nep-ent New Economics Papers
on Entrepreneurship
Issue of 2008‒01‒05
eighteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. The Institutions of Economic Freedom and Entrepreneurship: Evidence from Panel Data By Nyström, Kristina
  2. Opportunity Spin-offs and Necessity Spin-offs By G. Bünstorf
  3. Risky Earnings, Taxation and Entrepreneurial Choice : A Microeconometric Model for Germany By Frank M. Fossen
  4. The Persistence of Self-Employment Across Borders: New Evidence on Legal Immigrants to the United States By Randall Kekoa Quinones Akee; David A. Jaeger; Konstantinos Tatsiramos
  5. Segregation, entrepreneurship and work values: the case of France By Claudia Senik; Thierry Verdier
  6. What is Middle Class about the Middle Classes Around the World? By Banerjee, Abhijit; Duflo, Esther
  7. The international entrepreneurial firms' social networks By Manuel Portugal Ferreira; Fernando Ribeiro Serra; João Carvalho Santos
  8. Entry, exit and plant-level dynamics over the business cycle By Yoonsoo Lee; Toshihiko Mukoyama
  9. Firm productivity dynamics in Spain By Paloma López-García; Sergio Puente; Ángel Luis Gómez
  10. Regional Industrial Dominance, Agglomeration Economies, and Manufacturing Plant Productivity By Joshua Drucker; Edward Feser
  11. Does it pay firms to register for taxes ? the impact of formality on firm profitability By Sakho, Yaye Seynabou; McKenzie, David
  12. Strategic analysis of petty corruption with an intermediary By Ariane Lambert-Mogiliansky; Mukul Majumdar; Roy Radner
  13. Firm Growth and Scaling of Growth Rate Variance in Multiplant Firms By Alex Coad
  14. Geographical Agglomeration in Australian Manufacturing By Anne Leahy; Alfons Palangkaraya; Jongsay Yong
  15. The Dynamics of Research Joint Ventures: A Panel Data Analysis By Tomaso Duso; Enrico Pennings; Jo Seldeslachts
  16. Trade Liberalisation, Exit, and Output and Employment Adjustments of Australian Manufacturing Establishments By Alfons Palangkaraya; Jongsay Yong
  17. Italian SMEs and industrial districts on the move: Where are they going? By Roberta Rabellotti; Anna Carabelli; Giovanna Hirsch
  18. Mentoring and Segregation: Female-Led Firms and Gender Wage Policies By Ana Rute Cardoso; Rudolf Winter-Ebmer

  1. By: Nyström, Kristina (The Ratio Institute)
    Abstract: This paper provides new evidence on the determinants of entrepreneurship across countries. The paper investigates the relationship between the institutional setting, in terms of economic freedom, and entrepreneurship, as measured by self-employment in a panel data setting covering 23 OECD countries and the time-period 1972-2002. The measure of economic freedom includes five aspects: size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and the regulation of credit, labour and business. The empirical findings show that a smaller government sector, better legal structure and security of property rights and less regulation of credit, labour and business tend to increase entrepreneurship.
    Keywords: entrepreneurship; self-employment; institutions; economic freedom
    JEL: M13 O50
    Date: 2008–01–03
  2. By: G. Bünstorf
    Abstract: Necessity spin-offs are organized by employees of incumbent firms to escape deteriorating job conditions. This paper proposes a conceptual model of the spin-off process. Necessity spin-offs are distinguished from opportunity spin-offs on the basis of their triggering events. An empirical analysis of German laser spin-offs traces differences in the performance and determinants of the two types of spin-offs. Necessity spin-offs are important to limit the devaluation of individual competences by the market process. They are particularly relevant in growth crises of innovative firms, and in the restructuring of economies with protected or state-owned companies.
    Keywords: Spin-offs, necessity entrepreneurship, opportunity discovery, market process, laser industry Length 32 pages
    JEL: L25 L26 M13
    Date: 2007–12
  3. By: Frank M. Fossen
    Abstract: Which role do individual income prospects play in the decision to be an entrepreneur rather than an employee? In a model of occupational choice, higher expected after-tax earnings attract people to self-employment, while more risky net earnings deter risk-averse individuals. In this paper I analyse the expected value and variance of income in self-employment and dependent employment empirically, accounting for selection. Based on this analysis, structural models of self-employment entry and exit under risk are estimated, which include a standard risk aversion parameter. The model predicts that the German income tax reduction of 2000 induced smaller exit rates out of self-employment for men and smaller entry rates for women.
