nep-ent New Economics Papers
on Entrepreneurship
Issue of 2008‒09‒20
sixteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Start-ups, New Business Employment, and the Effects on Incumbents: Who Contributes the Larger Share? By Michael Fritsch; Florian Noseleit
  2. I can't get no Satisfaction - Necessity Entrepreneurship and Procedural Utility By Joern Block; Philipp Koellinger
  3. Intellectual Property Rights and the Knowledge Spillover Theory of Entrepreneurship By Zoltan J. Acs; Mark Sanders
  4. Is Entrepreneurship the Salvation for Enhanced Economic Growth? By Nyström, Kristina
  5. Adverse Selection and Entrepreneurship in a Model of Development By Esteban Jaimovich
  6. Too Sick To Start: Health of the Entrepreneur and Business Entry in Townships around Durban, South Africa By Li-Wei Chao; Helena Szrek; Nuno Sousa Pereira; Mark V. Pauly
  7. Science and Technology-based Regional Entrepreneurship in the Netherlands: Building Support Structures for Business Creation and Growth Entrepreneurship By Hulsink, W.; Suddle, K.; Hessels, S.J.A.
  8. Entrepreneurship and Innovation in Functional Regions By Karlsson, Charlie; Johansson, Börje; Stough, Roger
  9. Concentration, entry and exit barriers : effects on the entrepreneurship in the Senegal industry By SENE, Serigne Moustapha
  10. Globalization and the Rise of the Entrepreneurial Economy By David B. Audretsch; Mark Sanders
  11. Formality, Informality, and Social Welfare By John Bennett
  12. Adverse selection and financing of innovation: is there a need for R&D subsidies? By Takalo , Tuomas; Tanayama , Tanja
  13. Regional Institutional Environment and Swedish Regional New Firm Formation By Nyström, Kristina
  14. Quelle place pour l'entrepreneur dans les théories de la croissance régionale ? By Martin Koning; François Facchini
  15. Do R&D subsidies affect SME's: access to external financing By Meuleman, M.; De Maeseneire, W.
  16. Do Active Innovation Policies Matter? – Findings from a Survey on the Hong Kong Electronics SMEs By Wan-Hsin LIU

  1. By: Michael Fritsch (Friedrich Schiller University Jena, School of Economics and Business Administration); Florian Noseleit (Friedrich Schiller University Jena, School of Economics and Business Administration)
    Abstract: We investigate the effects that new business formation has on employment in incumbent firms and compare it to the development in the start-ups. The analysis is performed for West German regions over the 1984-2002 period. It shows that the employment effects of new businesses on the incumbents are significantly positive. Moreover, we find indication that these effects on incumbents are considerably larger than the employment that is directly generated in the start-ups. We draw conclusions for policy and for further research.
    Keywords: Entrepreneurship, new business formation, regional development, direct and indirect effects
    JEL: L26 M13 O1 O18 R11
    Date: 2008–09–10
  2. By: Joern Block (Technische Universität München); Philipp Koellinger (Erasmus University Rotterdam)
    Abstract: We study a unique sample of 1,547 nascent entrepreneurs in Germany and analyze which factors are associated with their self-reported satisfaction regarding their start-up. Our study identifies a new facet of procedural utility and offers new insights about the motivations and goals of nascent entrepreneurs. Most importantly, we identify a group of nascent entrepreneurs that “cannot get satisfaction” with their start-up—not because their start-up fails to deliver financial returns, but because they did not choose to become entrepreneurs in the first place. This group of unsatisfied entrepreneurs includes individuals starting a business after a period of long-term unemployment and those individuals with a lack of better employment alternatives (necessity entrepreneurs). In addition, we provide additional evidence for the importance of both financial and non-financial incentives of entrepreneurs. While financial success is the most important determinant of start-up satisfaction, achievement of independence and creativity is also highly important. Our results emphasize the relevance of procedural utility for understanding economic behavior.
    Keywords: Entrepreneurship; Satisfaction; Procedural Utility; Unemployment; Necessity Entrepreneurship
    JEL: J24 J17 L26
    Date: 2008–09–02
  3. By: Zoltan J. Acs (George Mason University and Max Planck Institute of Economics); Mark Sanders (Utrecht School of Economics and Max Planck Institute of Economics)
    Abstract: We develop a model in which stronger protection of intellectual property rights has an inverted U-shaped effect on innovation. Intellectual property rights protection allows the incumbent firms to capture part of the rents of commercial exploration that would otherwise accrue to the entrepreneurs. Stronger patent protection will increase the incentive to do R+D and generate new knowledge. This has a positive impact on entrepreneurship and innovation. However, after some point, further strengthening patent protection will reduce the returns to entrepreneurship sufficiently to reduce overall economic growth.
