nep-ent New Economics Papers
on Entrepreneurship
Issue of 2006‒04‒29
fourteen papers chosen by
Marcus Dejardin
Facultes Universitaires Notre-Dame de la Paix

  1. Movement of Star Scientists and Engineers and High-Tech Firm Entry By Lynne G. Zucker; Michael R. Darby
  2. Not for Lack of Trying : American Entrepreneurship in Black and White By Philipp Köllinger; Maria Minniti
  3. Financial Constraints on New Firms:<br />Looking for Regional Disparities By Jean Bonnet; Sylvie Cieply; Marcus Dejardin
  4. Regional and sector-specific determinants of industry dynamics and the displacement effect By J. M. Arauzo; M. Manjón; M. Martín; A. Segarra
  5. Social Capital and Labour Productivity in Italy By Fabio Sabatini
  6. SME financing and the choice of lending technology By Hirofumi Uchida; Gregory F. Udell; Nobuyoshi Yamori
  7. The Effect of Credit Guarantees on Survival and Performance of SMEs in Korea By Kang, Jae-Won; Heshmati, Almas; Choi, Gyong-Gyu
  8. Comparative Analysis of Firm Dynamics by Size: Korean Manufacturing By Oh, Inha; Heshmati, Almas; Baek, Chulwoo; Lee, Jeong-Dong
  9. The Effects of Innovation on Performance of Korean Firms By Heshmati, Almas; Kim, Yee-Kyoung; Kim, Hyesung
  10. Technological agglomeration and the emergence of clusters and networks in nanotechnology By Robinson, D.K.R.; Rip, A.; Mangematin, V.
  11. Business environment and labor market outcomes in Europe and Central Asia countries By Lopez-Garcia, Paloma
  12. Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector By Sumon Kumar Bhaumik; Shubhashis Gangopadhyay; Shagun Krishnan
  13. Entry, Exit, and Productivity of Indonesian Electronics Manufacturing Plants By Alfons Palangkaraya; Jongsay Yong
  14. A Tale of Two Literatures: Transaction Cost and Property Rights in Innovation Outsourcing By Nishaal Gooroochurn; Aoife Hanley

  1. By: Lynne G. Zucker; Michael R. Darby
    Abstract: This paper extends the concept of star scientist to all areas of science and technology. We follow 1,838 stars' careers 1981-2004, using their publication history to locate them each year. The number of stars in a U.S. region or in one of the top-25 science and technology countries has a consistently significant and quantitatively large positive effect on the probability of firm entry in the same area of science and technology. Thus the stars themselves rather than their potentially disembodied discoveries play a key role in the formation or transformation of high-tech industries. Other measures of academic knowledge stocks have weaker and less consistent effects. We identify separate economic geography effects in poisson regressions for the 179 BEA-defined U.S. regions, but not for the 25 countries analysis. Stars become more concentrated over time, moving from areas with relatively few peers to those with many in their discipline. A special counter-flow operating on the U.S. versus the other 24 countries is the tendency of foreign-born American stars to return to their homeland when it develops sufficient strength in their area of science and technology. In contrast high impact articles and university articles and patents all tend to diffuse, becoming more equally distributed over time.
    JEL: O31 J61 J44 M13
    Date: 2006–04
  2. By: Philipp Köllinger; Maria Minniti
    Abstract: Using a sample obtained from a survey conducted in the United States during summer 2002, we study the variables related to observed differences in the rate of entrepreneurial involvement between black and white Americans. We find strong evidence that differences in subjective and often biased perceptions are highly associated with entrepreneurial propensity across these two racial groups. In addition, we find that black Americans tend to exhibit more optimistic perceptions of their business environment than other racial groups and are more likely than others to attempt starting a business. In fact, our results show that blacks are almost twice as likely as whites to try starting a business. Thus, our results suggest that the under representation of black Americans among established entrepreneurs is not due to lack of trying but may instead be due to stronger barriers to entry and higher failure rates.
    Keywords: Entrepreneurship, Black Entrepreneurship, Minority Entrepreneurship, Nascent Entrepreneurship.
