nep-ent New Economics Papers
on Entrepreneurship
Issue of 2007‒11‒24
twenty papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. A Theory of Destructive Entrepreneurship By Sameeksha Desai; Zoltan J. Acs
  2. What Makes a Young Entrepreneur By David G. Blanchflower; Andrew J. Oswald
  3. Entrepreneurship in the United States By David G. Blanchflower
  4. Demography and Innovative Entrepreneurship By Werner Bönte; Oliver Falck; Stephan Heblich
  5. Does Self-Employment reduce Unemployment? By A. Roy Thurik; Martin A. Carree; Andre van Stel; David B. Audretsch
  6. African Americans’ Pursuit of Self-Employment By Magnus Lofstrom; Timothy Bates
  7. Trade and Entrepreneurship with Heterogeneous Workers By Oyama, Daisuke; Sato, Yasuhiro; Tabuchi, Takatoshi; Thisse, Jacques-François
  8. Entrepreneurship, Brands and the Development of Global Business By Teresa da Silva Lopes; Mark Casson
  9. ARE THE DYNAMICS OF KNOWLEDGE-BASED INDUSTRIES ANY DIFFERENT? By Ricardo Paes Mamede; Daniel Mota; Manuel Mira Godinho
  10. Investment Climate and Employment Growth: The Impact of Access to Finance, Corruption and Regulations Across Firms By Reyes Aterido; Mary Hallward-Driemeier; Carmen Pagés
  11. Creating Strategic Advantage through Entrepreneurial Governance in New Ventures By David B. Audretsch; Erik E. Lehmann; Lawrence A. Plummer
  12. Export Dynamics in Colombia: Firm-Level Evidence By Jonathan Eaton, Marcela Eslava, Maurice Kugler, and James Tybout
  13. SME's perceptions regarding strategic and structural entry barriers By Lutz, Clemens; Kemp, Ron; Dijkstra, S. Gerhard
  14. Who are the active investors? Evidence from Venture Capital By L. Bottazzi; M. Da Rin; T. Hellmann
  15. The Employees of Native and Immigrant Self-Employed By Pernilla Andersson; Eskil Wadensjö
  16. The Importance of Trust for Investment: Evidence from Venture Capital  By L. Bottazzi; M. Da Rin; T. Hellmann
  17. Die reformierte Gründungsförderung für Arbeitslose: Chancen und Risiken By Marco Caliendo; Alexander S. Kritikos
  18. Labour Turnover and Firm Performance By Sarah Brown; Gaia Garino; Christopher Martin
  19. Bankruptcy: Is It Enough to Forgive or Must we Also Forget? By Piero Gottardi; Ronel Elul
  20. Liberalization of European Telecommunications and Entrepreneurship: Why German and Portuguese Experiences are so Equal and so Different? By Leitão, João; Ferreira, João

  1. By: Sameeksha Desai (Max Planck Institute of Economics and George Mason University); Zoltan J. Acs (George Mason University and Max Planck Institute of Economics)
    Abstract: Policy interest since the early 1980s has focused in different ways on the creation of a large, productive, taxable economy - in which entrepreneurship plays a role for employment, income growth and innovation. The current understanding of various forms of entrepreneurship remains incomplete, focusing largely on productive and unproductive entrepreneurship. However, destructive entrepreneurship plays an important role in many, if not most, economies. This paper addresses the conceptual gap in the allocation of entrepreneurship by proposing a theory of destructive entrepreneurship.
    Keywords: destructive entrepreneurship, allocation of entrepreneurship, rent-seeking, rent-destroying, incentives, institutions, property rights, contractual enforcement, conflict, social capital, trust, ethnic capital
    JEL: O17 O20 P00
    Date: 2007–11–12
  2. By: David G. Blanchflower (Dartmouth College, NBER, Bank of England and IZA); Andrew J. Oswald (University of Warwick and IZA)
    Abstract: This paper documents some of the patterns in modern microeconomic data on young people’s employment, attitudes and entrepreneurial behaviour. Among other sources, the paper uses the Eurobarometer Surveys; the Labour Force Surveys from Canada and the Current Population Survey in the United States. The first conclusion is that self-employed individuals - a special but well-defined entrepreneurial group - report markedly greater wellbeing than equivalent employees. Their job satisfaction and life-satisfaction are all higher than workers of identical personal characteristics. The second conclusion is that individuals say they would like to be self-employed. There is, according to the survey data, a large pool of potentially entrepreneurial people. Across the West, many millions of employees would apparently prefer to be self-employed. Third, we showed that another important determinant of being self-employed is having a self-employed parent. This appears to help young people to set up in business themselves. It is unclear whether this is done by inheriting the business, or working in the family firm or actually setting up a new business entirely.
