nep-ent New Economics Papers
on Entrepreneurship
Issue of 2009‒05‒30
nine papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. The Evolution of Entrepreneurial Spirit and the Process of Development By Oded Galor; Stelios Michalopoulos
  2. The impact of the business environment on the business creation process By Klapper, Leora; Delgado, Juan Manuel Quesada
  3. Innovative firms or innovative owners ? determinants of innovation in micro, small, and medium enterprises By de Mel, Suresh; McKenzie, David; Woodruff, Christopher
  4. Entrepreneurship in post-conflict transition : the role of informality and access to finance By Demirguc-Kunt, Asli; Klapper, Leora F.; Panos, Georgios A.
  5. Innovations for Reviving Small-Scale Industries By Anil. K Gupta
  6. Modeling excess profit By Carlo Alberto Magni
  7. Semi-Public Contests By Prüfer, J.
  8. Social Influence Given (Partially) Deliberate Matching: Career Imprints in the Creation of Academic Entrepreneurs By Pierre Azoulay; Christopher C. Liu; Toby E. Stuart
  9. Science-Based R&D in Schumpeterian Growth By Guido Cozzi; Silvia Galli

  1. By: Oded Galor; Stelios Michalopoulos
    Abstract: This research suggests that the evolution of entrepreneurial spirit played a significant role in the process of economic development and the dynamics of inequality within and across societies. The study argues that entrepreneurial spirit evolved non-monotonically in the course of human history. In early stages of development, the rise in income generated an evolutionary advantage to entrepreneurial, growth promoting traits and their increased representation accelerated the pace of technological progress and the process of economic development. Natural selection therefore had magnified growth promoting activities in relatively wealthier economies as well as within the upper segments of societies, enlarging the income gap within as well as across societies. In mature stages of development, however, non-entrepreneurial individuals gained an evolutionary advantage, diminishing the growth potential of advanced economies and contributing to the convergence of the intermediate level economies to the advanced ones.
    Keywords: Elasticity of Substitution, Growth, Technological Progress, Evolution, Natural Selection
    JEL: O11 O14 O33 O40 J11 J13
    Date: 2009
  2. By: Klapper, Leora; Delgado, Juan Manuel Quesada
    Abstract: New data from the 2008 World Bank Group Entrepreneurship Survey indicates a very strong and statistically significant relationship between entrepreneurship and a better business environment. Data for 100 countries on the number of total and newly registered corporations over an eight-year period (2000-2007) were collected directly from registrars of companies around the world. Data were also collected on the functioning and structure of business registries. Empirical evidence suggests that greater ease in starting a business and better governance are associated with increased entrepreneurial activity. After controlling for economic development (gross domestic product per capita), higher entrepreneurial activity is significantly associated with cheaper, more efficient business registration procedures and better governance. Although the degree of progress in the modernization of business registries varies greatly, countries usually have a common goal to evolve from a paper-based business registry to a one-stop, automated, web-enabled registry capable of delivering products and services online via transactions involving authenticated users and documents. Tests show that business registry modernization (often a component of broader private sector reforms) has a positive impact not only on the ease of creating a business, but also on new business registration. Overall, the data show that a quick, efficient, and cost-effective business registration process is critical for fostering formal sector entrepreneurship.
    Keywords: E-Business,Competitiveness and Competition Policy,Business in Development,Business Environment,Governance Indicators
    Date: 2009–05–01
  3. By: de Mel, Suresh; McKenzie, David; Woodruff, Christopher
    Abstract: Innovation is key to technology adoption and creation, and to explaining the vast differences in productivity across and within countries. Despite the central role of the entrepreneur in the innovation process, data limitations have restricted standard analysis of the determinants of innovation to consideration of the role of firm characteristics. The authors develop a model of innovation that incorporates the role of both owner and firm characteristics, and use this to determine how product, process, marketing, and organizational innovations should vary with firm size and competition. They then use a new, large, representative survey from Sri Lanka to test this model and to examine whether and how owner characteristics matter for innovation. The survey also allows analysis of the incidence of innovation in micro and small firms, which have traditionally been overlooked in the study of innovation, despite these firms comprising the majority of firms in developing countries. The analysis finds that more than one-quarter of the microenterprises are engaging in innovation, with marketing innovations the most common. As predicted by the model, firm size has a stronger positive effect, and competition a stronger negative effect, on process and organizational innovations than on product innovations. Owner ability, personality traits, and ethnicity have a significant and substantial impact on the likelihood of a firm innovating, confirming the importance of the entrepreneur in the innovation process.
    Keywords: E-Business,Education for Development (superceded),Innovation,Labor Policies,Microfinance
    Date: 2009–05–01
  4. By: Demirguc-Kunt, Asli; Klapper, Leora F.; Panos, Georgios A.
    Abstract: The authors examine the factors affecting the transition to self-employment in Bosnia and Herzegovina, using the World Bank Living Standard Measurement Survey panel household survey for the years 2001-2004. In the beginning of the sample, the country changed its legal framework, with the primary aim to promote labor market flexibility and to encourage entrepreneurial activity. The analysis identifies individuals that switched to self-employment (employers and own account) during the sample period and the viability of this transition, in terms of business survival for more than one year. The results suggest an important role for financing constraints. Specifically, wealthier households are more likely to become entrepreneurs and survive in self-employment. After controlling for household wealth, having an existing bank relationship increases the likelihood of starting a business with hired employees and increases the chances of survival for the new entrepreneur. By contrast, overseas - and in some cases domestic - remittances decrease the likelihood of becoming an entrepreneur.
