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on Entrepreneurship |
| By: | Norbäck, Pehr-Johan; Persson, Lars; Svensson, Roger |
| Abstract: | We develop a theory of innovation for entry and sale into oligopoly, and show that an invention of higher quality is more likely to be sold (or licensed) to an incumbent due to strategic product market effects on the sales price. Preemptive acquisitions by incumbents are shown to stimulate the process of creative destruction by increasing the entrepreneurial effort allocated to high-quality invention projects. Using data on patents granted to small firms and individuals, we find evidence that high-quality inventions are sold under bidding competition. Asymmetric information problems are shown to be solved by verification through entry for sale. |
| Keywords: | Acquisitions; Entrepreneurship; Innovation; Ownership; Patent; Start-ups |
| JEL: | G24 L1 L2 M13 O3 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8281&r=ent |
| By: | Feng, Xunan (Shanghai Jiaotong University); Johansson, Anders C. (China Economic Research Center); Zhang, Tianyu (The Chinese University of Hong Kong) |
| Abstract: | This paper examines the value of political participation by private entrepreneurs in China. Using a unique sample of all initial public offerings by entrepreneurial firms during 1994-2007 and political participation by the controlling entrepreneurs, we test the hypothesis that firms with entrepreneurs who participate in politics are able to exploit rent-seeking opportunities that normal firms do not have access to. We document that the long-run stock performance after the IPO of firms controlled by entrepreneurs who participate in politics is superior to that of common entrepreneurial firms. Our results also show that political participation has a significant positive effect on change in operating performance and a negative effect on first-day returns. Moreover, we find that economic development and local institutions are important for this value effect. The difference in performance is even larger in regions characterized by more abundant rent-seeking opportunities, indicating that the value effect of political participation likely originates from rent seeking. This finding is consistent with the hypothesis that political participation facilitates entrepreneurs’ rent seeking. |
| Keywords: | Political participation; Entrepreneurial firms; Corporate governance; Initial public offerings; China |
| JEL: | G30 G32 G34 P48 |
| Date: | 2011–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hacerc:2011-017&r=ent |
| By: | Bruno, Randolph; Bytchkova, Maria; Estrin, Saul |
| Abstract: | We analyse a micro-panel data set to investigate the effect of regional institutional environment and economic factors on Russian new firm entry rates across time, industries and regions. The paper builds on novel databases and exploits inter-regional variation in a large number of institutional variables. We find entry rates across industries in Russia are not especially low by international standards and are correlated with entry rates in developed market economies, as well as with institutional environment and firm size. Furthermore, industries that, for scale or technological reasons, are characterised by higher entry rates experience lower entry within regions affected subject to political change. A higher level of democracy enhances entry rates for small sized firms but reduces them for medium or large ones. |
| Keywords: | democracy; entry rate; institutions |
| JEL: | L26 P31 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8283&r=ent |
| By: | Carlos Bozzoli (German Institute of Economic Research); Tilman Brück (German Institute of Economic Research); Nina Wald (German Institute of Economic Research) |
| Abstract: | Many Colombians are confronted with the ongoing conflict which influences their decision making in everyday life, including their behaviour on labour markets. This study focuses on the impact of violent conflict on self-employment, enlarging the usual determinants by a set of conflict variables. In order to estimate the effect of conflict on selfemployment, we employ fixed effects estimation. Three datasets are combined for estimation: the Familias en Acción dataset delivers information about individuals, a second dataset contains different indicators of the Colombian conflict on the municipality level and the third dataset includes taxes to measure a municipality’s economic situation. Our results show that high homicide and displacement rates at the community of origin reduces self-employment while a high influx of displaced increases the probability of self-employment at the municipality of destination. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:hic:wpaper:82&r=ent |
| By: | Tanguy Bernard; Stefan Dercon; Alemayehu Seyoum Taffesse |
| Abstract: | Fatalism is considered pervaisve, not leaste within many poor communities. In this paper, we explore whether 'fatalistic' beliefs have implications for the attitudes and behaviour of poor rural households towards investment in the future. We first explore the idea of fatalos, drawing inspiration from theories in psychology focusing on the role of locus of control and self-efficacy, and from the theoretical framework of aspiration failure as developed in recent economic literature. using survey data from rural Ethiopia, we find evidence of fatalistic beliefs among a substantial group of rural households, as well as indicators consistent withy a small aspiration gap and low self-efficay. We also find that such beliefs consistently correlate with lower demand for credit, in terms of loan size, repayment horizon and productive purposes. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2011-03&r=ent |
| By: | Auriol, Emmanuelle; Flochel, Thomas; Straub, Stéphane |
| Abstract: | A model of entrepreneurial choices in an economy with a corrupt public procurement sector is built, providing predictions along two main dimensions. First, corruption is more frequent in sectors where public institutions are large buyers. Second, firms favoured with corrupt contracts enjoy extra returns, so that procurement related activities attract the best entrepreneurs. A large scale microeconomic database, including all public procurement operations over a 4 year period in Paraguay, amounting annually to approximately 6% of the country’s GDP, is then used to corroborate these predictions. |
| Keywords: | Corruption; Development; Procurement; Rent-seeking |
| JEL: | D72 D73 H57 O5 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8282&r=ent |
| By: | Michaelides, Marios; Benus, Jacob |
