nep-ent New Economics Papers
on Entrepreneurship
Issue of 2008‒11‒25
fifteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Who Becomes an Entrepreneur? Labor Market Prospects and Occupational Choice By Poschke, Markus
  2. The Impact of Entrepreneurship Education on Entrepreneurship Competencies and Intentions: An Evaluation of the Junior Achievement Student Mini-Company Program By Oosterbeek, Hessel; van Praag, Mirjam; IJsselstein, Auke
  3. Entrepreneurship, Collective Entrepreneurship and the Producer-Owned Firm By Bijman, Jos; Doorneweert, Bart
  4. Financial development, entrepreneurship, and job satisfaction By Milo Bianchi
  5. Businessman or Host? Individual Differences between Entrepreneurs and Small Business Owners in the Hospitality Industry By Wagener, S.L.; Gorgievski-Duijvesteijn, M.J.; Rijsdijk, S.A.
  6. Entrepreneurial Proclivity and the Performance of Farms: The Cases of Dutch and Slovenian Farmers By Verhees, F.J.H.M.; Klopcic, M.; Kuipers, A.
  7. Determinants of self-employment : the case in Vietnam. By Thi Quynh Trang Do; Gérard Duchêne
  8. Entry and Exit of firms explained by trigger points: Dutch glasshouse horticulture By Goncharova, Natalia V.; Oskam, Arie J.
  9. Market Driven Entrepreneurship: The Convergence of Market Orientation and the Resource Based View By Micheels, E.T.; Gow, H.R.
  10. Modelling the Incidence of Self-Employment: Individual and Employment Type Heterogeneity. By Sarah Brown; Lisa Farrell; Mark N Harris
  11. New Producer Strategies: The Emergence of Patron- Driven Entrepreneurship By Cook, M.L.; Burress, M.J.; Iliopoulos, C.
  12. Collective Reputation, Entry and Minimum Safety Standard By Rouviere, Elodie; Soubeyran, Raphael
  13. Israel Kirzner on Coordination and Discovery By Klein, Daniel B.; Briggeman, Jason
  15. Firms as bundles of discrete resources - towards an explanation of the exponential distribution of firm growth rates. By Alex Coad

  1. By: Poschke, Markus (McGill University)
    Abstract: Why do some people become entrepreneurs (and others don't)? Why are firms so heterogeneous, and many firms so small? To start, the paper briefly documents evidence from the empirical literature that the relationship between entrepreneurship and education is U-shaped, that many entrepreneurs start a firm "out of necessity", that most firms are small, remain so, yet persist in the market, and that returns to entrepreneurship have a much larger cross-sectional variance than returns to wage work. Popular models of firm heterogeneity cannot easily account for the U-shape or for the persistence of low-productivity firms. The paper shows that these facts can be explained in a model of occupational choice between wage work and entrepreneurship where agents are heterogeneous in their ability as workers, and starting entrepreneurs face uncertainty about their project's productivity. Then, if agents' expected productivity as entrepreneurs is increasing and not too concave in their ability as workers, the most and the least able individuals choose to become entrepreneurs. This sorting is due to heterogeneous outside options in the labor market. Because of their low opportunity cost, low-ability agents benefit disproportionately from the ability to pursue only good business projects and abandon low-productivity ones. This also makes them more likely to immediately abandon a project for a new one. Data from the NLSY79 gives support to these two predictions. Individuals with relatively high or low wages when employed, or with a high or low degree, are more likely to be entrepreneurs or to become entrepreneurs, and spend more time in entrepreneurship. Among entrepreneurs, more of the firms run by individuals with low wages when employed, or with a low degree, are abandoned after only a year.
    Keywords: occupational choice, entrepreneurship, firm entry, selection, search
    JEL: E20 J23 L11 L16
    Date: 2008–11
  2. By: Oosterbeek, Hessel (University of Amsterdam); van Praag, Mirjam (University of Amsterdam); IJsselstein, Auke (University of Amsterdam)
    Abstract: This paper analyzes the impact of a leading entrepreneurship education program on college students’ entrepreneurship competencies and intentions using an instrumental variables approach in a difference-in-differences framework. We exploit that the program was offered to students at one location of a school but not at another location of the same school. Location choice (and thereby treatment) is instrumented by the relative distance of locations to parents’ place of residence. The results show that the program does not have the intended effects: the effect on students’ self-assessed entrepreneurial skills is insignificant and the effect on the intention to become an entrepreneur is even significantly negative.
