nep-ent New Economics Papers
on Entrepreneurship
Issue of 2009‒01‒31
eleven papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Research universities and regional high-tech firm start-ups and exit By De Silva, Dakshina G.; McComb, Robert P.
  2. Self-Employment and the Role of Health Insurance By Gumus, Gulcin; Regan, Tracy L.
  3. To Be Financed or Not … - The Role of Patents for Venture Capital Financing By Haeussler, Carolin; Harhoff, Dietmar; Mueller, Elisabeth
  4. Venture Capital and Sequential Investments By Dirk Bergemann; Ulrich Hege; Liang Peng
  5. Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe By Da Rin, M.; Di Giacomo, M.; Sembenelli, A.
  6. Firm size, managerial practices and innovativeness: some evidence from Finnish manufacturing By Heli Koski; Luigi Marengo; Iiro Mäkinen
  7. A Model of Collateral, Investment, and Adverse Selection By Alberto Martin
  8. Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya By Pascaline Dupas; Jonathan Robinson
  9. Last-In First-Out Oligopoly Dynamics By Jaap H. Abbring; Jeffrey R. Campbell
  10. Comparative Advantage, Segmentation and Informal Earnings: A Marginal Treatment Effects Approach By Arias, Omar; Khamis, Melanie
  11. Out of Equilibrium Profit and Innovation By Cristiano Antonelli; Giuseppe Scellato

  1. By: De Silva, Dakshina G.; McComb, Robert P.
    Abstract: If localized knowledge spillovers are present in the university setting, higher rates of both start-ups and/or survival than in the broader economy would be observed in areas that are geographically proximate to the university. Using a fully-disclosed Quarterly Census of Employment and Wages for Texas for the years 1999:3-2006:2, this paper analyzes start-ups and exit rates for high-tech firms in Texas. We find that there is evidence that the presence of a research institution will affect the likelihood of technology start-ups. However, results suggest that geographic proximity to knowledge centers does not reduce hazard rates.
    Keywords: Entry and Survival; R & D; Regional; Urban; and Rural Analyses.
    JEL: R53 O18 R12
    Date: 2009–01–26
  2. By: Gumus, Gulcin (Florida International University); Regan, Tracy L. (University of Miami)
    Abstract: We investigate the effect of health insurance on labor market transitions in and out of self-employment as well as on the likelihood of being self-employed. We consider the role of individual health insurance coverage along with that from a spouse. Next, we examine a series of tax deductions granted to the self-employed through amendments made to the 1986 Tax Reform Act. Using data from the Current Population Survey for 1996-2007, we find significant but small effects of the after-tax health insurance premium on the entry rate, with no effect on exits from self-employment or the likelihood of being self-employed.
    Keywords: health insurance, self-employment, CPS, ORG
    JEL: J32 J48 I11
    Date: 2009–01
  3. By: Haeussler, Carolin; Harhoff, Dietmar; Mueller, Elisabeth
    Abstract: This paper investigates how patent applications and grants held by new ventures improve their ability to attract venture capital (VC) financing. We argue that investors are faced with considerable uncer-tainty and therefore rely on patents as signals when trying to assess the prospects of potential portfolio companies. For a sample of VC-seeking German and British biotechnology companies we have identified all patents filed at the European Patent Office (EPO). Applying hazard rate analysis, we find that in the presence of patent applications, VC financing occurs earlier. Our results also show that VCs pay attention to patent quality, financing those ventures faster which later turn out to have high-quality patents. Patent oppositions increase the likelihood of receiving VC, but ultimate grant decisions do not spur VC financing, presumably because they are anticipated. Our empirical results and interviews with VCs suggest that the process of patenting generates signals which help to overcome the liabilities of newness faced by new ventures.
    Keywords: patents; venture capital; intellectual property rights; R&D; biotechnology
    JEL: O30 O34 L20 L26 G24
    Date: 2009–01–20
  4. By: Dirk Bergemann; Ulrich Hege; Liang Peng
    Date: 2009–01–15
  5. By: Da Rin, M.; Di Giacomo, M.; Sembenelli, A. (Tilburg University, Center for Economic Research)
    Abstract: Can tax policy foster the creation of new companies? To answer this question, we assemble a novel country-industry level panel database with entry data of European companies between 1997 and 2004. We compute effective tax rates and explore the effect of corporate taxation policy on entry rates at country-industry level. Drawing on the recent political economy literature, we also account for the endogeneity of taxation. We find a significant negative effect of corporate income taxation on entry rates. The effect is concave and suggests that tax reductions affect entry rates only below a certain threshold tax level. We also find that a reduction in corporate tax rates is more effective in countries with better institutional infrastructure. Our results are robust to alternative measures of effective taxation and to the use of alternative and additional explanatory variables.
