nep-ent New Economics Papers
on Entrepreneurship
Issue of 2007‒03‒10
ten papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Entrepreneurship, State Economic Development Policy, and the Entrepreneurial University By David Audretsch; Ronnie J. Phillips
  2. Entrepreneurship and State Public Policy By Steven F. Kreft; Elham Mafi-Kreft
  3. Red Tape and Delayed Entry By Antonio Ciccone; Elias Papaioannou
  4. Entrepreneurial Risk, Investment and Innovation By Andrea Caggese
  5. Business demography in Spain: determinants of firm survival By Paloma López-García; Sergio Puente
  6. Firm innovation in emerging markets : the roles of governance and finance By Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav
  7. Hidden champions - how young and small technology-oriented firms can attain high export-sales ratios By Fryges, Helmut
  8. The Impact of Microfinance on Micro and Small Enterprise’s Performance and the Improvement of Their Business Opportunity By Rahmat; Megananda; Achmad maulana
  9. Clusters, Functional Regions and Cluster Policies By Karlsson, Charlie
  10. Are Sunk Costs a Barrier to Entry? By Cabral, Luís M B; Ross, Thomas

  1. By: David Audretsch; Ronnie J. Phillips
    Abstract: In this paper, we discuss the nature of the university-industry relationship and recommend specific policies to help achieve the goal of greater economic growth. We argue that state-supported research universities can be used to integrate entrepreneurship into state economic development and incubate entrepreneurial companies. Regional entrepreneurship policy is a new strategy that regards economic development as a process that goes from supporting research and development to creating and growing new businesses. Specifically, we believe that an entrepreneurial higher education system is a key to state-level economic policies. There is an opportunity at research universities to combine the human capital talent available on faculties with the needs and expertise of private industry to accelerate entrepreneurship and economic growth.
    Date: 2007–02
  2. By: Steven F. Kreft (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Elham Mafi-Kreft (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: Many state and local governments have focused on enacting policies to promote entrepreneurship in an effort to enhance economic growth. This paper will test the relationship between entrepreneurial activity and state economic freedom in a Granger causality framework. We build a panel data set of freedom scores and entrepreneurial activity measures within the fifty US states from 1981 to 2003, and our results show that, as a whole, economic freedom causes entrepreneurship. However, we find evidence that once entrepreneurs are in place, they increase the size of government spending, which is contradictory to economic freedom.
    Keywords: entrepreneurship, public Policy, economic freedom
    JEL: H7 H4 H1
    Date: 2007–01
  3. By: Antonio Ciccone; Elias Papaioannou
    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 regulation, entry, globally expanding industries
    JEL: E6 F43 L5 L60 L16
    Date: 2006–11
  4. By: Andrea Caggese
    Abstract: In this paper I develop a general equilibrium model with risk averse entrepreneurial firms and with public firms. The model predicts that an increase in uncertainty reduces the propensity of entrepreneurial firms to innovate, while it does not affect the propensity of public firms to innovate. Furthermore, it predicts that the negative effect of uncertainty on innovation is stronger for the less diversified entrepreneurial firms, and is stronger in the absence of financing frictions in the economy. In the second part of the paper I test these predictions on a dataset of small and medium Italian manufacturing firms.
    Date: 2006–12
  5. By: Paloma López-García (Banco de España); Sergio Puente (Banco de España)
    Abstract: The impact of entry upon market performance depends not only on the number of entries and their size, but also on how long do the firms last. Consequently, there are an increasing number of papers, most of them focused on the United States and restricted to the manufacturing sector, aimed at analysing the post entry performance of firms. Unfortunately, there is not much about this important topic in Spain due to the lack of appropriate longitudinal micro data on firms. The current paper aims to fill this gap by means of a new database covering all sectors of the business economy constructed at the Bank of Spain. We study the determinants of new firm survival using non parametric and parametric procedures especially designed to analyse duration phenomena. We find that larger start ups survive longer and that the probability of exit is larger in sectors with high entry rates and low concentration. One of the contributions of the paper is the inclusion of the initial firm's financial structure among the determinants of survival. Our results suggest that holding debt, instead of equity, has positive and important effects on survival up to some point. Beyond this point, further debt increments have a negative impact on survival, and this effect is more important the higher is the corresponding debt ratio or indebtness of the firm.