    Keywords: entrepreneur competencies, program evaluation, entrepreneurship education, entrepreneur intentions
    JEL: A20 C31 H43 H75 J24 L26
    Date: 2008–08
  3. By: Bijman, Jos; Doorneweert, Bart
    Abstract: Entrepreneurship is predominantly associated with the activities of an individual actor €Ӡ the entrepreneur. It has also been related to the concept of firm ownership (e.g. Foss and Klein, 2005). This may lead to the conjecture that a collectively-owned firm is a setting for collective entrepreneurship. However, such reasoning encounters a number of taxing questions. If entrepreneurship is usually related to the individual, how does the collective embody entrepreneurial spirit and lead to effective outcomes? These and other questions will be addressed in this paper, which is mainly based on a review of the literature. The paper starts by providing an overview of the different schools of (economic) thought on entrepreneurship. Subsequently we discuss the implications for the conceptualization of entrepreneurship when it is not carried out by an individual but by a group of people. Finally, the notion of collective entrepreneurship will be framed within the context of the producer-owned firm in agriculture, by considering conditions under which collective entrepreneurship can be attributed to the cooperative.
    Keywords: entreprepreneurship, cooperative, pro, Agribusiness, Industrial Organization,
    Date: 2008
  4. By: Milo Bianchi
    Abstract: This paper explores both theoretically and empirically the relation between financial development and occupational choices, as determined by utility differences between the self-employed and employees. In our model, financial constraints may impede firms' creation and depress labor demand, thereby pushing some individuals into self-employment by lack of salaried jobs. When these constraints are relaxed, instead, more individuals choose self-employment because of their talent. In more financially developed countries, then, the self-employed are more satisfied with their job, even if competition is higher and profits may be lower. Our empirical results support these predictions by showing that greater financial development increases job satisfaction for the self-employed, despite reducing their profits, as it allows them to enjoy greater non-monetary benefits, and in particular higher independence in their job.
    Date: 2008
  5. By: Wagener, S.L.; Gorgievski-Duijvesteijn, M.J.; Rijsdijk, S.A. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Prior research has identified individual characteristics that distinguish business owners from non-business owners. We tested our contention that not every successful business owner can be characterized by such typical “entrepreneurial†characteristics. Multiple Analysis of Variance (MANOVA) on a unique dataset of 194 business owners in the hospitality industry revealed that several individual characteristics discriminated between entrepreneurs and small business owners. Entrepreneurs possessed higher levels of independence, tolerance of ambiguity, risk-taking propensity, innovativeness, and leadership qualities, but not of market orientation and self-efficacy. We conclude that “entrepreneurial†characteristics identified in the literature may be useful predicting a specific type of business ownership. However, other criteria need to be developed in order to describe other groups of business owners operating in the service industry.
    Keywords: business success;entrepreneurship;small business owners;job performance;personality characteristics
    Date: 2008–11–11
  6. By: Verhees, F.J.H.M.; Klopcic, M.; Kuipers, A.
    Abstract: Farms are advised to be entrepreneurial, but empirical research showing that an entrepreneurial proclivity (EP) of farmers results in better performance is scant. This research will test empirically whether an EP contributes to the performance of farms. We provide a model with hypotheses about the relationship between EP and performance, which is tested for a sample of Dutch and Slovenian farmers. We find that EP has a universal positive influence on performance and performance expectations of farmers in The Netherlands and in Slovenia. The influence of the underlying dimension of EP, i.e. innovativeness, proactiveness and risk taking, on performance are mixed and context specific.
    Keywords: Entrepreneurship, innovativeness, proactiveness, Productivity Analysis,
    Date: 2008
  7. By: Thi Quynh Trang Do (Centre d'Economie de la Sorbonne); Gérard Duchêne (Centre d'Economie de la Sorbonne)
    Abstract: The determinants of self-employment are widely studied in the economic literature in recent twenty years. However, in the case of Vietnam where self-employed population takes an important proportion in workforce, it remains an under researched area. By using the data from the Vietnam Household Living Standard Survey 2004 (VHLSS2004), this paper aims to provide clearer insights into this area. We use the Heckman method to determine the level and identify the factors that affect the workers' choice between self-employment and wage employment in Vietnam. We emphasize the role of expected earnings differential in workers' decision making. Comparisons between female and male workers are made. Our empirical results show that there exist a number of determinants that permit to construct the pattern of self-employed as well a salary workers in Vietnam. Regardless of educational attainment, experiences and familial background, perspective of having higher earnings plays an important role in choice behavior of workers.
    Keywords: GARCH, Generalized Hyperbolic Distribution, pricing, risk neutral distribution.
