nep-ent New Economics Papers
on Entrepreneurship
Issue of 2008‒08‒31
twelve papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. The Alert and Creative Entrepreneur: A Clarification By Kirzner, Israel M.
  2. The Entrepreneurial Advantage of World Cities - Evidence from Global Entrepreneurship Monitor Data By Zoltan Acs; Niels Bosma; Rolf Sternberg
  3. Productive and Destructive Entrepreneurship in a Political Economy Framework By Douhan, Robin; Henrekson, Magnus
  4. If You Are So Smart, Why Aren’t You an Entrepreneur? Returns to Cognitive and Social Ability: Entrepreneurs versus Employees By Hartog, Joop; van Praag, Mirjam; van der Sluis, Justin
  5. Entrepreneurs' gender and financial constraints: evidence from international data By Alexander Muravyev; Dorothea Schaefer; Oleksandr Talavera
  6. Businesswomen in Germany and Their Performance by Ethnicity: It Pays to Be Self-Employed By Constant, Amelie F.
  7. Towards an evolutionary model of the entrepreneurial financing process: insights from biotechnology startups By Vanacker, T.; Manigart, S.; Meuleman, M.
  8. High-technology VCs: a distinct species on the investment market By Knockaert, M.; Clarysse, B.
  9. Cross-Boundary Disruptors: Powerful Inter-Industry Entrepreneurial Change Agents By Burgelman, Robert A.; Grove, Andrew S.
  10. Creative Destruction and Regional Productivity Growth: Evidence from the Dutch Manufacturing and Services Industries By Niels Bosma; Erik Stam; Veronique Schutjens
  11. Entrepreneurship, Spillovers and Productivity Growth in the Small Firm Sector of UK Manufacturing By Hany El Shamy; Paul Temple
  12. Labour Productivity and Firm Entry and Exit in Manufacturing By Anni Nevalainen

  1. By: Kirzner, Israel M. (New York University)
    Abstract: Israel M. Kirzner is the 2006 winner of The International Award for Entrepreneurship and Small Business Research (the FSF-Nutek Award). In this Prize Lecture he argues that a number of those who have commented on his work have misunderstood certain aspects of his theoretical system, and as a result the common distinction in the literature between “Schumpeterian” and “Kirznerian” entrepreneurs is flawed. He also argues that his understanding of the market process (set in motion by entrepreneurial decisions) provides a theoretical underpinning for public policy vis-à-vis entrepreneurship. Professor Kirzner’s main contributions to the economics of entrepreneurship were also presented and evaluated by Douhan, Eliasson and Henrekson (2007).
    Keywords: Austrian economics; Economic development; Entrepreneurship; Small business economics
    JEL: B49 B52 B53 O31
    Date: 2008–08–12
  2. By: Zoltan Acs (George Mason University, Washington D.C.and Max Planck Institute of Economics); Niels Bosma (Utrecht University, EIM Business + Policy Research, Global Entrepreneurship Research Association); Rolf Sternberg (University of Hannover)
    Abstract: Recent discussions in the Economic Geography literature increasingly focus on creative cities and the importance of creativity for achieving economic growth. Considering the increased attention on urban areas it is not surprising that the regional dimension of entrepreneurship is a subject of great interest. We set out a framework encompassing the individual process between entrepreneurial perceptions and entrepreneurial activity and demonstrate how the urban environment can have an impact on this process. We create entrepreneurship indices for 34 world cities exploiting the Global Entrepreneurship Monitor (GEM) Database 2001-2006. We investigate differences between the city-level and country-level for a selection of the indices. These exercises can be seen as initial tests of the ‘entrepreneurial advantage of cities.’ Based on the literature we expect that most indices will be higher for world cities, although exceptions are also plausible, for instance in world cities where the government resides. Our findings predominantly confirm the entrepreneurial advantage of world cities.
    Keywords: entrepreneurship, world cities, entrepreneurial perceptions, entrepreneurial activity, urbanization, Global Entrepreneurship Monitor
    JEL: R11 M13 O18
    Date: 2008–08–22
  3. By: Douhan, Robin (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: Recent research has highlighted the role of institutions in channeling entrepreneurs into activities with positive or negative effects on overall productivity. Embedding central elements from these theories into a political economy framework reveals the bilateral causal relation between entrepreneurs and institutions. Core features of the entrepreneur force us to view its effects on institutions as more than mechanic general equilibrium adjustments. Three analytically separate channels of influence are isolated, analyzed and exemplified. Entrepreneurs influence formal economic institutions through direct involvement in politics, by using their entrepreneurial talent to wield de facto political power and by altering the effect of formal institutions. We propose a parsimonious framework that incorporates these effects as well as the role of institutions in channeling entrepreneurial talent. We use examples from modern history as a real-world context to illustrate our framework.
