nep-ent New Economics Papers
on Entrepreneurship
Issue of 2006‒01‒01
twelve papers chosen by
Marcus Dejardin
Facultés Universitaires Notre-Dame de la Paix

  1. Explaining Female and Male Entrepreneurship at the Country Level By Verheul, I.; Stel, A.J. van; Thurik, A.R.
  2. Allocation and Productivity of Time in New Ventures of Female and Male Entrepreneurs By Verheul, I.; Carree, M.A.; Thurik, A.R.
  3. Do enclaves matter in immigrants’ self-employment decision? By Maude Toussaint-Comeau
  4. Agglomeration economies and entrepreneurship: testing for spatial externalities in the Dutch ICT industry By Frank G. van Oort; Erik Stam
  5. A more complete conceptual framework for financing of small and medium enterprises By Udell, Gregory F.; Berger, Allen N.
  6. SBA guaranteed lending and local economic growth By Ben R. Craig; William E. Jackson, III; James B. Thomson
  7. Financing of Competing Projects with Venture Capital By Ekaterina Goldfain; Eugen Kovac
  8. Technology innovation and market turbulence: a dotcom example By Zhu Wang
  9. The spatial evolution of the British automobile industry By Ron A. Boschma; Rik Wenting
  10. The effect of regional differences on the performance of software firms in the Netherlands By Ron A. Boschma; Anet B.R. Weterings
  11. The Impact of Minimum Quality Standards on Firm Entry, Exit and Product Quality: the Case of the Child Care Market By V. Joseph Hotz; Mo Xiao
  12. Markov Perfect Industry Dynamics with Many Firms By Gabriel Weintraub; C. Lanier Benkard; Ben Van Roy

  1. By: Verheul, I.; Stel, A.J. van; Thurik, A.R. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Using Global Entrepreneurship Monitor data for 29 countries this study investigates the (differential) impact of several factors on female and male entrepreneurship at the country level. These factors are derived from three streams of literature, including that on entrepreneurship in general, on female labor force participation and on female entrepreneurship. The paper deals with the methodological aspects of investigating (female) entrepreneurship by distinguishing between two measures of female entrepreneurship: the number of female entrepreneurs and the share of women in the total number of entrepreneurs. The first measure is used to investigate whether variables have an impact on entrepreneurship in general (influencing both the number of female and male entrepreneurs). The second measure is used to investigate whether factors have a differential relative impact on female and male entrepreneurship, i.e., whether they influence the diversity or gender composition of entrepreneurship. Findings indicate that ? by and large ? female and male entrepreneurial activity rates are influenced by the same factors and in the same direction. However, for some factors (e.g., unemployment, life satisfaction) we find a differential impact on female and male entrepreneurship. The present study also shows that the factors influencing the number of female entrepreneurs may be different from those influencing the share of female entrepreneurs. In this light it is important that governments are aware of what they want to accomplish (i.e., do they want to stimulate the number of female entrepreneurs or the gender composition of entrepreneurship) to be able to select appropriate policy measures.
    Keywords: Entrepreneurship;Gender;Determinants of Entrepreneurship;
    Date: 2005–12–19
  2. By: Verheul, I.; Carree, M.A.; Thurik, A.R. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This study investigates the factors explaining the number of hours invested in new ventures, making a distinction between the effect of preference for work time versus leisure time and that of productivity of work time. Using data of 1247 Dutch entrepreneurs, we find that time invested in the business is determined by various aspects of human, financial and social capital, availability of other income, outsourcing, side activities and gender. We show that some of the identified factors relate to preferences and others to productivity. Women appear to invest less time in the business as a result of a range of indirect productivity effects.
    Keywords: Time Allocation;New Ventures;Gender;
    Date: 2005–12–19
  3. By: Maude Toussaint-Comeau
    Abstract: This paper uses 2000 U.S. Census data to study the determinants of self- employment decisions among immigrants. It outlines a theoretical framework for analyzing the role of ethnic enclaves in the self- employment decision of immigrants that captures nuances involved in the interaction between ethnic enclaves and different ethnic groups. It assesses the effect of ethnic enclaves for different groups and explores explanations for differences. The results show that higher ethnic concentration in metropolitan areas is positively related to the probability of selfemployment of immigrants. However, the significance of ethnic concentration for selfemployment differs by the country or region of origin of immigrants. The relationship between location and self-employment probability of immigrants is reinforced by other metropolitan areaspecific characteristics that include labor market factors, such as the unemployment rate, the selfemployment rate, the monetary returns to self-employment relative to wage employment, and the success of self-employed co-ethnic members.
