nep-ent New Economics Papers
on Entrepreneurship
Issue of 2008‒04‒15
sixteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Entrepreneurship and Innovation Policy By Erik Stam
  2. Defining Entrepreneurial Activity: Definitions Supporting Frameworks for Data Collection By Nadim Ahmad; Richard G. Seymour
  3. What do we know about spatial entry? By Nicolas Debarsy; Marcus Dejardin
  4. Entry and exit as a source of aggregate productivity growth in two alternative technological regimes By Carlos Carreira; Paulino Teixeira
  5. Entry, Exit and Investment-Specific Technical Change By Roberto M. Samaniego
  6. Tax Policy for Venture Capital Backed Entrepreneurship By Christian Keuschnigg
  7. Individual Entrepreneurship Capacity and Performance of SMEs By Leitão, João; Franco, Mário
  8. The impact of entrepreneurship education on entrepreneurship competencies and intentions: An evaluation of the Junior Achievement Student Mini-Company Program By Hessel Oosterbeek; Mirjam van Praag; Auke IJsselstein
  9. Never the same after the first time: The satisfaction of the second-generation self-employed. By Andrew E. Clark; Nathalie Colombier; David Masclet
  10. The Labour Market Consequences of Self-employment Spells: European Evidence By Ari Hyytinen; Petri Rouvinen
  11. What do we know about the capital structure of privately held firms? Evidence from the Surveys of Small Business Finance By Cole, Rebel
  12. How Costly is Diversity? Affirmative Action in Light of Gender Differences in Competitiveness By Muriel Niederle; Carmit Segal; Lise Vesterlund
  13. Who Needs Agglomeration? Varying Agglomeration Externalities and the Industry Life Cycle By Frank Neffke; Martin Svensson Henning; Ron Boschma; Karl-Johan Lundquist; Lars-Olof Olander
  14. On The Preferences of Principals and Agents By Marco Castillo; Ragan Petrie; Maximo Torero
  15. A Note on the Excess Entry Theorem in Spatial Models with Elastic Demand By Yiquan Gu; Tobias Wenzel
  16. The impact of innovation activities on employment in the environmental sector : empirical results for Germany at the firm level By Horbach, Jens

  1. By: Erik Stam
    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: 2008–03
  2. By: Nadim Ahmad; Richard G. Seymour
    Abstract: This paper sets out definitions of the entrepreneur, entrepreneurship and entrepreneurial activity for the purpose of supporting the development of related indicators. The paper recognises the long history in this area and the contention and differences that have existed, and that continue to exist, between academics who have confronted this issue over the last two centuries. It deliberately adopts a more pragmatic approach based on two principles ? relevance and measurability - resulting in definitions that are developed from both a bottom-up and top-down approach. Importantly, the definitions emphasise the dynamic nature of entrepreneurial activity and focus attention on action rather than intentions or supply/demand conditions. The paper concludes with an overview of policy implications arising from the definitions. <BR>Ce document propose les définitions de l’entrepreneur, de l’entrepreneuriat et de l'activité entrepreneuriale afin d'étayer le développement d'indicateurs statistiques sur l'entrepreneuriat. Le document reconnaît les controverses et différences qui ont existé, et qui continuent à exister, entre universitaires qui se sont confrontés à cette question au cours des deux derniers siècles. Les auteurs adoptent délibérément une approche plus pragmatique basée sur deux principes - pertinence et mesurabilité - ayant pour résultat des définitions élaborées à partir d’une approche ascendante (à partir de données mesurables) et descendante (basée sur les objectifs à atteindre). Les définitions soulignent en priorité la nature dynamique de l'activité entrepreneuriale et se concentrent sur l’action plutôt que sur les intentions ou les conditions de l’offre et de la demande. Le papier conclut avec une vue d’ensemble des implications résultant de ces définitions pour les politiques économiques.
