nep-ent New Economics Papers
on Entrepreneurship
Issue of 2008‒10‒28
ten papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Trespassing entrepreneurship – bridging business and community development By Trägårdh, Björn
  2. Attitudes of Higher Education students to new venture creation: a preliminary approach to the Portuguese case By Aurora A.C. Teixeira; Todd Davey
  3. Occupational Choice and Social Contacts Across Regions By Stefan Bauernschuster; Oliver Falck; Stephan Heblich
  4. Does Gender Matter for Firm Performance? Evidence from Eastern Europe and Central Asia By Sabarwal, Shwetlena; Terrell, Katherine
  5. The Role of Information and Institutions in Understanding the Black-White Gap in Self-Employment By Uwaifo Oyelere, Ruth; Belton, Willie
  6. Different Types of Venture Capital Investors and Value-added to High-Tech Portfolio Firms By Terttu Luukkonen
  7. Acquisition, Insolvency and Managers in UK Small Companies By Isachenkova, N.; Weeks, M.
  8. Are There Canada-U.S. Differences in SME Financing? By Danny Leung; Césaire Meh; Yaz Terajima
  9. Firms as Bundles of Discrete Resources - Towards an Explanation of the Exponential Distribution of Firm Growth Rates By Alex Coad
  10. Incorporation and Taxation: Theory and Firm-level Evidence By Peter Egger; Christian Keuschnigg; Hannes Winner

  1. By: Trägårdh, Björn (Department of Business Administration, School of Business, Economics and Law, Göteborg University)
    Abstract: The prime objective of this article is to explore the phenomenon of ‘trespassing entrepreneurship’, i.e. combined business and community entrepreneurship. The purpose is to explore two questions: How do ‘trespassing entrepreneurs’ combine business and community enterprise? Why do entrepreneurs engage themselves in both business and community development? A sample of four trespassing entrepreneurs has been interviewed and observed in a series of research projects. We found that it was a heterogeneous category in many aspects, but they all combined business and as community entrepreneurship by ‘dragging’ local authorities into entrepreneurial activities in order to develop the community. Acting on both arenas might be a more common phenomenon in the future, since management and entrepreneurship on different arenas have a tendency to become more alike. However, trespassing entrepreneurship is probably mostly a rural or small town phenomenon, since the links between business and community development are more obvious in such settings. Thus, demographic conditions, rather than individual traits, seem to determine the frequency of trespassing entrepreneurship. The notion of trespassing entrepreneurs demonstrates that distinctly different communities of practice, societal sectors or other terms for opposite elements can be united, at least partly, in single individuals.<p>
    Keywords: trespassing entrepreneurship; business; community; rural
    Date: 2008–10–17
  2. By: Aurora A.C. Teixeira (INESC Porto, CEMPRE, Faculdade de Economia, Universidade do Porto); Todd Davey (Muenster University of Applied Sciences)
    Abstract: Institutions of higher education have an important role in the generation of high tech ‘entrepreneurial capacity’. Being entrepreneurship in Portugal an emergent phenomenon there is an urgent need to better understand and develop this area not only by analysing the ‘supply side’ (i.e., the courses taught in this field) but also the ‘demand side’, that is, the attitudes of students, future potential entrepreneurs, to new venture creation. Based on 4413 responses of students enrolled in Portuguese higher education institutions, gathered in June-July 2008, we found, using a multivariate model, that students who had already created a firm although, on average, possess larger entrepreneurial experience and knowledge, they do not reveal high risk propensity or creativity. Those students that have taken some steps to create new businesses and, to a larger extent, those foreseeing their future career as owning their business have higher risk and creative profiles. Students who live in an environment which ‘breads’ entrepreneurship have stronger desire to become entrepreneurs. This supports the contention that entrepreneurship is a learned process and that school, teachers, and other institutions and individuals may encourage entrepreneurial behaviours. ‘Role models’ seem indeed to constitute a key factor fostering entrepreneurship among Portuguese higher education students – in the Portuguese case, the entrepreneur and entrepreneurial company references are, respectively, Belmiro de Azevedo and Sonae. Although in a descriptive analysis students enrolled in non-university (e.g., polytechnics) and private higher education institutions reveal higher effective and potential entrepreneurial propensities, when we (simultaneously) control for a vast number of factors which are likely to affect entrepreneurship propensity, such differences cease to be statistically relevant. Students’ personality (risk, creativity) and demographic traits (gender and age), competencies and familiarity with entrepreneurship (entrepreneurial experience, knowledge, awareness, interest), and contextual factors (professional experience, role models) are important determinants of entrepreneurial propensity, whereas the type of higher education institutions (public vs private, non-university vs university), and, to some extent, the degree (postgraduate vs undergraduate), and the scientific area, fail to emerge as key determinants.
