nep-ent New Economics Papers
on Entrepreneurship
Issue of 2007‒05‒19
eleven papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Renaissance of Entrepreneurship? Some remarks and empirical evidence for Germany By Boegenhold, Dieter; Fachinger, Uwe
  2. Occupational Choice and the Quality of Entrepreneurs By Eren Inci
  3. Learning mode of small business owners By A. WILLEM; H. VAN DEN BROECK
  4. Should Credit be a Right ? By Marek Hudon
  5. Returns to capital in microenterprises : evidence from a field experiment By Woodruff, Christopher; McKenzie, David; de Mel, Suresh
  6. Measuring microenterprise profits : don ' t ask how the sausage is made By Woodruff, Christopher; McKenzie, David; de Mel, Suresh
  7. L'entrepreneuriat, le territoire et les conditions de leurs dynamiques cumulatives By Marcus Dejardin
  8. Employment Protection, Product Market Regulation and Firm Selection By Winfried Koeniger; Julien Prat
  9. Neoclassical vs Evolutionary Theories of Financial Constraints : Critique and Prospectus By Alex Coad
  10. Innovation and Export of Vietnam’s SME Sector By Nguyen, Ngoc Anh; Pham, Quang Ngoc; Nguyen, Dinh Chuc; Nguyen, Duc Nhat
  11. The Effects of Mergers and Acquisitions on the Firm Size Distribution By Elena Cefis; Orietta Marsili; Hans Schenk

  1. By: Boegenhold, Dieter; Fachinger, Uwe
    Abstract: The paper deals with margins of entrepreneurship where small business owners are almost working on their own having no or just a few employees and where one can find also people working with low returns and having firms without stability or prosperous dynamics. However, even the area of entrepreneurship at the margins seems to be a wide field. It highlights not only the broad margins of entrepreneurship but also the fluent boarders between entrepreneurship and the informal sector on the one side and the system of the labour market on the other. New firms – even those which are very successful at a later point of career – are almost created in an experimental period of testing market and product ideas in which business founders are still employed or registered as unemployed people. The practical starting-point of an entrepreneurial existence falls into a fluent continuum of different activities being closely connected to spheres of dependent work as employees or periods of seeking a new job during unemployment. With growing solo self-employment a new social phenomenon in the structure of the labour market and the division of occupations has emerged in which different social developments are overlapping each other. The question for the landscape of solo self-employment and related driving forces of their emergence is of crucial research interest: Must they be regarded primarily as a result of pushes by labour market deficiencies or are they a response to new life-styles and working demands which act as pulling factors into self-employment? In other words, does solo self-employment serve as a valve of a pressing labour market or must it be regarded more positively as a new option of the classic division of labour by which an increasing number of people find new self-reliant and also stable jobs? The idea of the paper is to discuss this particular issue of margins of entrepreneurship not only within the conventional scope of entrepreneurship discussion but within an integrated framework which combines entrepreneurship analysis with labour market research and studies on social stratification and social mobility. The paper will not come about with definite last answers but hopes to contribute to that debate by presenting better information.
    Keywords: Self-employment; entrepreneurship; labour market; empirical analysis
    JEL: J23
    Date: 2007–02
  2. By: Eren Inci (Boston College)
    Abstract: This paper focuses on the quality of entrepreneurs when individuals, who differ in terms of entrepreneurial ability and wealth, choose between entrepreneurship and wage-earning. A loan is required to become an entrepreneur. Four wealth classes form endogenously. Banks' inability to identify the ability of individuals leads them to offer pooling contracts to the poor and the lower-middle classes. Regardless of ability, all poor class individuals become workers and all lower-middle class individuals become entrepreneurs. Banks are able to offer separating contracts to the upper-middle and the rich classes. High-ability individuals in these wealth classes become entrepreneurs and their low-ability counterparts become workers. Equilibrium contracts may entail cross-subsidies within or between occupations. In some economies, a small success tax on entrepreneurs used to subsidize workers can increase the average quality of entrepreneurs and welfare by changing the thresholds of the wealth classes. In some others a reverse policy is required. Since the aggregate level of investment is fixed, the reason for these policies is not under- or overinvestment by entrepreneurs, as it often is in previous literature.
