nep-ent New Economics Papers
on Entrepreneurship
Issue of 2009‒07‒28
twelve papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Household wealth and entrepreneurship: is there a link? By Silvia Magri
  2. How does entry regulation influence entry into selfemployment and occupational mobility? By Susanne Prantl; Alexandra Spitz-Oener
  3. Entrepreneurial intentions: The influence of organizational and individual factors By Lee, Lena; Wong, Poh Kam; Foo, Maw Der; Leung, Aegean
  4. Linking Entrepreneurial Strategy and Firm Growth By J. BRUNEEL; B. CLARYSSE; M. WRIGHT
  6. Does Social Capital Create Trust? Evidence from a Community of Entrepreneurs By Fabio Sabatini
  7. Financial distress and firm exit: determinants of involuntary exits, voluntary liquidations and restructuring exits By S. BALCAEN; J. BUYZE; H. OOGHE
  8. From distress to exit: determinants of the time to exit By S. BALCAEN; S. MANIGART; H. OOGHE
  9. The Cultural Dimensions of the Vietnamese Private Entrepreneurship By Quan-Hoang Vuong; Tran Tri Dung
  10. On the Establishment Dynamics in the United States and Japan By Toshihiko Mukoyama
  11. Innovation and productivity in SMEs. Empirical evidence for Italy By Bronwyn H. Hall; Francesca Lotti; Jacques Mairesse
  12. The Firm Size Distribution in a Small Open Economy: Theory and Evidence By Qi Li; Patrick Paul Walsh

  1. By: Silvia Magri (Bank of Italy)
    Abstract: In the absence of any correlation between wealth and entrepreneurial talent, initial net wealth should have an explanatory power in the decision to become an entrepreneur only for households that are financially constrained; further, its importance should decrease with wealth. I test these theoretical predictions for the Italian case, using the Survey of Household Income and Wealth. The evidence is that household's initial wealth is indeed important in the decision to become an entrepreneur and its effect is lower for the richest households. When net wealth is instrumented, the results are similar. Furthermore, the effect of net wealth is stronger when legal enforcement of the loan contract is weaker, as also predicted by the model. Finally, conditional on becoming entrepreneurs, initial household wealth does not significantly affect the size of the business. In summary, it seems that imperfections in capital markets can induce people to accumulate assets in order to facilitate the decision to become entrepreneurs.
    Keywords: entrepreneurship, start-up businesses, household wealth
    JEL: D13 E21 L26
    Date: 2009–06
  2. By: Susanne Prantl (Department Wirtschaftszentrum Berlin and IFS); Alexandra Spitz-Oener (Humboldt University Berlin)
    Abstract: We analyze how an entry regulation that imposes a mandatory educational standard affects entry into self-employment and occupational mobility. We exploit the German reunification as a natural experiment and identify regulatory effects by comparing differences between regulated occupations and unregulated occupations in East Germany with the corresponding differences in West Germany after reunification. Consistent with our expectations, we find that entry regulation reduces entry into selfemployment and occupational mobility after reunification more in regulated occupations in East Germany than in West Germany. Our findings are relevant for transition or emerging economies as well as for mature market economies requiring large structural changes after unforeseen economic shocks.
    Keywords: Entry Regulation,Self-Employment, Occupational Mobility
    JEL: J24 J62 K20 L11 L51 M13
    Date: 2009–07
  3. By: Lee, Lena; Wong, Poh Kam; Foo, Maw Der; Leung, Aegean
    Abstract: An individual's intent to pursue an entrepreneurial career can result from the work environment and from personal factors. Drawing on the entrepreneurial intentions and the person–environment (P–E) fit literatures, and applying a multilevel perspective, we examine why individuals intend to leave their jobs to start business ventures. Findings, using a sample of 4192 IT professionals in Singapore, suggest that work environments with an unfavorable innovation climate and/or lack of technical excellence incentives influence entrepreneurial intentions, through low job satisfaction. Moderating effects suggest that an individual's innovation orientation strengthens the work-environment to job-satisfaction relationship; selfefficacy strengthens the job-satisfaction to entrepreneurial intentions relationship.
    Keywords: Entrepreneurial intentions Job satisfaction Self-efficacy
    JEL: L26 M13
    Date: 2009
    Abstract: The growth of young, technology-based firms has received considerable attention in the literature given their importance for the generation and creation of economic wealth. Taking a strategic management perspective, we link the entrepreneurial strategy deployed by young, technology-based firms with firm growth. In line with recent research, we consider both revenue and employment growth as they reflect different underlying value creation processes. Using a unique European dataset of research-based spin-offs, we find that firms emphasizing a product and hybrid strategy are positively associated with growth in revenues. The latter strategy also has a positive influence on the creation of additional employment. Contrary to expectation, however, we find that firms pursuing a technology strategy do not grow fast in employment. Our study sheds new light on the relationship between entrepreneurial strategy and firm growth in revenues and employment.
    Date: 2009–04
    Abstract: We expand and test Ajzen’s Theory of Planned Behavior (TPB) to explain the transfer of an entrepreneurial venture upon exit. Our results confirm TPB: transfer intentions and perceived control over the transfer are the main drivers of the likelihood to transfer. In addition, contextual business characteristics complement TPB in explaining transfer outcomes. While intangibility of firm assets directly impacts transfer outcomes, business viability is partially mediated via transfer intentions. These results shed more light on the role of implicit planning in transfer decisions and help to better understand contextual factors impacting the process of entrepreneurial exits.