    JEL: J15 J23 M13
    Date: 2006
  3. By: Jean Bonnet (CREM - Centre de Recherche en Economie et Management - - [CNRS : UMR6211] - [Université Rennes I][Université de Caen] - []); Sylvie Cieply (CREM - Centre de Recherche en Economie et Management - - [CNRS : UMR6211] - [Université Rennes I][Université de Caen] - []); Marcus Dejardin (CREW - Centre de Recherche sur l'Economie Wallonne - - [Facultés Universitaires Notre Dame de la Paix Namur] - [] - [])
    Abstract: Abstract: Financial constraints affecting new firms are some of the factors most cited for<br />impeding entrepreneurial dynamics from flourishing. This article introduces the problem of<br />regional patterns of financial constraints. The research is conducted with regard to the French<br />regions and the new French firms being tracked at the firm level. It refers to entrepreneurial<br />projects that are concretized in new firms. General entrepreneurial intentions in the French<br />population that are aborted due to financial constraints are not reported. The point is of<br />importance as the firm financing conditions are considered. First, an assessment of the<br />regional banking activity leads to the conclusion of a relatively homogeneous situation, the<br />activity in the core-region Île-de-France appearing however more contrasted. Second, the<br />financial constraints affecting new firms are distinguished according to a four-case typology<br />of credit rationing. It appears, inter alia, that a majority of firms is not facing credit rationing,<br />but also that a non-negligible share is “self-constrained”. The classification is, third and<br />finally, differentiated according to the regions. Despite the relatively homogeneous banking<br />supply, some differences may still be at work. The explanations are hypothetical at this stage but<br />evidence suggests that the regional dimension should definitely deserve further attention.
    Keywords: Financial constraints; Credit rationing; New Firms; Regional Disparities
    Date: 2006–04–21
  4. By: J. M. Arauzo; M. Manjón; M. Martín; A. Segarra
    Abstract: In this paper we analyze the regional and sector-specific determinants of industry dynamics. Concretely, we empirically tested three hypotheses (originally proposed by Shapiro and Khemani 1987) for the relationship between the entry and exit of firms in Spanish regions and sectors. The simplest one claims that entries and exits are independent. The symmetry and simultaneity hypotheses, on the other hand, take the opposite view. The symmetry hypothesis claims that barriers to entry are also barriers to exit, while the simultaneity hypothesis claims that there is a close relationship between entry and exit. Our estimates from a panel data system of equations seem to confirm the simultaneity hypothesis for Spain during the period 1980 to 1994.
  5. By: Fabio Sabatini (University of Rome La Sapienza)
    Abstract: This paper carries out an empirical assessment of the relationship between social capital and labour productivity in small and medium enterprises in Italy. By means of structural equations models, the analysis investigates the effect of different aspects of the multifaceted concept of social capital. The bonding social capital of strong family ties and the bridging social capital shaped by informal ties connecting friends and acquaintances are proved to exert a negative effect on labour productivity, the economic performance, and human development. On the contrary, the linking social capital of voluntary organizations positively influences such outcomes.
    Keywords: Labour productivity, Small and medium enterprises, Social capital, Social networks, Structural equations models
    JEL: J24 R11 O15 O18 Z13
    Date: 2006–02
  6. By: Hirofumi Uchida; Gregory F. Udell; Nobuyoshi Yamori
    Abstract: Using data from a unique survey in Japan, we investigate the relevance of different lending technologies which are utilized in lending to small- and medium-sized enterprises. We characterize loans from a technology point of view, and ask (i) to what extent different lending technologies are used, (ii) how complementary the technologies are, and (iii) what determines the choice of each technology. We find that although the financial statement lending technology is most commonly used, multiple lending technologies are usually used at the same time. This suggests the existence of complementarity among lending technologies. We also find that individual technologies have their distinct characteristics as well, and, among other findings, smaller banks and banks with a rich accumulation of soft information tend to lend using the relationship lending technology.
