nep-ent New Economics Papers
on Entrepreneurship
Issue of 2007‒02‒10
ten papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Hunting the Heffalump: Can Trait and Cognitive Characteristics Predict Entrepreneurial Orientation? By E. COOLS; H. VAN DEN BROECK
  2. What determines entrepreneurial clusters? By Luigi Guiso; Fabiano Schivardi
  3. The Determinants of New-firm Survival across Regional Economies By Zoltan J. Acs; Catherine Armington; Ting Zhang
  4. The Shadow of Death: Pre-exit Performance of Firms in Japan By Kozo Kiyota; Miho Takizawa
  5. New goods and the size distribution of firms By Erzo G.J. Luttmer
  6. On the Return to Venture Capital By Boyan Jovanovic; Balàzs Szentes
  7. The Spatial Dynamic Between Established Firms and Entrants By Lawrence A. Plummer
  8. Technological Trampolines for new venture creation in Catalonia: the case of University of Girona By Andrea Bikfalvi; Christian Serarols; David Urbano; Yancy Vaillant
  9. The Role of Loan Guarantee Schemes in Alleviating Credit Rationing in the UK By Cowling, Marc
  10. Investor Protection, Risk Sharing and Inequality By Alessandra Bonfiglioli

    Abstract: The aim of this study was to get more insight into what typifies Flemish entrepreneurs. We compared entrepreneurs with non-entrepreneurs for five traits (tolerance for ambiguity, selfefficacy, proactive personality, locus of control, need for achievement) and for cognitive styles. Additionally, we used these trait and cognitive characteristics to predict variances in entrepreneurial orientation (EO). Whereas the link between EO and organizational performance has been studied intensively, the examination of possible antecedents of EO remains a white space. We found that entrepreneurs (N = 177) score significantly higher on all traits than nonentrepreneurs (N = 60). For the cognitive styles (measured with the Cognitive Style Indicator), we found that non-entrepreneurs score higher on the knowing and planning style. No differences were found for the creating style. With regard to the link between the entrepreneur’s profile and EO, we found a significant contribution of tolerance for ambiguity and proactive personality to EO.
    Keywords: traits; cognitive styles; entrepreneurial orientation; entrepreneurs versus nonentrepreneurs
    Date: 2006–12
  2. By: Luigi Guiso; Fabiano Schivardi
    Abstract: We contrast two potential explanations of the substantial differences in entrepreneurial activity observed across geographical areas: entry costs and external effects. We extend the Lucas model of entrepreneurship to allow for heterogeneous entry costs and for externalities that shift the distribution of entrepreneurial talents. We show that these assumptions have opposite predictions on the relation between entrepreneurial activity and firm level TFP: with different entry costs, in areas with more entrepreneurs firms’ average productivity should be lower and vice versa. We test these implications on a sample of Italian firms and unambiguously reject the entry costs explanation in favor of the externalities one. We also investigate the sources of external effects, finding robust evidence that learning externalities are an important determinant of cross-sectional differences in entrepreneurial activity
    Keywords: Entrepreneurship, clustering, agglomeration economies
    JEL: D24 D62 J23
    Date: 2006
  3. By: Zoltan J. Acs; Catherine Armington; Ting Zhang
    Abstract: Motivated by differences in new-firm survival across regions, this paper explores the impact of regional human capital on new-firm survival rates. New-firm survival is interpreted through formation rates of surviving versus closed firms in the service sector. By incorporating knowledge spillovers through a geographical variation model for Labor Market Areas, we empirically test the relationship between regional human capital stocks and new-firm survival. The expected positive relationship between regional human capital and new-firm survival is supported for the period 1993-1995, but is not as strong for the recession period 1990-1992. Controlling for human capital, the new-firm survival rate is negatively related to service sector specialization and positively related to all industry intensity, suggesting that city size and diversity may be an important determinant of new-firm survival in both periods.
    Keywords: New-Firm Survival, Human Capital, Knowledge Spillovers, Entrepreneurship, Labor Market Area
    JEL: J24 L80 M13 O3 R1
    Date: 2006–12
  4. By: Kozo Kiyota; Miho Takizawa
    Abstract: This paper examines the pre-exit productivity performance and asks how productivity affects future survival, using firm-level data in Japan for 1995-2002. We found that firms did not face "sudden death" but there was a "shadow of death." Future exiting firms had lower performance four years before their exit. Besides, within a hair 's breadth of death, the unobserved heterogeneity of firm such as management effort played an important role in the firm survival.