    Date: 2008–01–24
  3. By: Nicolas Debarsy (CERPE - FUNDP-University of Namur, FNRS); Marcus Dejardin (CERPE - FUNDP-University of Namur)
    Abstract: In his oft-cited "What do we know about entry?", Paul Geroski (1995) gave a survey of empirical works on this central topic regarding industrial organization and, more precisely, market dynamics. Surprisingly, his article remains silent on the spatial dimension of these dynamics. This paper gives first accessory support to some of the Geroski's a-spatial observations with reference to firm entries and exits of a selection of retail and consumer service industries in Belgium over the 1998-2001 period. More important is the proposed application of the Exploratory Spatial Data Analysis (ESDA) that has been developed for in-depth exploring of spatial datasets. Evidences are collected at highly disaggregated geographical and industrial levels. They do not only contribute to a better understanding of the geographical patterns of the industries, but they lead to interesting observations regarding industrial organization and market dynamics by examining the space-time structures of entries and exits. These observations may be considered as an opening tribute towards a spatial extension of what Geroski has presented as stylized facts in his 1995 article.
    Keywords: entry, exit, spatial interactions, local market, ESDA
    JEL: L11 L80 R12
    Date: 2008–03–27
  4. By: Carlos Carreira (GEMF and Faculdade de Economia, Universidade de Coimbra); Paulino Teixeira (GEMF and Faculdade de Economia, Universidade de Coimbra)
    Abstract: This paper proposes a neo-Schumpeterian model in order to discuss how the mechanisms of entry and exit contribute to industry productivity growth in alternative technological regimes. By assuming a) that firms learn about the technology through a variety of sources, and b) a continuous flow of entry and exit, our numerical simulation exercise does show that exits and contraction take mostly place among less productive firms, while entry and expansion are concentrated among the more efficient ones. We were also able to replicate the fact that the entry-exit effect is larger in the entrepreneurial regime, while the contribution of continuing firms is larger in the routinized regime. Our model was thus very effective in replicating some major empirical regularities of industry dynamics, including the very prominent role of entry and exit in productivity growth. Our analysis also suggests that micro analysis is the proper complement to aggregate industry studies, as it provides a considerable insight into the causes of productivity growth.
    Keywords: Entry and Exit; Industrial Dynamics; Learning; Productivity growth; Nelson-Winter evolutionary industry model
    JEL: L1 D24 O3 C63
    Date: 2008
  5. By: Roberto M. Samaniego (Department of Economics, George Washington University)
    Abstract: Across industries, this paper finds that the rate of investment-specific technical change (ISTC) is positively related to rates of entry and exit. This finding is consistent with industry dynamics along the balanced growth path of a general equilibrium, multi-industry model of the plant lifecycle, in which technology adoption is costly and the rate of ISTC varies across industries. Results are robust to allowing for structural change induced by technological progress. The model also generates lumpy investment as a result of technology adoption by incumbents.
    Keywords: Entry, exit, turnover, investment-specific technical change, entry costs, vintage capital, embodied technical change, selection, obsolescence, structural change, lumpy investment.
    JEL: L16 O33 O41
    Date: 2008–04–02
  6. By: Christian Keuschnigg
    Abstract: Venture capital has become an important source of financing young entrepreneurial firms. Venture capital backed firms are often perceived as more innovative and as creating more value than others. Perhaps for this reason, policy makers are keen to create a good institutional framework to facilitate the development of an active venture capital industry. We explore the role of tax policy in determining the incentives of individuals to start up new firms and of venture capitalists to finance and advise them. In particular, we examine how business taxation at the company and investor level together with start-up capital subsidies affect the volume and quality of venture capital backed entrepreneurship.