    Keywords: Corporate Taxation;Political Economy;Firm Entry;Entry Regulation;Panel Data.
    JEL: C23 H32 L51 M13
    Date: 2008
  6. By: Heli Koski; Luigi Marengo; Iiro Mäkinen
    Abstract: In this study we use a survey data on 398 Finnish manufacturing firms for the years 2002 and 2005 to empirically explore whether and which organizational factors explain why certain firms produce larger innovative research output than others, and whether the incentives to innovate that certain organizational practices generate differ between small and large firms, and between those firms that are operating in low-tech and high-tech industries. Our study indicates that there appear to be vast differences in the organizational practices leading to more innovation both between small and large firms, and between the firms that operate in high- and low-tech industries. While innovation in small firms benefits from the practices that enhance employee participation in decision-making, large firms that have more decentralized decision-making patterns do not seem to innovate more than those with a more bureaucratic decision-making structure. The most efficient incentive for innovation among the sampled companies seems to be the ownership of a firm's stocks by employees and/or managers. Performance based wages also relates positively to innovation, but only when it is combined with a systematic monitoring of the firm's performance.
    Keywords: Innovation, firm size, organizational practices, HRM practices
    JEL: L25 M54 O31
    Date: 2009–01–26
  7. By: Alberto Martin
    Abstract: This paper characterizes the relationship between entrepreneurial wealth and aggregate investment under adverse selection. Its main finding is that such a relationship need not be monotonic. In particular, three results emerge from the analysis: (i) pooling equilibria, in which investment is independent of entrepreneurial wealth, are more likely to arise when entrepreneurial wealth is relatively low; (ii) separating equilibria, in which investment is increasing in entrepreneurial wealth, are most likely to arise when entrepreneurial wealth is relatively high and; (iii) for a given interest rate, an increase in entrepreneurial wealth may generate a discontinuous fall in investment.
    Keywords: Adverse Selection, Collateral, Investment, Lending Standards, Screening
    JEL: D82 E44 G10
    Date: 2009–01
  8. By: Pascaline Dupas; Jonathan Robinson
    Abstract: This paper presents results from a field experiment designed to test whether savings constraints prevent the self-employed from increasing the size of their businesses. We opened interest-free savings accounts in a local village bank in rural Kenya for a randomly selected sample of poor daily income earners (such as market vendors), and collected a unique dataset constructed from self-reported logbooks that respondents filled on a daily basis. Despite the fact that the savings accounts paid no interest and featured substantial withdrawal fees, take-up and usage was high among women. In addition, we find that the savings accounts had substantial, positive impacts on productive investment levels and expenditures for women, but had no effect for men. These results imply that a substantial fraction of daily income earners face important savings constraints and have a demand for formal saving devices (even for those that offer negative de facto interest rates). We also find some suggestive evidence that female entrepreneurs draw down their working capital in response to health shocks, and that the accounts enabled the treatment group to cope with these shocks without having to liquidate their inventories.
    JEL: G21 L26 O12
    Date: 2009–01
  9. By: Jaap H. Abbring; Jeffrey R. Campbell
    Abstract: This paper extends the static analysis of oligopoly structure into an infinite-horizon setting with sunk costs and demand uncertainty. The observation that exit rates decline with firm age motivates the assumption of last-in first-out dynamics: An entrant expects to produce no longer than any incumbent. This selects an essentially unique Markov-perfect equilibrium. With mild restrictions on the demand shocks, sequences of thresholds describe firms' equilibrium entry and survival decisions. Bresnahan and Reiss's (1993) empirical analysis of oligopolists' entry and exit assumes that such thresholds govern the evolution of the number of competitors. Our analysis provides an infinite-horizon game-theoretic foundation for that structure.
    JEL: L13
    Date: 2009–01
  10. By: Arias, Omar (World Bank); Khamis, Melanie (IZA)
    Abstract: This paper employs recently developed econometric models of marginal treatment effects to analyze the relevance of labor market comparative advantage and segmentation in the participation and earnings performance of workers in formal and informal jobs in Argentina. A novel household data set on informality and self-employment and information on labor inspections targeting informal work was collected for this purpose. We account for endogeneity and selectivity issues in our estimations. Our results offer evidence for both comparative advantage and segmentation. No significant differences between the earnings of formal salaried workers and the self-employed are found, once accounted for positive selection bias into formal work. This is consistent with labor market comparative advantage considerations. On the contrary, informal salaried employment carries significant earnings penalties, alongside negative selection bias and modest positive sorting. These results are more consistent with segmentation.
    Keywords: marginal treatment effects, occupational choice, segmentation, earnings, comparative advantage, informality, labor markets
    JEL: C31 J24 J31 J42 O17
    Date: 2008–12
  11. By: Cristiano Antonelli; Giuseppe Scellato
    Date: 2009–01–15

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