    Keywords: entrepreneurial exit, exit process, transfer decision, Theory of Planned Behavior
    Date: 2009–04
  6. By: Fabio Sabatini (University of Siena)
    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: J24 O15 Z13
    Date: 2009–06
    Abstract: This paper provides new insights on the determinants of firm exit after distress. Using nested logit models and a sample of 6118 distress-related exits from Belgium, we analyze the impacts of available and potential slack and the relative efficiency of voluntary liquidation, compared to acquisition and merger, on the type of exit. It appears essential to examine the type of exit outcome as a two-stage process. The first stage considers the fundamental distinction between voluntary and involuntary exit, the latter being the least favorable and most avoided exit strategy. In this situation, high levels of available and potential slack resources, as reflected by large cash holdings, strong group relations and low current leverage, increase the probability of voluntary exit. High slack allows distressed firms to avoid bankruptcy and decide on their exit process. In the second stage, and provided that exit is voluntary, voluntary liquidation is compared to restructuring exit (acquisition, merger or split). In this stage, a higher relative efficiency of voluntary liquidation compared to a restructuring exit, as indicated by absence of group relations, small firm size, high secured debt level and large cash holdings, increase the likelihood of voluntary liquidation and reduce the probability of a restructuring exit.
    Date: 2009–06
    Abstract: This paper analyses the duration of the time to exit of distressed firms, differentiating between involuntary exits (mainly bankruptcies) and voluntary liquidations. It examines how long firms survive after initial signs of economic distress. The study is conducted on an extensive dataset of 5,233 Belgian distress-related exits of non-starting firms, the majority being privately held. The results highlight that slack resources have an opposite effect on the timing of involuntary exits and voluntary liquidations. On the one hand, high levels of available and potential slack increase the time to involuntary exit, as they allow distressed firms to postpone an impending involuntary exit. On the other hand, high available slack resources shorten the time to voluntary liquidation as they make voluntary liquidation easier. Further, a high level of stakeholder dependence increases the time to exit after distress, whether the firm exits through a voluntary or through an involuntary procedure. This is explained by the fact that stakeholder dependence increases the complexity of the exit decision and the exit procedure.
    Date: 2009–05
  9. By: Quan-Hoang Vuong (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.); Tran Tri Dung (Dan Houtte, Vuong & Partners, Hanoi, Vietnam.)
    Abstract: In this essay, we explore cultural impacts on the private entrepreneurship in the post-Doi Moi Vietnam. Some important aspects of the traditional cultural values of the Vietnamese society are explored in conjunction with the socio-economic changes over the past two decades. Traditional cultural values continue to have strong impacts on the Vietnamese society, and to a large extent to adversely affect the entrepreneurial spirit of the community. Typical constraints private entrepreneurs face may have roots in the cultural facet as legacy of the Confucian society, such as relationship-based bank credit. Low quality business education is both victim and culprit of the long-standing tradition that looks down on the role of private entrepreneurship in the country.
    Keywords: Culture; Confucian values; Confucianism; Entrepreneurship; Market economy; Rent seeking; Vietnam
    JEL: A14 E00 L14 L26 M21 P20 P31 Z10 Z13
    Date: 2009–07
  10. By: Toshihiko Mukoyama (University of Virginia and CIREQ (E-mail: tm5hs@
    Abstract: This paper compares the establishment-level dynamics of the United States and Japan. I find that there are substantial differences in entry and exit behavior, the average size of establishments, and the amount of job reallocation. First, entry and exit rates are much lower in Japan. Second, the average size of establishments is much smaller in Japan, while the average size of opening/closing establishments are similar in the U.S. and Japan. Third, the amount of job creation and job destruction is much smaller in Japan, especially for continuing establishments. I first examine whether these differences are accounted for by sectoral compositions, and find that the differences in sectoral composition do not explain these facts. Then I construct a general equilibrium industry dynamics model and explore the roles of various frictions in generating these differences. The model experiments suggest that in Japan, there may be important impediments for establishment entry/exit and there may be factors impeding productive establishments from growing larger.
    Keywords: Establishment Dynamics, Sectoral Composition, Industry Dynamics Model, Reallocation
    JEL: E23 H25 J62 L25
    Date: 2009–07
  11. By: Bronwyn H. Hall (Department of Economics, University of California at Berkeley); Francesca Lotti (Bank of Italy); Jacques Mairesse (CREST (ENSAE, Paris))
    Abstract: Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture. Therefore, in this paper, we develop a structural model of innovation which incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures. We then apply the model to data on Italian SMEs from the “Survey on Manufacturing Firms” conducted by Mediocredito-Capitalia covering the period 1995-2003. The model is estimated in steps, following the logic of firms’ decisions and outcomes. We find that international competition fosters R&D intensity, especially for high-tech firms. Firm size, R&D intensity, along with investment in equipment enhances the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on firm’s productivity, especially process innovation. Among SMEs, larger and older firms seem to be less productive.
    Keywords: R&D, innovation, productivity, SMEs, Italy
    JEL: L60 O31 O33
    Date: 2009–06
  12. By: Qi Li (SPIRe and Geary Institute); Patrick Paul Walsh (SPIRe and Geary Institute)
    Abstract: We construct a theoretical model of the dynamic processes (firm entry, growth, decline, and exit) that underpin the determination of a limiting firm size distribution (FSD). In particular, we model such dynamic processes using key structural parameters; sunk cost, exogenous entry constraints, and opportunity values of finite duration. The limiting FSD we derive, in steady state, turns out to be a combination of a Logarithmic and Zipf distribution. We estimate these structural parameters using long periods of Irish company data for defined cohorts of firms, in terms of trade orientation, within narrowly defined industries. Within non-exporting and exporting samples of companies our model fits the actual FSD well with a good return to the Zipf distribution in the upper tail, that is less dependent on the estimated structural parameters, and a good return at the lower tail, where the Logarithmic effects are endogenously driven by firm heterogeneity in estimated structural parameters.
    JEL: L11 F15
    Date: 2009–07–13

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