nep-ent New Economics Papers
on Entrepreneurship
Issue of 2006‒10‒21
nine papers chosen by
Marcus Dejardin
Facultes Universitaires Notre-Dame de la Paix

  1. Entrepreneurial Innovations, Competition and Competition Policy By Norbäck, Pehr-Johan; Persson, Lars; Vlachos, Jonas
  2. Entrepreneurship in Early-Modern Europe (1450 - 1750): An Exploration of Some Unfashionable Themes in Economic History By John H. Munro
  3. Economic Freedom and Entrepreneurial Activity: Some Cross-Country Evidence By Christian Bjørnskov; Nicolai J. Foss
  4. Entrepreneurship as sampling - A theoretical note By Rehn, Alf
  5. Black Enterprise in Berlin: Labor Market Integration of Black Immigrants Through Entrepreneurship By Suzy Kim
  6. The role of comparing in financial markets with hidden information By Niinimäki, Juha-Pekka; Takalo, Tuomas; Kultti, Klaus
  7. Management of Knowledge Workers By Hvide, Hans K.; Kristiansen, Eirik G.
  8. Macroeconomic fluctuations and firm entry : theory and evidence By Vivien Lewis
  9. Evaluating Public Policy Formation and Support Mechanisms for Technological Innovation By Ramsey, Elaine; Bond, Derek

