nep-ent New Economics Papers
on Entrepreneurship
Issue of 2008‒02‒09
thirteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Who chooses to become an entrepreneur? The Jacks-of-all-Trades in Social and Human Capital By Uschi Backes-Gellner; Petra Moog
  2. What Does "Entrepreneurship" Data Really Show? By Zoltan J. Acs; Sameeksha Desai; Leora Klapper
  3. The Process of Creative Construction: Knowledge Spillovers, Entrepreneurship and Economic Growth By Rajshree Agarwal; David Audretsch; MB Sarkar
  4. Entrepreneurship and Innovation Policy By Erik Stam
  5. Taxing Entrepreneurial Income By Henrekson, Magnus; Sanandaji, Tino
  6. Employment Growth of New Firms By Erik Stam; Petra Gibcus; Jennifer Telussa; Elizabeth Garnsey
  7. Gazelles as Job Creators – A Survey and Interpretation of the Evidence By Henrekson, Magnus; Johansson, Dan
  8. Metamorphosis of Entrepreneurial Ventures: A Holistic Paradigm from Two Tales By Dixit Mukund R.; Karna Amit; Sharma Sunil
  9. Occupational choice and the spirit of capitalism By Matthias Doepke; Fabrizio Zilibotti
  10. Bankruptcy: Is It Enough to Forgive or Must we Also Forget? By Piero Gottardi; Ronel Elul
  11. Die Empfänger von Innovationsförderung: Ergebnisse einer Unternehmensbefragung in Niedersachsen By Verena Mertins
  12. Urban Amenities or Agglomeration Economies? Locational Behaviour and Entrepreneurial Success of Dutch Fashion Designers By Rik Wenting; Oedzge Atzema; Koen Frenken
  13. Can institutional forces create competitive advantage? An empirical examination of environmental innovation By Berrone, Pascual; Gelabert, Liliana; Fosfuri, Andrea; Gomez-Mejia, Luis R.

  1. By: Uschi Backes-Gellner (Institute for Strategy and Business Economics, University of Zurich); Petra Moog (University of Siegen)
    Abstract: This paper studies willingness to become an entrepreneur depending on an individual’s composition of human and social capital. Our theoretical analysis is an extension of Lazear’s (2005) jack-of-all-trades theory. Our primary implication is that it is not individuals with a higher level of human or social capital but rather individuals with a more balanced portfolio of human and social capital that are more willing than others to become entrepreneurs. We use survey data from a sample of more than 2000 German students to test this hypothesis and find that the jacks-of-all-trades, i.e. the more balanced individuals are more likely to become entrepreneurs. On the other hand, the Masters-in-One, i.e. the specialists, are better off being an employee and rightly prefer to be so.
    Keywords: Entrepreneurship, Jack-of-all-trades theory, Social capital
    JEL: L26 J24
    Date: 2007–02
  2. By: Zoltan J. Acs (George Mason University and Max Planck Institute of Economics); Sameeksha Desai (Max Planck Institute of Economics and George Mason University); Leora Klapper (The World Bank, Development Research Group)
    Abstract: We compare two "entrepreneurship" datasets: Global Entrepreneurship Monitor (GEM) captures early-stage entrepreneurship and World Bank Group Entrepreneurship Survey (WBGES) captures business registration. GEM data is higher in developing economies than WBGES data, but this reverses in developed countries. We find differences related to local institutional conditions, after controlling for economic development. A possible explanation is WBGES measures formal entry, whereas GEM measures intent. This can be interpreted as the spread between individuals who could potentially operate businesses in the formal sector - and those that actually do. Our findings suggest entrepreneurs in developed countries have greater ease and incentives to incorporate.
    Keywords: Global Entrepreneurship Monitor, World Bank Group Entrepreneurship Survey, entrepreneurial intent, formal business registration, entry
    JEL: O17 O50 Y10
    Date: 2008–01–30
  3. By: Rajshree Agarwal (University of Illinois at Urbana Champaign); David Audretsch (Max Planck Institute of Economics); MB Sarkar (University of Central Florida)
    Abstract: Questioning the underlying assumptions of the process of creative destruction, we conceptualize an alternative process of creative construction that may characterize the dynamics between entrants and incumbents. We discuss the underlying mechanism of knowledge spillover strategic entrepreneurship whereby knowledge investments by existing organizations, when coupled with entrepreneurial action by individuals embedded in their context, results in new venture creation, heterogeneity in performance and subsequent growth in industries, regions and economies. The framework has implications for future research in entrepreneurship, strategy and economic growth.