    Keywords: Access to Finance,Labor Markets,,Banks&Banking Reform,Labor Policies
    Date: 2009–05–01
  5. By: Anil. K Gupta
    Abstract: "Given the economic distress worldwide, the micro, small and medium scale enterprises (MSME) had been hit hard. Large numbers of workers have been laid off because of depressed demand, piled up inventory, pending retrievables and squeezed credit market. A sector which provides maximum employment cannot be left to fend for itself without a major transformation led by the entrepreneurs, policy makers and also other support organizations. There are several innovative options that one can try at four different levels such as (a) stimulating demand, (b) upgrading technology and skills, (c) promoting innovations for developing new products and services and (d) forging new partnerships among the entrepreneurs and also with the R&D institutions, grassroots innovation networks and the technology students.This is a painful time for the MSMEs and the workers being laid off. A bipartition approach is required among the major political parties to put forward a revitalization plan. Millions of workers and small entrepreneurs will anyway soon vote on the vision of the parties in taking country out of the current stressful situation.[IIMA WP NO 03]"
    Keywords: micro, small and medium scale enterprises; organized sector; industrial symbiosis; entrepreneurs; Upgrading technology; skills; Techpedia; National Innovation; National Innovation Foundation
    Date: 2009
  6. By: Carlo Alberto Magni
    Abstract: This paper deals with the problem of modelling in a formal way the concept of excess profit, also known as residual income. A common idea is that excess profit is an unequivocal concept, being the diference between profit and costs, where all types of costs are taken into account, included the opportunity cost, i.e. the profit the entrepreneur would obtain if she invested in another business. This paper aims at showing that this diference is not univocal and that diferent approaches may be followed to give voice to such a notion. It turns out that two diferent interpretations are possible. The one existing in the literature is well described by Preinrich (1938), Edwards and Bell (1961) and, more recently, by Peasnell (1981, 1982) in the accounting literature and by Stewart (1991) in the value-based management literature. The interpretation here provided gives rise to a diferent way of modelling the notion of excess profit. While the existing models are tied to the financial literature, the model here presented is more akin to a microeconomic perspective. The paper focuses on the formal relations among the various models and necessary and sufficient conditions are provided for the integration of all models in the systemic framework here adopted. Furthermore, it shows that the systemic paradigm enjoys an aggregation property which makes residual incomes aggregate in a value sense and enables one to reduce forecasting errors in valuation.
    Date: 2009–05–17
  7. By: Prüfer, J. (Tilburg University, Center for Economic Research)
    Abstract: The process of innovation is driven by two main factors: new inventions and institutions supporting the transformation of inventions into marketable innovations. This paper proposes a new institution, called a semi- public contest, that has been neglected by the economic literature but exists frequently in practice. I show how semi-public contests can mitigate a dilemma that arises at a very early stage of innovative activity and specify the general requirements for situations in which a semi-public contest can increase welfare. This paper's results suggest that governments promote knowledge about the semi-public contest mechanism but refrain from direct public funding of contests.
    Keywords: Innovation;Contests;Entrepreneurs;Institutional Design;Business Plan Competitions;Auctions
    JEL: D02 D86 L10 O31
    Date: 2009
  8. By: Pierre Azoulay (Columbia University, Columbia Business School); Christopher C. Liu (Harvard Business School); Toby E. Stuart (Harvard Business School, Entrepreneurial Management Unit)
    Abstract: Actors often match with associates on a small set of dimensions that matter most for the particular relationship at hand. In so doing, they are exposed to unanticipated social influences because counterparts have more interests, attitudes, and preferences than would-be associates considered when they first chose to pair. This implies that some apparent social influences (those tied to the rationales for forming the relationship) are endogenous to the matching process, while others (those that are incidental to the formation of the relationship) may be conditionally exogenous, thus enabling causal estimation of peer effects. We illustrate this idea in a new dataset tracking the training and professional activities of academic biomedical scientists. In qualitative and quantitative analyses, we show that scientists match to their postdoctoral mentors based on two dominant factors, geography and scientific focus. They then adopt their advisers' orientations toward commercial science as evidenced by the transmission of patenting behavior, but they do not match on this dimension. We demonstrate this in two-stage models that adjust for the endogeneity of the matching process, using a modification of propensity score estimation and a sample selection correction with valid exclusion restrictions. Furthermore, we draw on qualitative accounts of the matching process recorded in oral histories of the career choices of the scientists in our data. All three methods-qualitative description, propensity score estimators, and those that tackle selection on unobservable factors-are potential approaches to establishing evidence of social influence in partially endogenous networks, and they may be especially persuasive in combination.
    Date: 2009–05
  9. By: Guido Cozzi; Silvia Galli
    Abstract: Firm success is often associated with the development of better products. Private firms undertake applied R&D seeking market advantage, by capitalizing on the freely accessible results of basic research. But unpatentable basic research often fails to address applied R&D open problems. What is the role of the incentives in improving the innovative performance of an economy by matching partially motivated public researchers to their mission? Sometimes government funded research projects are mission-directed, yet in many cases the public sector academics indulge in carrier-driven research. An innovation system where, as in the US, also basic research is driven by patents, implicitly sets an ex-post incentive to the researchers guided by invisible hand. For a public innovation system - like the European one - designing an incentive scheme to motivate public researchers is of key importance for fostering the performance of the economic system. This paper extends the Schumpeterian multisector growth model with vertical innovation by highlighting a link between the degree of "targetness" of public research and aggregate innovation. A positive effect of social capital is also proved.
    Keywords: Sequential Innovation, Research Tools, Basic Research, Knowledge Management, Social Capital.
    JEL: H44 O31 O34 O38
    Date: 2009–04

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