    Keywords: Entrepreneurship; Innovation; Institutions; Regulation; Self-employment
    JEL: L50 M13 O31 P14
    Date: 2008–08–26
  4. By: Hartog, Joop (University of Amsterdam); van Praag, Mirjam (University of Amsterdam); van der Sluis, Justin (University of Amsterdam)
    Abstract: How valuable are cognitive and social abilities for entrepreneurs’ incomes as compared to employees? We answer three questions: (1) To what extent does a composite measure of ability affect an entrepreneur's earnings relative to employees? (2) Do different cognitive abilities (e.g. math ability, language ability) and social ability affect earnings of entrepreneurs and employees differently?, and (3) Does the balance in these measured ability levels affect an individual's earnings? Our individual fixed-effects estimates of the differential returns to ability for spells in entrepreneurship versus wage employment account for selectivity into entrepreneurial positions as determined by fixed individual characteristics. General ability has a stronger impact on entrepreneurial incomes than on wages. Entrepreneurs and employees benefit from different sets of specific abilities: Language and clerical abilities have a stronger impact on wages, whereas mathematical, social and technical ability affect entrepreneurial incomes more strongly. The balance in the various kinds of ability also generates a higher income, but only for entrepreneurs: This finding supports Lazear's Jack-of-all-Trades theory.
    Keywords: (non-)cognitive abilities, intelligence, earnings, entrepreneur(ship), wage employment, income differentials
    JEL: J23 J24 J31 J44 M13
    Date: 2008–08
  5. By: Alexander Muravyev (DIW - Berlin); Dorothea Schaefer (DIW - Berlin and Free University of Berlin); Oleksandr Talavera (Aberdeen Business School and Kyiv School of Economics)
    Abstract: This paper studies gender discrimination against entrepreneurs by financial institutions. Based on the cross-country Business Environment and Enterprise Performance Survey (BEEPS) our analysis suggests that, compared to male-managed counterparts, female-managed firms are less likely to obtain a bank loan. In addition, we find that female entrepreneurs are charged higher interest rates when loan applications are approved. There is also some evidence that the gender differences in access to financing vanish with the level of financial development, which is consistent with the Becker-type discrimination. The results of our analysis are robust to a number of specification checks.
    Keywords: Entrepreneurship, financial constraints, gender, discrimination
    JEL: G21 J16 L26
    Date: 2008–08
  6. By: Constant, Amelie F. (DIW DC, Georgetown University and IZA)
    Abstract: In this paper I assert that the entrepreneurial spirit can also exist in salaried jobs. I study the determinants of wages and the labor market success of two kinds of entrepreneurial women in Germany – self-employed and salaried businesswomen – and investigate whether ethnicity is important in these challenging jobs. Employing data from the German Socioeconomic Panel I estimate selection adjusted wage regressions for both types of businesswomen by country of origin. I find that self-employment offers businesswomen a lucrative avenue with higher monetary rewards, albeit for a shorter spell. If salaried businesswomen went into self-employment, they would receive considerably higher wages and for at least 30 years. However, if self-employed businesswomen went into salaried jobs, their wages would decline, suggesting that it is the self-employment sector that offers better opportunities and monetary success. Self-employed women in Germany fare well and most importantly, success does not depend on their ethnicity.
    Keywords: businesswomen, entrepreneurship, self-employment, economics of minorities, immigrants wage differentials
    JEL: M13 J23 J15 J61 J31
    Date: 2008–08
  7. By: Vanacker, T.; Manigart, S.; Meuleman, M. (Vlerick Leuven Gent Management School)
    Abstract: Using multiple longitudinal case studies of young biotechnology firms, we study differences in the financing process between high and low performing firms. Findings suggest that initial differences in the specialization of the investors with whom entrepreneurs affiliate early on, affect the ease with which firms attract (specialized) follow-on financing and firm performance. We demonstrate the role of the social context in shaping initial financing outcomes, as entrepreneurs limit their search for financing to one or a few investors with whom they have pre-existing ties. Additionally, our research provides a dynamic view of the financing process. We identify isolating mechanisms, including entrepreneurial learning and homophily and network considerations in investor syndication, which limit entrepreneurs when trying to adopt successful financing strategies implemented by competitors later on. A core contribution is that we theorize on evolutionary processes in the financing process. This new perspective advances our knowledge on dynamics in the financing process and opens multiple avenues for future research.