    Keywords: youth entrepreneurship, self-employment
    JEL: J21
    Date: 2007–11
  3. By: David G. Blanchflower (Dartmouth College, NBER, Bank of England and IZA)
    Abstract: In this paper I examine changes in self-employment that have occurred since the early 1980s in the United States. It is a companion paper to a recent equivalent paper relating to the UK. Data on random samples of twenty million US workers are examined taken from the Basic Monthly files of the CPS (BMCPS), the 2000 Census and the 2005 American Community Survey (ACS). In contrast to the official definition of self-employment which simply counts the numbers of unincorporated self-employed, we also include the incorporated self-employed who are paid wages and salaries. The paper presents evidence on trends in self-employment for the US as a whole as well as in construction. Construction is particularly important given that it accounts for a fifth of all self-employment and self-employment rates are roughly double the national rates. It is also important given the existence of public sector procurement programs that primarily exist in construction that have the intended purpose of assisting firms owned by women and minorities. I document the fact that self-employment rates of white women and minorities in comparison to those of white males have increased in construction and elsewhere as have self-employment earnings. Despite this substantial disparities remain. I also find evidence of discrimination in the small business credit market. Firms owned by minorities in general and blacks in particular are much more likely to have their loans denied and pay higher interest than is the case for white males.
    Keywords: entrepreneurship, self-employment, discrimination
    JEL: J15
    Date: 2007–10
  4. By: Werner Bönte (Max Planck Institute of Economics, Entrepreneurship, Growth, and Public Policy Group); Oliver Falck (Ifo Institute for Economic Research and CESifo); Stephan Heblich (Max Planck Institute of Economics, Entrepreneurship, Growth, and Public Policy Group)
    Abstract: Demographic change will be one of the major challenges for economic policy in the developed world in the next decades. In this article, we analyze the relationship between age structure and the number of startups. We argue that an individual's decision to start a business is determined by his or her age and, therefore, that a change in a region's age distribution affects the expected number of startups in the region. Using German regional data, we estimate a count-data model and find that the expected number of startups is positively influenced by the fraction of individuals of working age? 20-64 years old. A more detailed analysis of the working-age distribution suggests that startups in knowledge-based (high-tech) manufacturing industries are affected by changes in this distribution whereas firms in other industries are not. In particular, increases in the fraction of individuals in the 20-30 age range and individuals in the 40-50 age range have a positive effect on the number of high-tech startups.
    Keywords: Demography, Age Distribution, Entrepreneurship, Innovation, Region
    JEL: J1 L26 O3 R11
    Date: 2007–11–12
  5. By: A. Roy Thurik (Erasmus University Rotterdam; EIM Business and Policy Research, Zoetermeer; and Max Planck Institute of Economics); Martin A. Carree (University of Maastricht); Andre van Stel (EIM Business and Policy Research; Cranfield School of Management; and Max Planck Institute of Economics); David B. Audretsch (Max Planck Institute of Economics; and Indiana University, USA)
    Abstract: This paper investigates the dynamic relationship between self-employment and unemployment rates. On the one hand, high unemployment rates may lead to start-up activity of self-employed individuals (the "refugee" effect). On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods (the "entrepreneurial" effect). This paper introduces a new two-equation vector autoregression model capable of reconciling these ambiguities and estimates it for data from 23 OECD countries between 1974 and 2002. The empirical results confirm the existence of two distinct relationships between unemployment and self-employment: the "refugee" and "entrepreneurial" effects. We also find that the "entrepreneurial" effects are considerably stronger than the "refugee" effects.
