|
on Entrepreneurship |
|
Issue of 2006‒08‒19
nine papers chosen by Marcus Dejardin Facultes Universitaires Notre-Dame de la Paix |
| By: | Kirsten Foss; Nicolai J. Foss; Peter G. Klein |
| Abstract: | Recent work links entrepreneurship to the economic theory of firm using the Knightian concept of entrepreneurship as judgment. When judgment is complementary to other assets, and these assets or their services are traded in well-functioning markets, it makes sense for entrepreneurs to hire labor and own assets. The entrepreneur’s role, then, is to arrange or organize the human and capital assets under his control. We extend this Knightian concept of the firm by developing a theory of delegation under Knightian uncertainty. What we call original judgment belongs exclusively to owners, but owners may delegate a wide range of decision rights to subordinates, who exercise derived judgment. We call these employees “proxy-entrepreneurs,” and ask how the firm’s organizational structure — its formal and informal systems of rewards and punishments, rules for settling disputes and renegotiating agreements, means of evaluating performance, and so on — can be designed to encourage forms of proxy-entrepreneurship that increase firm value while discouraging actions that destroy value. Building on key ideas from the entrepreneurship literature, Austrian economics, and the economic theory of the firm we develop a framework for analyzing the tradeoff between productive and destructive proxy-entrepreneurship. We link this analysis to the employment relation and ownership structure, providing new insights into these and related issues in the economic theory of the firm. |
| Keywords: | Judgment; entrepreneur; delegation; employment relation; ownership |
| JEL: | B53 D23 L2 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:06-09&r=ent |
| By: | Simeon Djankov (the World Bank); Yingyi Qian (UC Berkeley and NBER); Gerard Roland (UC Berkeley and CEPR); Ekaterina Zhuravskaya (New Economic School/CEFIR and CEPR) |
| Abstract: | We study the determinants of the decision to become an entrepreneur in Russia, China, and Brazil, using unique survey data at the individual level. We find that entrepreneurs have many common characteristics relative to non-entrepreneurs in all three countries. They are more likely to have entrepreneurs among their relatives and friends, place a higher value on work, are happier and perceive themselves as more successful. There are also a few important differences. Russian and Chinese entrepreneurs are more mobile geographically and across jobs. In Brazil, on the contrary, entrepreneurs are less mobile across jobs and industries. Brazil entrepreneurs have higher trust than non-entrepreneurs, while in Russia and China this is not the case. Finally, we confirm that perceptions of institutional environment are an important determinant of individual decisions to expand business. |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0066&r=ent |
| By: | Andrew B. Bernard; Stephen Redding; Peter K. Schott |
| Abstract: | This paper examines the frequency, pervasiveness and determinants of product switching among U.S.manufacturing firms. We find that two-thirds of firms alter their mix of five-digit SIC products everyfive years, that one-third of the increase in real U.S. manufacturing shipments between 1972 and 1997is due to the net adding and dropping of products by survivors, and that firms are more likely to dropproducts which are younger and have smaller production volumes relative to other firms producingthe same product. The product-switching behavior we observe is consistent with an extended model ofindustry dynamics emphasizing firm heterogeneity and self-selection into individual product markets.Our findings suggest that product switching contributes towards a reallocation of economic activitywithin firms towards more productive uses. |
| Keywords: | Heterogeneous firms, Product differentiation, Product market entry and exit |
| JEL: | D21 E23 L11 L60 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0736&r=ent |
| By: | Nicolai J. Foss |
| Abstract: | The “knowledge governance approach” is characterized as a distinctive, emerging approach that cuts across the fields of knowledge management, organisation studies, strategy, and human resource management. Knowledge governance is taken up with how the deployment of governance mechanisms influences knowledge processes, such as sharing, retaining and creating knowledge. It insists on clear micro (behavioural) foundations, adopts an economizing perspective, and examines the links between knowledge-based units of analysis with diverse characteristics and governance mechanisms with diverse capabilities of handling these transactions. Research issues that the knowledge governance approach illuminates are sketched. |
| Keywords: | Governance; knowledge management; organizational economics |
| JEL: | L1 L2 M1 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:06-10&r=ent |
| By: | Ralph Ossa |
| Abstract: | This paper presents a model of social learning about the suitability of local conditions fornew business ventures and explores its implications for the microeconomic patterns ofeconomic development. I show that: i) firms tend to 'rush' into business ventures with whichother firms have had surprising success thus causing development to be 'lumpy'; ii) sufficientbusiness confidence is crucial for fostering economic growth; iii) development may involvewave-like patterns of growth where successive business ventures are first pursued and thengiven up; iv) there is, nevertheless, no guarantee that firms pursue the best venture even in thelong-run. |
| Keywords: | Economic Development, Social Learning, Lumpiness |
