nep-ent New Economics Papers
on Entrepreneurship
Issue of 2005‒02‒13
thirteen papers chosen by
Marcus Dejardin
Facultés Universitaires Notre-Dame de la Paix

  1. Entrepreneurship, Regional Development and Job Creation: the Case of Portugal By Rui Baptista; Paulo Madruga; Vitor Escaria
  2. Hold-Up Problems and Firm Formation By Gersbach, Hans; Haller, Hans
  3. Can Venture Capital Funds Pick Winners? Evidence from Pre-IPO Survival Rates and Post-IPO Performance By Ber, Hedva; Yafeh, Yishay
  4. A Flexible Economy? Entrepreneurship and Productivity in New Zealand By McMillan, John
  5. Self-Employment Dynamics Across the Business Cycle: Migrants vs Natives By Constant, Amelie; Zimmermann, Klaus F
  6. Explaining venture capital firms’ syndication behavior: A longitudinal study By D. DE CLERCQ; D. P. DIMOV
  7. The Theory of the Firm and Its Critics: A Stocktaking and Assessment By Nicolai J. Foss; Peter G. Klein
  8. Lobbying on Entry By Perotti, Enrico C; Volpin, Paolo
  9. Industry/University S&T Transfers: What Can We Learn From Belgian CIS-2 Data? By Capron, Henri; Cincera, Michele
  10. The Financing of Innovation: Learning and Stopping By Dirk Bergemann; Ulrich Hege
  11. Private Equity Investments and Disclosure Policy By C. BEUSELINCK; M. DELOOF; S. MANIGART
  12. Firm Size Dynamics of Industries: Stochastic Growth Processes, Large Fluctuations, and the Population of Firms as a Complex System By Daniel Teitelbaum and Robert Axtell, NuTech Solutions, Inc.
  13. Statistical models for company growth By Jean-Philippe Bouchaud; Matthieu Wyart

