nep-ent New Economics Papers
on Entrepreneurship
Issue of 2009‒01‒24
ten papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Entrepreneurship, Job Creation, and Wage Growth By Nikolaj Malchow-Møller; Bertel Schjerning; Anders Sørensen
  2. Creative Destruction and Regional Productivity Growth: Evidence from the Dutch Manufacturing and Services Industries By Niels Bosma; Erik Stam; Veronique Schutjens
  3. Fostering Entrepreneurship for Innovation By Axel Mittelstädt; Fabienne Cerri
  4. Entrepreneurship and Development - local processes and global patterns By Karlsson, Charlie; Johansson, Börje; Stough, Roger
  5. When Does Domestic Saving Matter for Economic Growth? By Philippe Aghion; Diego Comin; Peter Howitt; Isabel Tecu
  6. Return Migration and Occupational Choice By Piracha, Matloob; Vadean, Florin
  7. The role of R&D in new firm growth By Erik Stam; Karl Wennberg
  8. Small Business Economics of the Lakota Fund on the Native American Indian Reservation By Benson, David A.; Lies, Aaron; Okunade, Albert A.; Wunnava, Phanindra V.
  9. Does social capital create trust? Evidence from a community of entrepreneurs By Fabio Sabatini
  10. Persistence of Profits and the Systematic Search for Knowledge - R&D and profits above the norm By Wiberg, Daniel

  1. By: Nikolaj Malchow-Møller (University of Southern Denmark); Bertel Schjerning (Department of Economics, University of Copenhagen); Anders Sørensen (Copenhagen Business School)
    Abstract: This paper analyses the importance of entrepreneurs for job creation and wage growth. Relying on unique data that cover all establishments, firms and individuals in the Danish private sector, we are able to distil a number of different subsets from the total set of new establishments – subsets which allow us to more precisely capture the "truly new" or "entrepreneurial" establishments than in previous studies. Using these data, we find that while new establishments in general account for one third of the gross job creation in the economy, entrepreneurial establishments are responsible for around 25% of this, and thus only account for about 8% of total gross job creation in the economy. However, entrepreneurial establishments seem to generate more additional jobs than other new establishments in the years following entry. Finally, the jobs generated by entrepreneurial establishments are to a large extent low-wage jobs, as they are not found to contribute to the growth in average wages.
    Keywords: job creation; entrepreneurial establishments; wage growth
    JEL: L26 J21 J31
    Date: 2009–01
  2. By: Niels Bosma (Urban and Regional research Centre Utrecht (URU), Utrecht University, Utrecht, The Netherlands); Erik Stam (Tjalling Koopmans Institute, Utrecht School of Economics, Utrecht University, Utrecht, The Netherlands; Centre for Technology Management, University of Cambridge, Cambridge, United Kingdom; Scientific Council for Government Policy (WRR), The Hague, The Netherlands; Max Planck Institute of Economics - Entrepreneurship, Growth and Public Policy group, Jena, Germany); Veronique Schutjens (Urban and Regional research Centre Utrecht (URU), Utrecht University, Utrecht, The Netherlands)
    Abstract: Do 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: firm entry, firm exit, turbulence, regional competitiveness, total factor productivity
    JEL: L10 M13 O18 R11
    Date: 2009–01–12
  3. By: Axel Mittelstädt; Fabienne Cerri
    Abstract: Entrepreneurship and firm creation have long been recognised as a vital force driving innovation. With globalization and the co-incident shift towards a knowledge-based economy, the link between entrepreneurship policy and innovation has received renewed attention. By underpinning firm creation and firm expansion entrepreneurship policies strengthen innovation, increasing productivity in the enterprise sector. In return, policies fostering innovation will tend to spur firm creation as the results of R&D are commercialized. Many countries have taken initiatives since early 2000 to test the potential of entrepreneurship and SME policies, articulating these with an innovation-oriented policy approach. This report consists of a synthesis report based on four country case studies on the role of entrepreneurship policies in supporting innovation in Korea, Mexico, Norway and Turkey. These country case studies are appended to the synthesis report.<P>Promouvoir l'entrepreunariat pour soutenir l'innovation<BR>L’entrepreneuriat et les créations d’entreprises sont traditionnellement considérés comme l’un des principaux moteurs de l’innovation. Avec la mondialisation et la transition concomitante vers une économie du savoir, le lien entre les politiques de l’innovation et celles en faveur de l’entrepreneuriat revient sur le devant de la scène. En soutenant la création d’entreprises et leur expansion les politiques en faveur de l’entrepreneuriat renforcent l’innovation et la croissance de la productivité. Réciproquement, les politiques de soutien à l’innovation favorisent généralement la création d’entreprises, car les résultats des activités de R-D sont commercialisés. De nombreux pays ont engagé, dès le début des années 2000, un examen systématique des politiques en faveur de l’entrepreneuriat et des PME, en optant pour une approche axée sur l’innovation. Ce rapport consiste d’un rapport de synthèse basé sur quatre études de cas portant sur le rôle joué par les politiques en faveur de l’entrepreneuriat dans la promotion de l’innovation en Corée, au Mexique, en Norvège et en Turquie. Chacune de ces études de cas est annexée au rapport de synthèse.