    Keywords: Entrepreneurship, Risk, Returns to Self-Employment, Taxation
    JEL: J23 H24 D81 C51
    Date: 2007
  4. By: Randall Kekoa Quinones Akee (IZA); David A. Jaeger (Department of Economics, College of William and Mary); Konstantinos Tatsiramos (IZA)
    Abstract: Using recently-available data from the New Immigrant Survey, we find that previous self-employment experience in an immigrant’s country of origin is an important determinant of their self-employment status in the U.S., increasing the probability of being self-employed by about 7 percent. Our results improve on the previous literature by measuring home-country selfemployment directly rather than relying on proxy measures. We find little evidence to suggest that home-country self-employment has a significant effect on U.S. wages in either paid employment or self employment.
    Keywords: Self-employment, entrepreneurship, New Immigrant Survey
    JEL: J61 J21
    Date: 2007–12–20
  5. By: Claudia Senik; Thierry Verdier
    Abstract: This paper studies the interaction between labor market integration, the evolution of "work values" and entrepreneurial capital inside minority communities. A simple model of labor market segmentation with ethnic capital and endogenous transmission of cultural values inside minority groups is presented. It emphasizes the role of entrepreneurial capital as an important driver of labor market integration and as a promoter of meritocratic work values inside the community. Using a new French survey rich in attitudinal variables, it then proposes an empirical illustration, focusing on the dissimilarity between the labor market integration of South European versus North African second generation immigrants in France. It shows that the contrasted economic and cultural integration of these minorities can be explained away by their different levels of entrepreneurial capital.
    Date: 2007
  6. By: Banerjee, Abhijit; Duflo, Esther
    Abstract: This paper uses household surveys from 13 developing countries to describe consumption choices, health and education investments, employment patterns and other features of the of the economic lives of the “middle classes” defined as those whose daily consumption per capita is between $2 and $4 or between $6 and $10. The data shed lights on differences and similarities between the middle classes and the poor and helps discriminating between various theories of the role of the middle classes in the development process. We find that the average middle class person is not an entrepreneur in waiting: while he or she might run a business, this is usually a small, not very profitable business. The single most important characteristic of the middle class seems to be that they are more likely to be holding a steady job. Perhaps as a result, they also have fewer, healthier, and better educated children. While there are clear differences in consumption patterns between the poor and the middle classes, there are also very strong resemblance within countries, and contrasts across countries, which might either reflect the importance of relative prices in shaping consumption decisions or the power of norms/fashions in determining consumption.
    Keywords: consumption; development; investment; middle class
    JEL: I32 O10 O12
    Date: 2007–12
  7. By: Manuel Portugal Ferreira (Instituto Politécnico de Leiria); Fernando Ribeiro Serra (Unisul Business School); João Carvalho Santos (Instituto Politécnico de Leiria)
    Abstract: ABSTRACT This paper investigates theoretically the importance and impact of the international entrepreneurial firms? (IEFs) social networks on selected firms? strategies. We focus specifically on some core attributes of IEFs and the impact of social networks on such strategies as the choice of the foreign markets to operate and the foreign entry modes. The social networks are a major driver of the internationalization from inception and help in overcoming a variety of physical and social resource limitations as well as transactional hazards. We conclude that it is likely that both some fundamental characteristics of the IEFs and those of the foreign markets entered account for these firms reliance on their social networks.
    Keywords: entrepreneurship, international entrepreneurial firms, social networks, internationalization
    JEL: M1
    Date: 2007–12
  8. By: Yoonsoo Lee; Toshihiko Mukoyama
    Abstract: This paper analyzes the implications of plant-level dynamics over the business cycle. We first document basic patterns of entry and exit of U.S. manufacturing plants, in terms of employment and productivity between 1972 and 1997. We show how entry and exit patterns vary during the business cycle, and that the cyclical pattern of entry is very different from the cyclical pattern of exit. Second, we build a general equilibrium model of plant entry, exit, and employment and compare its predictions to the data. In our model, plants enter and exit endogenously, and the size and productivity of entering and exiting plants are also determined endogenously. Finally, we explore the policy implications of the model. Imposing a firing tax that is constant over time can destabilize the economy by causing fluctuations in the entry rate. Entry subsidies are found to be effective in stabilizing the entry rate and output.
