|
on Entrepreneurship |
|
Issue of 2007‒01‒02
twelve papers chosen by Marcus Dejardin Facultes Universitaires Notre-Dame de la Paix |
| By: | Enrico Santarelli (University of Bologna, Max Planck Institute of Economics Jena, ENCORE Amsterdam, and IZA Bonn); Marco Vivarelli (Università Cattolica Piacenza, CSGR Warwick, Max Planck Institute of Economics Jena, and IZA Bonn) |
| Abstract: | This survey paper aims at critically discussing the recent literature on firm formation and survival and the growth of new-born firms. The basic purpose is to single out the microeconomic entrepreneurial foundations of industrial dynamics (entry and exit) and to characterise the founder’s ex-ante features in terms of likely ex-post business performance. The main conclusion is that entry of new firms is heterogeneous with innovative entrepreneurs being found together with passive followers, over-optimist gamblers and even escapees from unemployment. Since founders are heterogeneous and may make "entry mistakes", policy incentives should be highly selective, favouring nascent entrepreneurs endowed with progressive motivation and promising predictors of better business performance. This would lead to the least distortion in the post-entry market selection of efficient entrepreneurs. |
| Keywords: | entrepreneurship, new firm, survival, post-entry performance |
| JEL: | L10 M13 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2475&r=ent |
| By: | Galor, Oded; Michalopoulos, Stelios |
| Abstract: | This research suggests that the evolution of entrepreneurial spirit played a significant role in the process of economic development and the evolution of inequality within and across societies. The study argues that entrepreneurial spirit evolved non-monotonically in the course of human history. In early stages of development, the rise in income generated an evolutionary advantage to entrepreneurial, growth promoting traits and their increased representation accelerated the pace of technological advancements and the process of economic development. Natural selection therefore had magnified growth promoting activities in relatively wealthier economies as well as within the upper segments of societies, enlarging the income gap within as well as across societies. In mature stages of development, however, non-entrepreneurial individuals gained an evolutionary advantage, diminishing the growth potential of advanced economies and contributing to the convergence of the intermediate level economies to the advanced ones. |
| Keywords: | evolution; growth; natural Selection; risk Aversion; technological progress |
| JEL: | J11 J13 O11 O14 O33 O40 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6022&r=ent |
| By: | Ciccone, Antonio; Papaioannou, Elias |
| Abstract: | Does cutting red tape foster entrepreneurship in industries with the potential to expand? We address this question by combining the time needed to comply with government entry procedures in 45 countries with industry-level data on employment growth and growth in the number of establishments during the 1980s. Our main empirical finding is that countries where it takes less time to register new businesses have seen more entry in industries that experienced expansionary global demand and technology shifts. Our estimates take into account that proxying global industry shifts using data from only one country--or group of countries with similar entry regulations--will in general yield biased results. |
| Keywords: | entry; entry regulation; globally expanding industries |
| JEL: | E6 F43 L16 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5996&r=ent |
| By: | Ken Clark (University of Manchester and IZA Bonn); Stephen Drinkwater Author-Emails.drinkwater@surrey.ac.uk (University of Surrey and IZA Bonn) |
| Abstract: | The over-representation of certain ethnic minority and immigrant groups in self-employment is, in common with other developed countries, a notable feature of the UK labour market. Compared to substantial growth in self-employment in the 1980s, the 1990s saw overall selfemployment rates plateau. Despite this, some minority groups experienced continued growth whilst others, particularly Chinese and Indian males and Pakistani, Bangladeshi and Chinese females, saw their self-employment rates decline. In this paper we use microdata samples from the 1991 and 2001 Censuses to investigate the trends in ethnic entrepreneurship. Using decomposition methods we find that, for males from the Asian groups, changes in observable characteristics associated with an increasing proportion of second generation individuals explain much of the decline in self-employment. This, which is also true of Chinese females, reflects in part the age structure and educational experiences of the second generation. The dynamics of Black male and Pakistani/Bangladeshi female entrepreneurship are less easy to explain. We also find that, while there is no evidence of self-employment being an “enclave” phenomenon, local economic conditions do affect rates of entrepreneurship for some groups, notably Pakistanis and Bangladeshis. |
| Keywords: | self-employment, entrepreneurship, ethnicity, immigrants |
| JEL: | J23 J7 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2495&r=ent |
| By: | Ruud de Mooij; Gaetan Nicodème |
| Abstract: | In Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. We exploit a panel of European data on firm births and legal form of business to analyze income shifting via increased entrepreneurship and incorporation. The results suggest that lower corporate taxes exert an ambiguous effect on entrepreneurship. The effect on incorporation is significant and large. It implies that the revenue effects of lower corporate tax rates – possibly induced by tax competition -- partly show up in lower personal tax revenues rather than lower corporate tax revenues. Simulations suggest that between 10% and 17% of corporate tax revenue can be attributed to income shifting. Income shifting is found to have raised the corporate tax-to-GDP ratio by some 0.2%-points since the early 1990s. |
| Keywords: | corporate tax, personal tax, entrepreneurship, incorporation, income shifting |
| JEL: | H25 M13 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1883&r=ent |
