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on Entrepreneurship |
| By: | Jana Bruder (University of Rostock); Doris Neuberger (University of Rostock); Solvig Raethke-Döppner (University of Rostock) |
| Abstract: | This is the first attempt to test hypotheses about financial constraints of ethnic minority owned businesses in Germany. Using data from a survey among 3,000 ethnic and native entrepreneurs, we examine differences in the financing patterns between both demographic groups. We find that entrepreneurs with a migration background are more likely to be denied credit or to obtain smaller loan amounts than requested. After controlling for observed risk factors and financial relationships as explanatory variables, ethnicity plays no role in explaining differences in the probability of credit rationing. These can be rather explained by the firm's location and characteristics of the bank-customer relationship. Thus, we find no evidence for prejudicial discrimination in the loan market. |
| JEL: | G21 G32 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ros:wpaper:84&r=ent |
| By: | Boris Groysberg; Ashish Nanda; M. Julia Prats |
| Abstract: | Our paper contributes to the studies on the relationship between workers' human capital and their decision to become self-employed as well as their probability to survive as entrepreneurs. Analysis from a panel data set of research analysts in investment banks over 1988-1996 reveals that star analysts are more likely than non-star analysts to become entrepreneurs. Furthermore, we find that ventures started by star analysts have a higher probability of survival than ventures established by non-star analysts. Extending traditional theories of entrepreneurship and labor mobility, our results also suggest that drivers of turnover vary by destination: (a) turnover to entrepreneurship and (b) other turnover. In contrast to turnover to entrepreneurship, star analysts are less likely to move to other firms than non-star analysts. |
| JEL: | J24 J4 J6 J63 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13633&r=ent |
| By: | Hongbin Cai; Yasuyuki Todo; Li-An Zhou |
| Abstract: | Using a unique firm-level dataset from China's "Silicon Valley," we investigate how multinational enterprises (MNEs) affect local entrepreneurship and R&D activities upon entry. We find that R&D activities of MNEs in an industry stimulate entry of domestic firms into the same industry and enhance R&D activities of newly entering domestic firms. By contrast, MNEs' production activities or domestic firms' R&D activities do not have such effect. Since MNEs are technologically more advanced than domestic firms, our findings suggest that diffusion of MNEs' advanced knowledge to potential indigenous entrepreneurs through MNEs' R&D stimulates entry of domestic firms. |
| JEL: | F23 L26 O33 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13618&r=ent |
| By: | Timothy S. Simcoe; Stuart J.H. Graham; Maryann Feldman |
| Abstract: | This paper studies the intellectual property strategy of firms that participate in the formal standards process. Specifically, we examine litigation rates in a sample of patents disclosed to thirteen voluntary Standard Setting Organizations (SSOs). We find that SSO patents have a relatively high litigation rate, and that SSO patents assigned to small firms are litigated more often than those of large publicly-traded firms. We also estimate a series of difference-in-differences models and find that small-firm litigation rates increase following a patent's disclosure to an SSO while those of large firms remain unchanged or decline. We interpret this result as evidence of a "platform paradox" -- while small entrepreneurial firms rely on open standards to lower the fixed cost of innovation, these firms are also more likely to pursue an aggressive IP strategy that may undermine the openness of a new standard. |
| JEL: | L0 L17 L26 O34 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13632&r=ent |
| By: | Vladimir Atanasov; Vladimir Ivanov; Kate Litvak |
| Abstract: | Venture capital contracts give VCs enormous power over entrepreneurs and early equity investors of portfolio companies. A large literature examines how these contractual terms protect VCs against misbehavior by entrepreneurs. But what constrains misbehavior by VCs? We provide the first systematic analysis of legal and non-legal mechanisms that penalize VC misbehavior, even when such misbehavior is formally permitted by contract. We hand-collect a sample of over 177 lawsuits involving venture capitalists. The three most common types of VC-related litigation are: 1) lawsuits filed by entrepreneurs, which most often allege freezeout and transfer of control away from founders; 2) lawsuits filed by early equity investors in startup companies; and 3) lawsuits filed by VCs. Our empirical analysis of the lawsuit data proceeds in two steps. We first estimate an empirical model of the propensity of VCs to get involved in litigation as a function of VC characteristics. We match each venture firm that was involved in litigation to otherwise similar venture firm that was not involved in litigation and find that less reputable VCs are more likely to participate in litigation, as are VCs focusing on early-stage investments, and VCs with larger deal flow. Second, we analyze the relationship between different types of lawsuits and VC fundraising and deal flow. Although plaintiffs lose most VC-related lawsuits, litigation does not go unnoticed: in subsequent years, the involved VCs raise significantly less capital than their peers and invest in fewer deals. The biggest losers are VCs who were defendants in a lawsuit, and especially VCs who were alleged to have expropriated founders. |
| JEL: | G24 G34 K22 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13641&r=ent |
| By: | Marco Da Rin; MarÃa Fabiana Penas |
| Abstract: | We examine a unique dataset of Dutch companies, some of which have received venture financing. The data include detailed information on innovation activities and other company characteristics. We analyse the role of venture finance in influencing innovation strategies. We find that venture capitalists push portfolio companies towards building absorptive capacity and towards more permanent in-house R&D efforts. By contrast, we find that public funding relaxes financial constraints, but does not lead to a build-up of absorptive capacity. Our results thus highlight the special role of venture capital in shaping companies' innovation strategies. |
| JEL: | G24 O32 O38 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13636&r=ent |
| By: | Elisabete Gomes Santana Félix (Universidade de Évora,Departamento de Gestão); Cesaltina Pires (Universidade de Évora,Departamento de Gestão); Mohamed Azzim Gulamhussenb (Instituto Superior de Ciências do Trabalho e da Empresa,Departamento de Finanças e Contabilidade) |