    Date: 2006–04
  7. By: Kang, Jae-Won; Heshmati, Almas (Ratio); Choi, Gyong-Gyu (Gyong-Gyu Choia)
    Abstract: This study evaluates the impact of provision of credit guarantee in Korea at the firm level. The data is assembled from two public funds providing credit guarantees covering the period 2000 to 2003. The sample firms consist of SMEs mainly. To measure the effects of credit guarantee, the relationship between credit guarantees, survival of firms, and their productive performance is analyzed. Since the data is collected as repeated cross sections and firms are not identified over time, the analysis is carried out by using a pseudo panel data approach. The pseudo panel data is created using time invariant firm characteristics. The result from regression analysis conducted indicates that the amounts of credit guarantee and the number of times a firm receives credit guarantees have effects on their survival and growth. The amounts of credit guarantee increase the growth of sales and productivity while frequency of credit guarantees decreases business failure. Size and age play a decisive role in survival of firms and their employment growth as well. Moreover, survival and performance of firms are different across periods, industries, and locations.
    Keywords: Credit guarantee; SMEs; Pseudo panel data; survival; performance
    JEL: C23 C41 G28
    Date: 2006–04–25
  8. By: Oh, Inha; Heshmati, Almas (Ratio); Baek, Chulwoo; Lee, Jeong-Dong
    Abstract: The Korean economy severely suffered from the Asian financial crisis, and is well known for rapid recovery in the years following. However, the recovery was mainly due to successful restructuring by a limited number of large-sized enterprises (LSEs). The small and medium sized enterprises (SMEs) are still suffering from the depression. The crisis and subsequent unequal size related recovery patterns have aggravated the pre-crisis gap between LSEs and SMEs. In this paper, the total factor productivity (TFP) of the South Korean manufacturing industry is calculated, at the firm level, and comparative analysis is performed by size classes. The sources of the TFP growth are decomposed into various effects related to entry, exit, and survival of firms. Additional survival analyses are used to investigate internal and external determinant variables for the survival of LSEs and SMEs. The results indicate that the exit of SMEs with higher productivity rates represented a major problem in Korean manufacturing, particularly in the post-crisis period. Non-selective government support for SMEs appears to have caused disorder in the SME sector.
    Keywords: Firm dynamics; TFP; survival analysis; SME; Korean manufacturing
    JEL: C33 C41 D24 L60 O30
    Date: 2006–04–25
  9. By: Heshmati, Almas (Ratio); Kim, Yee-Kyoung (Seoul National University); Kim, Hyesung (Seoul National University)
    Abstract: This study empirically examines the relationship between knowledge capital and performance heterogeneity at the firm level. The model is based on a knowledge production function comprising of four interdependent equations linking innovativeness to innovation input, innovation output and productivity. The empirical part is based on Korean firm level innovation data. The model is estimated using advanced econometric methods. We investigate whether innovation is a significant and contributing determinant of performance heterogeneity among firms. In examining the relationship between innovation and productivity we correct for selectivity and simultaneity biases. The results show that there is a two-way causal relationship between knowledge capital and labor productivity. Firm-specific effects positively contribute to innovation output but they are negatively related to productivity. Industry heterogeneity does not affect innovation output or productivity.
    Keywords: Innovation Input; Innovation Output; Productivity; Korea
    JEL: C33 E22 L60 O32
    Date: 2006–04–25
  10. By: Robinson, D.K.R.; Rip, A.; Mangematin, V.
    Abstract: Based on the analysis of two clusters in nanotechnologies (MESA+ in the Netherlands and Minatec in Grenoble in France), the paper examines the emergence and effects of technological agglomeration. The social and technical arrangements of a regional centre for nanotechnology both enable and constrain the ongoing activities and research lines that can be followed. Technology platforms and their co-location are a pre-requisite for nanotechnology research and agglomeration of such platforms are both a means and outcome for institutional entrepreneurs to mobilise resources, build networks and construct regional centres of excellence in nanotechnology. Technological agglomeration shapes the networks that evolve and leads to the convergence of scientific disciplines.
