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on Entrepreneurship |
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Issue of 2005‒04‒03
eight papers chosen by Marcus Dejardin Facultés Universitaires Notre-Dame de la Paix |
| By: | Cécile Carpentier; Jean-Marc Suret |
| Abstract: | Several governments have designed tax incentive programs to promote small business finance, yet evidence of their efficiency is very scarce. This article analyzes the QBIC program, introduced in Quebec to help capitalize SME. Individual investors in holding companies that finance one or more small corporations receive substantial tax credits. First, the functioning of the program is analyzed in light of the fundamentals of the small business finance paradigm, in particular the adverse selection, agency cost and control aversion problems. Because the program design does not consider these dimensions, it putatively cannot fulfill its primary objective of attracting angels. Rather, it should mainly serve mediocre quality firms, whose subsequent performance should be weak. We analyze the ownership of all the QBICs accredited between 1998 and 2003, and the operating performance of the 83 financed companies for which accounting data were available. Our tests confirm each of our hypotheses. The program can hardly be considered as a success. In terms of public policy, the study concludes that poorly designed programs cannot attain the objective of promoting small business capitalization. <P>De nombreux gouvernements ont instauré des programmes fiscaux destinés à promouvoir le financement des petites et moyennes entreprises. Il existe toutefois très peu d’études de l’efficacité de ces initiatives. Nous analysons le programme de Société de placements dans l’entreprise québécoise (SPEQ), instauré au Québec pour améliorer la capitalisation des petites et moyennes entreprises. Les actionnaires de sociétés de portefeuille obtiennent d’importants crédits d’impôt lorsque ces sociétés financent des entreprises admissibles. Nous analysons en premier lieu le programme à la lumière des principes de base du financement des entreprises : l’asymétrie informationnelle, les problèmes d’anti-sélection et d’agence et la réticence à partager le contrôle. Comme le programme ne tient aucun compte de ces diverses dimensions, nous posons l’hypothèse qu’il ne permettra pas l’atteinte de l’objectif premier, qui était d’attirer des investisseurs providentiels dans l’actionnariat des entreprises. Nous supposons également que le programme devrait attirer principalement des entreprises de qualité médiocre, dont la performance après le placement sera faible. L’analyse de l’ensemble des SPEQ agréées entre 1998 et 2003 et des 83 sociétés financées pour lesquelles des données comptables sont accessibles permet de confirmer chacune de ces hypothèses. Le programme n’atteint pas ses objectifs et ne peut pas être considéré comme un succès. L’étude met en évidence l’importance de dessiner très soigneusement les programmes d’aide au financement des petites entreprises. |
| Keywords: | public policy, small business finance, tax incentives, business angels, politiques publiques, financement des petites entreprises, incitatifs fiscaux, investisseurs providentiels |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-13&r=ent |
| By: | QUELIN, Bertrand V.; CLAUDE-GAUDILLAT, Valérie (CERAM) |
| Abstract: | This paper investigates the case of market entry strategies following the introduction of a disruptive innovation. Recognizing that market entry strategies have been envisioned in the literature as a discrete phenomenon, we develop an empirical framework that portrays these strategies as a capability building process. These organizational modes are integrated into our model : acquisition, alliance, and market transaction. We compare the first two with the third one and we test our model in the setting of the online brokerage industry by using a sample of 897 moves made by 98 firms over a seven-year period (1994 to 2000). We built this dataset by collecting secondary data.By suggesting that the entry into a new industry is not a discrete phenomenon, our research should lead the path to additional research on this topic. |
| Keywords: | innovation; market entry; capabilities; firm's boundaries |
| JEL: | L22 L86 M10 |
| Date: | 2004–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:0805&r=ent |
| By: | Thorsten Beck; Asli Demirguc-Kunt; Ross Levine |
| Abstract: | This paper explores the relationship between the relative size of the Small and Medium Enterprise (SME) sector, economic growth, and poverty alleviation using a new database on the share of SME labor in the total manufacturing labor force. Using a sample of 45 countries, we find a strong, positive association between the importance of SMEs and GDP per capita growth. The data do not, however, confidently support the conclusions that SMEs exert a causal impact on growth. Furthermore, we find no evidence that SMEs alleviate poverty or decrease income inequality. |