| By: | G. Buenstorf; D. Fornahl |
| Abstract: | This article studies entrepreneurial activities emerging out of one of Germany’s most prominent dot.com firms: Intershop, a maker of e-commerce software. We show that Intershop spawned at least 30 spin-offs. The majority entered locally, giving rise to a small but growing software cluster and counteracting the job losses accompanying the parent firm’s drastic downsizing after 2000. We trace the knowledge transfer from Intershop to the spin-offs and relate it to recent theorizing on the spin-off process as well as spin-off-based cluster formation. The Intershop case suggests that temporarily successful dot.coms could exert lasting effects on regional development. Length 30 pages |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2006-20&r=ent |
| By: | Lubos Pastor; Lucian Taylor; Pietro Veronesi |
| Abstract: | We develop a model in which an entrepreneur learns about the average profitability of a private firm before deciding whether to take the firm public. In this decision, the entrepreneur trades off diversification benefits of going public against benefits of private control. The model predicts that firm profitability should decline after the IPO, on average, and that this decline should be larger for firms with more volatile profitability and firms with less uncertain average profitability. These predictions are supported empirically in a sample of 7,183 IPOs in the U.S. between 1975 and 2004. |
| JEL: | G1 G3 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12792&r=ent |
| By: | Fredrik Andersson; Elizabeth E. Davis; Matthew L. Freedman; Julia I. Lane; Brian P. McCall; L. Kristin Sandusky |
| Abstract: | This paper uses matched employer-employee data from the Longitudinal Employer Household Dynamics database to investigate the contribution of worker and firm reallocation to within industry changes in wage inequality between 1992 and 2003. We find that the entry and exit of firms and the sorting of workers and firms based on underlying worker "skills" are important determinants of changes in industry earnings distributions over time. Our results suggest that the underlying dynamics of earnings inequality are complex and are due to factors that cannot be measured in standard crosssectional data. |
| URL: | http://d.repec.org/n?u=RePEc:hrr:papers:0106&r=ent |
| By: | Jaap H. Abbring; Jeffrey R. Campbell |
| Abstract: | This paper considers the effects of raising the cost of entry for potential competitors on infinite-horizon Markov- perfect industry dynamics with ongoing demand uncertainty. All entrants serving the model industry incur sunk costs, and exit avoids future fixed costs. We focus on the unique equilibrium with last- in first-out expectations: a firm never exits before a younger rival does. When an industry can support at most two firms, we prove that raising barriers to a second producer’s entry increases the probability that some firm will serve the industry and decreases its long-run entry and exit rates. In numerical examples with more than two firms, imposing a barrier to entry stabilizes industry structure. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-06-29&r=ent |
| By: | Jaap H. Abbring; Jeffrey R. Campbell |
| Abstract: | This paper extends the static analysis of oligopoly structure into an infinite- horizon setting with sunk costs and demand uncertainty. The observation that exit rates decline with firm age motivates the assumption of last-in first- out dynamics: An entrant expects to produce no longer than any incumbent. This selects an essentially unique Markov-perfect equilibrium. With mild restrictions on the demand shocks, a sequence of thresholds describes firms’ equilibrium entry and survival decisions. Bresnahan and Reiss’s (1993) empirical analysis of oligopolists’ entry and exit assumes that such thresholds govern the evolution of the number of competitors. Our analysis provides an infinite-horizon game- theoretic foundation for that structure. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-06-28&r=ent |
| By: | Pietro Tommasino (Bank of Italy) |
| Abstract: | Why do some countries suffer from backward financial institutions and weak corporate governance rules? We show that, even if, overall, the economy would benefit corporate governance reforms, not all the agents would stand to gain from the improvement. In particular, entrepreneurs and firms that are already well-established fear better rules, which would allow the financing of new firms and enhance competition. As a consequence, industry incumbents will try to influence the political process to block the reforms. If national political institutions are weak, these efforts are likely be successful. |
| Keywords: | Corporate Governance, Entry, Financial Development, Investor Protection, Politics |
| JEL: | G30 G38 K22 K42 L11 O16 P16 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_604_06&r=ent |
| By: | Almeida, Rita; Carneiro, Pedro |
| Abstract: | This paper investigates how enforcement of labour regulation affects the firm's use of informal labour, firm size and firm performance. Using firm level data on employment, capita, and output, census data on informal employment at the city level, and administrative data on enforcement of regulation at the city level, we show that in areas where law enforcement is stricter firms employ a smaller proportion of informal workers. Furthermore, by reducing the firm's access to unregulated labour stricter enforcement is also associated with smaller firms, less fluid labour markets, and (possibly) lower labour productivity. We control for different regional and firm characteristics, and we instrument enforcement with the distance between firm location and the location of an enforcement office, a measure of access of labour inspectors to firms. Taken together, our findings suggest that increased access to labour flexibility frees the firm from growth constraints, and it is likely to contribute to an improvement in productivity. |
| Keywords: | employment; informal sector; labour demand; labour markets; productivity; regulation |
| JEL: | H00 H10 J50 K20 L50 L60 O17 O40 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5976&r=ent |