    Keywords: adverse selection; entrepreneurship; general equilibrium contract theory; moral hazard; occupational choice; success tax; wage subsidy
    JEL: D43 D82 H25 L26
    Date: 2007–05–02
    Abstract: The aim of the paper is to explore the learning mode of small business owners, from a theoretical stance, and based on empirical evidence. We distinguish between the required learning mode, the actual learning mode and the supported learning mode. Data were collected using the focus group method in a very heterogeneous sample of Belgian small business owners. The results indicate several gaps between the required, actual and supported learning modes, of which many are due to unawareness of learning needs and lack of reflective learning among small business owners. The data also indicate among others that solutions to fill learning gaps proposed in the literature are not applicable to all owners, e.g. not all owners are able to learn through networks.
    Keywords: Belgium, learning capability, learning mode, learning gaps, learning process, learning support, reflective learning, research paper, small business owners, focus groups
    Date: 2007–02
  4. By: Marek Hudon (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and Harvard University, Boston.)
    Abstract: Access to credit is today a main constrain for many entrepreneurs. This article studies the question of a right to credit. If access to financial services is so crucial and too many hurdles stop the very poor citizens to benefit from the opportunities the markets can offer, one can consider, as Nobel Prize Laureate M. Yunus, that a specific right should be established. Nevertheless, the use of credit is still controversial and does not always lead to economic development. Hence, rather than a loose right to credit, we argue for a right in a goal-right system. This system could take into account the important elements necessary to the positive impact of credit.
    Keywords: human right, credit, justice, microfinance
    JEL: B0 O16 Q14
    Date: 2007–05
  5. By: Woodruff, Christopher; McKenzie, David; de Mel, Suresh
    Abstract: Small and informal firms account for a large share of employment in developing countries. The rapid expansion of microfinance services is based on the belief that these firms have productive investment opportunities and can enjoy high returns to capital if given the opportunity. However, measuring the return to capital is complicated by unobserved factors such as entrepreneurial ability and demand shocks, which are likely to be correlated with capital stock. The authors use a randomized experiment to overcome this problem and to measure the return to capital for the average microenterprise in their sample, regardless of whether they apply for credit. They accomplish this by providing cash and equipment grants to small firms in Sri Lanka, and measuring the increase in profits arising from this exogenous (positive) shock to capital stock. After controlling for possible spillover effects, the authors find the average real return to capital to be 5.7 percent a month, substantially higher than the market interest rate. They then examine the heterogeneity of treatment effects to explore whether missing credit markets or missing insurance markets are the most likely cause of the high returns. Returns are found to var y with entrepreneurial ability and with measures of other sources of cash within the household, but not to vary with risk aversion or uncertainty.
    Keywords: Economic Theory & Research,Investment and Investment Climate,Microfinance,Small Scale Enterprise,Economic Growth
    Date: 2007–05–01
  6. By: Woodruff, Christopher; McKenzie, David; de Mel, Suresh
    Abstract: A large share of the world ' s poor is self-employed. Accurate measurement of profits from microenterprises is therefore critical for studying poverty and inequality, measuring the returns to education, and evaluating the success of microfinance programs. But a myriad of problems plague the measurement of profits. The authors report on a variety of different experiments conducted to better understand the importance of some of these problems and to draw recommendations for collecting profit data. In particular, they (1) examine how far we can reconcile self-reported profits and reports of revenue minus expenses through more detailed questions; (2) examine recall errors in sales and report on the results of experiments which randomly allocated account books to firms; and (3) ask firms how much firms like theirs underreport sales in surveys like this, and have research assistants observe the firms at random times 15-16 times during a month to provide measures for comparison. The authors conclude that firms underreport revenues by about 30 percent, that account diaries have significant effects on both revenues and expenses but not on profits, and that simply asking profits provides a more accurate measure of firm profits than detailed questions on revenues and expenses.
    Keywords: Busines s in Development,Business Environment,Competitiveness and Competition Policy,Economic Theory & Research,Income
    Date: 2007–05–01
  7. By: Marcus Dejardin (Faculté des Sciences économiques, sociales et de gestion, FUNDP - [Facultés Universitaires Notre-Dame de la Paix])
    Abstract: La contribution néo-autrichienne en matière<br />d'entrepreneuriat est insérée dans un cadre d'analyse<br />économique dynamique tenant compte du fait<br />régional. Une introduction à la théorie kirznerienne de<br />l'entrepreneuriat est d'abord proposée. Nous traitons<br />plus spécialement de la notion de vigilance, de<br />l'absence de coût entrepreneurial d'un point de vue<br />analytique, ainsi que des coûts et des revenus<br />attendus de l'activité entrepreneuriale relativement à<br />d'autres activités en situation de système incomplet<br />de marchés. Le choix occupationnel des individus et<br />les effets de l'entrepreneuriat sur la croissance sont<br />ensuite discutés dès lors que la dimension régionale<br />des activités est introduite dans l'argumentation. Une<br />présentation systémique des arguments du choix<br />occupationnel et de la croissance conduit à mettre en<br />évidence le fait que les effets de l'action<br />entrepreneuriale sur la croissance peuvent<br />difficilement être considérés indépendamment des<br />effets en retour sur les paramètres de choix<br />individuels, a fortiori en référence à un ensemble de<br />ressources et d'activités économiques localisées en<br />interrelation ou en interaction.
