nep-ent New Economics Papers
on Entrepreneurship
Issue of 2005‒08‒13
thirteen papers chosen by
Marcus Dejardin
Facultés Universitaires Notre-Dame de la Paix

  1. Business Dynamics in Europe By Nicola Brandt
  2. Business Dynamics, Regulation and Performance By Nicola Brandt
  3. Spinoff Entry in High-tech Industries: Motives and Consequences By Peter Thompson; Steven Klepper
  4. Selection and Firm Survival: Evidence from the Shipbuilding Industry, 1825-1914 By Peter Thompson
  5. The Start-Up and Growth Stages in Enterprise Formation: The New View of Dividend Taxation Reconsidered By Vesa Kanniainen; Seppo Kari; Jouko Ylä-Liedenpohja
  6. Mexican Entrepreneurship: A Comparison of Self-Employment in Mexico and the United States By Robert Fairlie; Christopher Woodruff
  7. Financial Integration and Entrepreneurial Activity: Evidence from Foreign Bank Entry in Emerging Markets By Giannetti, Mariassunta; Ongena, Steven
  8. Improving the Capacity to Innovate in Germany By Andrés Fuentes; Margaret Morgan; Eckhard Wurzel
  9. Dynamics of Biotechnology Research and Industry in India: Statistics, Perspectives and Key Policy Issues By Sachin Chaturvedi
  10. A Simple Model of Brain Circulation By Nicolas Schmitt; Antoine Soubeyran
  11. Relationship significance: is it sufficiently explained? By Filipe J. Sousa; Luís M. de Castro
  12. Social Interactions and Industry Choices of Entrepreneurs: Identification by Residential Addresses By Rocco Huang
  13. The Cyclical Behaviour of Shadow and Regular Employment By Maurizio Bovi

  1. By: Nicola Brandt
    Abstract: <P>This study presents evidence on firm entry and exit, growth and survival derived with new data from Eurostat, covering nine European Union member countries. One contribution of the study is an analysis of the role of data quality for studies of firm demographics. Confronting results obtained with the Eurostat data with those of a previous OECD cross-country firm-level data project reveals that different size thresholds and difficulties in distinguishing genuine firm entry and exit from mergers & acquisitions, ownership changes or changes in legal form can have sizeable impacts on results. Cross-country differences in firm entry and exit rates are analysed with a special emphasis on detailed information and communication technology (ICT) related sectors, which has not been possible with previously available cross-country data. After controlling for some basic factors, such as countries’ industry composition, crosscountry differences in entry and exit rates in mature sectors turn out ...</P> <P>Dynamique des entreprises en Europe <P>Cette étude présente, à partir de nouvelles statistiques d’Eurostat qui couvrent neuf pays membres de l’Union européenne, des données sur l’entrée, la sortie, la croissance et la survie des entreprises. Elle comporte notamment une analyse de l’importance que revêt la qualité des données dans les études sur la démographie des entreprises. La confrontation des résultats obtenus à l’aide des données d’Eurostat avec ceux d’un projet précédent de l’OCDE sur des données internationales au niveau de l’entreprise révèle que les différences de seuils de taille ainsi que les difficultés liées à la distinction entre ce qui constitue véritablement des entrées ou sorties d’entreprises d’une part et les fusions et acquisitions d’autre part, les transferts de propriété et la modification de la forme juridique peuvent avoir des effets non négligeables sur les résultats. L’étude analyse les différences internationales en ce qui concerne les taux d’entrée et de sortie des entreprises, en faisant une ...</P>
    Keywords: entry, exit, survival, micro data, entrée, sortie, survie, microdonnées
    JEL: C81 G33 L11 M13
    Date: 2004–03–11
  2. By: Nicola Brandt
    Abstract: <P>Building on an earlier study of patterns on firm entry, exit growth and survival based on new data from Eurostat covering nine European Union member countries (Brandt, 2004), this paper takes a closer look at the role of policies and institutions for firm entry and survival and at the link between new firm creation and economic performance. The earlier study revealed that firm entry rates, <I>i.e.</I> the number of new firms in a market in relation to all active enterprises, were particularly high in Information and Communication (ICT) related industries in recent years. This lends some support to the idea present in some theories of economic growth that new firms are important for the development and implementation of new technologies. This paper takes a closer look at the relationship between firm entry and economic performance. Results reveals that high rates of firm entry tend to coincide with rapid productivity, output and employment growth, especially in the ICT related services ...</P> <P>Dynamique de l’entreprise, réglementation et performance <P>S'appuyant sur une étude antérieure concernant les profils d'entrée, de sortie, de croissance et de survie des entreprises, elle-même fondée sur de nouvelles données d'Eurostat portant sur neuf pays membres de l'Union européenne (Brandt, 2004), le présent rapport examine de plus près le rôle des politiques et des institutions dans l'entrée sur le marché et la survie des entreprises, ainsi que le lien entre la création de nouvelles entreprises et les performances économiques. L'étude initiale révélait que les taux d'entrée des entreprises, c'est-à-dire le nombre de nouvelles entreprises en proportion de l'ensemble des entreprises en activité sur un marché, avaient été particulièrement élevés dans les branches d'activité liées à l'information et aux communications (TIC) ces dernières années. Cela tend à confirmer l'idée avancée dans certaines études théoriques sur la croissance économique selon laquelle les nouvelles entreprises jouent un rôle important dans le développement et la ...</P>
