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on Entrepreneurship |
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Issue of 2006‒03‒18
nine papers chosen by Marcus Dejardin Facultes Universitaires Notre-Dame de la Paix |
| By: | Erik Stam; David Audretsch; Joris Meijaard |
| Abstract: | Why should individuals that have exited their firm consider re-entering into entrepreneurship, i.e. become renascent entrepreneurs? According to the logic of economic models of firm dynamics there is no reason to re-enter into entrepreneurship following termination of a previous firm. In contrast, research on nascent entrepreneurship has shown the positive effect of entrepreneurial experience on planning a new firm start. Based on the empirical evidence from a database consisting of ex-entrepreneurs, this study shows that renascent entrepreneurship is a pervasive phenomenon in current society. Especially entrepreneurial human and social capital induce renascent entrepreneurship. In addition, the nature of the firm exit also affects the probability of renascent entrepreneurship. |
| Keywords: | entrepreneurial preferences, entrepreneurial skills, firm exit, renascent entrepreneurship, economics of entrepreneurship |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:esi:egpdis:2006-06&r=ent |
| By: | Mangematin, V.; Rip, A.; Delemarle, A.; Robinson, D.K.R. |
| Abstract: | In the case of new technologies like nanotechnology, institutional entrepreneurs appear who have to act at different levels (organizational, regional, national) at the same time. We reconstruct, in some detail, the history of two cases, in Grenoble and in Twente/Netherlands. An intriguing finding is that institutional entrepreneurs build their environment before changing their institution. They first mobilize European support to convince local and national levels before actual cluster building occurs. Only later will there be reactions against any de-institutionalisation caused at the base location. The Dutch case shows another notable finding: when mobilizing support the entrepreneur will have to agree to further conditions, and then ends up in a different situation (a broad national consortium) than originally envisaged (the final cluster involved a collaboration of Twente with two other centres). In general, an institutional entrepreneur attempts to create momentum, and when this is achieved, he has to follow rather than lead it. |
| Keywords: | INSTITUTIONAL ENTREPRENEUR; DEINSTITUTIONALISATION; CLUSTER; LOCATION; EMERGING TECHNOLOGIES; PROMISE; NANOTECHNOLOGY |
| JEL: | M13 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:rea:gaelwp:200515&r=ent |
| By: | Chandra Pankaj |
| Abstract: | Small producers face a variety of challenges - some related to markets and others related to capabilities. Inability to develop technological capabilities has often restricted small firms from growing large. In this paper, we present learning from three global networks , i.e., TAMA in Japan, Wenzhou in China and Rajkot in India, that have adopted a variety of mechanisms of coordination between small producers and has led to both capability enhancement and demand enhancement. We argue that the capability enhancement effects play as significant a role as demand enhancement effects in the growth of small firms. Coordination that allows firms to improve their capabilities enhances both productivity as well as innovative capabilities to develop new products and processes. The paper, with the help of these three case studies, presents a generic model for SME development that is based on acquiring distinctive capabilities and linkages with other small producers or other members of the supply chain. We propose distinctive determinants of a collaborative model for engaging SMEs in technological innovation over a period of time. These are : Focus of the Firm, Interactive Producers, Processing and Product Manufacturing, Innovation Investment, Markets, Market Makers (and market making processes), and Regulatory Support. |
| Date: | 2006–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2006-03-02&r=ent |
| By: | Robert M. Hunt |
| Abstract: | This paper develops a simple duopoly model in which investments in R&D and patents are inputs in the production of firm rents. Patents are necessary to appropriate the returns to the firm’s own R&D, but patents also create potential claims against the rents of rival firms. Analysis of the model reveals a general necessary condition for the existence of a positive correlation between the firm’s R&D intensity and the number of patents it obtains. When that condition is violated, changes in exogenous parameters that induce an increase in firms’ patenting can also induce a decline in R&D intensity. Such a negative relationship is more likely when (1) there is sufficient overlap in firms’ technologies so that each firm’s inventions are likely to infringe the patents of another firm, (2) firms are sufficiently R&D intensive, and (3) patents are cheap relative to both the cost of R&D and the value of final output. |
| Keywords: | Patents ; Research and development |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:06-6&r=ent |
| By: | Michael R. Darby; Lynne G. Zucker |
| Abstract: | The basic competitive model with freely available technology is suited for static industries but misleading as applied to major innovative economies for which development of new technologies equals in magnitude around 10% of gross domestic investment. We distinguish free generic technology from proprietary technologies resulting from risky investment with uncertain outcome. The totality of possible outcomes drives the national innovation system and the returns to a particular successful technology cannot be compared to its own direct investment costs. Eureka moments are hardly ever self-enabling and incentives are required to motivate investment attempting to turn them into an innovation. The alternative to a valuable proprietary innovation is not the same innovation freely available but the unchanged generic technology. Growth is concentrated in any country at any time in a few firms in a few industries that are achieving metamorphic technological progress as a result of breakthrough innovations. So long as the entry and exit of firms using the generic technology sets the price in an industry, one or more price-taking firms can coexist with proprietary technologies yielding more or less substantial quasi-rents to the sunk development costs. Consumer welfare is increased if an innovator creates a proprietary technology such that the market equilibrium price is reduced and output increased. If the technological breakthrough is sufficiently large for the innovator to drive all generic producers out of the industry and increase output as a wealth-maximizing monopolist, consumer welfare is surely increased. After some time, the innovative technology will diffuse into an imitative generic technology. The best innovators develop a stream of innovations so that technological leaders can maintain their status as dominant firm or monopolist for extended periods of time despite lagged diffusion, and consumers benefit from this stream as well. The economics of an innovative nation are different from those of the no-growth stationary state which we teach and fall back on. We propose an ambitious agenda to integrate major research streams treating innovation as an object of economic analysis into our standard models. |