    Keywords: Entrepreneuriat, territoire, croissance, Kirzner
    Date: 2007–05–10
  8. By: Winfried Koeniger; Julien Prat
    Abstract: Why are firm and job turnover rates so similar across OECD countries? We argue that this may be due to the joint regulation of product and labor markets. For our analysis, we build a stochastic equilibrium model with search frictions and heterogeneous multiple-worker firms. This allows us to distinguish firm entry and exit from hiring and firing in a model with equilibrium unemployment. We show that firing costs, sunk entry costs and bureaucratic flow costs have countervailing effects on firm and job turnover as different types of firms select to operate in the market.
    Keywords: Firing Cost, Product Market Regulation, Firm Selection, Firm Turnover, Job Turnover, Unemployment
    JEL: E24 J63 J64 J65
    Date: 2007–01
  9. 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: Complicated neoclassical models predict that if investment is sensitive to current financial performance, this is a sign that something is "wrong" and is to be regarded as a problem for policy. Evolutionary theory, on the other hand, refers to the principle of "growth of the fitter" to explain investment-cash flow sensitivities as the workings of a healthy economy. In particular, I attack the neoclassical assumption of managers maximizing shareholder-value. Such an assumption is not a helpful starting point for empirical studies into firm growth. one caricature of neoclassical theory could be "Assume firms are perfectly efficient. Why aren't they getting enoug funding ?", whereas evolutionary theory considers that firms are forever struggling to grow. This essay highlights how policy guidelines can be framed by the initial modelling assumptions, even though these latter are often chosen with analytical tractability in mind rather than realism.
    Keywords: Financial constraints, firm growth, evolutionary theory, neoclassical theory, investment.
    Date: 2007–05–03
  10. By: Nguyen, Ngoc Anh; Pham, Quang Ngoc; Nguyen, Dinh Chuc; Nguyen, Duc Nhat
    Abstract: Innovation has long been considered an important factor for creating and maintaining the competitiveness of nations and firms. The relationship between innovation and exporting has been investigated for many countries. However, there is a paucity of research in Vietnam with respect to this issue. In this paper we examine whether innovation performed by Vietnam’s small and medium enterprises (SMEs) enhances their exporting likelihood. Using the recently released Vietnam Small and Medium Enterprise Survey 2005, we find that innovation as measured directly by ‘new products’, ‘new production process’ and ‘improvement of existing products’ are important determinants of exports by Vietnamese SMEs.
    Keywords: Vietnam; Export; Innovation; Small and Medium Enterprise
    JEL: F10 O3
    Date: 2007–05
  11. By: Elena Cefis; Orietta Marsili; Hans Schenk
    Abstract: This paper provides new empirical evidence on the effects of mergers and acquisitions on the shape of the firm size distribution (FSD), by using data of the population of manufacturing firms in the Netherlands. Our analysis shows that M&As do not affect the size distribution when we consider the entire population of firms. When we focus on the firms involved in a M&A event, we observed a shift of the FSD towards larger sizes. FSD becomes more concentrated around the mean size, less skewed to the right hand side, and thinner at the tails as a whole. The shift toward higher sizes due to M&A is not uniform but affects firms of different sizes in different ways. While the number of firms in the lower tail decreased, the number of firms in the central size classes increased substantially and outweighed the increase in the number (and mean size) of firms in the upper tail of the distribution (consequently the overall market concentration measured by the Herfindhal index declines). M&As leads to a departure from log-normality of the FSD, suggesting that external growth does not follow a Gibrat’s law. Our counterfactual analysis highlights that only internal growth does not affect the shape of the size distribution of firms. On the contrary, it suggests that the change in the size distribution is almost entirely due to the external growth of the firms.
    Keywords: Firms Size Distribution, Mergers and Acquisitions, Firm Entry and Exit, Industry Concentration
    JEL: L11 L25 D21 C14
    Date: 2006–12

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