    Date: 2005
  4. By: Frank G. van Oort; Erik Stam
    Abstract: Although there is growing evidence on the role of agglomeration economies in the formation and growth of firms, both the concepts of agglomeration economies and entrepreneurship tend to be ambiguously defined and measured in the literature. In this study, we aim to improve the conceptualisations and measures of agglomeration economies and entrepreneurship. Indicators of agglomeration economies are analysed in clearly defined urban regimes on three spatial scales in the Netherlands – national zoning, labour market connectedness, and urban size. This is done in order to uncover their effect on two entrepreneurial phases in the firm life cycle - new firm formation and the growth of incumbent firms in the relatively new ICT industry in the Netherlands. In comparison with new firm formation, the growth of incumbent firms is not so much related to spatial clustering of the ICT industry and other localized sources of knowledge economies associated with urban density. Instead, knowledge as an input for growth of incumbent firms is associated with more endogenous (firm internal) learning aspects, reflected by a significant correlate with R&D-investments. Also the effect of local ICT firm competition differs between the two types of firms: a positive effect on new firm formation, but a negative effect on incumbent firm growth. In general, agglomeration economies have stronger effects on the formation of ICT firms than on the growth of ICT firms.
    Keywords: agglomeration economics, spatial externalities, entrepreneurship, location, urban regimes, ICT industry
    JEL: D21 L25 L63 L86 M13 O18 R12 R30
    Date: 2005–03
  5. By: Udell, Gregory F.; Berger, Allen N.
    Abstract: The authors propose a more complete conceptual framework for analysis of credit availability for small and medium enterprises (SMEs). In this framework, lending technologies are the key conduit through which government policies and national financial structures affect credit availability. They emphasize a causal chain from policy to financial structures which affect the feasibility and profitability of different lending technologies. These technologies, in turn, have important effects on SME credit availability. Financial structures include the presence of different financial institution types and the conditions under which they operate. Lending technologies include several transactions technologies, plus relationship lending. The authors argue that the framework implicit in most of the literature is oversimplified, neglects key elements of the chain, and often yields misleading conclusions. A common oversimplification is the treatment of transactions technologies as a homogeneous group, unsuitable for serving informationally opaque SMEs, and a frequent misleading conclusion is that large institutions are disadv antaged in lending to opaque SMEs.
    Keywords: Banks & Banking Reform,Financial Intermediation,Investment and Investment Climate,Economic Theory & Research,Financial Crisis Management & Restructuring
    Date: 2005–12–01
  6. By: Ben R. Craig; William E. Jackson, III; James B. Thomson
    Abstract: Increasingly, policymakers look to the small business sector as a potential engine of economic growth. Policies to promote small businesses include tax relief, direct subsidies, and indirect subsidies through government lending programs. Encouraging lending to small business is the primary policy objective of the Small Business Administration's (SBA) loan-guarantee program. Using a panel data set of SBA guaranteed loans, we assess whether SBA guaranteed lending has an observable impact on local economic performance. We find a positive and significant (although economically small) relationship between the relative levels of SBA guaranteed lending in a local market and the future per capita income growth in that market.
    Date: 2005
  7. By: Ekaterina Goldfain; Eugen Kovac
    Abstract: We analyze innovation race in a moral hazard setting. We develop a model in which two competing entrepreneurs work independently on the same project. The entrepreneurs do not possess any wealth of their own and their research is financed by a venture capitalist. The project, if successful, generates a prize, which is to be shared between the winning entrepreneur and the venture capitalist. The venture capitalist cannot observe the allocation of funds he provides, which creates a moral hazard problem. We compare a competitive setting with a benchmark case where the venture capitalist finances only one entrepreneur. We show that the venture capitalist can increase the efficiency of research (hence, his own expected profit from investments) and alleviate the moral hazard problem if he finances both entrepreneurs. This conclusion is unambiguous, when the entrepreneurs are at the same (the last) stage of R&D. It holds for a reasonably large range of parameters, when the entrepreneurs are at different stages of R&D.
