nep-ent New Economics Papers
on Entrepreneurship
Issue of 2006‒12‒01
twelve papers chosen by
Marcus Dejardin
Facultes Universitaires Notre-Dame de la Paix

  1. Israel M. Kirzner: An Outstanding Austrian Contributor to the Economics of Entrepreneurship By Douhan, Robin; Henrekson, Magnus; Eliasson, Gunnar
  2. Entrepreneurs´ perceptions of success: examining differences across gender and family status By JULIO DE CASTRO; ALICIA CODURAS; CRISTINA CRUZ; RACHIDA JUSTO
  3. Entrepreneurship and Economic Growth: An Empirical Analysis By Héctor Salgado-Banda
  4. Entrepreneurs, HRM Orientations and Environmental Fit: A UK-Japan Comparison in High Tech Manufacturing By Hugh Whittaker; Philippe Byosiere; Junpe Higuchi; Thelma Quince
  5. The impact of financial constraints on innovation : evidence from French manufacturing firms By Frédérique Savignac
  6. Is Academic Entrepreneurship Good or Bad for Science? Empirical Evidence from the Max Planck Society By Guido Bünstorf
  7. Can´t block, must run: Small firms and appropriality By Justin Byma; Aija Leiponen
  8. Do business angels alter the risk-return equation in early stage investments? Business angels as seen by venture capitalists in the German speaking countries By Heukamp, Franz; Liechtenstein, Heinrich; Wakeling, Nick
  9. How Does Opportunistic Behavior Influence Firm Size? By Christian Cordes; Peter J. Richerson; Richard McElreath; Pontus Strimling
  10. Towards an Explanation of the Exponential Distribution of Firm Growth Rates By Alex Coad
  11. Creditor Protection and the Dynamics of the Distribution in Oligarchic Societies By Manuel Oechslin
  12. Riskirahoituksen merkitys biotekniikka-alalla: Pääomasijoittajien vertailu yritysten näkökulmasta By Terttu Luukkonen; Mari Maunula

  1. By: Douhan, Robin (Uppsala University); Henrekson, Magnus (Research Institute of Industrial Economics); Eliasson, Gunnar (Royal Institute of Technology)
    Abstract: Israel M. Kirzner is the 2006 winner of The International Award for Entrepreneurship and Small Business Research. In this essay, we present and evaluate his main contributions to the economics of entrepreneurship. The focus is on how Kirzner defines the entrepreneurial function. In order to better understand his theory, we posit Kirzner’s notion of an entrepreneur in the Austrian tradition. In so doing we emphasize that this concept opens up different perspectives as compared to the neoclassical theoretical framework. The three areas of economic policy, justice and freedom and economic growth are discussed. We also show why the Kirznerian entrepreneur makes these issues relevant. Perhaps most importantly, Kirzner has made the Austrian School intelligible for non-Austrians. By bridging the chasm between Austrian and mainstream thinking, the crucial role of entrepreneurship and the individual entrepreneur has become visible to a much broader audience.
    Keywords: Austrian economics; Economic development; Entrepreneurship; Small business economics
    JEL: B49 B52 B53 O31
    Date: 2006–10–26
  2. By: JULIO DE CASTRO (Instituto de Empresa); ALICIA CODURAS (Instituto de Empresa); CRISTINA CRUZ (Instituto de Empresa); RACHIDA JUSTO (Instituto de Empresa)
    Abstract: Our study examines to what extent female and male entrepreneurs differ in the way they perceive and assess entrepreneurial success, measured by extrinsic or intrinsic dimensions. Our results indicate a number of similarities between men and women entrepreneurs but also reveal interesting gender-based differences related to family status. Rather than assuming that women entrepreneurs are a homogeneous group, we found that family factors, and especially parental status, play a key role in shaping fundamentally different perceptions of entrepreneurial success amongst different types of women entrepreneurs.
    Keywords: Entrepreneur, Gender, Children, Perception of success
    Date: 2006–02
  3. By: Héctor Salgado-Banda
    Abstract: This paper proposes a new variable based on patent data to proxy for productive entrepreneurship. Data on self-employment is used as an alternative proxy. In particular, the paper studies the impact of entrepreneurship on economic growth by using these two measures. The study considers 22 OECD countries and finds a positive relationship between the proposed measure of productive entrepreneurship — degree of innovativeness of different nations — and economic growth, while the alternative measure, based on self-employment, appears to be negatively correlated with economic growth. The findings are backed by a battery of econometric specifications and techniques.