    JEL: D21 J24 M13 O17
    Date: 2008–09
  8. By: Goncharova, Natalia V.; Oskam, Arie J.
    Abstract: The entry and exit decisions, considered as investment decisions, are investigated in the paper. Taking into account the heterogeneity of entry and exit, the analysis is based on two types of entry-exit: real (related to the establishment or closing of a firm), or entry-exit in a new sector (indicating the diversification or changing specialisation). The theoretical model is based on Marshallian trigger points with Real Option trigger points as an alternative. The estimation exploited the negative binomial model to investigate the role of trigger points (thresholds) on the observed number of entry or exit firms in Dutch glasshouse horticulture over 25 years. Firms should overcome different thresholds depending on types of entry and exit. Marshallian trigger points function as good as the ones based on Real Option theory. The estimation of the model, which takes into account expected output prices, uncertainty and the interest rate, however, provides the best explanation of entry and exit. That model can be considered of a flexible variant of Real Option theory. The model provides plausible elasticities of entry and exit, either real or in changing specialisation.
    Keywords: entry and exit, trigger points, glasshouse horticulture, Crop Production/Industries, Industrial Organization,
    Date: 2008
  9. By: Micheels, E.T.; Gow, H.R.
    Abstract: The dramatically changing marketing structure for agricultural products is forcing agricultural producers to become more entrepreneurial, but what does this mean? How do agricultural producers produce sustainable competitive advantage within a commodity market characterised by homogeneous producers? The convergence of two academic literatures - Market orientation from market strategy and Resource Based View from strategic management €Ӡprovide a number of insights. In this paper we lay the foundation for research into the market orientation€Ӱerformance link in terms of production agriculture. Building on the previous market orientation literature, we examine its ability to create a sustainable competitive advantage using a resource based view (RBV). Focusing primarily on the U.S. beef industry, we examine these two distinct literatures in tandem and show that the concept of a market orientation meets all the necessary conditions laid out in the RBV literature to create a sustainable competitive advantage, even in a commodity marketplace such as agriculture. This convergence between these two literatures has important implications and direction for future research as we attempt to analyze and evaluate the heterogeneous responses of firm the new global agri-food business environment.
    Keywords: Market Orientation, Resource Based View, Production Agriculture, Marketing,
    Date: 2008
  10. By: Sarah Brown; Lisa Farrell; Mark N Harris (Department of Economics, The University of Sheffield)
    Abstract: Modelling the incidence of self-employment has traditionally proved problematic. Whilst the individual supply side characteristics of the self-employed are well documented, we argue that the literature has largely neglected demand-side aspects. We explore the determinants of self-employment using individual level data drawn from the U.S. Survey of Consumer Finances (SCF). We present results from an econometric framework, the Parameterised Dogit model, that allows us to separately, and simultaneously, model individual heterogeneity (i.e. supply side) and employment type heterogeneity (i.e. demand-side) influences that determine self-employment. Our findings suggest that whilst individual characteristics are important determinants of self-employment, there are also factors which are specific to the type of employment that influence whether an individual is self-employed.
    Keywords: Discrete Choice Models, Dogit Models, Self-Employment.
    JEL: J23 J33 C25 C10
    Date: 2008–09
  11. By: Cook, M.L.; Burress, M.J.; Iliopoulos, C.
    Abstract: Abstract€ԅxisting research treats the cooperative structure as relatively homogeneous. The proposed paper argues that all cooperatives are not created equal €Ӡand consideration of organizational structure is critical when analyzing the economic impact of cooperation. In recent empirical work, we observe cooperatives forming as single- or multi-purpose; generating equity capital passively, quasi-passively, or proactively; vertically integrating in a centralized, federated, or a hybrid fashion; governing through fixed or proportional control rights; and instituting open, closed or class-varying membership criteria. The emergence of multiple-level rent-seeking cooperatives challenges our traditional rent dispersion models of collective action. We call these multi-level, patron, rent-seeking entities a form of collective entrepreneurship. This paper develops a set of criteria enabling us to distinguish between traditional forms of cooperation and collective entrepreneurship. We employ these characteristics to analyze and contrast these two extreme forms of collective action. We propose a continuum from single-level rent seeking, traditional, patron, user-driven cooperative forms; through forms of hybrids and macrohierarchies; to multiple-level rent seeking, patron, user-investor-driven collective entrepreneurship.
    Keywords: Collective entrepreneurship, Agribusiness, Property Rights, Agribusiness,
    Date: 2008
  12. By: Rouviere, Elodie; Soubeyran, Raphael
    Abstract: This article deals with the issue of entry into an industry where firms share a collective reputation. First, we show that free entry is not socially optimal; there is a need for regulation through the imposition of a minimum quality standard. Second, we argue that a minimum quality standard can induce firms to enter the market. Contrary to conventional wisdom, a minimum quality standard should not always be considered as a barrier to entry.