    Date: 2004–03–17
  3. By: Peter Thompson (Department of Economics, Florida International University); Steven Klepper (Department of Social and Decision Sciences, Carnegie Mellon University)
    Abstract: Various theories have been advanced for why employees leave incumbent firms to found firms in the same industry, which we call spinoffs. We review the accumulating evidence about spinoffs in various high-tech industries, highlighting the central role often played by disagreements. Because existing theories have ignored them, we develop the foundations of a model of spinoff formation driven by disagreements. Doing so proves to be rather challenging, because disagreements are not possible among rational actors that talk to each other. We introduce a minimal degree of non-rationality, based on the concept of solipsism, and ask whether such a concept is capable of generating predictions consistent with the empirical literature.
    Keywords: Spinoffs, Technological change, learning, disagreements
    JEL: L2 O33
    Date: 2005–02
  4. By: Peter Thompson (Department of Economics, Florida International University)
    Abstract: Several theories of firm performance can explain the well-known observation that survival is positively related to age. However, a more mundane explanation – selection bias driven by variations in firm quality – may also underlie the phenomenon. This paper employs a 90-year plant-level panel data set on the US iron and steel shipbuilding industry of the 19th and early 20th centuries to discriminate between the two explanations. The shipbuilding industry exhibits the usual joint dependency of survival on age and size, but this dependency is eliminated after controlling for heterogeneity by using pre-entry experience as a proxy for firm quality. The evidence points to a dominant role for selection bias in creating the age-dependency of survival. At the same time, pre-entry experience is found to have a large and extremely persistent effect on survival, and this finding is inconsistent with standard explanations for the role of pre-entry experience on firm performance.
    Keywords: shipbuilding, firm survival, age, selection, unobserved heterogeneity
    JEL: N16 L11 L25
    Date: 2004–03
  5. By: Vesa Kanniainen; Seppo Kari; Jouko Ylä-Liedenpohja
    Abstract: Early-stage uncertainty makes the initial cost of capital greater than the expansion-stage one. Tax effects on enterprise formation, entrepreneurial effort and quality, and on capital costs are derived. For an incorporated enterprise (i) the entrepreneur’s ability threshold rises with the tax rate of the corporate form, (ii) the initial cost of capital due to a dividend tax is above the old view double-tax one, (iii) the start-up investment is not affected by undervaluation, but the discouragement engendered by dividend taxation is compensated by realization-based capital gains tax, (iv) with undervaluation, the expansion-stage cost of capital corresponds to the Johansson-Samuelson tax which is lower than the new view suggests, (v) without undervaluation, the dividend tax boosts expansion investment.
    Keywords: taxation of start-up enterprises
    JEL: H25
    Date: 2005
  6. By: Robert Fairlie; Christopher Woodruff
    Abstract: Nearly a quarter of Mexico's workforce is self employed. But in the U.S. rates of self employment among Mexican Americans are only 6 percent, about half the rate among non-Latino whites. Using data from the Mexican and U.S. population census, we show that neither industrial composition nor differences in the age and education of Mexican born populations residing in Mexico and the U.S. accounts for the differences in the self employment rates in the two countries. Within the U.S., however, the data show self employment rates are much higher in ethnic enclaves. In PUMAS with a high percentage of residents of Latino origin, rates of self employment are comparable to rates among non-Latino whites. The data also indicate that the lack of English language ability and the lack of legal status among Mexican American immigrants helps account for their lower rates of self employment.
    JEL: F2 J2
    Date: 2005–08
  7. By: Giannetti, Mariassunta; Ongena, Steven
    Abstract: An extensive empirical literature has documented the positive growth effects of equity market liberalization. However, this line of research ignores the impact of financial integration on a category of firms crucial for economic development, i.e. the small entrepreneurial firms. This paper aims to fill this void. We employ a large panel containing almost 60,000 firm–year observations on listed and unlisted companies in Eastern European economies to assess the differential impact of foreign bank lending on firm growth and financing. Foreign lending stimulates growth in firm sales, assets, and leverage, but the effect is dampened for small firms. We also find that the most connected businesses benefit least from foreign bank entry. This finding suggests that foreign banks can help mitigate connected lending problems and improve capital allocation.