    Keywords: students; entrepreneurship; attitudes
    Date: 2008–10
  3. By: Stefan Bauernschuster (University of Jena); Oliver Falck (Ifo Institute for Economic Research); Stephan Heblich (Max Planck Institute of Economics, Jena)
    Abstract: This paper tests the importance of social contacts on entrepreneurship. To measure differences in the interconnectedness of social contacts, we compare rural and agglomerated areas. A smaller community size in rural areas generates greater network closure. Agents’ neighborhoods are more likely to overlap, which intensifies social contacts and thus facilitates resource mobilization. Analyzing the impact of social contacts across regions, we find that greater network closure increases the likelihood of being an entrepreneur by 1.9 to 14.2 percentage points, depending on the number of underlying social contacts. These results remain robust after applying matching techniques and concentrating on young entrepreneurs.
    Keywords: Occupational Choice, Entrepreneurship, Social Contacts
    JEL: J Z13
    Date: 2008–10–30
  4. By: Sabarwal, Shwetlena (World Bank); Terrell, Katherine (University of Michigan)
    Abstract: Using 2005 firm level data for 26 ECA countries, this paper estimates performance gaps between male- and female-owned businesses, while controlling for their location by industry and country. We find that female entrepreneurs have significantly smaller scale of operations (as measured by sales revenues) and are less efficient in terms of Total Factor Productivity (TFP), although this difference is very small. However, they generate the same amount of profit per unit of revenue as men. We find that while both male and female entrepreneurs in ECA are sub-optimally small, women's returns to scale are significantly larger than men's implying that they would gain more from increasing their scale. We argue that the main reasons for the sub-optimal size of female-owned firms are that they are both capital constrained and concentrated in industries with small firms.
    Keywords: entrepreneurship, finance, gender, Eastern Europe, Central Asia
    JEL: D24 M21 O12 O16
    Date: 2008–10
  5. By: Uwaifo Oyelere, Ruth (Georgia Tech); Belton, Willie (Georgia Tech)
    Abstract: It has been well documented in the literature that ethnicity matters significantly in the determination of self-employment rates. In particular, African-American self-employment rates lag far behind rates for other racial groups. Similarly, the literature also provides evidence of the long lived nature of institutions and the link between institutions and decision making. After controlling for the appropriate factors that can lead to self-employment differentials, we provide an explanation for the self-employment gap that still exists between African-Americans and White Americans. We focus on the important role of repeated negative institutional shocks and how such shocks influence the development of an information matrix as well as the transmission of information across time and generations. We show that African-Americans who were less likely to be influenced by negative institutional shocks and the information stock created from these experiences, have similar self-employment rates to comparably situated White Americans.
    Keywords: African-American, institutions, information, self-employment
    JEL: J15 J01 J24 D80
    Date: 2008–10
  6. By: Terttu Luukkonen
    Abstract: ABSTRACT : This paper examines the knowhow in strategic business areas that venture capital companies and organizations impart to their portfolio firms in early-stage high-tech enterprises and the mechanisms they use to impart this knowledge. The paper considers three types of investors, independent, private-sector venture capital firms, public-sector venture capital organizations, and business angels, who can be regarded as informal venture capital investors. The study draws on a limited data set to illustrate their activities. The paper draws attention to different theoretical approaches that might explain the observed behaviour. It examines whether the differences are related to the intermediary position of each investor type and subsequent incentives they have in doing their jobs - especially expounded by contract-based approaches - or the competencies in doing their jobs – based on competence-based view of the firms. It turns out that neither approach alone can account for the observed behaviour. It is claimed that the two different types of rationales have interactive relations thus reinforcing the observed patterns of behaviour. Thus an active involvement both ex ante and ex post by the private sector venture capital firms might be the result of both factors at work. Another important finding relates to the role of public sector venture capital organizations as the most passive among the investor types. This leads the paper to suggest a reconsideration of the role of the public sector organisations in venture capital activity.