| JEL: | O1 O2 L11 L25 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11224&r=ent |
| By: | Nyström, Kristina (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology) |
| Abstract: | This paper investigates the dynamics of firm entry and exit with a focus on differences between industrial sectors. The paper discusses how entry and exit rates in industrial sectors are affected by previous exit and entry rates. Economic theory presents two different approaches to how entry and exit of firms are interrelated to each other, the multiplier effect and the competition effect. This paper intends to investigate which force that is the predominant one. The empirical analysis is based on data for 25 Swedish manufacturing industries at the 2-digit SIC-level, for firms with more than five employees during the period 1991-2000. A dynamic panel data approach as suggested by Anderson and Hsio (1981) and Arellano and Bond (1991) are used in estimating the relationships. The empirical results find some evidence of the multiplier effect being the predominant effect explaining entry while competition effects are more important for explaining exit patterns. |
| Keywords: | Entry; exit; dynamic panel data |
| JEL: | C33 L10 |
| Date: | 2005–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0028&r=ent |
| By: | Hyeok Jeong; Robert M. Townsend |
| Abstract: | Total factor productivity (TFP) growth is measured as a residual and its sources typically remain unknown inside the residual. This paper aims to identify the underlying sources of this residual growth, being explicit about both micro underpinnings and transitional growth. The key forces are occupational choice and limited access to credit. We develop a method of growth accounting that decomposes not only the overall growth but also TFP growth into four components: occupational shifts, financial deepening, capital heterogeneity, and sectoral Solow residuals. Thus we explicitly evaluate the quantitative importance of micro impediments to trade such as credit constraint on aggregate growth dynamics, in particular the TFP dynamics. Applying this method to Thailand, which experienced rapid growth with enormous structural changes for the two decades between 1976 and 1996, we find that 73 percent of TFP growth can be explained on average by occupational shifts and financial deepening, without presuming exogenous technical progress. Expansion of credit is a major part of this explained TFP growth. The remainder TFP growth is related to the sectoral Solow residuals, which are determined by the endogenous interaction between the price dynamics of wage, interest rate, and profits and the evolution of wealth distribution. The nature of this interaction between price dynamics and wealth distribution depends on access to credit, and the di¤erences in measured TFP growth across subgroups di¤erentiated by any specific characteristics may reflect the varying degrees of limited access to credit rather than subgroup-specific technical changes. The above key forces of TFP also provide a micro foundation of the relationship between growth and inequality. The inequality among the non-intermediated a¤ects the growth of the intermediated. The growth of the intermediated trickles down to the non-intermediated and reduces inequality among them. |
| Keywords: | Total Factor Productivity, Occupation Choice, Financial Deepening |
| JEL: | O47 O16 J24 D24 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:scp:wpaper:05-19&r=ent |
| By: | David Law; Nathan McLellan (New Zealand Treasury) |
| Abstract: | This paper evaluates the contributions from firm entry, exit and continuation to labour productivity growth in New Zealand over the period 1995 to 2003. Decomposition techniques developed by Griliches and Regev (1995) and by Foster, Haltiwanger and Krizan (1998) are employed. Results suggest significant heterogeneity across both industries and firms. Most entering firms’ initial level of labour productivity is below the industry average but grows rapidly thereafter. Continuing firms generally add to industry labour productivity growth. On average exiting firms experience stagnant or declining labour productivity in the years leading up to their death, and when they eventually die most have below average labour productivity compared to their industry. This pattern persists even at a highly disaggregated industry level and indicates that firm turnover has positively contributed to labour productivity growth in New Zealand. |
| Keywords: | Firm Performance; Entry; Exit; Turnover; Mobility; Labour Productivity; New Zealand |
| JEL: | D21 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:05/01&r=ent |
| By: | Cécile Carpentier; Jean-Marc Suret |