    Keywords: entrepreneurship, self-employment, unemployment
    JEL: J23 J64 L26 L53 M13 O11
    Date: 2007–11–12
  6. By: Magnus Lofstrom (University of Texas at Dallas and IZA); Timothy Bates (Wayne State University)
    Abstract: This study examines causes of black/white gaps in business ownership and self-employment rates by analyzing small-business entry and exit patterns. We proceed by recognizing heterogeneity in business ownership across different industry groups: a classification of firms by human- and financial-capital "intensiveness", or entry barriers, we find, is useful for explaining racial differences in entrepreneurship. The barriers facing aspiring entrepreneurs seeking entry into low-barrier industries differ substantially from those limiting entry into highbarrier industries. Higher entry and lower exit rates typifying whites, relative to African Americans, are traditionally interpreted as reflections of the greater financial- and humancapital resources possessed by non-minorities. This consensus view, however, is simplistic. While education background is a powerful predictor of self-employment patterns in the lowbarrier industries, advanced educational credentials actually predict lower entry: college graduates are less likely to select into low-barrier small business ownership. In the highbarrier fields, in contrast, college-educated individuals are more likely than less educated persons to enter into self employment. Overall, black presence in high-barrier fields is held down by lower net asset holdings and weaker educational credentials of potential and actual entrepreneurs. In the low-barrier industries, where the majority of black-owned businesses operate, net worth levels and educational backgrounds are trumped by the racial characteristic: low black entry and high exit rates are powerfully predicted by one's race.
    Keywords: self-employment, entrepreneurship, entry barriers, African American
    JEL: J15 L26
    Date: 2007–11
  7. By: Oyama, Daisuke; Sato, Yasuhiro; Tabuchi, Takatoshi; Thisse, Jacques-François
    Abstract: This paper investigates the impacts of progressive trade openness, technological externalities, and heterogeneity of individuals on the formation of entrepreneurship in a two-country occupation choice model. We show that trade opening gives rise to a non-monotonic process of international specialization, in which the share of entrepreneurial firms in the large (small) country first increases (decreases) and then decreases (increases), with the global economy exhibiting first de-industrialization and then re-industrialization. When countries have the same size, we also show that strong technological externalities make the symmetric equilibrium unstable, generating equilibrium multiplicity, while sufficient heterogeneity of individuals leads to the stability and uniqueness of the symmetric equilibrium.
    Keywords: entrepreneurship; externality; heterogeneity; stability; trade liberalization
    JEL: F12 F16 J24 O14 R12
    Date: 2007–11
  8. By: Teresa da Silva Lopes; Mark Casson
    Abstract: This paper provides an account of how entrepreneurs have contributed to the development of successful global brands in consumer goods industries in the twentieth century and why so few independent brands survived the merger waves of the 1980s. The industries analysed are those where the promotion of the brand relies principally on advertising rather than the technology embodied in the product. Drawing on cross-industry and cross-country comparisons of brands in consumer goods, and using a ‘stretched’ definition of the entrepreneur, the paper highlights the entrepreneurial and innovative strategies pursued by brand managers. It emphasises the role of distinct types of entrepreneurs and marketing knowledge in the creation and development of brands in successful global businesses.
    Date: 2007–09
  9. By: Ricardo Paes Mamede (GEE, Ministério da Economia e da Inovação; Faculdade de Economia, Instituto Universitário de Lisboa - ISCTE); Daniel Mota (Instituto Nacional de Estatística); Manuel Mira Godinho (Instituto Superior de Economia e Gestão, Universidade Técnica de Lisboa)
    Abstract: The concept of «knowledge-based industries» (KBIs) has been widely used both in the academy and in policy-making over the last decade, due to the increasing role those industries play – both in terms of value added and employment – in contemporary, advanced economies. In this paper we discuss the extent to which KBIs differ from other industries in what concerns some of the stylised facts and regularities of industry dynamics usually found in the literature. In particular, we analyse the patterns and the determinants of firm entry and post-entry performance (measured in terms of survival of new firms), comparing KBIs groups with the remaining industries, using data for the Portuguese economy in the second half of the 1990s. We find that KBIs and the firms within them show some signs of distinctiveness in their dynamics as compared to the general case. In particular, on average, KBIs firms have higher survival chances, and entry within the KBIs groups is less responsive to incentives.