    Keywords: Business cycles ; Manufacturing industries
    Date: 2007
  9. By: Paloma López-García (Banco de España); Sergio Puente (Banco de España); Ángel Luis Gómez (Banco de España)
    Abstract: We have constructed a new database aimed at the study of the relation between firm demography and labour productivity, with a large number of Spanish firms from both industry and service sectors. This database allows us to analyze in detail the degree of dispersion and persistence of productivity levels, as well as the contribution of firm demography to productivity growth. This analysis has been done at different levels of sector aggregation. We have also studied explicitly the differential role of small and large firms.
    Keywords: entry and exit, micro-data, labour productivity
    JEL: D24 J24 L11 L25
    Date: 2007–12
  10. By: Joshua Drucker; Edward Feser
    Abstract: In a seminal article, Benjamin Chinitz (1961) focused attention on the effects that industry size, structure, and economic diversification have on firm performance and regional economies. He also raised a related but conceptually distinct question that has been overlooked since: how does the extent to which a regional industry is concentrated in a single or small number of firms impact the performance of other local firms within that industry? He suggested that such regional industrial dominance may impact input prices, limit capital accessibility, deter entrepreneurial activity, and reduce the regional availability of agglomeration economies such as specialized labor and supply pools In this paper, we use an establishment-level production function to quantify the links between industrial dominance, agglomeration economies, and firm performance. We consider two questions. First, do greater levels of regional industrial dominance lead to lower economic performance by small, dominated manufacturing plants? Second, are small plants in dominated regional industries more limited in capturing regional agglomeration benefits and therefore do they face rigidities in deploying production factors to maximum advantage? Our results suggest that regional industrial organization does influence productivity but that the effect tends to be a direct one, rather than an indirect effect via its influence on agglomeration economies.
    Date: 2007–12
  11. By: Sakho, Yaye Seynabou; McKenzie, David
    Abstract: This paper estimates the impact of registering for taxes on firm profits in Bolivia, the country with the highest levels of informality in Latin America. A new survey of micro and small firms enables the authors to control for a rich set of measures of owner ability and business motivations that can affect both profits and the decision to formalize. The paper identifies the impact of tax registration on business profitability using the distance of a firm from th e tax office where registration occurs, conditional on the distance to the city center, as an instrument for registration. Proximity to the tax office provides firms with more information about registration, but is argued to not directly affect profits. The findings show that tax registration leads to significantly higher profits for the firms that the instrument affects. However, there is also evidence of heterogeneous effects of tax formality on profits. Tax registration is found to increase profits for the mid-size firms in the sample, but to lower profits for both the smaller and larger firms, in contrast to the standard view that formality increases profits. The analysis shows that owners of large firms who have managed to stay informal have higher entrepreneurial ability than formal firm owners, in contrast to the standard view (correct among smaller firms) that informal firm owners have low ability.
    Keywords: Microfinance,Debt Markets,Transport Economics Policy & Planning,Taxation & Subsidies,E-Business
    Date: 2007–12–01
  12. By: Ariane Lambert-Mogiliansky; Mukul Majumdar; Roy Radner
    Abstract: This notes reports part of a larger study of "petty corruption" by government bureaucrats in the process of approving new business projects. Each bureaucrat may demand a bribe as a condition for approval. Entrepreneurs use the services of an intermediary who, for a fee, undertakes to obtain all the required approvals. In a dynamic game model we investigate (1) the multiplicity of equilibria, (2) the equilibria that are "socially efficient", and (3) the equilibria that maximize the total expected bureaucrat's bribe income. We compare these results with those for the case in which entrepreneurs apply directly to the bureaucrats.
    Date: 2007
  13. By: Alex Coad (Max Planck Institute of Economics, Jena, Germany; Centre d'Economie de la Sorbonne, Equipe MATISSE, Univ. Paris 1 - CNRS)
    Abstract: While Gibrat's Law assumes that growth rate variance is independent of size, empirical work has usually found a negative relationship between growth rate variance and ï¬rm growth. Using data on French manufacturing ï¬rms, we observe a relatively low, but statistically signiï¬cant, negative relationship between ï¬rm size and growth rate variance. Furthermore, we observe that growth rate variance does not decrease monotonically the more plants a ï¬rm possesses, which is at odds with a number of theoretical models.