    Keywords: venture capital, high tech startups, non-financial value-added
    JEL: G24 O16
    Date: 2008–10–21
  7. By: Isachenkova, N.; Weeks, M.
    Abstract: This paper investigates the determinants of involuntary insolvency and acquisition in UK small and medium-sized companies. Using a competing risks model and data from the survey database of the ESRC CBR at the University of Cambridge, we draw specific attention to the impact of managerial characteristics. The explanatory power of financial variables, firm size, and firm age, highlighted by previous studies, is confirmed. In addition, the results indicate that .rms run by entrepreneurial managers with higher human capital and intentions to pursue a strategy of growth have greater survival prospects and are less likely to be forced into insolvency or become acquired.
    Keywords: Small firm, management human capital, involuntary insolvency, acquisition target, competing risks model, MCMC, Bayesian analysis
    JEL: C41 C11 C33 C51 L26 D21
    Date: 2008–08
  8. By: Danny Leung; Césaire Meh; Yaz Terajima
    Abstract: Previous surveys of Canadian and U.S. business owners suggest that access to financing in Canada may be more problematic than in the United States. Using the 2003 Survey of Small Business Financing in the United States and the 2004 Survey on Financing of Small and Medium Enterprises in Canada, this paper examines whether this perception can be better quantified. Compared to U.S. SMEs, Canadian SMEs are found to have greater reliance on loans from individuals (family, friends and others) and less reliance on loans from financial institutions. This result can be interpreted either as indicative of lower availability of formal credit in Canada, or a lower need for formal credit. Furthermore, while evidence validating the perception that Canadian financial institutions are less likely to approve loan application of risky SMEs cannot be found, there is evidence that supports the notion that Canadian financial institutions are following a more uniform pricing policy than U.S. financial institutions.
    Keywords: Financial services
    JEL: G21 C21
    Date: 2008
  9. By: Alex Coad (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Max Planck Institute of Economics - Evolutionary Economics Group)
    Abstract: A robust feature of the corporate growth process is the Laplace, or symmetric exponential, distribution of firm growth rates. In this paper, we sketch out a class of simple theoretical models capable of explaining this empirical regularity. We do not attempt to generalize on where growth opportunities comme from, but rather we focus on how firms build upon growth opportunites. We borrow ideas from the self-organizing criticality literature to explain how the interdependent nature of discrete resources may lead to the triggering off of a series of additions to a firm's resources. In a first formal model we consider the case of employment growth in a hierarchy, and observe that growth rates follow an exponential distribution. In a second model we include plant and capital as resources and we are able to reproduce a number of stylized facts about firm growth.
    Keywords: Firm growth rates, exponential distribution, hierarchy, growth autocorrelation.
    Date: 2008–10
  10. By: Peter Egger; Christian Keuschnigg; Hannes Winner
    Abstract: This paper provides theory and firm-level evidence on the incorporation decision of entrepreneurs in a model of corporate governance and taxation. The theory explains how the incorporation decision of entrepreneurs is driven by taxation (corporate and personal income taxes), corporate transparency, access to external capital and limited liability. We estimate features of this model using a large cross-section of more than 540, 000 firms in European manufacturing. The impact of taxation on the incorporation decision is at the heart of this analysis. We find that higher personal income tax rates and their progression are associated with an increase in the probability of incorporation, while higher corporate tax rates entail an impediment to incorporate. This finding is robust to the inclusion of other economic and institutional determinants and to a variety of functional form assumptions about the latent variable in the estimated discrete choice model.
    Keywords: Incorporation, governance, taxes, discrete choice models
    JEL: H25 H73 F23 C21
    Date: 2008–09

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