    Keywords: knowledge-based industries; market entry; firm survival
    JEL: L29
    Date: 2007–11
  10. By: Reyes Aterido (World Bank); Mary Hallward-Driemeier (World Bank); Carmen Pagés (Inter-American Development Bank and IZA)
    Abstract: Using firm level data on 70,000 enterprises in 107 countries, this paper finds important effects of access to finance, business regulations, corruption, and to a lesser extent, infrastructure bottlenecks in explaining patterns of job creation at the firm level. The paper focuses on how the impact of the investment climate varies across sizes of firms. The differences across size categories come from two sources. First, objective conditions of the business environment do vary systematically by firm types. Micro and small firms have less access to formal finance, pay more in bribes than do larger firms, and face greater interruptions in infrastructure services. Larger firms spend significantly more time dealing with officials and red tape. Second, even controlling for these differences in objective conditions, there is evidence of significant non-linearities in their impact on employment growth. The results suggest strong composition effects: A weak business environment shifts downward the size distribution of firms. In the case of finance and business regulations this occurs by reducing the employment growth of all firms, particularly micro and small firms. On the other hand, corruption and poor access to infrastructure reduce employment growth by affecting the growth of medium size and large firms. With significant differences between firms with less than 10 employees and SMEs, these results indicate significant reforms are needed to spur micro firms to grow into the ranks of the SMEs.
    Keywords: employment growth, investment climate, corruption, regulatory framework, finance
    JEL: J23
    Date: 2007–11
  11. By: David B. Audretsch (Max Planck Institute of Economics and Indiana University); Erik E. Lehmann (University of Augsburg and Max Planck Institute of Economics); Lawrence A. Plummer (Clemson University and Max Planck Institute of Economics)
    Abstract: An important literature has made a fundamental link between corporate governance and corporate strategy. According to agency theory, assigning managers stock options aligns their interests with the interests of the owners of the firm. This paper suggests that this may not apply in the context of new ventures. Instead, an alternative perspective offered in this paper suggests that if contracts are incomplete, then managerial stock ownership not only provides a mechanism to align managerial incentives with the owners' goals, as agency theory predicts, it also grants top managers residual control rights to be used in subsequent negotiations with the owners. The ability to exercise residual control rights improves the ex post bargaining position of the CEO as an asset owner, thereby increasing her incentive to make relationship-specific investments that are specific to the new venture. Thus, in the context of new venture strategy assigning asset ownership to those who have the most important relationship-specific resources or who have indispensable human capital is a crucial source of subsequent competitive advantage. This theory of entrepreneurial governance is tested using patent ownership as a proxy for both relationship-specific investments and indispensable human capital of the CEO of the new venture. The empirical results support the main hypothesis posited by the entrepreneurial governance model.
    Keywords: managerial equity ownership, new ventures, property rights, governance, knowledge, innovation
    JEL: M13 L R30
    Date: 2007–11–12
  12. By: Jonathan Eaton, Marcela Eslava, Maurice Kugler, and James Tybout (Wilfrid Laurier University)
    Abstract: Using transactions-level customs data from Colombia, we study firm-specific export patterns over the period 1996-2005. Our data allow us to track firms\' entry and exit into and out of individual destination markets, as well as their revenues from selling there. We find that, in a typical year, nearly half of all Colombian exporters were not exporters in the previous year. These new exporters tend to be extremely small in terms of their overall contribution to export revenues, and most do not continue exporting in the following year. Hence export sales are dominated by a small number of very large and stable exporters. Nonetheless, out of each cohort of new exporters, a fraction of firms go on to expand their foreign sales very rapidly, and over the period of less than a decade, these successful new exporters account for almost half of total export expansion. Finally, we find that new exporters survive, gradually expand into additional destinations. The geographic expansion paths they follow, and their likelihood of survival as exporters, depend on their initial destination market.
    Keywords: Export growth, market entry and experimentation, destination market expansion path
    JEL: F10
    Date: 2007–11
  13. By: Lutz, Clemens; Kemp, Ron; Dijkstra, S. Gerhard (Groningen University)
    Abstract: Abstract Extant literature discusses a large number of different entry barriers that may hamper market efficiency or entrepreneurial activity. In practice several of these barriers cohere and stem from the same root. Factor analysis is used to identify the underlying dimensions of these barriers. 7 generic factors have been found that drive the system. In the literature a debate exists between scholars that stress the importance of structural and/or strategic barriers. This paper shows that in the perception of firms both types of barriers are important and argues that the effectiveness of strategic barriers depends on attributes of the market structure. Based on the seven generic factors, a conjoint analysis is carried out to identify the most important factors perceived by firms. The conjoint analysis shows that in particular the barriers rooted in three underlying dimensions require attention of market authorities as they may refrain new entrants from entry: finance, access to distribution channels and strategic action. Remarkably, government rules and regulations, product differentiation, R&D and advertising constitute a minor entry problem according to the firms.