    Keywords: Entrepreneurship, venture capital, taxes, subsidies
    JEL: D82 G24 H24 H25
    Date: 2008–03
  7. By: Leitão, João; Franco, Mário
    Abstract: This paper analyses the importance of human capital and organizational capital on the determination of SME’s performance, by proposing and testing a conceptual model about Individual Entrepreneurship Capacity, and its impact both on non-economic and economic performance. This constitutes an innovative approach in the sense that uses information collected at the individual level, that is, the entrepreneur. Moreover, it constitutes a first attempt for facing the caveat in the literature on the relationship among types of capital and entrepreneurial performance. A model where the individual entrepreneurship capital is defined as a function of two types of capital: Human and Organizational; is proposed and empirically tested. For the Human Capital we consider three dimensions: (a) Individual Characteristics; (b) Managerial Push; and (c) Managerial Pull. As concerns the Organizational Capital, four dimensions are considered: (i) Individual Entrepreneurial Behavior; (ii) Collective Entrepreneurial Behavior; (iii) Managerial Practices; and (iv) Organizational Culture (in terms of the Superstructure and the Socio-Structure). The use of the stepwise method provides the selection of significant variables that impact on SME’s performance. When only non-economic indicators are considered for measuring the performance, in what respects the human capital we find out that the only significant variable is: enthusiasm at work. In what concerns the organizational capital the significant variables are: efficient organizational structure; participative management; incentives for interdisciplinary discussion and dialogue; and frequent meetings of working groups. For its turn, when economic indicators are considered for measuring the performance, we find out that the significant human capital determinants are: entrepreneur’s intuition; and propensity for innovating activities. In terms of organizational capital determinants we reveal that the significant variables are: efficient organizational structure; and use of external indicators for improving entrepreneurial performance. The main policy implication of the paper is the possibility of creating, at an individual level, new incentives and motivational tools based on the identification of the most important variables of human capital and organizational capital, for fostering SME’s performance.
    Keywords: Human Capital; Organizational Capital; Performance; SME.
    JEL: L25 D23 L26
    Date: 2008–04–09
  8. By: Hessel Oosterbeek; Mirjam van Praag (Max Planck Institute for Economics, Jena); Auke IJsselstein
    Abstract: Both the European Community, its member countries and the United States have stimulated schools to implement entrepreneurship programs into schooling curricula on a large scale, based on the idea that entrepreneurial competencies and mindsets must be developed at school. The leading and acclaimed worldwide program is the Junior Achievement Student Mini-Company Program. Nevertheless, so far, its effects on students? entrepreneurship competencies and attitudes have not been evaluated. This paper analyzes the impact of the program in a Dutch college using an instrumental variables approach in a difference-in-differences framework. The results show that the program does not have the intended effects: students? self-assessed entrepreneurial skills remain unaffected and students? intentions to become an entrepreneur even decrease significantly.
    Keywords: Entrepreneurship education, program evaluation, entrepreneur competencies, entrepreneur intentions
    JEL: A20 C31 H43 H75 I20 J24 L26
    Date: 2008–03–26
  9. By: Andrew E. Clark; Nathalie Colombier; David Masclet
    Abstract: Previous empirical work has shown that the self-employed are generally more satisfied than salaried workers. This paper contributes to the existing literature in two ways. First, using French data from the ECHP and British data from the BHPS, we investigate the domains over which this differential operates. We show that, after controlling for occupation, self-employed workers are generally more satisfied with working conditions and pay, but less satisfied than employees with respect to job security. We then consider the differences between the first- and second-generation self-employed. The first-generation self-employed (those whose parents were not self-employed) are more satisfied overall than are the second-generation self-employed. We argue that this finding is consistent with the self-employed partly comparing their labor market outcomes with those of their parents, as well as parental transfers which loosen the self-employment participation constraint. This result is found in both pooled and panel analysis.
