nep-ent New Economics Papers
on Entrepreneurship
Issue of 2005‒02‒27
four papers chosen by
Marcus Dejardin
Facultés Universitaires Notre-Dame de la Paix

  1. Growth, Uncertainty and Finance. By K Blackburn; D Varvarigos
  2. Do Firms Benefit from Multiple Banking Relationships?: Evidence from Small and Medium-Sized Firms in Japan By Masayo Shikimi (Tomiyama)
  3. On the Evolution of Size and Productivity in Transition: Evidence from Slovenian Manufacturing Firms By Saso Polanec
  4. Perfectly Competitive Innovation (Growth) By Michele Boldrin; David K Levine

  1. By: K Blackburn; D Varvarigos
    Abstract: We study the effects of uncertainty on long-run growth in two model economies, where households fund risky investment projects of entrepreneurs in the presence of financial market imperfections. Imperfections in the first model are due to asymmetric information which is resolved through costly state verification. In this case, some entrepreneurs may decide at the outset not to borrow and not to run projects. Imperfections in the second model are due to incomplete enforceability of loan contracts. In this case, all entrepreneurs are willing to borrow, but some of them may choose not to run projects, preferring to abscond with their loans, instead. We show that, in both cases, an increase in uncertainty increases the rate of interest on loans which increases the number of entrepreneurs who abstain from running projects. This reduces capital accumulation and growth. We also show that financial market frictions have similar effects, and that the effects of uncertainty disappear when these frictions are absent.
    Date: 2005
  2. By: Masayo Shikimi (Tomiyama)
    Abstract: This paper examines empirically the effects of multiple banking relationships on the cost and availability of credit. The analysis is based on an unbalanced panel data set for Japanese small and medium-sized firms over the period 2000-2002. The Hausman-Taylor estimator is used to allow for possible correlation between unobservable heterogeneity among firms and multiple banking relationships. The results suggest that the cost of credit is positively correlated with the number of banking relationships when the endogeneity of the banking relationships is considered. Multiple banking relationships have a positive effect on the availability of credit for financially constrained firms.
  3. By: Saso Polanec
    Abstract: This paper compiles a set of stylized facts on the evolution of Firm size and labor and total factor productivity distributions during the process of transition. These facts are based on the data for all Slovenian manufacturing firms active between 1994 and 2003. Stylized picture of transition can be summarized as follows. Initially, we can distinguish between two types of firms: small and on average more productive and large and on average less productive firms. Removal of institutional restrictions has spurred growth of small firms and entry of new firms on one hand and decline and exit of large firms on the other. These simultaneous shifts have transformed the shape of firm size distribution from bimodal into unimodal. While labor and total factor productivity distributions exhibit large right-hand shifts and lower heterogeneity over time, firm productivity rankings changed substantially. Smaller firms, which were initially more productive, exhibited lower productivity growth rates and thus gradually lost their advantage. Commonly held view of transition as a process of reallocation of resources from inefficient state to efficient private firms is at odds with our results of aggregate labor and total factor productivity decompositions. Almost half of aggregate labor productivity growth can be explained by within firm growth and the rest by reallocation. Our evidence suggests that within firm growth seems to be related to the process of technological catching up of less productivelarge firms. These stylized facts may give a wrong impression of transition being a deterministic process, while it is not. The process is stochastic and thus similar to those found for established market economies. Hence theoretical models of transition should reflect deterministic features that we outlined and preserve stochastic elements introduced in now standard models of industrial dynamics.
    Keywords: manufacturing, size, labor productivity, total factor productivity, catching up, distributions, transition
    JEL: L11 L16 L60
  4. By: Michele Boldrin; David K Levine
    Date: 2005–02–22

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