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on Entrepreneurship |
| By: | Werner, Arndt; Moog, Petra |
| Abstract: | Based on the finding that entrepreneurs who found new firms tend to work as employees of small rather than large firms prior to start-up, we test how different working conditions, which enhance entrepreneurial learning, affect their decision to become entrepreneurs when moderated by firm size. Based on data of the German Socio-Economic Panel (SOEP), we find a significant relationship between entrepreneurial learning (extracted in an orthogonal factor analysis based on twelve working conditions as proxy for entrepreneurial human capital and work experience) and firm size when predicting the probability of leaving paid employment for self-employment. We think, that this is a special kind of knowledge spillover. We also control for other aspects such as gender, age, wage, etc. – factors that may potentially influence the decision to become self-employed. Thus, our analysis sheds new light onto the black box of SMEs as a hotbed of new start-ups. |
| Keywords: | Entrepreneurship; Occupational Choice; Working Conditions; Human Capital |
| JEL: | J28 M54 J24 M13 C33 |
| Date: | 2009–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18826&r=ent |
| By: | Robert W. Fairlie (Department of Economics, University of California, Santa Cruz and RAND); Kanika Kapur (School of Economics and Geary Institute, University College Dublin and RAND); Susan Gates (RAND) |
| Abstract: | The focus on employer-provided health insurance in the United States may restrict business creation. We address the limited research on the topic of “entrepreneurship lock” by using recent panel data from matched Current Population Surveys. We use difference-in-difference models to estimate the interaction between having a spouse with employer-based health insurance and potential demand for health care. We find evidence of a larger negative effect of health insurance demand on the entrepreneurship probability for those without spousal coverage than for those with spousal coverage. We also take a new approach in the literature to examine the question of whether employer-based health insurance discourages entrepreneurship by exploiting the discontinuity created at age 65 through the qualification for Medicare. Using a novel procedure of identifying age in months from matched monthly CPS data, we compare the probability of business ownership among male workers in the months just before turning age 65 and in the months just after turning age 65. We find that business ownership rates increase from just under age 65 to just over age 65, whereas we find no change in business ownership rates from just before to just after for other ages 55-75. Our estimates provide some evidence that "entrepreneurship lock" exists, which raises concerns that the bundling of health insurance and employment may create an inefficient allocation of which or when workers start businesses. |
| Keywords: | Self-employment, entrepreneurship, health insurance |
| Date: | 2009–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:200939&r=ent |
| By: | Ashish Arora; Anand Nandkumar |
| Abstract: | We analyze how entrepreneurial opportunity cost conditions performance. We depart from the literature on entrepreneurship which identifies survival with performance. Instead, many entrepreneurs aim for a cash-out (IPO or acquisition), especially in innovation based industries. Striving for a cash-out makes mistakes more likely and increases the probability of failure. High opportunity cost entrepreneurs will attempt to cash-out (IPO or friendly acquisition) quickly, even if it implies a higher risk of failure. Entrepreneurs with fewer outside alternatives may tend to linger on longer. We formalize this intuition with a simple model. Using a novel dataset of information security startups we find that entrepreneurs with high opportunity costs are not only more likely to cash-out but they are also more likely to fail. As well, our results confirm the predicted role of venture quality in conditioning the relationship between entrepreneurial opportunity cost and entrepreneurial performance. |
| JEL: | J4 L26 O3 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15532&r=ent |
| By: | Zoltan J. Acs; Claire Economidou; Mark Sanders |
| Abstract: | In this paper we present an endogenous growth model in which we investigate the implications of knowledge spillovers between knowledge creators (inventors) and commercializers (innovators). We then turn to the question how such knowledge spillovers affect value creation within and among organizations as well as at the aggregate level and discuss how the internalization of these knowledge spillovers can help improve economic performance at both levels. |
| Keywords: | knowledge spillovers; innovation management; strategic entrepreneurship |
| JEL: | L26 O31 O32 O38 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0932&r=ent |
| By: | Gabler, Alain; Licandro, Omar |
