nep-ent New Economics Papers
on Entrepreneurship
Issue of 2006‒11‒25
nine papers chosen by
Marcus Dejardin
Facultes Universitaires Notre-Dame de la Paix

  1. The Entrepreneur’s Mode of Entry: Business Takeover or New Venture Start By Simon C. Parker; C. Mirjam van Praag
  2. Small firm credit market discrimination, SBA-guaranteed lending, and local market economic performance By Ben R. Craig; William E. Jackson, III; James B. Thomson
  3. Innovation and the Determinants of Firm Survival By Hielke Buddelmeyer; Paul H. Jensen; Elizabeth Webster
  4. Firm Survival and Growth in Retail and Service Industries: Evidence from Franchised Chains By Renata Kosova; Francine Lafontaine
  5. Does FDI facilitate Domestic Entrepreneurship? Evidence from the Czech Republic By Renata Kosova; Meghana Ayyagari
  6. Education and Self-Employment: Changes in Earnings and Wealth Inequality By Yaz Terajima
  7. The patenting universities: Problems and perils By Baldini, Nicola
  8. Assessing job flows across countries : the role of industry, firm size, and regulations By Haltiwanger, John; Scarpetta, Stefano; Schweiger, Helena
  9. Cluster Complexes: A Framework for Understanding the Internationalisation of Innovation Systems By Wixted, Brian

