nep-ent New Economics Papers
on Entrepreneurship
Issue of 2006‒10‒14
twelve papers chosen by
Marcus Dejardin
Facultes Universitaires Notre-Dame de la Paix

  1. The Effect of Motivation on Self-Employment Duration in Germany: Necessity versus Opportunity Entrepreneurs By Block, Joern; Sandner, Philipp
  2. Is Venture Capital a regional business? – The role of syndication By Michael Fritsch; Dirk Schilder
  3. Employment effects of business dynamics: Mice, Gazelles and Elephants By Zoltan Acs; Pamela Mueller
  4. The effects of new firm formation on regional development over time: The case of Great Britain By Pamela Mueller; André van Stel; David J. Storey
  5. Testing Baumol: Institutional Quality and the Productivity of Entrepreneurship. By Russell S. Sobel
  6. Entry, Exit and Patenting in the Software Industry By Iain M. Cockburn; Megan J. MacGarvie
  7. Taxation, entrepreneurship, and wealth By Marco Cagetti; Mariacristina De Nardi
  8. Has Wal-Mart Buried Mom and Pop?: The Impact of Wal-Mart on Self Employment and Small Establishments in the United States. By Russell S. Sobel; Andrea M. Dean
  9. DO BUSINESS DENSITY AND VARIETY DETERMINE RETAIL PERFORMANCE? By Mercedes Esteban-Bravo; Jose M. Mugica; Jose M. Vidal-Sanz
  10. Innovation and competitive pressure By Vives, Xavier
  11. L’influence des Capital Investisseurs sur la gestion des ressources humaines des entreprises financées:dimensions, enjeux et limites By Anne Stévenot-Guéry; Loris Guéry
  12. Micro-dynamics of Free and Open Source Software Development. Lurking, laboring and launching new projects on SourceForge By Paul A. David; Francesco Rullani

  1. By: Block, Joern; Sandner, Philipp
    Abstract: Using data from the German Socio-Economic Panel Study (GSOEP), we analyze whether necessity and opportunity entrepreneurs differ in terms of self-employment duration. We find that the two types of entrepreneurs differ regarding their duration in self-employment. Once controlled for educational variables however, this effect turns out to be no longer significant. We therefore conclude that the difference observed is no original effect but is due to selection. We then go on to discuss the implications of our finding for entrepreneurship-policy making. Suggestions to improve governmental start-up support programmes are given. Estimations are carried out with discrete time hazard rate models controlling for unobserved heterogeneity.
    Keywords: Self-employment; Firm survival; Necessity entrepreneurs; Opportunity entrepreneurs; Hazard rates; GSOEP
    JEL: J22 M13 C41 J24
    Date: 2006–10–04
  2. By: Michael Fritsch; Dirk Schilder
    Abstract: We investigate whether the supply of Venture Capital (VC) in Germany is driven by spatial influences. The study is based on information from more than 300 VC investments made in Germany between 2004 and 2005. We find evidence that the geographical distance between a VC company and the portfolio firm is not an important factor for German VC investments. Syndication of investments helps to overcome the problem of distance to portfolio firms if one of the investors is located close to the investment. Altogether, we find no evidence for a severe regional equity gap for young and innovative companies in Germany.
    Keywords: Venture Capital, regional equity gap, start-up financing
    JEL: G24 O16 D21 M13 R12
    Date: 2006–10
  3. By: Zoltan Acs; Pamela Mueller
    Abstract: This paper examines the relationship between business dynamics and employment effects in 320 U.S. Metropolitan Statistical Areas (MSA). Much of the theoretical work on industry dynamics focuses on the role of noisy selection and incomplete information on entry and survival. We extend this research by looking at the impact of firm heterogeneity on employment persistence. We find that only start-ups with greater than twenty employees have persistent employment effects over time and only in large diversified metropolitan regions. Therefore, both the type of entry and the characteristics of the region are important for employment growth.
    Keywords: Industry dynamics, new business formation, employment effects, regions
    JEL: J6 L6 L8 M13
    Date: 2006–10
  4. By: Pamela Mueller; André van Stel; David J. Storey
    Abstract: This paper re-examines the link between new firm formation and subsequent employment growth. It investigates whether it is possible to have the wrong type of entrepreneurship - defined as new firm formation which leads to zero or even negative subsequent employment growth. It uses a very similar approach to that of Fritsch and Mueller (2004), confirming their findings that the employment impact of new firm formation is in three discrete phases. Then, using data for Great Britain, the paper shows the employment impact of new firm formation is significantly positive in England, but zero in Scotland where formation rates are much lower. It also shows that, in the low enterprise counties of GB, new firm formation has a negative effect on employment, implying that we find that the "wrong type of entrepreneurship" is possible.