    Keywords: Intellectual Property Rights, Endogenous Growth, Entrepreneurship, Incentives, Knowledge Spillovers, Rents
    JEL: J24 L26 M13 O3
    Date: 2008–09–11
  4. By: Nyström, Kristina (Division of Economics KTH and Ratio Institute)
    Abstract: During the last decades, enhancing entrepreneurship has emerged as commonly used policy- measure in order to improve economic growth. However, is it true that entrepreneurship unambiguously can be claimed to improve economic growth? This paper intends to review the empirical evidence on the relationship between entrepreneurship on three measures of economic growth, employment, productivity and aggregate economic growth. The review shows that the studies that find no positive relationship between entrepreneurship and productivity growth have studied a relatively short period. Most studies that have studied a longer period (about ten years) provide rather clear evidence on the positive relationship between entrepreneurship and growth. Regarding the relationship between entrepreneurship and employment growth, the empirical evidence to some extent point in different directions. However, it must be concluded that in the long run there seems to be a positive relationship. A majority of the studies on the relationship between entrepreneurship and aggregate economic growth find a positive relationship. Studies that find a negative relationship usually employ non-harmonised self-employment rates as the measure of entrepreneurship.
    Keywords: entrepreneurship; economic growth; productivity; employment
    JEL: L26 R11
    Date: 2008–09–09
  5. By: Esteban Jaimovich
    Abstract: This paper presents a theory in which risk-averse heterogeneously talented entrepreneurs are the key agents driving the process of development and modernisation. Entrepreneurial skills are private information, which prevents full risk sharing. In that setup, development to a modern industrial economy might fail to take place, since potentially talented entrepreneurs may refrain from taking on the entrepreneurial risks as a way to avoid income shocks. An interesting feature of the model is that the informational asymmetries in the economy are endogenous to the process of development, as they are related to the heterogeneity in entrepreneurial skills required in the manufacturing activities.
    Keywords: Adverse Selection, Development, Entrepreneurship, Risk-Sharing
    JEL: O12 O16 D81 D82
    Date: 2008
  6. By: Li-Wei Chao (Population Studies Department, University of Pennsylvania); Helena Szrek (CETE, Faculdade de Economia, Universidade do Porto); Nuno Sousa Pereira (CETE, Faculdade de Economia, Universidade do Porto); Mark V. Pauly (Health Care Systems Department, The Wharton School, University of Pennsylvania)
    Abstract: Small businesses contribute a substantial share of economic activity in all countries, and may be an engine for job creation in developing economies. Unlike large firms with management teams, small businesses are usually run by one key person, the owner-entrepreneur, who bears almost all of the risks and who makes almost all of the decisions related to the business. Because the owner-entrepreneur also embodies most of the firm-specific knowledge capital, health of the owner-entrepreneur is an important factor contributing to the production process. Following a cohort of respondents with and without small businesses around Durban, South Africa, over a three-year period, our prior study found that poor baseline health and deteriorations in the health of the owner-entrepreneur were strongly associated with subsequent business exit. In the current study, we examined the relationship between an individual’s physical health and the decision to start a business. Our results suggest that respondents who were recent business entrants were in better health than respondents who did not start new businesses. Moreover, respondents without a business at the beginning of the study but who later opened businesses during the three-year study interval were significantly more likely to have better health before business entry than those respondents who never started a new business. Hence, good health among entrepreneurs seems to be an important prerequisite to both small business survival and small business entry.
    Keywords: South Africa; small businesses; business entry; health; entrepreneur
    JEL: I12
    Date: 2008–09
  7. By: Hulsink, W.; Suddle, K.; Hessels, S.J.A. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: In this contribution we develop a theoretical framework derived from the national system of innovation literature and the subsequent criticisms voiced by regional scientists and industry/technology experts who emphasize the importance of the intermediate subnational and sectoral levels to analysing science- and technology-based regional entrepreneurship in the Netherlands. The national system of innovation of the Netherlands, and its specifics and peculiarities, and the country’s general entrepreneurship policy, and the most important policy and support initiatives are subsequently discussed. Based on a desire to overcome the knowledge paradox between fundamental research and market needs and on the recognition that the Netherlands lags behind other countries when it comes to innovative entrepreneurship, various changes and initiatives were recently introduced in the Netherlands. The impression is of an overambitious national government with numerous programmes, schemes and agencies involved, sometimes working with each other but at other times separately as well, and its effectiveness can be questioned. Serious paperwork and preparation is involved in the participation in most programes and, together with the complexity of these programmes and policies, small and young entrepreneurs are neither informed, ready or well-equipped; some of them are not even interested in participating in those schemes.
