nep-ent New Economics Papers
on Entrepreneurship
Issue of 2009‒03‒22
nine papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. When Things Get Tough Do the Tough Get Going? Founders’ Pre-entry Work Experience and High-tech Start-up Survival during an Industry Crisis By Luca Grilli
  2. Entrepreneurship, Self-Employment and Business Data: An Introduction to Several Large, Nationally-Representative Datasets By Fairlie, Robert W.; Robb, Alicia M.
  3. The Entrepreneurial Adjustment Process in Disequilibrium: Entry and Exit when Markets Under and Over Shoot By Andrew Burke; Andre van Stel
  4. The Age Effect in Entrepreneurship: Founder’s Tenure, Firm Performance, and the Economic Environment By Marco Cucculelli; Giacinto Micucci
  5. Public Initiatives to Support Entrepreneurs: Credit Guarantees versus Co-Funding By Stefan Arping; Gyöngyi Lóránth; Alan Morrison
  6. Public Knowledge, Private Knowledge: The Intellectual Capital of Entrepreneurs By Albert Link; Christopher Ruhm
  7. Return Migration and Occupational Choice By Matloob Piracha; Florin Vadean
  8. The Growth of Knowledge-Intensive Entrepreneurship in India, 1991-2007 Analysis of its Evidence and Facilitating Factors By Sunil Mani
  9. Self-Confidence and Timing of Entry By Tiago Pires; Luís Santos-Pinto

  1. By: Luca Grilli
    Abstract: This article adds new insights into the relationship between founders’ human capital and the survival prospects of startup businesses. The impact of founders’ human capital on firm survival is controversial. On one hand, more experienced and skilled individuals are likely to create start-up businesses with a high chance of survival; on the other hand, their opportunity costs to run the firm may be high given the potential returns for investing their efforts in alternative employment opportunities. Analysing a sample of 179 Italian start-up companies created during 1995-early 2000 and operating in ICT services markets, this study provides evidence that, in intense industry crises (early 2000-2003), highly work experienced entrepreneurs may pursue an exit strategy and highlights the importance of distinguishing between different types of work experience and different exit routes. In particular, founding teams with highly specific work experience show higher probability of following the M&A route, while a higher level of generic work experience is more conducive to closure.
    Keywords: High-tech entrepreneurship; Start-up exit; Founders’ human capital; ICT
    JEL: L26 L86
    Date: 2009–01
  2. By: Fairlie, Robert W. (University of California, Santa Cruz); Robb, Alicia M. (University of California, Santa Cruz)
    Abstract: Only a few large, nationally-representative datasets include information on both the owner and the business. We briefly describe several of the most respected and up-to-date sources of data on entrepreneurs, the self-employed, and small businesses. More information including estimates of recent trends in business ownership and performance (e.g. survival rates, sales, employment, payroll, profits and industry) from these datasets is contained in Fairlie and Robb (2008).
    Keywords: small businesses, business owners, self-employment, entrepreneurship, data
    JEL: L26 Y1
    Date: 2009–03
  3. By: Andrew Burke; Andre van Stel
    Abstract: The main contribution of entrepreneurship theory to economics is to provide an account of market performance in disequilibrium but little empirical research has examined firm entry and exit in this context. We redress this by modelling the interrelationship between firm entry and exit in disequilibrium. Introducing a new methodology we investigate whether this interrelationship differs between market ‘undershooting’ (the actual number of firms is below the equilibrium number) and ‘overshooting’ (vice versa). We find that equilibrium-restoring mechanisms are faster in over than in undershoots. The results imply that in undershoots a lack of competition between incumbent firms contributes to restoration of equilibrium (creating room for new-firm entry) while in overshoots competition induced by new firms (in particular strong displacement) helps restore equilibrium.