| JEL: | D40 D24 O31 L1 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12094&r=ent |
| By: | Margus Kõomägi; Priit Sander |
| Abstract: | The aim of the article is to describe how Estonian venture capitalists make financing and investment decisions, and compare these results with theoretical recommendations found in corporate finance and venture capital literature. The focus is on the methodological procedures in venture capital investment and financing. A case study approach is used to collect information about the current practice of venture capital investments and financing in Estonia. Five of the largest Estonian venture capital funds were analyzed in this article, and different problems have been presented in the article. Some of them require an academic and some a practical solution. The problems are divided into four parts: venture capital deal structuring, corporate governance and investor protection, the cost of venture capital and valuation. Venture capital deal structuring is discussed first, and we look at of the following topics: syndication, staged investment, use of financial instruments, ownership share and dilution problems. Syndication of investments, staged investments and convertible financial instruments are used quite rarely by Estonian venture capitalists. Most Estonian venture capitalists take a minority holding in their portfolio companies and the ownership share changes mainly due to the use of convertible instruments and financial options. Estonian venture capitalists do not consider this kind of dilution a big problem. Most Estonian venture capitalists do not have a measure of the required rate of return as considered in financial theory. The determination of the rate of return among Estonian venture capitalists is more intuitive: they use an internal rate of return instead. The required rates of return used by Estonian venture capitalists have about the same interval as in the rest of the world. Corporate control and investor protection are important issues in the venture capital process. These are closely linked to deal structuring. The Estonian Commercial code has average investor protection, but it restricts the use of preferred shares, which are often used in venture capital deal structuring abroad. Some corporate control problems have arisen at the board level in Estonia. Although venture capitalists do not use complicated models to find the cost of capital, they pay much more attention to complicated valuation models. Multiples, book value, and DCF methods are used. Numerical analysis is not as important as the authors expected. Much attention is paid to the linkages between these themes. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:mtk:febawb:44&r=ent |
| By: | James Bergin (Queen's University); Dan Bernhardt (University of Illinois) |
| Abstract: | We study the dynamics of an industry subject to aggregate demand shocks where the productivity of a firm's technology evolves stochastically over time. Each period, each firm, given the aggregate demand shock, the productivity of its technology, and the distribution of technology productivities in the economy, (i) chooses whether to remain in the industry or to exit to sell its resources to an entrant; and (ii) an active firm chooses how much capital and labor to employ, and hence output to produce. To characterize the intertemporal evolution of the distribution of firms, we discuss in particular how exit decisions, aggregate output, profits and distributions of firm productivities vary, (a) across different demand realization paths; (b) along a demand history path, detailing the effects of continued good or bad market conditions; and (c) for different anticipated future market conditions. Sufficient conditions are provide for worse demand realizations to lead to increased exit of low-productivity firms and then to improved distributions of firms at all future dates and states. Finally, it is shown that a downturn in demand can raise welfare due to the impact on exit decisions. |
| Keywords: | stochastic heterogeneity, aggregate shocks, exit, thin markets, demand uncertainty |
| JEL: | E32 L16 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1043&r=ent |
| By: | Diego Comin; Erica L. Groshen; Bess Rubin |
| Abstract: | Has greater turbulence among firms fueled rising wage instability in the United States? Earlier research by Gottschalk and Moffitt shows that rising earnings instability was responsible for one-third to one-half of the rise in wage inequality during the 1980s. These growing transitory fluctuations remain largely unexplained. To help fill this gap, this paper further documents the recent rise in transitory fluctuations in compensation and investigates its linkage to the concurrent rise in volatility of firm performance documented in research by Comin and Mulani and others. ; After examining models that explain the relationship between firm and wage volatility, we investigate this linkage in three complementary panel data sets, each with its own virtues and limitations: the Panel Study of Income Dynamics (detailed information on workers, but no information on employers), COMPUSTAT (detailed firm information, but only average wage and employment levels about workers), and the Federal Reserve Bank of Cleveland's Community Salary Survey (wages and employment for specific occupations for identified firms). We find support for the hypothesis in all three data sets. We can rule out straightforward compositional churning as an explanation for the link to firm performance in high-frequency (over spans of five years) wage volatility, although not in more persistent fluctuations (between successive five-year averages). We conclude that the rise in firm turbulence explains about 60 percent of the recent rise in high-frequency (five-year) wage volatility. |
| Keywords: | Wages ; Corporate profits |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:238&r=ent |
| By: | A. Arrighetti; F. Traù |
| Keywords: | Firm size, Firm Growth; Industrial Structure; Polyarchies; Hierarchies; Italy |
| JEL: | L22 L25 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2006-ep02&r=ent |