    Keywords: Growth rate variance, Firm growth, Scaling relationship, Multiplant ï¬rms, Gibrat's Law
    JEL: L25 L20
    Date: 2007–12–18
  14. By: Anne Leahy (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Alfons Palangkaraya (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Jongsay Yong (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: This paper investigates the geographic agglomeration of establishments in the Australian manufacturing industries during the period of 1994{1997. We find that although the agglomeration of Australian manufacturing has doubled during the period, it is still not as agglomerated as those in other developed economies such as the United States, the United Kingdom, France and Ireland. We also find that industries which receive higher assistance tend to be more agglomerated. However, there is no statistically significant evidence that the extent of the reduction in assistance due to trade liberalisation between 1994 and 1997 was associated with a further decrease in agglomeration. In terms of establishment dynamics, we ¯nd a significant increase in agglomeration but no evidence that establishment entry-exit patterns are correlated with agglomeration.
    Keywords: Agglomeration; Australian Manufacturing; Industry assistance; Trade liberalisation; Entry and exit.
    JEL: R11 R12
    Date: 2007–03
  15. By: Tomaso Duso (Humboldt University and Wissenschaftszentrum Berlin (WZB) Reichpietschufer 50, 10785 Berlin, Germany E-Mail : Tel: +49 30 2549 1403); Enrico Pennings (Dept. of Applied Economics, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands E-mail: Tel: +31 10 40 82166); Jo Seldeslachts (Wissenschaftszentrum Berlin (WZB) Reichpietschufer 50, 10785 Berlin, Germany E-Mail: Tel: +49 30 2549 1404)
    Abstract: The aim of this paper is to test the determinants of Research Joint Ventures’ (RJVs) group dynamics. We look at entry, exit and turbulence in RJVs that have been set up under the US National Cooperative Research Act, which allows for certain antitrust exemptions in order to stimulate firms to cooperate in R&D. Accounting for unobserved project characteristics and controlling for inter-RJV interactions and industry effects, the Tobit panel regressions show the importance of group and time features for an RJV’s evolution. We further identify an average RJV’s long-term equilibrium size and assess its determining factors. Ours is a first attempt to produce robust stylized facts about cooperational short- and long-term dynamics, an important but neglected dimension in research cooperations.
    Keywords: research joint ventures, dynamics, panel data
    JEL: C23 L24 O32
    Date: 2007
  16. By: Alfons Palangkaraya (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Jongsay Yong (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: We use unpublished establishment level data of Australian manufacturing from 1993-94 and 1996-97 censuses to study how trade liberalisation affects productivity. More specifically, we use the variation in the extent of trade liberalisation across four digit ANZSIC manufacturing industries classification to identify the link between trade liberalisation and three outcomes: establishments’ probability of exit, the change in the size of output and the change in employment. There is weak evidence that establishments in industries with greater reductions in effective rate of assistance are more likely to exit. We find strong evidence that they reduce employment. There is no evidence for economies of scale through output expansion. Together these indicate that the documented productivity gains of trade liberalisation may come more from the pro-competitive effects which forces establishments to reduce their slackness rather than from the exit of less efficient establishments.
    Keywords: Agglomeration; Australian Manufacturing; Industry assistance; Trade liberalisation; Entry and exit.
    JEL: R11 R12
    Date: 2007–05
  17. By: Roberta Rabellotti; Anna Carabelli; Giovanna Hirsch (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: Since the second half of the 1990s the Italian economy has experienced a significant slowdown in the rate of economic growth. The ‘dwarfism’ of its manufacturing firms, their specialisation in traditional sectors and their organisation in industrial districts have been identified by many scholars as major structural weaknesses in the Italian industrial system. Nevertheless, there is a vast and flourishing empirical literature showing that many industrial districts are actually changing in terms of sector specialisation, international and innovation strategies and emergence of new forms of enterprise organisation. In this paper, we provide a critical survey of the new and different patterns of industrial organisation emerging in industrial districts.
    Keywords: industrial districts, small and medium sized firms, Italy
    JEL: L23 L25
    Date: 2007–12
  18. By: Ana Rute Cardoso (IZA); Rudolf Winter-Ebmer (University of Linz, IHS Vienna, CEPR and IZA)
    Abstract: We explore the impact of mentoring of females and gender segregation on wages using a large longitudinal data set for Portugal. Female managers can protect and mentor female employees by paying them higher wages than male-led firms would do. We find that females can enjoy higher wages in female-led firms, the opposite being true for males. In both cases is a higher share of females reducing the wage level. These results are compatible with a theory where job promotion is an important factor of wage increases: if more females are to be mentored, less promotion slots are available for males, but also the expected chance of a female to be promoted is lower.
    Keywords: female entrepreneurs, wages, gender gap, matched employer-employee data
    JEL: M52 D21 J31 J16
    Date: 2007–12

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