    Keywords: competition; emerging markets; foreign bank lending; lending relationships
    JEL: G21 L11 L14
    Date: 2005–07
  8. By: Andrés Fuentes; Margaret Morgan; Eckhard Wurzel
    Abstract: <P>Key indicators show Germany belonging to the countries in the OECD with strong innovation activity even though some weakening in Germany’s position relative to other OECD countries has occurred recently. While the redirection of resources towards unification-related spending as well as low economic growth have contributed to this development, more fundamental structural issues have also played a role. Germany has benefited less than other high-performing countries from the surge in new technologies, such as ICT and biotechnology, as innovation activities continue to focus on sectors, such as machinery and automobiles, in which Germany has a long record of strong export performance. Some features of the regulation of capital, product and labour markets are hampering the supply of risk capital, the creation of new firms and the reallocation of labour. In addition, firms are finding it increasingly difficult to recruit highly qualified labour. Measures to improve the framework ...</P> <P>Selon les principaux indicateurs, l’Allemagne est l’un des pays de l’OCDE où l’activité d’innovation est soutenue, même si sa position relative s’est quelque peu dégradée ces derniers temps. Si ce phénomène peut s’expliquer en partie par un détournement des crédits vers les dépenses liées à l’unification et par la lenteur de la croissance économique, des facteurs structurels plus fondamentaux sont également intervenus. L’Allemagne a bénéficié moins que autres pays de l’explosion des nouvelles technologies, telles que les TIC et la biotechnologie, l’activité d’innovation restant axée sur les secteurs dans lesquels l’Allemagne obtient depuis longtemps de très bons résultats à l’exportation. Certaines caractéristiques de la réglementation des marchés des capitaux, des produits et du travail freinent l’offre de capital-risque, la création de nouvelles entreprises et la redistribution de la main-d’œuvre. De plus, les entreprises ont de plus en plus de mal à recruter des travailleurs ...</P>
    Keywords: productivity, productivité, innovation, innovation, competition, concurrence, subsidies, research and development, technological change, potential growth, business taxes, tertiary education, intellectual property rights, firm entry, recherche-développement, changement technologique, croissance potentielle, impôts aux entreprises, subsides, éducation tertiaire, droits de propriété intellectuelle, entrée des entreprises
    JEL: H25 I28 O30 O31 O33 O38 O52
    Date: 2004–10–22
  9. By: Sachin Chaturvedi
    Abstract: The purpose of this paper is twofold. First, an inventory is made of biotechnology data collection in India. This will include an assessment of how the need for biotechnology related statistics is being addressed, mainly in terms of patent data, commercialisation of genetically modified organisms, R&D allocations for biotechnology and industry statistics. In general, limited efforts have been made by different Indian agencies to collect statistics on biotechnology. One of the reasons for this scarcity of statistics is a missing consensus in India on a definition of biotechnology. However, initiatives are underway to address this and to establish a measurement framework. A second objective of this document is to present a broad overview of the status of biotechnology in India, with a focus on the agricultural and the health sector. First the funding and research programmes of various institutions are discussed, followed by an overview of human resources development and training possibilities in the country. A third section discusses capital venture funding and the role of financial institutions, while the last two sections look at initiatives by state governments and the policy regulations in place. <P>Dynamique de la recherche et de l'industrie biotechnologiques en Inde Cet ouvrage répond à un double objectif. Il vise tout d’abord à faire le point sur la collecte des données relatives aux biotechnologies en Inde, notamment à travers une évaluation des solutions apportées aux besoins de statistiques dans les domaines suivants : brevets, commercialisation d’organismes génétiquement modifiés, crédits de R-D consacrés aux statistiques des biotechnologies et de l’industrie. Les différentes instances indiennes concernées ont en général relativement peu investi dans la collecte de statistiques, entre autres parce qu’il n’existe en Inde aucun consensus sur la définition des biotechnologies. Des initiatives ont toutefois été engagées dans le but d’y remédier et d’établir un cadre d’analyse. Cette publication a par ailleurs pour ambition de présenter un vaste panorama des biotechnologies en Inde, en privilégiant plus particulièrement les secteurs de l’agriculture et de la santé. Sont tout d’abord décrits les dispositifs de financement et les programmes de recherche de diverses institutions, puis est présenté un tour d’horizon des perspectives de développement des ressources humaines et de formation. Une troisième section est consacrée à l’analyse du financement du capital-risque et du rôle des institutions financières, tandis que les deux dernières sections passent en revue les actions engagées par les autorités publiques des Etats et les réglementations en place.