    Keywords: growth, spillovers, creative destruction, entrepreneurship
    JEL: L16 L21 M13 O11 O40 O57
    Date: 2008–01–30
  4. By: Erik Stam (University of Cambridge, Netherlands Scientific Council for Government Policy, Utrecht University and Max Planck Institute of Economics, Jena)
    Abstract: What is meant by entrepreneurship, innovation and economic growth is often not clear or very idiosyncratic. This paper starts with a discussion of the nature of entrepreneurship and its relation to innovation. The second section provides an overview of theory and empirical research on the relation between entrepreneurship, innovation and economic growth. The paper continues with a study on entrepreneurship and innovation in the Netherlands in an international and historical perspective. After these conceptual, theoretical and empirical investigations, we turn to policy issues.
    Keywords: entrepreneurship, innovation policy, innovation systems, the Netherlands
    JEL: E61 G38 L26 L53 O12 O31 O33 O38
    Date: 2008–01–30
  5. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Sanandaji, Tino (University of Chicago)
    Abstract: Taxation theory rarely takes entrepreneurship into consideration. We discuss how this omission affects conclusions derived from standard models of capital taxation when applied to entrepreneurial income. Some of the defining features of entrepreneurship often omitted by standard capital taxation theory are incorporated into the analysis. This includes the lack of a well-functioning external market for entrepreneurial effort, limited access to external capital and the complementarities between entrepreneurial effort, entrepre-neurial innovation and capital investment. Because of these constraints, the entrepreneurial project is tied to the individual owner-manager. Unlike the typical passive portfolio investor assumed in cost of capital models the entrepreneur is unable to decouple savings decisions from investment decisions, and due to the comple-mentarities in production makes a joint decision on the supply of effort and capital. The returns from success-ful entrepreneurial ventures thus cannot be readily divided into labor and capital income, in stark contrast to what is assumed in standard taxation theory. When unique attributes of entrepreneurship are taken into account, some major conclusions of capital taxation models no longer hold, including the neutrality of capital taxation in owner-managed firms. These results are particularly important for the Nordic system of dual taxation, the theoretical foundation of which relies on the ability to neatly separate capital income from the labor income of the self-employed.
    Keywords: Capital Income Taxation; Dual Income Taxation; Entrepreneurship; Innovation; Institutions; Labor Supply; New Firm Creation; Optimal Factor Taxes; Taxation; Tax Policy
    JEL: E25 G32 H21 H25 L26 L50 M13 O31
    Date: 2008–01–31
  6. By: Erik Stam (University of Cambridge, Netherlands Scientific Council for Government Policy, Utrecht University and Max Planck Institute of Economics, Jena); Petra Gibcus (EIM Business and Policy Research); Jennifer Telussa (EIM Business and Policy Research); Elizabeth Garnsey (University of Cambridge)
    Abstract: This paper analyses the association between dynamic capabilities and new firm growth, controlling for measures of firm resources, characteristics of the entrepreneur, and aspects of the environment. The central research question is: How strong is the relationship between dynamic capabilities and the growth of new firms? The paper opens with a review of empirical studies on employment growth in new firms and then moves on to a discussion on the role of dynamic capabilities in the explanation of new firm growth. After a description of the data and variables the results and implications of this study are discussed.
    Keywords: new firms, firm growth, innovation, dynamic capabilities
    JEL: D21 L23 L25 L26 M13 M21
    Date: 2008–01–30
  7. By: Henrekson, Magnus (IFN); Johansson, Dan (Ratio)
    Abstract: It is often claimed that small and young firms account for a disproportionately large share of net employment growth. We conduct a meta analysis of the empirical evidence regarding whether net employment growth rather is generated by a few rapidly growing firms – so-called Gazelles – that are not necessarily small and young. Gazelles are found to be outstanding job creators. They create all or a large share of new net jobs. On average, Gazelles are younger and smaller than other firms, but it is young age more than small size that is associated with rapid growth. Gazelles seem to be overrepresented in services.
    Keywords: Firm growth; Flyers; Gazelles; High-growth firms; Rapidly growing firms
    JEL: D21 L25 M13 O10 O40
    Date: 2008–02–07
  8. By: Dixit Mukund R.; Karna Amit; Sharma Sunil
    Abstract: Some entrepreneurial ventures grow into large organizations within a relatively short duration. These startups rapidly increase their scale and scope to turn into matured organizations. Though the literature is replete with such examples, there is no explanation for such a phenomenon. Also, nothing has been said about the role of the environment in metamorphosis of such ventures. We look at two global organizations and explain their metamorphosis. We arrive at four dynamic stages through which an entrepreneurial venture grows: prime pillar formation stage, scale catapult stage, scope enlargement stage, and maturity stage. We also explain the different roles played by the firm and the environment during each stage, the interactions between each of these roles, and the dominant strategic process underlying in each stage.