    Keywords: entrepreneurship; new venture finance; financing process; venture capital; performance
    Date: 2008–07–20
  8. By: Knockaert, M.; Clarysse, B. (Vlerick Leuven Gent Management School)
    Abstract: Over the last decades, venture capital investment management has considerably become interested in high-tech investing. Despite this higher interest, no clear analysis exists of who these high-tech VCs are, and how they differ from traditional VCs. Studying selection behaviour of VCs using a conjoint methodology, we identified 28 high-tech investors in a unique sample of 68 European early stage investors. These VCs emphasize high-tech related criteria during the selection process. A further analysis of this group of high-tech investors compared to traditional investors showed that high-tech VCs are to a larger extent publicly funded than traditional VCs. Besides, they tend to be more prominent in biotech investing. We found no indication that specific or general human capital with respect to high-tech investing affects selection behaviour. This research has important implications for public policy, aiming at resolving the market failure for high-tech investments, high-tech entrepreneurs looking for VC funding, and VC funds.
    Date: 2008–07–19
  9. By: Burgelman, Robert A. (Stanford U); Grove, Andrew S.
    Abstract: Based on comparative case studies of Apple Computer's strategic actions in the music and cellular telephony industries, we develop the concept of "cross-boundary disruptor" as a new type of entrepreneurial actor in inter-industry strategic dynamics. We document how the confluence of forces that drove the convergence of the music and computing industries gave rise to Apple Computer becoming a defining example of a cross-boundary disruptor to the music industry, and examine Apple's chances to do the same in the cellular telephony industry. Using our preliminary conceptual framework, we further examine what kind of company could become a cross-boundary disruptor in the US healthcare industry to help overcome its long-standing stasis. We summarize our case study-based findings into a preliminary substantive theory of the cross-boundary disruption phenomenon, and discuss several implications for further strategic entrepreneurship research and for strategic leadership practice.
    Date: 2007–10
  10. By: Niels Bosma; Erik Stam; Veronique Schutjens
    Abstract: Do processes of firm entry and exit improve the competitiveness of regions? If so, is this a universal mechanism or is it contingent on the type of industry or region in which creative destruction takes place? This paper analyses the effect of firm entry and exit on the competitiveness of regions, measured by Total Factor Productivity (TFP) growth. Based on a study across 40 regions in the Netherlands over the period 1988-2002, we find that firm entry is related to productivity growth in services, but not in manufacturing. The positive impact found in services does not necessarily imply that new firms are more efficient than incumbent firms; high degrees of creative destruction may also improve the efficiency of incumbent firms. We also find that the impact of firm dynamics on regional productivity in services is higher in regions exhibiting diverse but related economic activities.
    Keywords: entrepreneurship, entry & exit, turbulence, creative destruction, regional competitiveness, total factor productivity
    JEL: L10 M13 O18 R11
    Date: 2008–08
  11. By: Hany El Shamy (University of Surrey); Paul Temple (University of Surrey)
    Abstract: This paper considers the sources of technological change and productivity growth in the small firm sector of UK manufacturing over the period 1973- 2002, focusing on the mechanisms by which spillovers occur between the large firms which perform the bulk of R&D and smaller firms which are the recipients. It is argued that the current volume of domestic R&D generates profitable and high productivity opportunities for smaller firms. However this mechanism ignores the ways in which R&D also contributes to the more general knowledge base available to small firms as codified information which frequently takes the measurable form of industrial standards. A simple model of labour demand among small manufacturing is developed which employs two measures of technological activity intended to capture both these channels. A co-integrating relationship based upon an augmented labour demand equation is established for UK manufacturing, showing the relevance of both channels for the explanation of productivity growth in the small firm sector.
    Keywords: Key Words: Small firms; productivity; technological change; R&D; standards.
    JEL: J23 L25 L26 O32
    Date: 2008–08
  12. By: Anni Nevalainen
    Abstract: ABSTRACT : This paper investigates the connection between firm entry and exit and labour productivity growth. The study has its theoretical foundations in modern Schumpeterian growth theory, distance to frontier model and vintage capital models. The importance of productivity enhancing restructuring has been increasingly acknowledged and all these theories depict the productivity enhancing effects that external restructuring - in particular firm entry and exit – may have. Despite the vast theoretical discussion there is only a little empirical research on the subject. Thus, this study aims at contributing to the existing empirical literature by utilizing panel data that contain information on all manufacturing subsectors from eight EU member states between 1997 and 2004. Empirical analysis is conducted with fixed effects panel regression. It is noted that firm turnover, especially firm entry enhances productivity growth, but the effects appear with a lag. Productivity enhancing effects of firm entry are the strongest three years after the initial entry. The effects of firm exit on labour productivity growth are also positive but more modest than the effects of firm entry. Results of the analysis suggest that the population of firm entrants is extremely heterogeneous.
    Keywords: labour productivity, manufacturing, firm entry, firm exit, modern Schumpeterian growth theory
    JEL: L6 O4
    Date: 2008–08–25

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