression analysis using a hand collected dataset of all German IPOs in the period from 1997 to 2006 subsequently provides empirical support for this prediction. This paper adds to previous research in that it puts empirical evidence to the Grossman-Hart-Moore framework of incomplete contracts or property rights respectively. Secondly, we show that relevant specific human capital that is accumulated by a firm’s founder or manager owner significantly decreases that firm’s probability of being a takeover target. |
| Keywords: | ownership structure, property rights, mergers & acquisitions |
| JEL: | G32 D23 G34 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0307&r=ent |
| By: | Emanuel Shachmurove (Emanuel Shachmurove, Esq.); Yochanan Shachmurove (Department of Economics, University of Pennsylvania) |
| Abstract: | Public concern over global climate change, resource depletion, and environmental degradation has amplified over the last several years, leading to increased demand for environmentally friendly products. Additionally, the price of Clean-Technology products has fallen. This paper examines venture capital investment in the Clean-Technology industry of the U.S. in 1995-2008. The paper explores the effects of macroeconomic variables, national venture capital investment and geography on Clean-Technology investment. The conclusion indicates the importance of geographical location in affecting Clean-Technology investment. A weak correlation between national venture capital and Clean-Technology investments raises the possibility of a more diversified investment portfolio. |
| Keywords: | Venture Capital; Clean-Technology Industry; Economic Geography; Location; Environmental Economics; Sustainability; Industrial Sector |
| JEL: | C12 D81 D92 E22 G12 G24 G3 M13 M21 O16 O3 |
| Date: | 2009–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:09-043&r=ent |
| By: | Aureo de Paula (Department of Economics, University of Pennsylvania); Jose A. Scheinkman (Department of Economics, Princeton University) |
| Abstract: | We test implications of a simple equilibrium model of informality using a survey of 48,000+ small firms in Brazil. In the model, agent's ability to manage production differ and informal firms face a higher cost of capital and limitation on size, although these informal firms avoid tax payments. As a result, informal firms are managed by less able entrepreneurs, are smaller and employ a lower capital-labor ratio. When education is an imperfect proxy for ability, the model predicts that the interaction of the manager's education and formality is positively correlated with firm size. Using the model, we estimate that informal firms in our dataset faced at least 1.3 times the cost of capital of formal firms. |
| Keywords: | Informal Sector, Tax Avoidance, Brazil |
| JEL: | H2 H3 K4 |
| Date: | 2009–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:09-044&r=ent |