    Date: 2008–12–30
  4. 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 general motivation for this paper is the current interest in globalization as a phenomenon that strongly affects the conditions of local economic development. Our purpose is to contribute to some of the current development aspects, in particular those that foster the evolution of entrepreneurs in local-global processes. We present four eras of globalization, in recent decades and which have been described as different aspects of globalization are not new at all. In conclusion, we stress that those global patterns of change that are observed, and reported in the media and by social scientists are the result of innumerable local processes driven by economic, political and social entrepreneurs in localities, regions, and nations all around the globe.
    Keywords: Entrepreneurship; local economic development; globalization
    JEL: F10 M13 R11
    Date: 2009–01–15
  5. By: Philippe Aghion (Harvard University - Department of Economics); Diego Comin (Harvard Business School, Business, Government and the International Economy Unit); Peter Howitt (Brown University - Department of Economics); Isabel Tecu (Brown University - Department of Economics)
    Abstract: Can a country grow faster by saving more? We address this question both theoretically and empirically. In our theoretical model, growth results from innovations that allow local sectors to catch up with frontier technology. In poor countries, catching up requires the cooperation of a foreign investor who is familiar with the frontier technology and a domestic entrepreneur who is familiar with local conditions. In such a country, domestic saving matters for innovation, and therefore growth, because it enables the local entrepreneur to put equity into this cooperative venture, which mitigates an agency problem that would otherwise deter the foreign investor from participating. In rich countries, domestic entrepreneurs are already familiar with frontier technology and therefore do not need to attract foreign investment to innovate, so domestic saving does not matter for growth. A cross-country regression shows that lagged savings is positively associated with productivity growth in poor countries but not in rich countries. The same result is found when the regression is run on data generated by a calibrated version of our theoretical model.
    Keywords: Savings, growth, technology adoption, TFP, FDI
    JEL: E2 O2 O3
    Date: 2009–01
  6. By: Piracha, Matloob (University of Kent); Vadean, Florin (University of Kent)
    Abstract: This paper explores the impact of return migration on the Albanian economy by analysing the occupational choice of return migrants while explicitly differentiating between self-employment as either own account work or entrepreneurship. After taking into account the possible sample selection into return migration, we find that the own account workers have characteristics closer to non-participants in the labour market (i.e. lower education levels), while entrepreneurship is positively related to schooling, foreign language proficiency and savings accumulated abroad. Furthermore, compared to having not migrated, return migrants are significantly more likely not to participate in the labour market or to be entrepreneurs. However, after a one year re-integration period, the effect on non participation vanishes and that on entrepreneurship becomes stronger. As for non-migrants, the migration experience would have increased their probability to be entrepreneurs showing the positive impact of migration on job creating activities in Albania.
    Keywords: return migration, occupational choice, sample selection
    JEL: C35 F22 J24
    Date: 2009–01
  7. By: Erik Stam (Tjalling Koopmans Institute, Utrecht School of Economics, Utrecht University, Utrecht, The Netherlands; Centre for Technology Management, University of Cambridge, Cambridge, United Kingdom; Scientific Council for Government Policy (WRR), The Hague, The Netherlands; Max Planck Institute of Economics - Entrepreneurship, Growth and Public Policy group, Jena, Germany); Karl Wennberg (Centre for Entrepreneurship and Business Creation, Stockholm School of Economics, Stockholm, Sweden.)