  1. By: Rui Baptista; Paulo Madruga; Vitor Escaria
    Abstract: This paper investigates whether a high level of new business formation in a region stimulates employment in that region. The study looks at the lag structure of these effects, using a data set covering a fairly large time span (1982-2002). The indirect supply-side effects of new firm births, whether due to greater competition, efficiency or innovation, seem to be at least as important as the direct effects associated with employment creation by the new entrants. However, such supply-side effects only occur after a time lag of about eight years, leading to a pattern of lagged effects that is somewhat u-shaped. This finding suggests that new entrants bring about improvements to overall regional competitiveness, but that such improvements only become significant after some time.
  2. By: Gersbach, Hans; Haller, Hans
    Abstract: Agents from a homogeneous population organize themselves into productive partnerships and are confronted with a hold-up problem when making relation-specific investments in those partnerships. The problem is mitigated if agents can leave a partnership in which they have invested, bear the costs yet forego the benefits of the investment, join another partnership, invest there anew, and appropriate the surplus created by the new investment. To capture the idea we introduce the notion of reinvestment-proof equilibria in which no agent has an incentive to reinvest or to change his investment in the current firm. We show that the presence of a small inefficient firm causes substantial efficiency gains in all larger firms.
    Keywords: efficient firm structure; firm formation; hold-up problem; reinvestment-proof equilibria
    JEL: D20 D60 L20
    Date: 2004–10
  3. By: Ber, Hedva; Yafeh, Yishay
    Abstract: This Paper evaluates the ability of venture capital funds to identify and bring to market successful high-tech Israeli companies during the period 1991 to 2000. Using a newly constructed and highly detailed database we find that: (1) The probability of survival until the IPO stage is higher for venture-backed companies. (2) According to several different measures, conditional on making an IPO, the post-listing performance of venture-backed companies is not statistically different from that of non-venture companies throughout the 1990s. We interpret this as evidence that an important contribution of the venture capital industry may be in increasing the survival rates of young technology-intensive firms, rather than in identifying high performers.
    Keywords: IPO; long-run performance; survival rate; venture capital
    JEL: G20 G30
    Date: 2004–10
  4. By: McMillan, John
    Abstract: This Paper (a) provides a framework for quantifying any economy’s flexibility, and (b) reviews the evidence on New Zealand firms’ birth, growth and death. The data indicate that, by and large, the labour market and the financial market are doing their job.
    Keywords: flexibility; O56; turnover
    JEL: D23 L11
    Date: 2004–09
  5. By: Constant, Amelie; Zimmermann, Klaus F
    Abstract: Economically active people are either in gainful employment, are unemployed or self-employed. We are interested in the dynamics of the transitions between these states across the business cycle. It is generally perceived that employment or self-employment are absorbing states. However, innovations, structural changes and business cycles generate strong adjustment processes that lead to fluctuations between employment and self-employment, directly or through the unemployment state. Migrants are more likely to be sensitive to adjustment pressures than natives, since they have less stable jobs and choose more often self-employment to avoid periods of unemployment. These issues are investigated using a huge micro data set generated from 19 waves of the German Socioeconomic Panel. The findings suggest that the conditional probabilities of entry into self-employment are more than twice as high from the status of unemployment as from the status of employment. Self-employment is also an important channel back to regular employment. Business cycle effects strongly impact the employment transition matrix, and migrants take a larger part in the adjustment process. They use self-employment as a mechanism to circumvent and escape unemployment and to integrate into the host country's labour market.
    Keywords: business cycle; entrepreneurship; Markov chain analysis; migration; self-employment
    JEL: E32 J23 J61 M13
    Date: 2004–11
  6. By: D. DE CLERCQ; D. P. DIMOV
    Abstract: Using a unique methodological approach, we examine factors related to venture capital firms’ (VCFs’) involvement in syndication. We argue that VCFs’ investment strategy matters in terms of the extent to which VCFs engage in syndication. We test several hypotheses pertaining to VCFs’ syndication behavior based on a longitudinal data set of realized strategies of 200 U.S.-based VCFs over a twelve-year period. Overall, we find support for both knowledge-based and financial arguments for why VCFs engage in syndication. We discuss our results and provide avenues for future research.
    Date: 2004–11
  7. By: Nicolai J. Foss; Peter G. Klein
    Abstract: Ever since its emergence in the 1970s the modern economic or Coasian theory of the firm has been discussed and challenged by sociologists, heterodox economists, management scholars, and other critics. This paper reviews and assesses these critiques, focusing on behavioral issues (bounded rationality and motivation), process (including path dependence and the selection argument), entrepreneurship, and the challenge from knowledge-based theories of the firm.
    Keywords: Coasian theory of the firm; Bounded rationality; Motivation; Entrepreneurship
    JEL: B4 D23 L14 L22
    Date: 2005
  8. By: Perotti, Enrico C; Volpin, Paolo
    Abstract: We develop a model of endogenous lobby formation in which wealth inequality and political accountability undermine entry and financial development. Incumbents seek a low level of effective investor protection to prevent potential entrants from raising capital. They succeed because they can promise larger political contributions than the entrants due to the higher rents earned with less competition. Entry and investor protection improve when wealth distribution becomes less unequal, and the political system becomes more accountable. Consistent with these predictions, in a cross-section of 38 countries we find that greater accountability is associated with higher entry in sectors that are more dependent on external capital and have greater growth opportunities. Also, higher accountability and lower income inequality are associated with more effective legal enforcement, even after controlling for legal origin and per-capita income.
    Keywords: entrepreneurship; entry; financial development; growth; income inequality; investor protection; politics
    JEL: G21 G28 G32
    Date: 2004–08
  9. By: Capron, Henri; Cincera, Michele
    Abstract: The second European Innovation Survey (CIS-2) provides information about different modes of interactions between innovative firms and other research institutions, in particular universities. These data are exploited to estimate an ordered probit model with sample selection of the role played by universities and other partners as a main source of new ideas for firms innovation activities as well as a GHK triprobit model to explore the role of firm and industry characteristics on formal and informal collaborative agreements between firms, universities and other research partners. The results suggest that the factors explaining the use of a particular source of information are not the same according to the type of sources. In a same vein, the determinants of industry collaborations with universities have a different impact when other partners are considered.
    Keywords: Belgian CIS-2; industry-university collaborations; innovation
    JEL: O32
    Date: 2004–11
  10. By: Dirk Bergemann (Yale University); Ulrich Hege (ESSEC Business School, CEPR)
    Abstract: This paper considers the financing of a research project under uncertainty about the time of completion and the probability of eventual success. We distinguish between two financing modes, namely relationship financing, where the allocation decision of the entrepreneur is observable, and arm's length financing, where it is unobservable. We find that equilibrium funding stops altogether too early relative to the efficient stopping time in both financing modes. The rate at which funding is released becomes tighter over time under relationship financing, and looser under arm's length financing. The trade-off in the choice of financing modes is between lack of commitment with relationship financing and information rents with arm's length financing.
    Keywords: Innovation, venture capital, relationship financing, arm's length financing, learning, time-consistency, stopping, renegotiation-proofness
    JEL: D83 D92 G24 G31
    Date: 2001–02
    Abstract: We investigate whether a firm’s disclosure policy is affected by the changing corporate setting and intensified corporate governance associated with private equity (PE) investments. For a unique sample of unquoted PE backed firms we observe a significant switch to increased financial disclosure in the pre-investment year, consistent with the hypothesis that entrepreneurs attempt to reduce information asymmetries inherent to the PE application by increasing their disclosure levels. Further, we document that the governance and professionalization impact of PE investors affects their portfolio firms’ financial disclosure positively. Finally, differentiating on investor type (government versus non-government related) reveals no overall effect on disclosure, both in the pre- as in the post-investment years. Results are robust to various sensitivity checks.
    Keywords: Disclosure, private equity, unlisted firms, monitoring, corporate governance
    JEL: G30 M10 M41
    Date: 2005–01
  12. By: Daniel Teitelbaum and Robert Axtell, NuTech Solutions, Inc.
    Abstract: Firm growth rates do not fit the often assumed normal distribution. As a result, there are more slow-growing firms, more fast-growing firms, and fewer mediumgrowing firms than are generally modeled by economists. This finding held for all industries analyzed and growth rates were unrelated to establishment size.
    Date: 2005
  13. By: Jean-Philippe Bouchaud (Science & Finance, Capital Fund Management; CEA Saclay;); Matthieu Wyart (CEA Saclay;)
    Abstract: We study Sutton's `microcanonical' model for the internal organisation of firms, that leads to non trivial scaling properties for the statistics of growth rates. We show that the growth rates are asymptotically Gaussian in this model, at variance with empirical results. We also obtain the conditional distribution of the number and size of sub-sectors in this model. We formulate and solve an alternative model, based on the assumption that the sector sizes follow a power-law distribution. We find in this new model both anomalous scaling of the variance of growth rates and non Gaussian asymptotic distributions. We give some testable predictions of the two models that would differentiate them further. We also discuss why the growth rate statistics at the country level and at the company level should be identical.
    JEL: G10

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