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on Entrepreneurship |
| By: | Philippe Aghion (Harvard University); Thibault Fally (Paris-Jourdan Sciences Economiques); Stefano Scarpetta (OECD and IZA) |
| Abstract: | Advanced market economies are characterized by a continuous process of creative destruction. Market forces and technological developments play a major role in shaping this process, but institutional and policy settings also influence firms’ decision to enter, to expand if successful and to exit if competition becomes unbearable. In this paper, we focus on the effects of financial development on the entry of new firms and the expansion of successful new businesses. Drawing from harmonized firm-level data for 16 industrialized and emerging economies, we find that access to finance matters most for the entry of small firms and in sectors that are more dependent upon external finance. This finding is robust to controlling for other potential entry barriers (labor market regulations and entry regulations). On the other hand, financial development has either no effect or a negative effect on entry by large firms. Access to finance also helps new firms expand if successful. Both private credit and stock market capitalization are important for promoting entry and post entry growth of firms. Altogether, these results suggest that, despite significant progress over the past decade, many countries, including those in Continental Europe, should improve their financial markets so as to get the most out of creative destruction, by encouraging the entry of new (especially small) firms and the post-entry growth of successful young businesses. |
| Keywords: | financial development, entry, post-entry growth, firm size, micro data |
| JEL: | D21 D92 L11 G32 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3237&r=ent |
| By: | Lu, Jiangyong; Tao, Zhigang |
| Abstract: | The institutional environment – including protection of private properties and contract enforcement – has been rather unfavorable for the emergence and development of China’s private enterprises. This is in sharp contrast to the case of the developed economies where the institutional environment is conductive to the entrepreneurial activities and only the personal attributes of would-be entrepreneurs determine their entrepreneurship decision. We thus propose a theoretical framework for the entrepreneurship decision in China with a focus on the role of institutional environment. Using a life-histories survey data of 2,854 respondents from twenty cities in China, we find strong support for the impacts of the institutional environment and its interactions with other determinants of entrepreneurship decision. |
| JEL: | J2 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5675&r=ent |
| By: | Marco Caliendo (IZA and IAB); Alexander S. Kritikos (Hanseatic University Rostock, GfA and IAB) |
| Abstract: | Fostering and supporting start-up businesses by unemployed persons has become an increasingly important issue in many European countries. These new ventures are being supported by various governmental programs. Potential benefits include not only the end of unemployment for the new entrepreneur but also some further positive effects, e.g., direct job creation. However, it is often feared that the previously unemployed lack the basic qualifications to become entrepreneurs. Empirical evidence on skill-composition, direct job creation and other key variables is rather scarce, largely because of inadequate data availability. We base our analysis on a unique and very informative survey data containing a representative sample of over 3,100 start-ups founded by unemployed persons in Germany. Individuals were subsidized under two different schemes, and we are able to draw on extensive pre- and post-founding information concerning the characteristics of the business (start-up capital, industry, etc.) and of the business founders (education, motivation, preparation, etc.). We find that formerly unemployed founders are motivated by push and pull factors. Using a proportional hazard duration model with unobserved heterogeneity allows us to analyze the characteristics which drive success of the businesses. While survival rates 2.5 years after business founding are quite high (around 70%) for both programs and genders, the characteristics of the newly developed businesses are heterogeneous. |
| Keywords: | start-up subsidies, self-employment, unemployment, direct employment effects, survival |
| JEL: | J68 M13 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3220&r=ent |
| By: | Randall K. Q. Akee (IZA); David A. Jaeger (College of William and Mary, University of Bonn and IZA); Konstantinos Tatsiramos (IZA) |
| Abstract: | Using recently-available data from the New Immigrant Survey, we find that previous selfemployment 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 self-employment 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 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3250&r=ent |
| By: | Miglo, A. |
| Abstract: | Existing literature usually considers earnings manipulation to be a negative social phenomenon. We argue that earnings manipulation can be a part of the equilibrium relationships between firms' insiders and outsiders. We consider an optimal contract between an entrepreneur and an investor where the entrepreneur is subject to a double moral hazard problem (one being the choice of production effort and the other being intertemporal substitution, which consists of transferring cash flows between periods). Investment and production effort may be below socially optimal levels because the entrepreneur cannot entirely capture the results of his effort. The opportunity to manipulate earnings protects the entrepreneur against the risk of a low payoff when the results of production are low. Ex-ante, this provides an incentive for the entrepreneur to increase his level of effort and invest efficiently. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2008-3&r=ent |
| By: | Bart Hobijn; Aysegül Sahin |
| Abstract: | We study the effects of labor market rigidities and frictions on firm-size distributions and dynamics. We introduce a model of endogenous entrepreneurship, labor market frictions, and firm-size dynamics with many types of rigidities, such as hiring and firing costs, search frictions with vacancy costs, unemployment benefits, firm entry costs, and a tax wedge between wages and labor costs. We use the model to analyze how each rigidity explains firm-size differentials between the United States and France. We find that when we include all rigidities and frictions except hiring costs and search frictions, the model accounts for much of the firm-size differentials between the United States and France. The addition of search frictions with vacancy costs generates implausibly large differentials in firm-size distributions.> |
| Keywords: | Labor market ; Corporations - Finance ; Business enterprises - Finance ; Employment ; Unemployment |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:311&r=ent |
| By: | Enrico Beretta (Bank of Italy, Branch of Genoa, Research Office); Silvia Del Prete (Bank of Italy, Branch of Florence, Research Office) |
| Abstract: | Using Bank of Italy data on Italian banks in the period 1990-2004, the paper analyses the short and long-run effects of the concentration of the banking industry on the availability of credit to small and medium-sized firms. Our study employs a bank-based approach and investigates the differential effects of banking consolidation in the various geographical areas, in order to capture the influence of the different economic contexts. Our research also considers the different groups of intermediaries involved, as well as the role of “new entry” banks and of those not involved in consolidations (e.g. rivals). We find that banks’ specialization in terms of credit policy seems to be affected by M&As. On the one hand, the portion of credit allocated to small businesses decreases in the long run after mergers, which result in a more pronounced size change and a more complex organizational structure; this effect is stronger in the South and in the North East of Italy. On the other hand, in the case of acquisitions, banking groups improve their “expertise” in small business lending. These results hold in all the main geographical areas, except for the southern regions, where – everything being equal – small firms are riskier and banks’ takeovers are motivated mainly by the need to allow financial restructuring. However, in this market, the entry of new banks and close relationships between local banks and agglomerations of small firms partly offset the lower specialization on small business financing induced by acquisitions. |
| Keywords: | mergers and acquisitions, small business lending, regional analysis |
| JEL: | G21 G34 O18 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_644_07&r=ent |
| By: | Antcliff, V.; Higgins, David; Toms, Steven; Wilson, J.F. |
| Abstract: | There has been considerable and ongoing debate about the performance of the British economy since 1945. Empirical studies have concentrated on aggregate or industry level indicators. Few have examined individual firms’ financial performance. This study takes a sample of c.3000 firms in 19 industries and identifies Britain’s best performing companies over a period of 35 years. Successful companies are defined as a) those that survive as independent entities, b) that outperform peer group average return to capital for that industry, and c) that outperform other firms in the economy according to return on capital relative to industry average. Results are presented as league tables of success and some tentative explanations offered concerning the common strategies of successful firms. A broader research agenda for British business history is suggested. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:wrc:ymswp1:36&r=ent |