    Keywords: Collective Reputation, Entry, Minimum Quality Standard, Institutional and Behavioral Economics,
    Date: 2008
  13. By: Klein, Daniel B. (George Mason University); Briggeman, Jason (George Mason University)
    Abstract: Israel Kirzner has been one of the leaders in fashioning an Austrian school of economics. He has tried to marry Friedrich Hayek’s discourse with the deductive, praxeological approach of Ludwig von Mises. The praxeological style stakes its claims to scientific status on purported axioms and categorical, 100-percent deductive truths, as well as the supposed avoidance of any looseness in evaluative judgments. In keeping with the praxeological style of discourse, Kirzner claims that his notion of coordination can be used as a clear-cut criterion of economic goodness. Kirzner wishes to claim that gainful entrepreneurial action in the market is always coordinative. We contend that Kirzner’s efforts to be categorical and to avoid looseness are not successful. We argue that looseness inheres in the economic discussion of the most important things, and associate that viewpoint with Adam Smith. We suggest that Hayek is much closer to Smith than to Mises, and that Kirzner’s appeals to Hayek’s discussions of coordination are spurious. In denying looseness and by trying to cope with the brittleness of categorical claims, Kirzner becomes abstruse. We dissect Kirzner’s discourse and find that it erupts with problems. Kirzner has erred in rejecting the understanding of coordination held by Hayek, Ronald Coase, and their contemporaries in the field at large. Kirzner’s refraining from the looser Smithian perspective stems from his devotion to Misesianism. Beyond all the criticism, however, we affirm the basic thrust of what Kirzner says about economic processes. Once we give up the claim that voluntary profitable activity is always or necessarily coordinative, and once we make peace with the aesthetic aspect of the idea of concatenate coordination, the basic claims of Kirzner can be salvaged: Voluntary profitable activity is usually coordinative, and government intervention is usually discoordinative. But the praxeological style of discourse must be dropped.
    Keywords: coordination; concatenation; discovery; entrepreneurship;
    JEL: A10 B00 D02
    Date: 2008–11–17
  14. By: Carbone, Anna; Subioli, Giovanna
    Abstract: The scarce presence of young farmers is commonly considered one of the main weak points in the competitiveness of European agriculture. Firstly, the lack of young farmers puts under risk the survival of the sector itself, given that the main effect of an inadequate rate of generational turnover is that the exit of farms from the sector for ageing is not balanced by the entry of new farms run by young farmers. Secondly, the competitiveness of the sector suffer from the lower investment and innovation propensity of elder farmers. For these reasons, and also to slow down the pace of depopulation in most remote rural areas, the EU has always support the entry of young entrepreneurs in the primary sector. With the more recent CAP reforms, the main effort in this matter has been that of stressing the ties between the economic incentives for young farmers and the process of farm diversification and structural change within the more general framework of rural development, according to which is the rural area vitality as a whole that requires a positive demographic trend. In spite of the evident effort of the EU to this end, the effectiveness of the policy tools on the table is still quite debatable. In particular, it is questioned whether the €ܮew€ݠfarms that benefitted by the aid can be really considered as the €ܯutcome€ݠof the financial support. The paper opens with a comparative description of the ageing process in the primary sector of the main EU Member States, with the double goal of showing its evolution and offering an updated picture of the issue. The dynamic of the process is caught by the construction of the migratory balances calculated for 5 age brackets. The second step is to show the available data on the implementation of the measure in favour of young farmers included in the Rural Development Programmes for the 2000-2006 planning period with a specific focus on the Italian case. This provides some evidences and hints of reflection about the effectiveness of this policy in the light of which the novelties of Reg. 1783/03 are discussed. Furthermore, the paper provides a short summary of the main contents of the resolution approved by the European Parliament on the 5th June 2008. The document, while acknowledging the persistent problem within European agriculture, moves an open and specific criticism not only to the scarce efficacy displayed by the CAP in counteracting the problem, but also points out the role that the CAP actively played in contributing to cause this situation. Some concluding remarks are given in the last section.
    Keywords: Young farmers, generational turnover, Rural Development, CAP, Agricultural and Food Policy, Community/Rural/Urban Development, Q18,
    Date: 2008–11–11
  15. By: Alex Coad (Centre d'Economie de la Sorbonne et Max Planck Institute of Economics)
    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.
    JEL: L1 C1
    Date: 2008–10

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