| Abstract: | This article analyzes the determinants of the European venture capital market, extending the equilibrium model from Jeng and Wells (2000). Our empirical model includes many of the determinants already tested in previous studies. In addition, we test whether the unemployment rate, the trade sale divestment and the market-to-book ratio are important factors in explaining venture capital. We use aggregated data from the European venture capital market as well as macroeconomic data, to estimate panel data models, with fixed and random effects. The random effects models revealed to be the most adequate. Our results confirm the importance of some of the already known factors and show that the unemployment rate and trade sale divestments are important determinants in the European venture capital market. |
| Keywords: | Venture capital, Europe, Venture capital determinants, IPO, Trade sale, Write-off, Unemployment rate |
| JEL: | C23 G24 G32 G34 M13 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:cfe:wpcefa:2007_01&r=ent |
| By: | Iain M. Cockburn; Megan MacGarvie |
| Abstract: | The impact of stronger intellectual property rights in the software industry is controversial. One means by which patents can affect technical change, industry dynamics, and ultimately welfare, is through their role in stimulating or stifling entry by new ventures. Patents can block entry, or raise entrants' costs in variety of ways, while at the same time they may stimulate entry by improving the bargaining position of entrants vis-Ã -vis incumbents, and supporting a "market for technology" which enables new ventures to license their way into the market, or realize value through trade in their intangible assets. One important impact of patents may be their influence on capital markets, and here we find evidence that the extraordinary growth in patenting of software during the 1990s is associated with significant effects on the financing of software companies. Start-up software companies operating in markets characterized by denser patent thickets see their initial acquisition of VC funding delayed relative to firms in markets less affected by patents. The relationship between patents and the probability of IPO or acquisition is more complex, but there is some evidence that firms without patents are less likely to go public if they operate in a market characterized by patent thickets. |
| JEL: | L1 O34 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13644&r=ent |
| By: | Ashish Arora; Anand Nandkumar |
| Abstract: | In this paper we study how the existence of a functioning market for technology differentially conditions the entry strategy and survival of different types of entrants, and the role of scale, marketing ability and technical assets. Markets for technology facilitate entry of firms that lack proprietary technology and increase vertical specialization. However, they also increase the relative advantage of downstream capabilities, which is reflected in the relatively improved performance of incumbent Information and Communication Technologies (ICT) firms compared to startups. We find that diversifying entrants perform better relative to startups. Contrary to earlier studies, we find that spin-offs do not perform any better than other startups. Moreover, firms founded by serious hobbyists and tinkerers, whom we call hackers, perform markedly better than other startups. These findings reflect the non-manufacturing setting of this study, as well as the distinctive nature of software technology. |
| JEL: | L24 L25 L26 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13634&r=ent |
| By: | Alexander Coad; Rekha Rao |
| Abstract: | We apply a panel vector autoregression model to a firm-level longitudinal database to observe the co-evolution of sales growth, employment growth, profits growth and growth of R&D expenditure. Contrary to expectations, profit growth seems to have little detectable effect on R&D investment. Instead, firms appear to increase their total R&D expenditure following growth in sales and growth of employment. In a sense, firms behave ‘as if’ they aim for a roughly constant ratio of R&D to employment (or sales). We observe heterogeneous effects for growing or shrinking firms however, suggesting that firms are less willing to reduce their R&D levels following a negative growth shock than they are willing to increase R&D after a positive shock. |
| Keywords: | Firm Growth, Panel VAR, R&D expenditure, Industrial Dynamics Length 32 pages |
| JEL: | L10 L20 O32 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2007-10&r=ent |
| By: | Gutiérrez-Romero, Roxana |
| Abstract: | The aim of the paper is to explore the influences of initial inequality on the long run distribution of wealth. The paper presents two mathematical models that analyse the occupational choice of individuals in the presence of capital constraints and risk in entrepreneurial activities. The models show that inequality and particularly polarization hinder economic growth. The higher the initial level of polarization is, the lower the long run aggregate wealth of the economy and the higher the long run polarization will be. The models are calibrated using numerical simulations. The implications of the models are assessed empirically using data on economic growth, and income distribution in Mexico, during the period 1895-1994, as well as the "Doing Business" databases of the World Bank. Policy-wise it is found that a more egalitarian wealth distribution and less poverty can be achieved through wealth redistribution policies and by improving the business climate. This can be done by reducing the cost of setting-up firms (technology,bureaucratic and administrative costs), introducing labour-market reforms encouraging the hiring of those typically excluded such as the poor, improving the access to credit markets by reducing the costs of creating and/or registering collateral and broadening the credit bureau coverage. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gdec07:6534&r=ent |
| By: | Dixit M.R.; Sharma Sunil; Karna Amit |
| Abstract: | This paper studies the developments in Air Deccan, a start up in the Indian aviation industry and discusses the linkages among the aspirations of the entrepreneur, enterprise strategy and its sustenance in a competitive environment. It argues that the entrepreneur fails to sustain his/her enterprise and the aspirations if his strategic and operational choices and environmental responses to the choices create a resource or competence imbalance and constrain the entrepreneur. Based on its analysis and discussion, the paper delineates managerial themes like encyclopedic entrepreneurship, sustenance through co-sharing aspirations, managing first and fast mover advantages, dynamics of enterprise and its environment and competence management in start- ups. |
| Date: | 2007–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2007-11-03&r=ent |