    Keywords: firm survival, entry and exit, micro-data
    JEL: L11 L25 G33 M13
    Date: 2006–04
  6. By: Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav
    Abstract: The authors investigate the determinants of firm innovation in over 19,000 firms across 47 developing economies. They define the innovation process broadly, to include not only core innovation such as the introduction of new products and new technologies, but also other types of activities that promote knowledge transfers and adapt production processes. The authors find that more innovative firms are large exporting firms characterized by private ownership, highly educated managers with mid-level managerial experience, and access to external finance. In contrast, firms that do not innovate much are typically state-owned firms without foreign competitors. The identity of the controlling shareholder seems to be particularly important for core innovation, with those private firms whose controlling shareholder is a financial institution being the least innovative. While the use of external finance is associated with greater innovation by all private firms, it does not make state-owned firms more innovative. Financing from foreign banks is associated with higher levels of innovation compared with financing from domestic banks.
    Keywords: Education for Development (superceded),Microfinance,Small Scale Enterprise,Investment and Investment Climate,Innovation
    Date: 2007–03–01
  7. By: Fryges, Helmut
    Abstract: Determinants of a firm’s export-sales ratio (degree of internationalisation) are frequently discussed in the literature related to individual firms’ export activities. Stylised facts show a positive relationship between firm size and firm age on the one hand and the firm’s export-sales ratio on the other hand. However, anecdotic evidence and recent empirical results revealed that it is not size or age per se that leads to a high export-sales ratio. This paper analyses the export-sales ratio of a sample of young technology-oriented firms in Germany and the UK. The empirical results confirm that neither youth nor smallness are necessarily an obstacle to realising a high degree of internationalisation. However, this requires that the firms possess firm-specific assets in order to overcome barriers to entry into the foreign market. These firm-specific assets may be acquired via conducting own R&D activities, buying novel technology from other companies, or by employing internationally experienced managers.
    Keywords: High-technology industries, export-sales ratio, fractional logit model
    JEL: F23 L60 L86
    Date: 2006
  8. By: Rahmat (Department of Economics, Padjadjaran University); Megananda (Department of Economics, Padjadjaran University); Achmad maulana (Department of Economics, Padjadjaran University)
    Abstract: This study finds that microfinance has positive impact to improvement of MSE’s ferformance indicated by sales; the difference in regional characteristic of MSE is also play role in determining its business scale. Since doubling amount of loan has negative impact to the performance, it’s very important to allocate the loan to the productive activities, such as investment, to improve the business opportunity.
    Keywords: microfinance, small and medium enterprises
    JEL: G21
    Date: 2006–08
  9. By: Karlsson, Charlie (Jönköping International Business School (JIBS) and CESIS)
    Abstract: This paper gives an overview of research on economic clusters and clustering and is motivated by the growing intellectual and political interest for the subject. Functional regions have the features that agglomeration of economic activities i.e. clusters, benefit from. Functional regions have low intra-regional transaction and transportation cost and has access to the local labour market. The features of spatial economic concentration were for a long time disregarded and it was first in the early 1990s that Krugman brought the subject into the stage light. The scientific interests of cluster and clustering phenomenon have after the “new” introduction rapidly increased in the last decade. Hence, the subject is being thought at various education levels. The importance of cluster and clustering has also been recognized at a national, regional and local level and cluster policies are becoming a major part of political thinking. These policies are however often based on a scarce analysis where no strict criterions are stated.
    Keywords: cluster; location; functional region; knowledge; innovation; entrepreneurship; cluster policy
    JEL: R12 R58
    Date: 2007–02–28
  10. By: Cabral, Luís M B; Ross, Thomas
    Abstract: The received wisdom is that sunk costs create a barrier to entry - if entry fails, then the entrant, unable to recover sunk costs, incurs greater losses. In a strategic context where an incumbent may prey on the entrant, sunk entry costs have a countervailing effect: they may effectively commit the entrant to stay in the market. By providing the entrant with commitment power, sunk investments may soften the reactions of incumbents. The net effect may imply that entry is more profitable when sunk costs are greater.
    Keywords: barriers to entry; sunk costs
    JEL: L13
    Date: 2007–03

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