    Keywords: venture capital, moral hazard, optimal contract, innovation race
    JEL: G32 G34 O31
    Date: 2005–12
  8. By: Zhu Wang
    Abstract: This paper explains market turbulence, such as the recent dotcom boom/bust cycle, as equilibrium industry dynamics triggered by technology innovation. When a major technology innovation arrives, a wave of new firms enter the market implementing the innovation for profits. However, if the innovation complements existing technology, some new entrants will later be forced out as more and more incumbent firms succeed in adopting the innovation. It is shown that the diffusion of Internet technology among traditional brick-and-mortar firms is indeed the driving force behind the rise and fall of dotcoms as well as the sustained growth of e-commerce. Empirical evidence from retail and banking industries supports the theoretical findings.
    Date: 2005
  9. By: Ron A. Boschma; Rik Wenting
    Abstract: This paper aims to describe and explain the spatial evolution of the automobile sector in Great Britain from an evolutionary perspective. This analysis is based on a unique database of all entries and exits in this sector during the period 1895-1968, collected by the authors. Cox regressions show that spinoff dynamics, localization economies and time of entry have had a significant effect on the survival rate of automobile firms during the period 1895-1968.
    Keywords: evolutionary economics, automobile industry, entry, exit
    Date: 2004–08
  10. By: Ron A. Boschma; Anet B.R. Weterings
    Abstract: This paper aims to explore the effect of regional differences on the performance of software firms in the Netherlands. Inspired by evolutionary economics, we account for the impact of (1) co-location and sharing a local knowledge base; (2) pre-entry experience in the same or related industries; (3) being connected; and, (4) having organisational capabilities to cope with change. The outcomes of the regression analyses on data gathered among 265 software firms suggest that firms located in regions specialised in ICT have a higher innovative productivity. Spin-offs and firms with organisational capabilities also perform better, while network relationships do not affect the performance of software firms.
    Keywords: evolutionary economics, agglomeration economies, innovative productivity, software industry, spin-offs
    Date: 2005–01
  11. By: V. Joseph Hotz; Mo Xiao
    Abstract: We examine the impact of minimum quality standards on the supply side of the child care market, using a unique panel data set merged from the Census of Services Industries, state regulation data, and administrative accreditation records from the National Association of Education for Young Children. We control for state-specific and time-specific fixed effects in order to mitigate the biases associated with policy endogeneity. We find that the effects of quality standards specifying the labor intensiveness of child care services are strikingly different from those specifying staff qualifications. Higher staff-child ratio requirements deter entry and reduce the number of operating child care establishments. This entry barrier appears to select establishments with better quality into the market and alleviates competition among existing establishments: existing establishments are more likely to receive accreditation and higher profits, and are less likely to exit. By contrast, higher staff-education requirements do not have entry-deterrence effects. They do have the unintended effects of discouraging accreditation, reducing owners' profits, and driving firms out of businesses.
    JEL: L5 L8
    Date: 2005–12
  12. By: Gabriel Weintraub; C. Lanier Benkard; Ben Van Roy
    Abstract: We propose an approximation method for analyzing Ericson and Pakes (1995)-style dynamic models of imperfect competition. We develop a simple algorithm for computing an ``oblivious equilibrium,'' in which each firm is assumed to make decisions based only on its own state and knowledge of the long run average industry state, but where firms ignore current information about competitors' states. We prove that, as the market becomes large, if the equilibrium distribution of firm states obeys a certain ``light-tail'' condition, then oblivious equilibria closely approximate Markov perfect equilibria. We develop bounds that can be computed to assess the accuracy of the approximation for any given applied problem. Through computational experiments, we find that the method often generates useful approximations for industries with hundreds of firms and in some cases even tens of firms.
    JEL: C63 C73 L11
    Date: 2005–12

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