| JEL: | O10 O12 O14 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0719&r=ent |
| By: | Klapper, Leora; Sarria-Allende, Virginia; Zaidi, Rida |
| Abstract: | The authors test competing theories of capital structure choices using firm-level data on firm borrowings. The majority of firms in the dataset are privately owned, young, micro or small and medium enterprise (SME) firms concentrated in the service sector. In general, the financing pattern of firms is low leverage ratios and, in particular, low levels of intermediated financing and long-term financing. Average firm growth rates decreased during the five years of the sample period. Average profitability growth ratios are also negative across age and sectors and large firms have the highest negative profit growth rates. Statistical tests find a positive firm size effect on financial intermediation. Larger firms have higher leverage ratios (both short term and long term), including higher use of trade credit. There is also a negative influence of profitability on leverage ratios (more profitable firms use less external financing), which supports the " pecking order " theory that in environments with greater asymmetric information (such as weaker credit information) firms prefer to use internal or inter-firm financing. Finally, firms operating in a competitive environment have higher leverage ratios. For instance, young, small firms are the most active employment generators in the Polish economy. In particular, the authors find that although SMEs seem to be very active in creating jobs in recent years. This suggests that a new type of firm is emerging that is more market and profit-oriented. But at the same time, these firms appear to have financial constraints that impede their growth. Improvements in the business environment, such as better credit and registry information, could help promote growth in this sector. |
| Keywords: | Small Scale Enterprise,Microfinance,Economic Theory & Research,Investment and Investment Climate,Financial Intermediation |
| Date: | 2006–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3984&r=ent |
| By: | Fernandes, Ana M. |
| Abstract: | The author studies the determinants of total factor productivity (TFP) for manufacturing firms in Bangladesh using data from a recent survey. She obtains TFP measures by making use of firm-specific deflators for output and inputs. Controlling for industry, location, and year fixed effects, she finds that: (1) firm size and TFP are negatively correlated; (2) firm age and TFP exhibit an inverse-U shaped relationship; (3) TFP improves with the quality of the firm ' s human capital; (4) global integration improves TFP; (5) firms with research and development activities and quality certifications have higher TFP, while more advanced technologies improve TFP only in the presence of significant absorptive capacity; (6) power supply problems cost firms heavily in terms of TFP losses; and (7) the presence of crime dampens TFP. |
| Keywords: | Water and Industry,Economic Growth,Microfinance,Small Scale Enterprise,Economic Theory & Research |
| Date: | 2006–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3988&r=ent |
| By: | Andreas Pyka (University of Augsburg, Department of Economics); Nigel Gilbert (School of Human Sciences, University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom); Petra Ahrweiler (Research Center Media and Politics, Institute for Political Science, University of Hamburg, Germany) |
| Abstract: | An agent-based simulation model representing a theory of the dynamic processes involved in innovation in modern knowledge-based industries is described. The agent-based approach al-lows the representation of heterogeneous agents that have individual and varying stocks of knowledge. The simulation is able to model uncertainty, historical change, effect of failure on the agent population, and agent learning from experience, from individual research and from partners and collaborators. The aim of the simulation exercises is to show that the artificial innovation networks show certain characteristics they share with innovation networks in knowledge intensive industries and which are difficult to be integrated in traditional models of industrial economics. |
| Keywords: | innovation networks, agent-based modelling, scale free networks |
| JEL: | O31 O32 L22 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0287&r=ent |
| By: | Nick Bloom; John Van Reenen |
| Abstract: | We use an innovative survey tool to collect management practice data from 732 medium sized manufacturingfirms in the US, France, Germany and the UK. These measures of managerial practice are strongly associatedwith firm-level productivity, profitability, Tobin's Q, sales growth and survival rates. Management practicesalso display significant cross-country differences with US firms on average better managed than Europeanfirms, and significant within-country differences with a long tail of extremely badly managed firms. We findthat poor management practices are more prevalent when (a) product market competition is weak and/or when(b) family-owned firms pass management control down to the eldest sons (primo geniture). European firmsreport lower levels of competition, while French and British firms also report substantially higher levels ofprimo geniture due to the influence of Norman legal origin and generous estate duty for family firms. Wecalculate that product market competition and family firms account for about half of the long tail of badlymanaged firms and up to two thirds of the American advantage over Europe in management practices. |
| Keywords: | management practices, productivity, competition, family firms |
| JEL: | L2 M2 O32 O33 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0716&r=ent |