    Keywords: cross-sectional analysis, dynamic panel data, economic growth, entrepreneurship, patents, self-employment, system estimation analysis
    Date: 2005–06
  4. By: Hugh Whittaker; Philippe Byosiere; Junpe Higuchi; Thelma Quince
    Abstract: Entrepreneurs cannot develop a business single handedly. One of the most important tasks the entrepreneur faces is to recruit, allocate work to, motivate and retain employees who will help the business to grow. Based on survey data, this paper examines the HRM orientations of UK and Japanese high tech manufacturing entrepreneurs, and identifies fundamentally different approaches to these tasks, at least as expressed by the entrepreneurs. The UK entrepreneurs espouse an employment relationship based on 'give and take' flexibility, while the Japanese entrepreneurs are more focused on raising or nurturing their employees. Reasons for the differences are explored, and relate to the entrepreneurs' backgrounds, as well as the business and social environment. Implications for the 'new employment relationship' are explored.
    Keywords: Entrepreneurship; HR management; High-tech small firms
    JEL: L60 M12 M13 M14 M50
    Date: 2006–09
  5. By: Frédérique Savignac (CREST-LMI - [Centre de Recherche en Economie et Statistique - Laboratoire de Microéconométrie])
    Abstract: This paper examines the impact of financial constraints on innovation for established firms. We make use of a qualitative indicator of the existence of financial constraints based on firms' own assessment obtained thanks to a French specific survey. Thus, the existence of financial constraints for innovation is measured by a direct indicator whereas previous studies rely on proxies (like the cash-flow sensitivity) subject to interpretation problems. The descriptive analysis of balance sheet structures reveals that innovative firms without financial constraints have the best profile in terms of economic performances, financing structure and risk whereas non innovative firms facing financial constraints have the poorest profile. From the econometric point of view, the probabilities of implementing innovative projects and of facing financial constraints are simultaneously estimated by a recursive bivariate probit model to account for the endogeneity of the financial constraint variable. We then find that firms having innovative projects face financial constraints that significantly reduce the likelihood that they implement their innovative investment. The probability of facing financing constraints is explained by firms' ex ante financing structure and economic performances, by industry sector and it decreases with firms' size.
    Keywords: Innovation, financing constraints, recursive bivariate probit.
    Date: 2006–11–22
  6. By: Guido Bünstorf
    Abstract: Based on new data, this paper studies invention disclosure, licensing, and firm formation activities of Max Planck Institute directors over the time period 1985-2004, and analyzes their effects on scientists’ publication and citation records. The results are consistent with prior findings that inventing does not adversely affect research output. More mixed results are obtained with regard to academic entrepreneurship. The analysis raises questions vis-à-vis earlier explanations for positive relationships between inventing and publishing. It finds little evidence than inventors learn from interacting with firms. Likewise, license revenues do not enable scientists to step up their research activities.
    Keywords: Basic science, academic entrepreneurship, innovation, licensing, firm formation Length 32 pages
    JEL: I23 O31
    Date: 2006–11
  7. By: Justin Byma; Aija Leiponen
    Abstract: This empirical study examines small firms’ strategies towards appropriating the returns to their investments in innovation and finds that they are qualitatively different from those found in earlier studies of more generally representative samples of firms. First, few of the smallest firms appear to benefit from patenting. Even within this sample of small firms, only the largest firms were likely to identify patents as the most important method of appropriating innovation returns. Thus, the strategic choice for most small firms is between secrecy and speed to market. The smallest firms and those in low technology or complex product industries tend to prefer speed, while small investments in R&D, discrete product technologies, and affiliation with higher tech-nology industries explain preference for trade secrets. These results raise policy questions regarding the functioning of the existing systems of intellectual property rights when key policy goals include innovation by and growth of small firms. Furthermore, innovation policies that mandate collaboration are likely to significantly influence firms’ appropriability strategies.
    Keywords: SMEs, intellectual property rights, innovation, collaboration
    JEL: O31 O34 L24
    Date: 2006–11–21
  8. By: Heukamp, Franz (IESE Business School); Liechtenstein, Heinrich (IESE Business School); Wakeling, Nick (Citigroup Corporate and Investment Bank)
    Abstract: Venture capitalists in German-speaking countries do not value the contribution of business angels in co-invested deals. Business angels do not reduce the risk perceived by venture capitalists in early-stage deals, even if the business angels have what venture capitalists regard as an ideal profile. Venture capitalists also refute that deals with business angels typically generate higher internal rates of return than deals without business angels.