    Abstract: Innovative start-ups are an important driver of economic growth. This article presents empirical evidence on the effects of R&D on new product development, inter-firm alliances and employment growth during the early life course of firms. We use a dataset that contains a sample of new firms that is representative for the whole population of start-ups. This dataset covers the first six years of the life course of firms. R&D reveals to play several roles during the early life course of high tech as well as high growth firms. The effect of initial R&D on high tech firm growth runs via increasing levels of inter-firm alliances in the first post-entry years. R&D efforts enable the exploitation of external knowledge. Initial R&D also stimulates new product development later on in the life course of high tech firms, but this does not seem to affect firm growth. R&D does not affect the growth rate of new low tech firms, which seems to be driven mainly by the growth ambitions of the founding entrepreneur. The results show that R&D matters for a limited but important set of new high tech and high growth firms, which are key in innovation and entrepreneurship policies.
    Keywords: New Firms, Innovation, R&D, firm growth, alliances, product development
    JEL: D21 L23 L25 L26 M13
    Date: 2009–01–12
  8. By: Benson, David A. (Duke University); Lies, Aaron (University of Memphis); Okunade, Albert A. (University of Memphis); Wunnava, Phanindra V. (Middlebury College)
    Abstract: Poverty rates on Native American Indian reservations are triple the US average. Small business incubation programs, available elsewhere in the US, are sparse on the reservations. Small businesses are potent drivers of US economic growth. Some 25.5 million entrepreneurs generate more than 50% of the GDP, are 26% of the exporters, and create 80% of the total net new job formation. The Small Business Administration (SBA), an independent agency of the federal government created in 1953, maintains and strengthens the nation's economy by aiding, counseling, assisting, and protecting the interests of small businesses and by assisting families and businesses to recover from national disasters. SBA services hardly exist on the Native American Indian Reservations (NAIRs), however. Studies have linked micro entrepreneurial activities to economic growth and poverty reduction. Our study tests the effects of the Lakota Fund (LF), a small business development initiative, on the NAIRs to determine whether SBA-like programs (loans, training, and consulting) can improve economic conditions on the NAIRs. The LF, a private micro loan and business training initiative on the Pine Ridge Reservation in South Dakota, is tested for its effectiveness in generating income. The 1980-2006 annual county-level data (Shannon Co. is 'treatment', Todd Co. is 'control') are a natural experiment; the counties are similar otherwise. Using the real per capita income (RPCI) dependent variable, and controlling for other factors, our regression results indicate that the LF initiative and its duration (intensity) raised RPCI significantly − suggesting the success of a privately funded small business incubation initiative targeted at isolated impoverished groups within the highly developed US economy. Suggestions for future research and program replication ideas are explored.
    Keywords: poverty rates, Small Business Administration, Lakota Fund, life expectancy, public sector
    JEL: L26 M21 O16
    Date: 2009–01
  9. By: Fabio Sabatini
    Abstract: Which kind of social capital fosters the diffusion of development-oriented trust? This paper carries out an empirical investigation into the causal relationships connecting four types of social capital (i.e. bonding, bridging, linking, and corporate), and different forms of trust (knowledge-based trust, social trust, trust towards public services and political institutions), in a community of entrepreneurs located in the Italian industrial district of the Tuscia. Our results suggest that the main factors fostering the diffusion of social trust among entrepreneurs are the perception that the local community is a safe place, and the establishment of corporate ties through professional associations. Trust in people is positively and significantly correlated also to higher levels of satisfaction and confidence in public services. Participation in voluntary organizations does not appear to increase trust in people. Rather, we find evidence of the other way round: interpersonal trust seems to encourage civic engagement
    Keywords: Trust, Social capital, Safety, Professional associations, Entrepreneurship, Corporate ties, Group and Interpersonal Processes, Social Perception and Cognition
    JEL: A13 J24 O15 Z13
    Date: 2009–01
  10. By: Wiberg, Daniel (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Economic theory tells us that abnormal industry and firm profits will not persist for any length of time. Any industry or firm making profits in excess of the normal rate of return will attract entrants and this competitive process will erode profits. A substantial amount of research however, has found evidence of persistent profits above the norm. Barriers to entry and exit are often put forward as explanation to this anomaly. In the absence of, or with low barriers to entry and exit, this reasoning provides little help in explaining why these above-norm profits arise and persist. In this paper the association between profits and the systematic search for knowledge is investigated. The results show that by investing in research and development firms may succeed in creating products or services that are preferred by the market and/or find a more cost efficient method of production. Corporations that systematically invest in research and development are, by doing so, offsetting the erosion of profits and thereby have profits which persistently diverge from the competitive return. It is argued that even in the absence of significant barriers to entry and exit profits may persist. This can be accredited to a systematic search for knowledge through research and development.
    Keywords: Persistence of profits; research and development; industrial organization
    JEL: L00 L22 L25 O32
    Date: 2009–01–15

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