    Keywords: New firm formation, employment growth, Great Britain, low entrepreneurial regions
    JEL: J23 L10 M13 R11
    Date: 2006–10
  5. By: Russell S. Sobel (Department of Economics, West Virginia University)
    Abstract: Baumol’s (1990) theory of productive and unproductive entrepreneurship is a significant recent contribution to the economics of entrepreneurship literature. He hypothesizes that entrepreneurial individuals channel their effort in different directions depending on the quality of prevailing economic, political, and legal institutions. This institutional structure determines the relative reward to investing entrepreneurial energies into productive market activities versus unproductive political and legal activities (e.g., lobbying and lawsuits). Good institutions channel effort into productive entrepreneurship, sustaining higher rates of economic growth. I test and confirm Baumol’s theory, and discuss its significance to the literature and policy reform.
    Date: 2006
  6. By: Iain M. Cockburn; Megan J. MacGarvie
    Abstract: We examine the effects of software patents on entry and exit in 27 narrowly-defined classes of software products, using a dataset with comprehensive coverage of both mature public firms and small privately held firms between 1994 and 2004. Reflecting the complex economics underlying the relationship between patent protection, entry costs and industry structure, we find that patents have a mixture of effects on entry and exit. Controlling for firm and market characteristics, firms are less likely to enter product classes in which there are more software patents. However, all else equal, firms that hold software patents are more likely to enter these markets. The net effect on entry of increasing the number of software patents is difficult to measure precisely: estimates of the effect of an across-the-board 10% increase in patent holdings on the number of entrants into the average market in this sample range from -5% to +3.5%, with quite large standard errors. Evidence on exit and survival is consistent with these findings - holding patents appears to enhance the survival prospects of firms after entering a market.
    JEL: L1 L6 O34
    Date: 2006–10
  7. By: Marco Cagetti; Mariacristina De Nardi
    Abstract: Entrepreneurship is a key determinant of investment, saving, and wealth inequality. We study the aggregate and distributional effects of several tax reforms in a model that recognizes this key role and that matches the large wealth inequality observed in the U.S. data. The aggregate effects of tax reforms can be particularly large when they affect small and medium-sized businesses, which face the most severe financial constraints, rather than big businesses. The consequences of changes in the estate tax depend heavily on the size of its exemption level. The current effective estate tax system insulates smaller businesses from the negative effects of estate taxation, minimizing the aggregate costs of redistribution. Abolishing the current estate tax would generate a modest increase in wealth inequality and slightly reduce aggregate output. Decreasing the progressivity of the income tax generates large increases in output, at the cost of large increases in wealth concentration.
    Date: 2006
  8. By: Russell S. Sobel (Department of Economics, West Virginia University); Andrea M. Dean (Department of Economics and Entrepreneurship Center, West Virginia University)
    Abstract: Saving traditional small ‘mom and pop’ businesses has been a justification for political and court decisions preventing Wal-Mart from opening new stores virtually everywhere across the United States. We present the first rigorous econometric investigation of how Wal-Mart actually impacts the small business sector. We examine the rate of self-employment and the number of smallemployer establishments using both time-series and cross-sectional data. Contrary to popular belief, our results suggest that the process of creative destruction unleashed by Wal-Mart has had no statistically significant long-run impact on the overall size and profitability of the small business sector in the United States.
    JEL: L81 D59 C21
    Date: 2006
  9. By: Mercedes Esteban-Bravo; Jose M. Mugica; Jose M. Vidal-Sanz
    Abstract: Outlet location plays a crucial role in retail strategy. In this paper we study the relationship between spatial density (concentration) of retailers in the trade area and their economic performance. This analysis will help managers figure out the economic potential of starting a retail business in a given area, reducing business start-up risks. We find that retail businesses located in high and low retail density zones enjoy higher performance levels, consistent with competitive advantage arising from agglomeration economies and local market power respectively. We also find that retail businesses located in intermediate density areas use a differentiation strategy based on business variety (diversification across stores). Outlets located in areas with the highest variety enjoy performance levels similar to those achieved in the agglomeration and low density areas. The results suggest that retail companies should jointly consider variety and density to determine location.