    Date: 2008–01–31
  9. By: Matthias Doepke; Fabrizio Zilibotti
    Abstract: The British Industrial Revolution triggered a reversal in the social order of society whereby the landed elite was replaced by industrial capitalists rising from the middle classes as the economically dominant group. Many observers have linked this transformation to the contrast in values between a hard-working and frugal middle class and an upper class imbued with disdain for work. We propose an economic theory of preference formation where both the divergence of attitudes across social classes and the ensuing reversal of economic fortunes are equilibrium outcomes. In our theory, parents shape their children's preferences in response to economic incentives. If financial markets are imperfect, this results in the stratification of society along occupational lines. Middle-class families in occupations that require effort, skill, and experience develop patience and work ethic, whereas upper-class families relying on rental income cultivate a refined taste for leisure. These class-specific attitudes, which are rooted in the nature of pre-industrial professions, become key determinants of success once industrialization transforms the economic landscape.
    Keywords: Aristocracy, endogenous preferences, entrepreneurship, finance, growth and income distribution, financial development, financial market imperfections, industrial revolution, middle class, patience, portfolio choice, savings, spirit of capitalism, work ethic
    JEL: D31 D91 G00 G11 N23
    Date: 2007–06
  10. 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
  11. By: Verena Mertins
    Abstract: In diesem Diskussionspapier werden die Ergebnisse einer im Mai/Juni 2007 durchgeführten Unternehmensbefragung im Raum Niedersachsen vorgestellt in Bezug auf die Fragestellung, ob sich Unternehmen, die In-novationsförderung erhalten, von nicht geförderten Unternehmen in Bezug auf generelle Unternehmenscharakteristika und Unternehmereigenschaften unterscheiden. Es existieren systematische Unterschiede zwischen geförderten und nicht geförderten Unternehmen, die darauf hindeuten, dass Innovationsförderprogramme nur von einer bestimmten Gruppe wahrgenommen werden. This discussion paper presents the results of a survey carried out in May/June 2007 among Lower Saxon businesses. The paper discusses the eventual effects of subsidies for innovation by comparing businesses that have received subsidies in the past and non-subsidised businesses. In particular, attention is given to general firm characteristics and personal attributes of the entrepreneur. It can be shown that systematic differences exist between subsidised and non-subsidised businesses, implying that programs for subsidies for innovation are only utilised by a certain group of entrepreneurs.
    Keywords: Innovation, R&D, Subsidies, Entrepreneurship, Information, Risk
    JEL: D02 D78 D81 D82 D83 H23
    Date: 2008–02–05
  12. By: Rik Wenting; Oedzge Atzema; Koen Frenken
    Abstract: Urban economic growth and industrial clustering is traditionally explained by Marshallian agglomeration economies benefiting co-located firms. The focus on firms rather than people has been challenged by Florida arguing that urban amenities and a tolerant climate attract creative people, and the firms they work for, to certain cities. We analyse to what extent these two mechanisms affect the locational behaviour of Dutch fashion designers. On the basis of a questionnaire, we find that urban amenities are considered more important than agglomeration economies in entrepreneurs’ location decision. Designers located in the Amsterdam cluster do not profit from agglomeration economies as such, but rather from superior networking opportunities with peers both within and outside the cluster.
    Keywords: Agglomeration economies, urban amenities, creative class, fashion design, cultural industries, social networks, cluster
    Date: 2008–01
  13. By: Berrone, Pascual (IESE Business School); Gelabert, Liliana (Universidad Carlos III); Fosfuri, Andrea (Universidad Carlos III); Gomez-Mejia, Luis R. (Arizona State University)
    Abstract: We examine institutional pressures as antecedents of environmental innovation. Drawing on institutional theory and a resource-based view of the firm, we argue that regulatory and normative forces influence companies' propensity to innovate in environment-related projects. Furthermore, we suggest that this relationship is contingent on the availability and specificity of the companies' resources. These relationships were tested using environmental patents and citations of 340 publicly-traded companies from polluting industries in the U.S. Results suggest that institutional pressures can be a source of competitive advantage, and regulatory forces are becoming more strongly associated with environmental innovations as the intensity of companies' R&D activities increase.
    Keywords: environmental innovation; institutional theory; resource-based view;
    Date: 2007–11–21

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