  1. By: Simon C. Parker (Durham University and IZA Bonn); C. Mirjam van Praag (University of Amsterdam and IZA Bonn)
    Abstract: We analyse the decision to become an entrepreneur by either taking over an established business or starting a new venture from scratch. A model is developed which predicts how several individual- and firm-specific characteristics influence entrepreneurs’ entry mode. The new venture creation mode is associated with higher levels of schooling and wealth, whereas managerial experience, new venture start-up capital requirements and risk promote the takeover mode. Entrepreneurs whose parents run a family firm are predicted to invest the least in schooling, since schooling reduces search costs and these individuals have the lowest probability of needing to search for a business opportunity outside their family. A sample of data on entrepreneurs from the Netherlands provides broad support for the theory; implications for policy-makers concerned about the survival of family firms lacking withinfamily successors are discussed.
    Keywords: entrepreneurship, business entry, venture start-up, business takeover, human capital
    JEL: J24 M13
    Date: 2006–10
  2. By: Ben R. Craig; William E. Jackson, III; James B. Thomson
    Abstract: We empirically test whether SBA-guaranteed lending has a greater impact on economic performance in markets with a high percentage of potential minority small businesses. This hypothesis is predicated on priors related to three overlapping assumptions. These three assumptions are: (1) The classic type of credit rationing developed in the seminal paper by Stiglitz and Weiss (1981) is more likely to occur in markets with a higher per capita percentage of minority small businesses because such markets are more likely to have more severe information asymmetry problems, (2) SBA-guaranteed lending is likely to reduce these credit rationing problems—thus improving the level of development of the local financial market, and (3) increased local financial market development helps to lubricate the wheels of economic performance (Rajan and Zingales, 1998). Using local labor market employment rates as our measure of economic performance, we find evidence consistent with this proposition. In particular, we find a positive and significant impact on the average annual level of employment in a local market of SBA-guaranteed lending in that local market. This impact is 200 percent larger in markets with a high percentage of potential minority small businesses. This result has important implications for public policy in general and SBA-guaranteed lending in particular.
    Keywords: Small business - Finance ; Small Business Administration ; Discrimination in consumer credit
    Date: 2006
  3. By: Hielke Buddelmeyer (University of Melbourne and IZA Bonn); Paul H. Jensen (University of Melbourne); Elizabeth Webster (University of Melbourne)
    Abstract: While many firms compete through the development of new technologies and products, it is well known that new-to-the-world innovation is inherently risky and therefore may increase the probability of firm death. However, many existing studies consistently find a negative association between innovative activity and firm death. We argue that this may occur because authors fail to distinguish between innovation investments and innovation capital. Using an unbalanced panel of over 290,000 Australian companies, we estimate a piecewiseconstant exponential hazard rate model to examine the relationship between innovation and survival and find that current innovation investments increase the probability of death while innovation capital lowers it.
    Keywords: firm survival, innovation
    JEL: O31 O32 C41
    Date: 2006–10
  4. By: Renata Kosova (The George Washington University School of Business); Francine Lafontaine (University of Michigan)
    Date: 2006–06
  5. By: Renata Kosova (The George Washington University School of Business); Meghana Ayyagari (The George Washington University School of Business)
    Date: 2006–09
  6. By: Yaz Terajima
    Abstract: The author quantitatively studies the interaction between education and occupation choices and its implication for the relationship between the changes in earnings inequality and the changes in wealth inequality in the United States over the 1983–2001 period. Among households whose head is a college graduate, the ratio of average household earnings between the self-employed and workers increased by 57 per cent. At the same time, the ratio of the average household wealth increased by 137 per cent. These findings suggest that both earnings and wealth inequality increased over this period. Did this change in relative average earnings lead to the change in relative average wealth? The author builds on a model of wealth distribution to include education and occupation choices, where earnings opportunities are dictated by productivity processes that are education-occupation specific. By calibrating these productivity processes to match the earnings observations separately for 1983 and 2001, the author quantitatively derives the model-implied changes in wealth inequality between different education-occupation groups of households. The results show that this exercise leads to one-third of the change in the relative average wealth between college self-employed and college worker households.
    Keywords: Economic models; Labour markets
    JEL: D31 I21 J23
    Date: 2006
  7. By: Baldini, Nicola
    Abstract: Starting from a review of more than 50 papers, this work will present a detailed overview of threats stemming from university patenting activity, then it will draw some policy implications and it will conclude with some suggestions for further research.
    Keywords: university patents; entrepreneurial university; open science; secrecy
    JEL: O31
    Date: 2006–03–27
  8. By: Haltiwanger, John; Scarpetta, Stefano; Schweiger, Helena
    Abstract: This paper reviews the process of job creation and destruction across a sample of 16 industrial and emerging economies over the past decade. It exploits a harmonized firm-level data set drawn from business registers and enterprise census data. The paper assesses the importance of technological factors that characterize different industries in explaining cross-country differences in job flows. It shows that industry effects play an important role in shaping job flows at the aggregate level. Even more importantly, differences in the size composition of firms-within each industry-explain a large fraction of the overall variability in job creation and destruction. However, even after controlling for industry/technology and size factors there remain significant differences in job flows across countries that could reflect differences in business environment conditions. The authors look at one factor shaping the business environment, namely, regulations on hiring and firing of workers. To minimize possible endogeneity and omitted variable problems associated with cross-country regressions, we use a difference-in-difference approach. The empirical results suggest that stringent hiring and firing costs reduce job turnover, especially in those industries that require more frequent labor adjustment. Regulations also distort the patterns of industry/size flows. Within each industry, medium and large firms are more severely affected by stringent labor regulations, while small firms are less affected, probably because they are partially exempted from such regulations or can more easily circumvent them.
    Keywords: Labor Markets,Small Scale Enterprise,Microfinance,Inequality,Water and Industry
    Date: 2006–11–01
  9. By: Wixted, Brian
    Abstract: The literature on clustering that has developed over the last two decades or so has given us a wealth of information on the formation and competitiveness of places in the global economy. Similarly, the systems literature on innovation has been valuable in moving the debate around technology from a focus on the entrepreneur to one than encompasses institutions, government, suppliers, customers and universities. However, there remains an important limit to this research; the borders of political jurisdictions, usually nation states, typically delineate the studies. It is argued in this paper that during an era when the international architecture of production relationships is changing, this view of systems is hindering its further development. This paper briefly examines what we have learnt of innovation systems, including clustering and also explores the limitations of this work. From this foundation it is proposed in this paper that a framework which understands clusters as nodes within extra-territorial networks is a promising approach for internationalising the systems of innovation perspective. The advantage of the approach presented here is that it can simultaneously capture regional specialisations and be disaggregated enough to apply on a technology / sectoral basis. Another principle advantage is that such a framework goes someway towards an understanding of interregional and international trade that is consistent with what other studies have shown of the development of innovation within particular geographic locations. The paper draws from extensive data analysis of industrial interdependencies that cross national borders to support the case for cluster complexes that transcend regional and national borders.
    Keywords: innovation systems; clusters; internationalisation
    JEL: R12 O30
    Date: 2006–10

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