| Abstract: | This paper presents new evidence on the efficacy of self-employment training programs using data from Project GATE (Growing America Through Entrepreneurship). Project GATE was an experimental design demonstration program that offered free self-employment training to a random sample of individuals who expressed a strong interest in self-employment. Our analyses show that the program was very effective in assisting unemployed participants start their own business, leading to significant gains in self-employment and overall employment in the early months following program participation. These impacts, however, dissipated over time. Despite the program’s impact on the rapid reemployment of unemployed participants, the program did not lead to significant gains in total earnings. Moreover, our analyses provide no evidence that the program was effective for participants who were employed, self-employed, or not in the labor force at the time of application. |
| Keywords: | self-employment; small business; unemployment; workforce development; SEA; Project GATE |
| JEL: | H4 J6 L2 |
| Date: | 2010–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20883&r=ent |
| By: | Giorgio Albareto (Bank of Italy); Paolo Mistrulli (Bank of Italy) |
| Abstract: | In this paper, we test whether micro firms run by migrants pay more for credit than firms run by natives and whether the differences in the cost of credit for these two groups of entrepreneurs decrease as the informational and cultural gaps narrow. We employ a large and unique data set providing us with detailed information on each overdraft loan granted by banks to sole proprietorships based in Italy. We find that migrants pay, on average, almost 70 basis points more for credit than natives. The interest rate differential is lower for entrepreneurs born in Italy whose parents were natives of other countries (“second generation” migrants) and for migrants whose parents were natives of Italy (“Italian migrants”). These results suggest that cultural differences may matter for the functioning of the credit market. A lengthening of credit history reduces the interest rate differential between the two types of entrepreneurs. Finally, we find that both increases in the size of the migrant community and improvements in banks’ ability to deal with cultural diversity help narrow the interest rate differential between migrant and Italian entrepreneurs. |
| Keywords: | migration, bank lending, interest rates |
| JEL: | G21 J15 J71 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_794_11&r=ent |
| By: | Tilman Brück (German Institute of Economic Research); Fernanda Llussá (Universidade Nova de Lisboa); José Tavares (Universidade Nova de Lisboa) |
| Abstract: | We provide, for the first time, comparative evidence of the impact of various types of extreme events – natural disasters, terrorism, and violent conflicts – on the perceptions of entrepreneurs concerning some key entrepreneurial issues – such as fear of failure in starting a business venture, whether individuals expect that good opportunities are likely to emerge in the next six months, and the expected level of competition stemming from creating new ventures. The occurrence of extreme events is likely to be exogenous to the perceptions affecting it so that we can identify a causal link from events to entrepreneurs and their perceptions. Using individual-level data from 43 countries from the period 2002 to 2005, we find that neither indicator of the intensity of extreme events has a significant impact on entrepreneurial activity, when country characteristics are not controlled for. Once invariant country characteristics are taken into account, we find that Terrorist Attacks have a positive and significant impact on business creation, Natural Disasters have a positive and negative impact on entrepreneurial activity, and Violent Conflict has no significant effect. These results are consistent with differential impacts of extreme events on perception variables such as Fear of Failure, Expected Business Opportunities, and Expected Level of Competition. Our results suggest that extreme events, while costly at the aggregate level, may induce a positive response in terms of entrepreneurial activity in specific circumstances. There is hence scope for entrepreneurs, and policies supporting them, to create growth from the ruins of extreme events. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:hic:wpaper:87&r=ent |
| By: | Marcel Fafchamps; Matthias Schündeln |
| Abstract: | Combining data from the Moroccan census of manufcaturing enterprises with information from a commune survey, we test whether firm expansion is affected by local financial development. Our findings are consistent with this hypothesis: local bank availability is robustly associated with faster growth for small and medium-size firms in sectors with growth opportunities, with a lower likelihood of firm exit and a higher likelihood of investment. The findings also suggests a channel for the effect of the availability of financing in firm growth in our data, namely that access to credit was used to invest in labor saving technology. |
| Keywords: | manufacturing, credit constraint, firm size |
| JEL: | O16 L25 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2011-02&r=ent |
| By: | Daunfeldt, Sven-Olov (The Ratio Institute and Dalarna University); Elert, Niklas (The Ratio Institute and Dalarna University); Lang, Åsa (Dalarna University and Mid Sweden University) |
| Abstract: | Gibrat’s Law predicts that firm growth is a purely random effect and therefore should be independent of firm size. The purpose of this paper is to test Gibrat’s law within the retail industry, using a novel data-set comprising all Swedish limited liability companies active at some point between 1998 and 2004. Very few studies have previously investigated whether Gibrat’s Law seems to hold for retailing, and they are based on highly aggregated data. Our results indicate that Gibrat´s Law can be rejected for a large majority of five-digit retail industries in Sweden, since small retail firms tend to grow faster than large ones. |
| Keywords: | firm dynamics; firm size; firm growth; retail |
| JEL: | L11 L25 L81 |
| Date: | 2011–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0164&r=ent |
| By: | Raffaello Bronzini (Bank of Italy); Eleonora Iachini (Bank of Italy) |
| Abstract: | This paper contributes to the literature on the effectiveness of R&D incentives by evaluating a unique investment subsidy program implemented in northern Italy. Firms were invited to submit proposals for new projects and only those that scored above a certain threshold received the subsidy. We use a sharp regression discontinuity design to compare investment spending of subsidized firms just above the cut-off score with spending by firms just below the cut-off. For the sample as a whole we find no significant increase in investment as a result of the program. This overall effect, however, masks substantial heterogeneity in the program’s impact. On average, we estimate that small enterprises increased their investments by about the amount of the subsidy they received from the program, whereas for larger firms the subsidies appear to have had no additional effect. |
| Keywords: | research and development, investment incentives, crowding-out, regression discontinuity design |
| JEL: | R0 H2 L10 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_791_11&r=ent |