    JEL: M13
    Date: 2006
  11. By: Lopez-Garcia, Paloma
    Abstract: New firm entry has been fundamental for job creation in the transition economies. Hence, the urge to reform the framework in which firms operate. This paper aims to improve our understanding of the business environment of the Europe and Central Asia (ECA) countries, as well as to assess which of the institutions that shape it are most important for labor market performance. To achieve that aim, the author groups the institutions into those affecting firm entry and those affecting business survival and growth, and proceeds to construct indicators to summarize them. Next, she analyzes the impact of the business environment institutions on the employment generated by the private sector of the countries, proxied by the service employment rate. The regression analysis uses an unbalanced panel of 28 ECA countries over 14 years-from 1988 to 2002. Recent literature on the labor market performance of the OECD countries argues that what matters for employment is the interaction between institutions and shocks. Accordingly, the explanatory variables used in the regression are the interactions between the transition shock suffered by the ECA countries and each of the business environment institutions previously defined. The author finds that access to finance is the most important institution across all ECA cou ntries. The development of the financial sector can explain about 40 percent of private employment creation in the European transition economies according to the model. On the other hand, the poor access to finance in Bulgaria, Croatia, and above all, Romania, is the main factor behind their poor development of the private sector. Market regulation (credit and labor regulation), start-up costs, and the tax burden are all found to significantly affect employment as well.
    Keywords: Labor Markets,Economic Theory & Research,Markets and Market Access,Microfinance,Small Scale Enterprise
    Date: 2006–04–01
  12. By: Sumon Kumar Bhaumik (Brunel University and IZA Bonn); Shubhashis Gangopadhyay (India Development Foundation); Shagun Krishnan (India Development Foundation)
    Abstract: It is now stylized that, while the impact of ownership on firm productivity is unclear, product market competition can be expected to have a positive impact on productivity, thereby making entry (or contestability of markets) desirable. Traditional research in the context of entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry. However, following De Soto (1989), there has been increasing emphasis on regulatory and institutional factors governing entry rates, especially in the context of developing countries. Using 3-digit industry level data from India, for the 1984-97 period, we examine the phenomenon of entry in the Indian context. Our empirical results suggest that during the 1980s industry level factors largely explained variations in entry rates, but that, following the economic federalism brought about by the post-1991 reforms, variations entry rates during the 1990s were explained largely by state level institutional and legacy factors. We also find evidence to suggest that, in India, entry rates were positively associated with growth in total factor productivity.
    Keywords: entry, productivity, institutions, regulations, India, reforms
    JEL: L11 L52 L64 L67 O14 O17
    Date: 2006–04
  13. By: Alfons Palangkaraya (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Jongsay Yong (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: We study the link between plant turnover and productivity using Indonesian plant-level data for the period of 1990-95. First, we compare productivity differentials among incumbents, entrants, and exiting plants by constructing the Farrell technical efficiency index using data envelopment analysis. We test the significance of these differentials using Simar and Wilson (1998) bootstrap algorithm and Li’s (1996) nonparametric test of closeness between unknown distributions. We find that the incumbent plants are on average the most productive group in every year of the estimation period. Also, the new plants are relatively less productive than the exiting plants in the early years. However, they are more productive than the exiting plants in the later years. Second, and more importantly, we estimate the productivity change during the study period using the Malmquist productivity change index and decompose the change to see if the differences in measured productivity change among the three groups of plants come from differences in the efficiency change or the technical change. Since the existing literature rarely distinguishes between these two different components, little is known whether exiting plants are less productive because of their inability to catch up to the current frontier or to adopt a better technology. Similarly, not much known whether entrants’ ability to survive come from their being equipped with a ’better’ technology or being able to catch up to the current frontier. Our findings indicate that although new plants enter with relatively lower productivity levels, they exhibit the highest productivity change during the early years. In addition, we find entrants’ high productivity growth in the early period is due to a movement toward the frontier, while in the later period is due to an upward shift of the technology frontier. Exiting plants, on the other hand, exhibit the lowest productivity change during the early years when entrants experience high productivity change.
    JEL: D24 L63
    Date: 2006–04
  14. By: Nishaal Gooroochurn (Nottingham University Business School); Aoife Hanley (Nottingham University Business School)
    Abstract: This paper investigates the relative importance of property rights (PR) and transactions cost (TC) factors in driving the decision of firms to outsource innovation. The TC literature explains a small part of outsourcing decisions (cost saving motives) while the PR literature deals with revenue maximisation. Using data for over 8,000 firms from the UK Community Innovation Survey, we find that PR variables dominate over TC variables. Our results suggest that the decision to outsource innovation is mostly driven by the ability of firms to control information leakages, less so by cost motives.
    Keywords: transaction cost, property rights, innovation
    JEL: L2 O3
    Date: 2006–04–18

This nep-ent issue is ©2006 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.