    Date: 2008
  10. By: Ari Hyytinen; Petri Rouvinen
    Abstract: ABSTRACT : We examine how those re-entering paid-employment after a brief self-employment spell fare upon return using data from the European Community Household Panel. Unconditionally, those re-entering paid-employment appear to have considerably lower wages than those staying in the wage sector. This difference appears to be larger in Europe than in the US. Conditional analysis suggests, however, that the difference is more apparent than real : It seems that Europeans select negatively into (and possibly out-of) self-employment, i.e., the likelihood of entering (and exiting) entrepreneurship correlates negatively with unobserved ability and/or in-paid-employment productivity. Our analysis of non-wage outcomes indicates that the selection is mostly involuntary and that for highly educated men, the brief self-employment spells are unemployment in disguise.
    Keywords: self-employment, job mobility, earnings, wage differentials, selection
    JEL: J23 J24 J31
    Date: 2008–03–28
  11. By: Cole, Rebel
    Abstract: The capital-structure decision is one of the most fundamental issues in corporate finance. Numerous studies have been conducted to test the two major competing theories of capital structure (Trade-Off Theory and Pecking-Order Theory), yet none of these studies has analyzed the capital-structure decisions of small, privately held U.S. firms, which constitute the vast majority of all U.S. business enterprises. In this study, we provide the first evidence on this important issue, utilizing data from four nationally representative surveys conducted by the Federal Reserve Board: the 1987, 1993, 1998 and 2003 Surveys of Small Business Finances (SSBF). We find that firm leverage as measured by the ratios of total loans to total assets and total liabilities to total assets is negatively related to firm size, age, profitability, liquidity and credit quality and is positively related to firm tangibility and limited liability. In addition, we find that firm leverage is an increasing function of both the number of banks and the number of non-bank financial institutions with which the firm has business relationships. Finally, we find no significant variations in firm leverage by race or ethnicity, but some evidence that femaleowned firms use less leverage. In general, these results are broadly supportive of the Pecking- Order Theory and inconsistent with the Trade-Off Theory.
    Keywords: capital structure; pecking-order theory; small business; trade-off theory; SSBF
    JEL: L26 G32 G21
    Date: 2008–03–16
  12. By: Muriel Niederle; Carmit Segal; Lise Vesterlund
    Abstract: Recent research documents that while men are eager to compete, women often shy away from competitive environments. A consequence is that few women enter and win competitions. Using experimental methods we examine how affirmative action affects competitive entry. We find that when women are guaranteed equal representation among winners, more women and fewer men enter competitions, and the response exceeds that predicted by changes in the probability of winning. An explanation for this response is that under affirmative action the probability of winning depends not only on one's rank relative to other group members, but also on one's rank within gender. Both beliefs on rank and attitudes towards competition change when moving to a more gender-specific competition. The changes in competitive entry have important implications when assessing the costs of affirmative action. Based on ex-ante tournament entry affirmative action is predicted to lower the performance requirement for women and thus result in reverse discrimination towards men. Interestingly this need not be the outcome when competitive entry is not payoff maximizing. The response in entry implies that it may not be necessary to lower the performance requirement for women to achieve a more diverse set of winners.
    JEL: C91 J16 J24
    Date: 2008–04
  13. By: Frank Neffke; Martin Svensson Henning; Ron Boschma; Karl-Johan Lundquist; Lars-Olof Olander
    Abstract: In this paper, the changing roles of agglomeration externalities during different stages of the industry life cycle are investigated. A central argument is that agglomeration externalities vary with mode of competition, innovation intensity, and characteristics of learning opportunities in industries. Following the Industry Life Cycle perspective, we distinguish between young and mature industries, and investigate how these benefit from MAR, Jacobs’ and Urbanization externalities. The empirical analysis builds on a Swedish plant level dataset that covers the period of 1974-2004.The outcomes of panel data regression models show that the benefits industries derive from their local environment are strongly associated with their stage in the industry life cycle. Whereas MAR externalities increase with the maturity of industries, Jacobs’ externalities decline when industries are more mature. This is in line with the hypothesis that young industries operate in an environment dominated by rapid product innovation and low levels of standardization. Hence, it pays off when knowledge can be sourced locally from many different sources, but there is still little scope for specialization benefits. Mature industries, in contrast, are associated with lower innovation intensities and a focus on cost saving process innovations. Therefore, there are major benefits to be derived from specialization, whereas knowledge spillovers from different industries are less relevant. The distinction between the product competition in young industries and price competition in mature industries is reflected in our finding that high regional factor costs are detrimental to mature industries, but not to young industries. This can also be related to the finding that high quality living environments, attractive for highly paid employees, are important to young industries. Overall, the outcomes stress that industrial life cycles have to be taken into account in the analysis of agglomeration externalities.
