nep-ent New Economics Papers
on Entrepreneurship
Issue of 2009‒11‒21
eight papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Heterogeneity in the effect of regulation on entrepreneurship and entry size By Silvia Ardagna; Annamaria Lusardi
  2. Financing Constraints and Entrepreneurship By William Kerr; Ramana Nanda
  3. Small firms, growth and financial constraints By Agustí Segarra; Mercedes Teruel
  4. Banking Deregulations, Financing Constraints, and Firm Entry Size By William Kerr; Ramana Nanda
  5. Entrepreneurship and Market Size. The Case of Young College Graduates in Italy By Sabrina Di Addario; Daniela Vuri
  6. Do Firms Learn by Exporting or Learn to Export? Evidence from Small and Medium-Sized Enterprises (SMEs) in Swedish Manufacturing By Hansson, Pär; Eliasson, Kent; Lindvert, Markus
  7. Emotional assuring, trust Building, and resource mobilization in start-up organizations By Huy, Quy; Zott, Christoph
  8. Mutual Loan-Guarantee Societies in Monopolistic Credit Markets with Adverse Selection By Giovanni Busetta; Alberto Zazzaro

  1. By: Silvia Ardagna; Annamaria Lusardi
    Abstract: We use cross-national harmonized micro data from a broad sample of developed and developing countries and investigate the heterogeneity of the effect of entry, contract enforcement regulation, and financial development on both the decision to become an entrepreneur and the level of employment of newly created businesses. We focus on the interaction between the level of regulation and financial development and some individual characteristics that are important determinants of entrepreneurship, such as gender, business skills, and social networks. We find that entry regulation moderates the effect of business skills, while accentuating the effect of gender, even after accounting for the level of financial development. Specifically, women are more likely to enter into entrepreneurship in countries with higher levels of entry regulation, but mainly because they cannot find better work. This effect is also more pronounced in countries that are less financially developed. Furthermore, individuals who report having business skills are less likely to enter entrepreneurship in countries with higher entry regulation. Finally, we also find that individuals who know other entrepreneurs are less likely to start large businesses in countries with higher levels of entry and contract enforcement regulation.
    JEL: K23
    Date: 2009–11
  2. By: William Kerr; Ramana Nanda
    Abstract: Financing constraints are one of the biggest concerns impacting potential entrepreneurs around the world. Given the important role that entrepreneurship is believed to play in the process of economic growth, alleviating financing constraints for would-be entrepreneurs is also an important goal for policymakers worldwide. We review two major streams of research examining the relevance of financing constraints for entrepreneurship. We then introduce a framework that provides a unified perspective on these research streams, thereby highlighting some important areas for future research and policy analysis in entrepreneurial finance.
    JEL: E44 G21 L26 M13
    Date: 2009–11
  3. By: Agustí Segarra (GRIT, Universitat Rovira Virgili); Mercedes Teruel (GRIT, Universitat Rovira Virgili)
    Abstract: This paper analyses the impact of different sources of finance on the growth of firms. Using panel data from Spanish manufacturing firms for the period 2000-2006, we investigate the effects of internal and external finances on firm growth. In particular, we examine three dimensions of these financial sources: a) the performance of the firms’ capital structure in accordance with firm size; b) the effects of internal and external financial sources on growth performance; c) the combined effect of equity, external debt and cash flow on firm growth. We find that low-growth firms are sensitive to cash flow and short-term bank debt, while high-growth firms are more sensitive to long-term debt. Furthermore, equity capital seems to reduce barriers to external finance. Our main conclusion is that during the start-up phase, firms are unable to increase their financial leverage and so their capital structure fails to promote correct investment strategies. However, as their equity capital increases, alternative financial mechanisms, in particular long-term debt, become available, which have a positive impact on firm growth.
    Keywords: firm growth, small firms.
    JEL: L25 R12
    Date: 2009–10
  4. By: William Kerr; Ramana Nanda
    Abstract: We examine the effect of US branch banking deregulations on the entry size of new firms using micro-data from the US Census Bureau. We find that the average entry size for startups did not change following the deregulations. However, among firms that survived at least four years, a greater proportion of firms entered either at their maximum size or closer to the maximum size in the first year. The magnitude of these effects were small compared to the much larger changes in entry rates of small firms following the reforms. Our results highlight that this large-scale entry at the extensive margin can obscure the more subtle intensive margin effects of changes in financing constraints.