    Keywords: Venture capital; Business Angels;
    Date: 2006–10–12
  9. By: Christian Cordes; Peter J. Richerson; Richard McElreath; Pontus Strimling
    Abstract: This paper relates firm size and opportunism by showing that, given certain behavioral dispositions of humans, the size of a profit-maximizing firm can be determined by cognitive aspects underlying firm-internal cultural transmission processes. We argue that what firms do better than markets – besides economizing on transaction costs – is to establish a cooperative regime among its employees that keeps in check opportunism. A model depicts the outstanding role of the entrepreneur or business leader in firm-internal socialization processes and the evolution of corporate cultures. We show that high opportunism-related costs are a reason for keeping firms’ size small.
    Keywords: Theory of the Firm, Transaction Cost Economics, Cultural Evolution, Opportunism, Cooperation Length 21 pages
    JEL: D21 D23 D01 M14 C61
    Date: 2006–11
  10. By: Alex Coad (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I], LEM - Laboratory of Economics and Management - [Sant'Anna School of Advanced Studies])
    Abstract: A robust feature of the corporate growth process is the exponential distribution of firm growth rates. This striking empirical regularity has been found to hold for a number of different datasets and at different levels of aggregation. In this paper, we propose a simple theoretical model capable of explaining this observed exponential distribution. We do not attempt to generalize on where growth opportunities come from, but rather we focus on how firms build upon growth opportunities. We borrow ideas from the self-organizing criticality literature to explain how the interdependent nature of discrete resources may lead to the triggering off a series of additions to a firm's resources. In a formal model we consider the case of employment growth in a hierarchy, and observe that growth rates follow an exponential distribution.
    Keywords: Firm growth rates, exponential distribution, hierarchy.
    Date: 2006–11–13
  11. By: Manuel Oechslin
    Abstract: This paper introduces credit market imperfections and barriers to entrepreneurship into the neoclassical growth model. It is assumed that only a small elite, the oligarchs, may run firms and that these oligarchs - when borrowing from workers - may renege on the debt contracts at low cost. In such an economy, poor contract enforcement slows down the transition towards the steady state and alters the dynamics of the distribution strongly in favor of the oligarchs. The reason is that the workers are forced to charge ”low” borrowing rates in order to decrease the incumbents’ incentives to default. With dynastic preferences, low returns reduce the workers’ propensity to save; they discount future wages less and consume more out of current income. Calibrations of the model suggest that the elite’s welfare gains are large - even if the oligarchic structure were associated with substantially lower productivity growth rates. These findings point to political forces behind low financial development.
    Keywords: Creditor protection, dynamics of the distribution, infinite horizon, oligarchy
    JEL: O11 O16 K42
    Date: 2006–06
  12. By: Terttu Luukkonen; Mari Maunula
    Abstract: The paper reports an empirical study on the overall importance and non-financial value-added provided by Venture Capital (VC) investors to their investee firms in biotechnology. The study compares the characteristics of firms that have obtained VC funding with those of firms that have not. Furthermore, it pays attention to the activities and non-financial value-added by different types of VC organization : informal investors (business angels), public sector VCs, and private sector VCs. The study data was collected through a survey and interviews at the end of 2005 with the total population of small and medium-sized biotech companies established in Finland since 1986 - 85 companies, 95 % of which participated in the study. VC investors indeed provided both financial and non-financial value-added to their investee firms. All three VC types, informal investors, public sector VCs, and private sector VCs, had somewhat different investment profiles in terms of firm type and age, and therefore, we may conclude that they are not alternatives to, but complement each other. Central findings of the study included an observation that all three VC types were fairly active in their activities vis-à-vis their investee firms. Nevertheless, they differed in terms of the overall perceived value-added as well as their activity profiles. Informal investors were found to have the highest overall value-added and kept closest contacts with their investee firms. It is, however, to be noted that informal investors invested in the youngest firms and therefore their advice and support was probably most needed. Overall, public sector VCs performed nearly as well as private sector VCs, contrary to expectations based on previous research literature on the subject.
    Keywords: venture capital, biotechnology
    JEL: O16 G24 O38 L65
    Date: 2006–11–21

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