    Keywords: system of innovation;science & technology policy;the Netherlands;regional entrepreneurship;high-growth entrepreneurship;universities;knowledge transfer
    Date: 2008–08–05
  8. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Stough, Roger (George Mason University)
    Abstract: The purpose of this paper is to discuss the role of entrepreneurship and innovations for economic development in functional regions and in doing that highlighting the different conditions offered for entrepreneurship and innovations in functional regions of various sizes. In conclusion, the conditions for entrepreneurship and innovations vary substantially between functional regions, since the necessary knowledge resources tend to be local and to cluster in certain regions and not others. Functional regions with a high capacity to generate new ideas, create knowledge, organizational learning and innovations are characterized as learning regions. Large functional regions offer a large market potential and a superior accessibility to knowledge and knowledge resources and they will further develop their creative capabilities due to an accumulation of innovative and entrepreneurial knowledge.
    Keywords: Entrepreneurship; Innovations; Regional development; R&D; Knowledge Sources; Knowledge Flows; Knowledge Creation
    JEL: D21 M13 R10
    Date: 2008–09–09
  9. By: SENE, Serigne Moustapha
    Abstract: This paper deals with the explicative factors of entry rate for Senegalese industry branches. The entry rate is considered as a function of branches specificities and affaires environment features. One distinguishes the structural entry barriers, no linked to the strategic behaviors of firms already installed, of other explicative variables, namely concentration, profit rate and exit barriers. The estimation by the generalized least squares method shows that, a fall of 10% of structural barriers involves a growth of 1% of the entry rate. Also, the exit barriers and the development of the competition improve significantly the entry rate which is not meanwhile sensitive to the profit rate. Besides, a semi parametric model is estimated by taking into account the expectancy of the entry rate and the conditional competition at exit barriers. The results reveal that, if the firms already in activity maintain their strategic behaviors, with the same profit rate and if the economy structures are unchanged, then the number of industrial firms in activity may widely increase in relation to the number of the previous year.
    Keywords: Key words : entrepreneurship; market structure; panel data
    JEL: L11 C23 L26
    Date: 2008–09–08
  10. By: David B. Audretsch; Mark Sanders
    Abstract: This paper argues that recent trends in the global economy have led to a shift in developed countries’ comparative advantage from mature industrial to early stage entrepreneurial production. We develop a three stage product life cycle model in which we distinguish between life cycle stages characterized by new, mature and off-shored production. In that model we analyze the impact of a level shock in the supply of unskilled labor in the South, a decrease in the level of political risk associated with outward foreign direct investment (off-shoring), and the widespread diffusion of a general purpose technology such as ICT. Due to endogenous responses in the allocation of entrepreneurial activity, the above shocks all result in a shift in the comparative advantage of developed countries towards new varieties, which corresponds to activities in the early stages of the product life cycle. Moreover, because entrepreneurs also serve as the agents that move varieties between life cycle stages, their value added increases due to globalization and technical change. By contrast, the factors of production employed in the mature stage of the life cycle, e.g. low skilled northern labor, become less valuable. Thus, the model predicts the emergence of an entrepreneurial economy in the North as the South opens up to trade and industrializes.
    Keywords: Product Cycles, International Trade, Entrepreneurship, Globalization
    JEL: F01 J31 O1 P0
    Date: 2008–06
  11. By: John Bennett
    Abstract: An industry is modeled in which entrepreneurs, who are heterogeneous in ability, may produce formally or informally. It is shown how the formalinformal mix depends on the distribution of ability, product demand and various parameter values. The industry equilibrium is compared to one in which informality is prohibited. With relatively high product demand, the effect of entrepreneurs being free to choose informality is that consumer surplus and total employment are reduced, but profit is redistributed towards more able entrepreneurs. With relatively low product demand the opposite effects obtain. We also show that informality may be a built-in stabilizer or destabilizer.
    Date: 2008–06
  12. By: Takalo , Tuomas (Bank of Finland Research); Tanayama , Tanja (Helsinki Center of Economic Research (HECER))
    Abstract: We study the interaction between private and public funding of innovative projects in the presence of adverse-selection based financing constraints. Government programmes allocating direct subsidies are based on ex-ante screening of the subsidy applications. This selection scheme may yield valuable information to market-based financiers. We find that under certain conditions, public R&D subsidies can reduce the financing constraints of technology-based entrepreneurial firms. Firstly, the subsidy itself reduces the capital costs related to innovation projects by reducing the amount of market-based capital required. Secondly, the observation that an entrepreneur has received a subsidy for an innovation project provides an informative signal to market-based financiers. We also find that public screening works more efficiently if it is accompanied by subsidy allocation.