  1. By: Norbäck, Pehr-Johan (Research Institute of Industrial Economics); Persson, Lars (Research Institute of Industrial Economics); Vlachos, Jonas (Research Institute of Industrial Economics)
    Abstract: We show that, in the case when innovations are for sale, increased product market competition, captured by reduced product market profits, can increase the incentives for innovations. The reason is that the incentive to innovate depends on the acquisition price which, in turn, might increase despite firms in the market making lower profits. We also show that stricter, but not too strict, merger and cartel policies tend to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation and by increasing the relative profitability of being the most efficient firm in the industry. Moreover, it is shown that increased intensity of competition can increase the relative profitability of innovation for sale, relative to innovation for entry.
    Keywords: Acquisitions; Entrepreneurship; Innovation; Competition
    JEL: G34 L13 L22 M13 O31
    Date: 2006–09–22
  2. By: John H. Munro
    Abstract: Entrepreneurship, by its very essence, concerns the theory of the firm – the individual enterprise – which in turn is the essential core of micro-economics. A major theme of this study, however, is to demonstrate the interaction of micro- and macro-economic phenomena: to show how such firms or enterprises, and entrepreneurship itself, were often shaped by, and often helped shape, such macro-economic forces as demographic changes, monetary changes, price changes – in terms of both deflation and inflation – long distance trade, overseas exploration and expansion (colonialism), and indeed related changes in social institutions and socio-cultural values that were also influenced by such macro-economic changes. One generalization about macro-economic changes involving inflations and deflations has both general and considerable importance in the history of European business enterprises and entrepreneurship itself: for long-term inflations (when moderate) tend to cheapen or reduce the relative factor costs of labour, land (rent contracts), and capital (fixed interest rates in loan contracts). Similarly, long term deflations tend, in reverse fashion, in increase the real or relative factor costs of labour, land, and capital, especially with pronounced wage-stickiness, and related ‘stickiness’ in leasehold rent contracts (and more so with customary tenures), and with loan contracts -- even if the long-term trends in real interest rates was falling over this long period. At the same time, both inflations and deflations are accompanied by changes in the relative prices of key industrial inputs. The key question to be posed is this: how did entrepreneurs respond to such changes in their factor costs, both short term and long term? This study commences by demonstrating how deflation in mid-15th century Europe, in increasing the purchasing power of silver, provided the stimulus for two major technological innovations in silver-mining and smelting that led to the South German silver-copper mining boom of 1460-1540, which also meant major changes in commercial-industrial entrepreneurship and in industrial scales. That mining boom in turn laid the foundations for the 130 year inflation of the Price Revolution (1520-1650) – an inflation further fostered by a financial revolution in credit and banking institutions (from the 1520s), and then further fuelled by the influx of Spanish-American silver.. The heart of this study is on the role of inflation, and associated macro-economic changes, in producing the roots of modern capitalist entrepreneurship, during what is often called Tawney’s Century (1540-1640). We begin, however, with two famous related theses: Hamilton’s thesis of ‘Profit Inflation’ (in which wages lag behind consumer prices), a wrongly-constructed thesis that endures only because Keynes endorsed it; and Nef’s thesis of the ‘Tudor Stuart industrial revolution’ – a much ridiculed response to Hamilton – whose merit lies in revealing the capitalist entrepreneurship, major technological changes, and changes in industrial scale that resulted from the substitution of coal – the hear of modern industrialization – for every more costly wood charcoal. Tawney’s three theses themselves concern the origins of modern agrarian capitalist, the related ‘Rise of the Gentry’ debate (on the role of inflation in shifting land ownership from the aristocracy to the capitalist gentry landowners), and the Weber-Tawney thesis on Religion (Protestantism) and the Rise of Capitalism, which, I endeavour to show has its real relevance only from the late 17th century. Associated with the Price Revolution era is the Age of Overseas Expansion (involving one of the most momentous technological and entrepreneurial change of the early modern era: the development of the Full Rigged Atlantic ship, with heavy artillery). England joined that overseas commercial-colonial race rather late, in the 1550s, but in doing developed the foundations of modern capitalism in creating the joint stock company. The study ends with the following era of monetary scarcity and deflation provided another macro-economic challenge whose response was revolutionary changes in banking and financial institutions – i.e., in financial-commercial entrepreneurship. It also fostered the growth and spread of rent-seeking Mercantilist philosophies that also influenced the character of early-modern capitalist entrepreneurship.
    Keywords: Entrepreneurship; Inflation; Deflation; Factor Costs; Technological Innovations; Minind and Metallurgy; Coal-Burning Industries; Joint-Stock Company
    JEL: E31 E40 F10 G20 G21 J10 J30 L10 L71 L72 N13 N23 N33 N83
    Date: 2006–10–09
  3. By: Christian Bjørnskov; Nicolai J. Foss
    Abstract: While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use measures of economic freedom from the Economic Freedom of the World database to examine which elements of economic policy making and the institutional framework are responsible for the supply of entrepreneurship. Our data on entrepreneurship are derived from the Global Entrepreneurship Monitor. The combination of these two datasets is unique in the literature. We find that the size of government is negatively correlated with entrepreneurial activity but that sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.
    Keywords: Economic freedom; entrepreneurship; cross-country variation
    JEL: M13 O31 O50
    Date: 2006
  4. By: Rehn, Alf
    Date: 2006–01–01
  5. By: Suzy Kim
    Date: 2006–10–16
  6. By: Niinimäki, Juha-Pekka (Department of Economics, Helsinki School of Economics); Takalo, Tuomas (Bank of Finland Research); Kultti, Klaus (Department of Economics, University of Helsinki)
    Abstract: This paper studies how comparing can be used to provide information in financial markets in the presence of a hidden characteristics problem. Although an investor cannot precisely estimate the future returns of an entrepreneur’s projects, the investor can mitigate the asymmetric information problem by ranking different entrepreneurs and financing only the very best ones. Information asymmetry can be eliminated with certainty if the number of compared projects is sufficiently large. Because comparing favours centralised information gathering, it creates a novel rationale for the establishment of a financial intermediary.
    Keywords: asymmetric information; banking; corporate finance; financial intermediation; ranking; venture capital
    JEL: G21 G24
    Date: 2006–01–01
  7. By: Hvide, Hans K. (University of Aberdeen Business School); Kristiansen, Eirik G. (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: We study how complementarities and intellectual property rights affect the management of knowledge workers. The main results relay when a firm will wish to sue workers that leave with innovative ideas, and the effects of complementary assets on wages and on worker initiative. We argue that firms strongly protected by property rights may not sue leaving workers in order to motivate effort, while firms weakly protected by complementary assets must sue in order to obtain positive profits. Firms with more complementary assets pay higher wages (and have lower turnover), but such higher pay has a detrimental effect on worker initiative. Our analysis suggests that strengthened property rights protection reduces turnover costs but weakens worker initiative.
    Keywords: Entrepreneurship; Innovation; IPP; Litigation; Personnel economics; R&D; Start-ups
    JEL: K41 M13 M50 O32
    Date: 2006–08–04
  8. By: Vivien Lewis (Center for Economic Studies, Catholic University Leuven)
    Abstract: This paper studies the behaviour of firm entry and exit in response to macroeconomic shocks. We formulate a dynamic stochastic general equilibrium model with an endogenous number of producers. From the calibrated model, we derive a minimum set of robust sign restrictions to identify four kinds of macroeconomic shocks in a vector autoregression, namely supply, demand, monetary and entry cost shocks. The variables entering the VAR are output, inflation, the nominal interest rate, profits and firm entry. The response of firm entry to the various shocks is freely estimated. Our main finding is that entry responds significantly to all types of shocks. The results also show a crowding-in of firm entry following an exogenous rise in demand, consistent with the effect of a consumption preference shock predicted by the model
    Keywords: firm entry, VAR, business cycles
    JEL: E30 E32
    Date: 2006–10
  9. By: Ramsey, Elaine; Bond, Derek
    Abstract: Policy evaluation is a complex task. Most approaches now adopt a mixed method approach combining both quantitative and qualitative techniques. A shortcoming of the standard approaches is that they fail to measure or investigate deeper perceptions of the policy. In this paper the usefulness of projective techniques as a tool for policy evaluation is investigated. Projective techniques are widely used in psychology and consumer studies but their usefulness in policy evaluation has still to be assessed. A simple evaluation is done in this paper by reporting on a study of owner-managers of tradeable-services small and medium size enterprises attitudes to Government e-business policy. The survey included firms from Northern Ireland, Republic of Ireland and New Zealand. Traditional quantitative and qualitative survey techniques were used, however these failed to produce conclusive evidence. To overcome this limitation two projective techniques- word association and completion tests were employed as an additional evaluation method. The paper illustrates how the results of projective techniques can be analysed using both context and matrix analysis. Given that the area of e-business is dynamic and fast changing and that SMEs are extremely heterogeneous, it is argued that the application of projective techniques to assess their attitudes and perceptions of government policy is a good test of the usefulness of the method. The results of the projective techniques lead to more insight into the perceptions and attitudes of the owner-managers and provide interesting individual perspectives into the issues. Problems with the method, such as costs, the level of skill needed to apply the technique and generalization are highlighted. The overall conclusions are that projective techniques could provide an interesting additional tool for policy evaluation and that further assessment of its usefulness is needed.
    Keywords: Policy evaluation; Projective techniques: E-business; SMEs
    JEL: O32 O38
    Date: 2006–07

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.
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