    Date: 2006–10
  10. By: Vives, Xavier (IESE Business School)
    Abstract: The effects of competition on process and product innovation are analyzed, obtaining robust results that hold for a range of market structures. It is found that increasing the number of firms tends to reduce R&D effort, whereas increasing the degree of product substitutability, with or without free entry, increases R&D effort -provided that the total market for product varieties does not shrink. Increasing the total market size increases R&D effort and has ambiguous effects on the number of varieties offered, while decreasing the cost of entry increases the number of entrants and varieties but reduces R&D effort per variety. The framework and results shed light on empirical strategies to assess the impact of competition on innovation.
    Keywords: cost reduction; X-inefficiency; market concentration; market size; substitutability; product introduction; corporate governance; globalization;
    Date: 2006–06–10
  11. By: Anne Stévenot-Guéry (Université de Nancy 2); Loris Guéry (Université de Bourgogne)
    Abstract: (VF)Dans la mesure où elle peut avoir une incidence sur la création de valeur, les capital investisseurs (CI) sont susceptibles d’intervenir dans la gestion des ressources humaines (GRH) des entreprises qu’ils financent. La littérature montre une implication des CI au niveau de la stratégie et de la gestion financière, mais peu d’études se sont intéressées spécifiquement à leur influence sur la GRH. Cette recherche vise par conséquent à mieux comprendre quelles sont les dimensions de la GRH influencées par les CI, comment s’opère cette influence (logiques disciplinaires et cognitives) et quelles sont les réactions des dirigeants des entreprises concernées (réactance psychologique et enracinement). La partie empirique consiste en une étude longitudinale de onze cas d’entreprises financées par CI. Des entretiens semi-directifs ont été menés auprès des représentants de quatre sociétés de CI et des onze dirigeants d’entreprises appartenant à leurs portefeuilles de participation.(VA)As Human Resource Management (HRM) can influence value creation, Venture Capitalists (VCs) are supposed to be involved in HRM of their financed firms. Literature shows that VCs have some influence on strategy and finance, but few studies deal with their impact on HRM. This research analyzes the aspects and the way (disciplinary and cognitive way) of VCs’ influence on HRM, and the CEO’s reactions (psychological reactance and entrenchment). Empirical data has been collected through a longitudinal qualitative study of eleven cases of firms financed by VCs. Interviews have been conducted with four VCs and eleven CEOs of their portfolio.
    Keywords: capital investisseurs;gestion des ressources humaines;gouvernance;enracinement;réactance psychologique;étude de cas;venture capitalists;human resource management;governance;entrenchment;psychological reactance;case study.
    JEL: G30 M12
    Date: 2006–05
  12. By: Paul A. David; Francesco Rullani
    Abstract: Quantitative methods are employed to describe two fundamental processes in the creation of free (libre) and open source software (FLOSS) that are at work in the collaborative development environment of the SourceForge.Net platform: resource mobilization, and “entrepreneurial initiatives” which generate new development projects. The micro dynamics of the individuals’ involvements in these processes are analysed by defining “activity states” that correspond to “lurking” (contributing to projects without become a member), “laboring” (joining one or more projects as members), and “launching” (founding one or more projects). The transition probability matrices constructed from observations on the activities of 222,835 individuals who registered on (during a 14-month period, mainly in 2001) characterize first-order Markov chains describing processes that are ergodic. The existence of a limiting “equilibrium” distribution of individual joining and launching activities is used to abstract from effects of transient disturbances (arising from the flow of new registrations), in order to reveal the implications of the underlying entrepreneurial and recruitment dynamics at work on the platform. Although only a small proportion of this cohort of registrants become even minimally active, and a still smaller proportion among those join projects, the active “core” of project members still numbers in the tens of thousands, and their ranks contain well more a thousand who found new projects. SourceForge is seen to be more than an attractor of projects that are being “born again” under open source licenses: this virtual collaborative development environment shares the regenerative properties of tangible “industrial districts” that give rise to new, innovative enterprises.
    Keywords: Open source software, Collaborative development environments, Industrial districts, Project founding, Project joining, Entrepreneurship and social communication skills, SourceForge, Markov chain models.
    Date: 2006–10–05

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