    Keywords: agglomeration externalities, industry life cycle, urbanization, Sweden
    Date: 2008–04
  14. By: Marco Castillo; Ragan Petrie; Maximo Torero
    Abstract: One of the reasons why market economies are able to thrive is that they exploit the willingness of entrepreneurs to take risks that laborers might prefer to avoid. Markets work because they remunerate good judgement and punish mistakes. Indeed, modern contract theory is based on the assumption that principals are less risk averse than agents. We investigate if the risk preferences of entrepreneurs are different from those of laborers by implementing experiments with a random sample of the population in a fast-growing, small-manufacturing, economic cluster. As assumed by theory, we find that entrepreneurs are more likely to take risks than hired managers. These results are robust to the inclusion of a series of controls. This lends support to the idea that risk preferences are an important determinant of selection into occupations. Finally, our lotteries are good predictors of financial decisions, thus giving support to the external validity of our risk measures and experimental methods.
    Date: 2007–12
  15. By: Yiquan Gu; Tobias Wenzel
    Abstract: This paper revisits the excess entry theorem in spatial models à la Vickrey (1964) and Salop (1979) while relaxing the assumption of inelastic demand. Using a demand function with a constant demand elasticity, we show that the number of firms that enter a market decreases with the degree of demand elasticity.We find that the excess entry theorem does only hold when demand is sufficiently inelastic. Otherwise, there is insufficient entry. In the limiting case of unit elastic demand, the market is monopolized. We point out when and how a public policy can be desirable and broaden our results with a more general transportation cost function.
    Keywords: Elastic demand, spatial models, excess entry theorem
    JEL: L11 L13
    Date: 2007–12
  16. By: Horbach, Jens
    Abstract: "The paper explores employment effects of environmental product innovations at the firm level. The empirical analysis is based on the establishment panel of the Institute for Employment Research (Nuremberg). A descriptive analysis shows that more than 50% of the firms in the environmental sector developed new products or improved existing products or services. The most dynamic environmental fields were analytics, consulting, measurement technology, waste disposal and recycling. A firm specialised in environmental research and development seems to have the best employment perspectives in the short and in the long run. Our econometric analysis had to address a simultaneity problem because the decision of a firm on the realisation of innovations and on the enlargement or reduction of employment is mutually dependant. Therefore, we apply a bivariate probit model that allows estimating the two variables simultaneously. The econometric results show that the influence of environmental innovation activities on the employment development is significantly positive. Furthermore, the quantitative importance of the new products with regard to the whole turnover of the firm is also important for employment growth. Within the bivariate probit model, the determinants of environmental innovation activities are also explored. They may be interpreted as indirect influences on the employment development of the firm. The results show that the improvement of the innovative capacities by R&D and further education measures and the existence of a high qualified human capital are significantly important for the development of new products in the environmental sector. A good strategy to improve the innovativeness of a firm seems to be a diversification of environmental product lines offered by the firm." (author's abstract, IAB-Doku) ((en))
    Keywords: Produktinnovation, Beschäftigungseffekte, Umweltschutzindustrie, IAB-Betriebspanel, Umweltforschung, Technik, Umweltverträglichkeit, Umwelttechnik, Recycling, Forschungsaufwand, Forschung und Entwicklung, Abfallbeseitigung, Umweltberatung, Innovationsfähigkeit
    JEL: Q52 Q55 J49 C25
    Date: 2008–03–27

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