    JEL: E44 G21 L26 L43 M13
    Date: 2009–11
  5. By: Sabrina Di Addario (Bank of Italy); Daniela Vuri (University of Rome Tor Vergata)
    Abstract: We analyze empirically the effects of urban agglomeration on Italian college graduates’ work possibilities as entrepreneurs three years after graduation. We find that each 100,000 inhabitant-increase in the size of the individual’s province of work reduces the chances of being an entrepreneur by0.2 per cent. This result is robust to controlling for regional fix effects and to instrumenting urbanization with three different sets of instruments. However, a positive urbanization externality emerges after taking into account urban amenities and dis-amenities, and, above all, provinces’ competition and cost of labor. In this case, every 100,000 inhabitant-increase raises the chance of entrepreneurship by 2.4 percent. Finally, as long as they succeed in entering the largest markets, young entrepreneurs are able to reap off the benefits of urbanization externalities: every 100,000 inhabitant-increase in the province’s population raises entrepreneurs’ net hourly income by 0.2 percent.
    Keywords: Labor market transitions; Urbanization
    JEL: R12 J24 J21
    Date: 2009–11–17
  6. By: Hansson, Pär (Department of Business, Economics, Statistics and Informatics); Eliasson, Kent (Department of Economics, Umeå University); Lindvert, Markus (Growth Analysis)
    Abstract: Using a matching approach, we compare the productivity trajectories of future exporters and matched and unmatched non-exporters. Future exporters have higher productivity than do unmatched non-exporters before entry into the export market, which indicates self-selection into exports. More interestingly, we also find a productivity increase among future exporters relative to matched non-exporters 1-2 years before export entry. However, the productivity gap between future exporters and matched non-exporters does not continue to grow after export entry. Our results suggest that learning-to-export occurs but that learning-by-exporting does not. In contrast to previous studies on Swedish manufacturing, we focus particularly on small and medium-sized enterprises (SMEs)
    Keywords: productivity; learning-to-export; learning-by-exporting; matching
    JEL: D24 F14
    Date: 2009–11–16
  7. By: Huy, Quy (INSEAD); Zott, Christoph (IESE Business School)
    Abstract: Based on a five-year field study of six new ventures, we investigate whether and how organization foun-ders use affective influence, a form of emotion management, with diverse stakeholders, namely investors, board members, customers, and employees. We found wide differences in founders' propensity to use affective influence actions and that not all affective influence actions were effective in mobilizing re-sources for the new firm. We identified a particular form of beneficial affective influence we call "emo-tional assuring," which refers to affective influence actions that seek to build three different dimensions of trust in regard to the new firm: (1) the firm's integrity, (2) the founder's competence as an entrepreneur, and (3) the founder's benevolent character. Although firms that practiced little emotional assuring could mobilize adequate resources as well as firms that did it in munificent environments, the latter gained an upper hand and were more resilient under tough economic conditions. We also identified the moderating conditions and limitations of emotional assuring.
    Keywords: Affective influence; emotional assuring; emotion; entrepreneurship; organization creation; resource mobilization; trust;
    Date: 2009–10–01
  8. By: Giovanni Busetta (Universit… di Messina, Department of Economics, Statistics, Mathematics, and Sociology V. Pareto); Alberto Zazzaro (Universit… Politecnica delle Marche, Department of Economics, MoFiR)
    Abstract: In many countries, Mutual Loan-Guarantee Societies (MLGSs) are assuming ever-increasing importance for small business lending. In this paper we provide a theory to rationalise the raison d'^etre of MLGSs. The basic intuition is that the foundation for MLGSs lies in the inefficiencies created by adverse selection, when borrowers do not have enough collateralisable wealth to satisfy collateral requirements and induce self-selecting contracts. In this setting, we view MLGSs as a wealth-pooling mechanism that allows otherwise inefficiently rationed borrowers to obtain credit. We focus on the case of large, complex urban economies where potential entrepreneurs are numerous and possess no more information about each other than do banks. Despite our extreme assumption on information availability, we show that MLGSs can be characterized by assortative matching in which only safe borrowers have an incentive to join the mutual society.
    Keywords: Collateral, Group formation, Mutual Loan Guarantee Society, Small business lending
    JEL: D82 G21
    Date: 2009–11

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