    Keywords: adverse selection; innovation finance; financial constraints; R&D subsidies; certification
    JEL: D82 G28 H20 O30 O38
    Date: 2008–09–09
  13. By: Nyström, Kristina (Division of Economics KTH and Ratio Institute)
    Abstract: This paper uses an institutional approach to investigate the relationship between the regional institutional environment and regional new firm formation. The importance of perceived attitudes regarding private enterprises, local taxes, political majority, the size of the government sector and perceived rules and bureaucracy on new firm formation in 286 Swedish municipalities are investigated. The empirical findings show that perceived positive attitudes toward private enterprises and political governance by a right bloc majority tend to have positive effects on regional new firm formation. A large local government sector, on the other hand, tends to have negative effects on regional new firm formation. The paper also explore if the effect of different aspects of regional institutional environment on new firm formation are similar across industries. The pattern in the private service sector industries is most similar to the overall pattern in the economy, while the only variable reflecting the regional institutional environment that influences new firm formation in manufacturing industries is perceived rules and bureaucracy.
    Keywords: institutions; new firm formation; regions
    JEL: L26 R11
    Date: 2008–09–09
  14. By: Martin Koning (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); François Facchini (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, LAEP - LAboratoire d'Economie Publique - Université Panthéon-Sorbonne - Paris I)
    Abstract: Cet article se propose de mettre en perspective les théories "traditionnelles" de la croissance régionale avec la théorie de l'entrepreneur. La revue de littérature que nous menons montre que, si la figure de l'entrepreneur n'est que très partiellement mobilisée dans les explications de la croissance régionale, il existe à la fois des similitudes et des moyens d'enrichir mutuellement les théories en présence. Le premier apport de la théorie de l'entrepreneur est d'intégrer une variable entrepreneuriale dans la fonction de production du modèle de croissance endogène. Le deuxième apport de la théorie de l'entrepreneur est une contribution à la théorie de la base. En distinguant activités productives et improductives, on se donne les moyens de montrer que la rente et le profit n'ont pas les mêmes effets sur la croissance économique régionale. Le troisième apport de la théorie de l'entrepreneur est de contribuer à la théorie du développement endogène et à ses extensions : école de la régulation et école californienne de géographie économique. Ces courants présentent de nombreuses ressemblances avec la théorie autrichienne de l'entrepreneur, tant dans leurs approches conceptuelles que dans leurs méthodologies. Pour toutes ces raisons, les théories de la croissance régionale devraient prendre plus en considération les figures de l'entrepreneur.
    Keywords: croissance régionale; entrepreneur
    Date: 2008–07
  15. By: Meuleman, M.; De Maeseneire, W. (Vlerick Leuven Gent Management School)
    Abstract: Many countries spend sizeable sums of public money on R&D grants to alleviate debt and equity gaps for small firms’ innovation projects. In making such awards, knowledgeable government officials may certify firms to private financiers. This paper investigates whether government subsidies to R&D enhance SMEs’ access to external financing due to this certification effect. Using a unique Belgian dataset of 1107 approved requests and a control group of 501 denied requests for a specific type of R&D grant, we examine the impact on small firms’ external equity, short term and long term debt financing. We find that obtaining a R&D subsidy provides a positive signal about SME quality and results in better access to long-term debt.
    Keywords: R&D subsidies, government policy, SMEs, financial constraints, certification hypothesis, behavioural additionality
    JEL: G32 H25 O38
    Date: 2008–09–10
  16. By: Wan-Hsin LIU
    Abstract: Since 1997 the Hong Kong (HK) government has markedly changed its role from being a mere institution provider to being an active innovation promoter. As such, it has actively implemented innovation policies that focus especially on creating new funding opportunities and establishing several R&D centres to facilitate information flow and innovation cooperation between universities and industries. One of the industries in which it has been especially active is the electronics industry. Thus this study looks at the electronics industry to examine, using data collected from a questionnaire survey on the HK electronics SMEs, whether these policies have positively affected innovation intensity in HK. The survey findings indicate that there has been an increase in innovation activities in HK, but also that neither the R&D centres nor the universities have played important roles as innovation sources or innovation partners for the HK electronics SMEs. Rather, the main way through which universities and R&D centres support the HK electronics SMEs’ innovation activities seems to be the provision of a highly-qualified labour-force transmitting academic knowledge to companies
    Keywords: electronics, innovation, innovation policy, regional survey, Hong Kong, China
    JEL: D21 L60 O31 O33 O38 R10
    Date: 2008–09

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