    Date: 2007
  14. By: L. Bottazzi; M. Da Rin; T. Hellmann
    Date: 2007–10
  15. By: Pernilla Andersson (SOFI, Stockholm University, SULCIS); Eskil Wadensjö (SOFI, Stockholm University, SULCIS and IZA)
    Abstract: Using unique register data for Sweden we can match self-employed persons to their employees. We analyze the national composition of the employees and ask if self-employed immigrants mainly employ workers from their home region and if self-employed natives mainly employ native workers. We find that both natives and immigrants are more likely to employ co-nationals than to employ workers with a different national background. We also analyze which factors influence the propensity to hire co-nationals. For immigrants we find that living in a municipality with a high share of co-nationals decreases the probability of employing natives, while the probability that natives employ immigrants increases with the immigrant share in the municipality. We find that the probability for immigrants to hire native workers increases with time spent in Sweden. This result points to that the proximity to people from the same region and possibly also one’s network plays an important role for the employment decisions for both self-employed natives and immigrants.
    Keywords: self-employment, immigrants, networks
    JEL: J15 J61
    Date: 2007–11
  16. By: L. Bottazzi; M. Da Rin; T. Hellmann
    Date: 2007–10
  17. By: Marco Caliendo (IZA and IAB Nuremberg); Alexander S. Kritikos (European University Viadrina)
    Abstract: Support schemes for unemployed aiming for self-employment have been recently reformed several times. In 2003, the "start-up subsidy" was added to the existing "bridging allowance". In 2006 both instruments were merged to the "Gründungszuschuss". Since the bridging allowance has been evaluated as effective and efficient and the start-up subsidy reached new target groups, the latest reform shows several shortcomings. The design of the Gründungszuschuss is suboptimal, leading to efficiency losses if its participants act rational. It will also be less effective when compared to the two old programs. Overall, the recent dynamic development of new businesses will slow down more than necessary.
    Keywords: start-up subsidies, active labour market policy, unemployment
    JEL: J68 M13
    Date: 2007–10
  18. By: Sarah Brown; Gaia Garino; Christopher Martin (Department of Economics, The University of Sheffield)
    Keywords: Firm Performance; Labour Turnover; Quit Rates
    JEL: J21 J23 E3 F4
    Date: 2007–09
  19. By: Piero Gottardi (Dipartimento di Scienze Economiche, Università di Venezia); Ronel Elul (Federal Reserve Bank of Philadelphia)
    Abstract: In many countries, lenders are not permitted to use information about past defaults after a specified period of time has elapsed. We model this provision and determine conditions under which it is optimal. We develop a model in which entrepreneurs must repeatedly seek external funds to finance a sequence of risky projects under conditions of both adverse selection and moral hazard. We show that forgetting a default makes incentives worse, ex-ante, because it reduces the punishment for failure. However, following a default it is generally good to forget, because by improving an entrepreneur’s reputation, forgetting increases the incentive to exert effort to preserve this reputation. Our key result is that if agents are sufficiently patient, and low effort is not too inefficient, then the optimal law would prescribe some amount of forgetting — that is, it would not permit lenders to fully utilize past information. We also argue that forgetting must be the outcome of a regulatory intervention by the government — no lender would willingly agree to ignore information available to him.
    Keywords: Bankruptcy, Information, Incentives, Fresh Start
    JEL: D86 G33 K35
    Date: 2007
  20. By: Leitão, João; Ferreira, João
    Abstract: The paper aims to investigate the impact of the liberalization of European Telecommunications Markets, on the Business Ownership Rate, the Employment, the Gross Domestic Product, and the Investment in ICT, in two European countries: Germany and Portugal. For this purpose, a Cointegrated Vector Autoregressive (CVAR) approach is developed, in order to identify the impacts that are originated from the adoption of this kind of public policies. In the case of Germany, a surprising causality relationship is detected, in the sense that Gross Domestic Product precedes decreasing Business Ownership Rates. In the case of Portugal, the Business Ownership Rate pulls for additional investments in ICT. Besides, a creative entrepreneurial destruction is somehow ratified, since the Business Ownership Rate impacts, negatively, on the level of employment.
    Keywords: Entrepreneurship, Information and Communication Technologies, Cointegration, Vector Autoregressive Model.
    JEL: L96 L51 M13
    Date: 2007–11–13

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