    Date: 2005–05–31
  10. By: Nicolas Schmitt; Antoine Soubeyran
    Abstract: This paper considers the allocation of two types of individuals differentiated by levels of talent within and between two countries when they choose to be workers or entrepreneurs. The equilibrium with international migrations requires both countries to be sufficiently different in talent endowments and is consistent with individuals moving in one or in both directions whether they are entrepreneurs or workers. Average welfare per capita falls in the country losing highly talented individuals and rises in the country attracting them. However, in both countries, the liberalization of migrations for immigrants, emigrants or both is always supported by majority voting.
    JEL: F20 F22 J61
    Date: 2005
  11. By: Filipe J. Sousa (Instituto Superior de Administração e Línguas (ISAL)); Luís M. de Castro (Faculdade de Economia, Universidade do Porto)
    Abstract: The Industrial Networks Theory (cf. Axelsson and Easton, 1992, Hakansson and Snehota, 1995) sets out to describe and explain the business relationships and markets in which the focal firm is deeply embedded. One of its major propositions pertains to the (time-varying) significance of business relationships for the focal firm (Gadde et al., 2003), i.e., business relationships influence to some extent the focal firm’s survival. Such significance seems strongly related to the role played by business relationships and consequently the relationship outcomes accruing to the focal firm. The theoretical justification underlying this proposition is outwardly oriented, somewhat overlooking the inside of the focal firm - in particular the influence of business relationships on what the focal firm does competently within and across its boundaries. Arguably, the creation and appropriation of relationship value by the focal firm is a necessary but not sufficient condition for relationship significance. A supplementary (internal) explanation supported by Knowledge-based Theories of the Firm (e.g., see Kogut and Zander, 1992), we suggest, may be missing. Our aim here has been to intuitively pinpoint a theoretical flaw, further suggesting a feasible path for its solution.
    Keywords: Industrial Networks Theory; relationship significance proposition; relationship functions, dysfunctions, benefits, sacrifices, and value
    JEL: M31
    Date: 2005–07
  12. By: Rocco Huang (University of Amsterdam)
    Abstract: This paper documents how social interactions shape industry choices of entrepreneurs. We utilize an administrative data set recording residential addresses of London entrepreneurs. In a large cross-section of community-industry pairs, we show that new entrepreneurs are more likely to enter industries historically over-represented by their residential neighbors. This persistence of industry specializations is stronger in communities where social interactions are more intensive, as proxied by higher ethnic homogeneity, housing structures that are more conducive to social interactions, or higher entrepreneurial density. The effect is also stronger in industries that require more informational interactions, as proxied by higher geographic agglomeration of entrepreneurs. The use of residential addresses helps us identify the presence of social interactions because we can safely argue that residential addresses affect social interactions but do not directly affect industry choices. The median home-business distances in our sample is nearly six kilometers, thus the persistence of industry specializations is unlikely to be driven by unobservable common product market conditions. In every regression, we also control for industry specializations at borough level (the higher level of geographic unit than community, each of which contains around 20 communities), to further remove the effects of unobservable factors. Finally, we also use various sub-groups of entrepreneurs to test for a series of alternative hypotheses, and we do not find support for them. We do not find lower failure rate for entrepreneurs who follow their neighbors’ popular choices. Nevertheless, overall, the results suggest that entry of new entrepreneurs tend to reinforce agglomeration, while exits do not reverse it. This is a weak evidence of agglomeration economies.
    JEL: M13 J24 R12
    Date: 2005–07–26
  13. By: Maurizio Bovi (Institute for Studies & Economic Analyses ISAE)
    Abstract: Using the Hodrick-Prescott filter, this paper examines the cyclical properties of the Italian labour market. Its main contribution is the empirical analysis of three different labour inputs - regular employees, regular self-employed and underground workers. Results from VAR models support the widespread view that the shadow employment functions as an improper tool for increasing the flexibility of the labour market. While the contemporaneous correlation between shadow labour and output is significant, as time passes their association looses momentum. The opposite is found for regular employees, which show significant positive correlations only with lagged output gaps. Somewhat puzzling, self- employment seems to be the less sensitive to the course of business cycles. The skewness of input distributions suggests that hiring employees is easier than firing them, while this can not be said for the other two labour gaps. Disaggregate data tell different stories. For instance, in the manufacturing sector the hidden employment is not correlated with the output, while in the trade sector the acyclical input turns out to be the recorded employees. In the transport industry, where no labour input follow the cycle, regular employees are more fired than hired.
    Keywords: Underground economy; VAR models; Labour Flexibility, Business Cycle.
    JEL: C32 C53 H26 J30
    Date: 2005–07–28

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