    Keywords: Pre-exit performance, Productivity, Size, Unobserved heterogeneity, Firm survival
    JEL: D21 D24 L25
    Date: 2007–01
  5. By: Erzo G.J. Luttmer
    Abstract: This paper describes a simple model of aggregate and firm growth based on the introduction of new goods. An incumbent firm can combine labor with blueprints for goods it already produces to develop new blueprints. Every worker in the economy is also a potential entrepreneur who can design a new blueprint from scratch and set up a new firm. The implied firm size distribution closely matches the fat tail observed in the data when the marginal entrepreneur is far out in the tail of the entrepreneurial skill distribution. The model produces a variance of firm growth that declines with size. But the decline is more rapid than suggested by the evidence. The model also predicts a new-firm entry rate equal to only 2.5% per annum, instead of the observed rate of 10% in U.S. data.
    Date: 2007
  6. By: Boyan Jovanovic; Balàzs Szentes
    Abstract: This paper provides a theory that explains the sizeable excess return to venture equity, and ties it to the high VC discount rates, i.e., to VC impatience. The theory is based on the shortage of venture capitalists (VCs). Since the VC's opportunity cost of dealing with a company is supporting a new profitable project, he is less patient with maturing firms than an ordinary entrepreneur would be. This may explain why VC-backed firms reach IPOs earlier than other start-ups and why they are worth more at IPO. The scarcity of VCs enables them to internalize their social value, so that the competitive equilibrium is socially optimal. We estimate the model and back out the return of solo entrepreneurs which is always below that of the return on venture equity. The model that we fit to data targets a VC ALPHA of five percent. We find that an ALPHA of ten percent would induce the VC to terminate too many projects.
    JEL: G24 L26
    Date: 2007–01
  7. By: Lawrence A. Plummer
    Abstract: The research uses 377 firms that filed initial public offerings from 1990 to 1993 as the basis for existing firms and follows their financial performance from 1990 to 2004. In the first year of a new firm’s existence, before the entrant has time to contribute to positive local effects, its entry is more likely to hurt the financial performance of existing firms. By the third year after entry, however, the effect on the financial performance of existing firms is positive. In the short term, entrants are foes and in the long term, entrants are friends.
    Date: 2007
  8. By: Andrea Bikfalvi (University of Girona); Christian Serarols (Departament d'Economia de l'Empresa, Universitat Autonoma de Barcelona); David Urbano (Departament d'Economia de l'Empresa, Universitat Autonoma de Barcelona); Yancy Vaillant (Departament d'Economia de l'Empresa, Universitat Autonoma de Barcelona)
    Abstract: Recent trends in technology transfer show an intensification of spin-off creation as a modality of university research commercialisation, complementary to the conventional ones, contract research and licensing. In this paper we analyse the evolution, objectives, resources and activities of a specialised unit –Technological Trampoline (TT) - in charge of new venture creation at the University of Girona (Catalonia-Spain). Based on two theoretical frameworks, Resource-based-view and Institutional Theory, we adopt a multi-dimensional approach to study the strategy of spinning-off new ventures at the University of Girona in terms of resources and activities, how this process is organised and if the outputs fit with this UdG’s objectives and the local environment. Our main contribution is an in-depth analysis of the spin-off creation unit with special emphasis on its variety of resources and activities. The results have a series of implications and recommendations at both university and TT level.
    Keywords: Spin-off, technology transfer, entrepreneurship, commercialisation of research
    Date: 2007–01
  9. By: Cowling, Marc
    Abstract: It is a widely held perception, although empirically contentious, that credit rationing is an important phenomenon in the UK small business sector. In response to this perception the UK government initiated a loan guarantee scheme (SFLGS) in 1981. In this paper we use a unique dataset comprised of small firms facing a very real, and binding, credit constraint, to question whether a corrective scheme such as the SFLGS has, in practice, alleviated such constraints by promoting access to debt finance for small credit constrained firms. The results broadly support the view that the SFLGS has fulfilled its primary objective.
    Keywords: credit rationing; small firms; entrepreneurship; debt finance
    JEL: G18 G14
    Date: 2007–01–30
  10. By: Alessandra Bonfiglioli
    Abstract: This paper studies the relationship between investor protection, financial risk sharing and income inequality. In the presence of market frictions, better protection makes investors more willing to take on entrepreneurial risk while lending to firms. This implies lower cost of external finance and better risk sharing between financiers and entrepreneurs. Investor protection, by boosting the market for risk sharing plays the twofold role of encouraging agents to undertake risky enterprises and providing them with insurance. By increasing the number of risky projects, it raises income inequality. By extending insurance to more agents, it reduces it. As a result, the relationship between the size of the market for risk sharing and income inequality is hump-shaped. Empirical evidence from a cross-section of sixty-eight countries, and a panel of fifty countries over the period 1976-2000, supports the predictions of the model.
    Keywords: Income inequality, stock market development, financial development, capital market frictions, investor protection
    JEL: D31 E44 G30 O15 O16
    Date: 2007–01–29

This nep-ent issue is ©2007 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.