    Keywords: entry, exit, equilibrium, industrial organization, undershooting, overshooting
    JEL: B50 J01 L00 L1 L26
    Date: 2009–01
  4. By: Marco Cucculelli; Giacinto Micucci
    Abstract: This paper tests the effect of founder’s tenure on firm performance by taking into account the impact of the changes occurring in the economic environment. We use a large dataset of founder-run firms that includes, in addition to financial data, company data directly collected through a survey of about 2,000 Italian firms. Unlike the negative relationship reported in most empirical papers, we found an inverted U-shaped relationship between founder-CEO tenure and firm performance. This relationship is strongly influenced by the characteristics of the environment in which the company competes: while experience plays a key role in fostering performance in less innovative- and less competitive sectors, a dynamic environment makes the performance of the firm less responsive to the benefits of founder tenure. From the viewpoint of policy, growing environment dynamism calls for greater efficiency of the market for corporate control, in order to assure a continued match between skills of CEOs and the external environment
    Keywords: ageing, entrepreneurship, founder-run firms, changing environment
    JEL: L25 J24 G34
    Date: 2009–03
  5. By: Stefan Arping (Faculty of Economics & Business, University of Amsterdam); Gyöngyi Lóránth (Judge Business School, University of Cambridge); Alan Morrison (Said Business School, University of Oxford)
    Abstract: We analyze financial support for the entrepreneurial sector. State support can raise welfare by relaxing financial constraints, but it can also reduce lending standards if entrepreneurs substitute public sources of collateral for their own assets, if it encourages excessive entrepreneurial entry, or if it undermines bank monitoring incentives. We derive a “pecking order” for support schemes: support funds should be channeled first to credit guarantee schemes and then, when entrepreneurs start to substitute public for private collateral, to co-funding entrepreneurial projects. The optimal level of credit guarantee is diminishing in the costs of incentivising bank monitoring. We show in an extension that the long-term effect of public subsidies may be to impair the private sector’s initiative to uncover cost savings.
    Keywords: Partial Credit Guarantees; Co-funding and Loan Subsidies; Private Sector Initiative; Lending Standards
    JEL: G2 G3
    Date: 2009–02–24
  6. By: Albert Link; Christopher Ruhm
    Abstract: This paper focuses on the innovative actions of entrepreneurs, namely their tendency to reveal the intellectual capital that results from their research efforts either in the form of public knowledge (publications) or private knowledge (patents). Using data collected by the National Research Council within the U.S. National Academies from their survey of firm’s that received National Institutes of Health Phase II Small Business Innovation Research awards between 1992 and 2001, we find that entrepreneurs with academic backgrounds are more likely to publish their intellectual capital compared to entrepreneurs with business backgrounds, who are more likely to patent their intellectual capital. We also find that when universities are research partners, their presence complements the tendencies of academic entrepreneurs but does not offset those of business entrepreneurs.
    JEL: M14 O31
    Date: 2009–03
  7. By: Matloob Piracha; Florin Vadean
    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: Occupational Choice; Return Migration; Sample Selection
    JEL: C35 F22 J24
    Date: 2009–03
  8. By: Sunil Mani
    Abstract: The paper takes a critical look at the available quantitative evidence on the growth of knowledge-intensive entrepreneurship. It then looks at five facilitating factors for the emergence of this phenomenon in terms of the existence of increased market opportunities, availability of financial support schemes in the form of venture capital funds, existence and enlargement of a number of government programmes, a number of private sector initiatives and education and training leading to the supply of technically trained personnel. The paper concludes with certain policy suggestions for the continued sustenance of this activity. [ WP 409]
    Keywords: India, knowledge-intensive entrepreneurship, knowledge
    Date: 2009
  9. By: Tiago Pires; Luís Santos-Pinto
    Abstract: This paper analyzes the impact of overconfidence on the timing of entry in markets, profits, and welfare. To do that the paper uses an endogenous timing model where (i) players have private information about costs and (ii) one player is overconfident and the other is rational. The paper shows that for moderate levels of self-confidence there is a unique cost-dependent equilibrium where the overconfident player has a higher ex-ante probability of entering the market before the rational player. In this equilibrium self-confidence reduces the profits of the rational player but can increase the profits of the overconfident player provided that cost asymmetries are small. Finally, we show that overconfidence reduces welfare, except when cost asymmetries are very small.
    Keywords: endogenous timing; entry; overconfidence
    JEL: A12 C72 D43 D82 L10
    Date: 2008–10

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