| Abstract: | To ease the financing of growing SMEs, governments found or indirectly fund venture capital companies. These companies act in a context of extreme information asymmetry and potentially exorbitant agency costs. The rigorous governance of these companies is thus pivotal to their performance. We analyze the financial reporting guidelines put in place for American SBICs by the Small Business Administration, along with the valuation guidelines issued by venture capital associations and institutions in several countries. SBICs are subject to rigorous uniform financial reporting and valuation standards, which likely partly explains their performance in recent years. We also describe the efforts of diverse institutions to develop venture capital valuation guidelines. The most rigorous methods entail filing the initial terms of the financial deal, which could allow more efficient control of the selection process of investments. The Quebec government would benefit from implementing more rigorous reporting and valuation guidelines. <P>Pour faciliter le financement des entreprises en croissance, les gouvernements mettent en place ou financent indirectement des sociétés de capital de risque. Celles-ci interviennent dans un contexte d’asymétrie informationnelle où les coûts d’agence sont potentiellement très élevés. L’encadrement strict de ces sociétés est donc une condition essentielle à leur performance. Nous analysons le cadre de reddition de comptes mis en place pour les Small Business Investment Companies (SBICs) par la Small Business Administration américaine, puis les normes d’évaluation des placements préconisés par les associations et organismes de capital de risque dans plusieurs pays. Les SBICs sont soumises à un cadre uniforme strict de reddition de comptes et d’évaluation, qui explique probablement en partie leur bonne performance dans les années récentes. Nous montrons également les efforts déployés par divers organismes pour développer un cadre d’évaluation des placements de capital de risque. Les méthodes les plus rigoureuses demanderaient l’archivage des conditions initiales du placement, ce qui contribuerait à un contrôle plus efficace du processus de sélection des investissements. Les initiatives québécoises gagneraient très certainement à disposer d’un cadre de reddition de comptes et d’évaluation plus strict que celui qui semble actuellement prévaloir. |
| Keywords: | public policy, venture capital, governance, reporting guidelines, valuation guidelines , politique publique, capital de risque, gouvernance, normes comptables, normes d’évaluation |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirpro:2005rp-07&r=ent |
| By: | Cécile Carpentier; Jean-Marc Suret |
| Abstract: | Most countries have set up structures and programs for new business creation and financing. We analyze strategies implemented in France, Germany and United Kingdom, where the proportion of government funds in venture capital financing is significantly smaller than in the Quebec, yet the rate of creation and growth of tech start-ups is comparable. In these countries, intervention is based on R&D, transfer, incubation and start-up, in high technology industries exclusively. Except in France, universities are pivotal to new business creation. Internal or subordinated divisions of ministries are created to manage and evaluate governmental programs, define priorities and avoid financing non-crucial industries. Often of limited duration, government programs must abide by rigorous performance and accreditation criteria. Tax incentives are generally not associated with these initiatives. <P>La plupart des pays ont instauré des institutions et des mécanismes dédiés à la création de nouvelles entreprises et au financement de leur croissance. Nous analysons les stratégies mises en place par la France, l’Allemagne et le Royaume-Uni. Dans ces pays, la part de l’État dans le financement par capital de risque est significativement inférieure à celle du Québec sans que la performance en termes de création et de croissance d’entreprises technologiques ne semble inférieure. Ces pays ont privilégié une action ciblée, axée sur les stades de R&D, transfert, incubation et démarrage, clairement restreinte aux technologies. Les universités sont, à l’exception de la France, au centre de l’effort de création de nouveaux projets d’entreprises. Des structures internes ou directement subordonnées aux ministères sont mises en place pour gérer et évaluer les programmes, établir les priorités et éviter les dérapages vers des secteurs en demande de fonds mais non prioritaires. Les programmes, dont la durée de vie est souvent limitée, sont très largement soumis à des critères de performance et d’accréditation rigoureux. Les modes d’intervention autres que les déductions fiscales sont privilégiés. |
| Keywords: | small business, public policy, business creation, financing, start-ups, petite entreprise, politiques publiques, création d'entreprises, financement, Europe |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-12&r=ent |