| Abstract: | This paper contributes to the literature on both embodied technical progress and firm dynamics, by formulating an endogenous growth model where selection and imitation play a fundamental role in helping capital good producers to learn about the productivity of technologies embodied in new plants. By calibrating the model to some key aggregates particularly relevant for the embodied capital literature, among them the growth rate of the relative investment price, the model quantitatively replicates the main facts associated to firm dynamics, such as the entry rate and the tail index of the establishment size distribution. In line with the previous literature, it also predicts a contribution to productivity growth of embodied technical progress and selection of around 60%. |
| Keywords: | endogenous growth; firm entry and exit; investment-specific technological change; selection and imitation |
| JEL: | B52 O3 O41 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7486&r=ent |
| By: | Shimomura, Ken-Ichi; Thisse, Jacques-François |
| Abstract: | Armchair evidence shows that many industries are made of a few big commercial or manufacturing firms, which are able to affect the market outcome, and of a myriad of small family-run businesses with very few employees, each of which has a negligible impact on the market. Examples can be found in apparel, catering, publishers and bookstores, retailing, finance and insurances, and IT industries. We provide a new general equilibrium framework that encapsulates both market structures. Due to the higher toughness of the market, the entry of big firms leads them to sell more through a market expansion effect, which is generated by the exit of small firms. Furthermore, the level of social welfare increases with the number of oligopolistic firms because the procompetitive effect associated with the entry of a big firm dominates the resulting decrease in product variety. |
| Keywords: | monopolistic competition; oligopoly; product differentiation; welfare |
| JEL: | L13 L40 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7404&r=ent |
| By: | Wahba, Jackline; Zenou, Yves |
| Abstract: | The aim of this paper is to investigate whether return migrants are more likely to become entrepreneurs than non-migrants. We develop a theoretical search model that puts forward the trade off faced by returnees since overseas migration provides an opportunity for human and physical capital accumulation but, at the same time, may lead to a loss of social capital back home. We test the predictions of the model using data from Egypt. We find that, even after controlling for the endogeneity of the temporary migration decision, an overseas returnee is more likely to become an entrepreneur than a non-migrant. Although migrants lose their original social networks whilst overseas, savings and human capital accumulation acquired abroad over-compensate for this loss. Our results also suggest that social networks have no significant impact on becoming entrepreneurs for returnees but matter for non-migrants. |
| Keywords: | entrepreneurship; savings; selection; social capital |
| JEL: | L26 O12 O15 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7552&r=ent |
| By: | Lofstrom, Magnus (Public Policy Institute of California) |
| Abstract: | More than half of the foreign born workforce in the U.S. have no schooling beyond high school and about 20 percent of the low-skilled workforce are immigrants. More than 10 percent of these low-skilled immigrants are self-employed. Utilizing longitudinal data from the 1996, 2001 and 2004 Survey of Income and Program Participation panels, this paper analyzes the returns to self-employment among low-skilled immigrants. We compare annual earnings and earnings growth of immigrant entrepreneurs to immigrants in wage/salary employment as well as native born business owners. We find that the returns to low-skilled self-employment among immigrants is higher than it is among natives but also that wage/salary employment is a more financially rewarding option for most low-skilled immigrants. An exception is immigrant men, who are found to have higher earnings growth than immigrants in wage/salary employment and are predicted to reach earnings parity after approximately 10 years in business. We also find that most of the 20 percent male native-immigrant earnings gap among low-skilled business owners can be explained primarily by differences in the ethnic composition. Low-skilled female foreign born entrepreneurs are found to have earnings roughly equal to those of self-employed native born women. |
| Keywords: | immigrants, low-skill, earnings, self-employment, entrepreneurship |
| JEL: | J15 J16 J31 L26 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4560&r=ent |
| By: | Laeven, Luc; Levine, Ross; Michalopoulos, Stelios |
| Abstract: | We model technological and financial innovation as reflecting the decisions of profit maximizing agents and explore the implications for economic growth. We start with a Schumpeterian endogenous growth model where entrepreneurs earn monopoly profits by inventing better goods and financiers arise to screen entrepreneurs. A novel feature of the model is that financiers also engage in the costly, risky, and potentially profitable process of innovation: Financiers can invent more effective processes for screening entrepreneurs. Every existing screening process, however, becomes less effective as technology advances. Consequently, technological innovation and, thus, economic growth stop unless financiers continually innovate. Historical observations and empirical evidence are more consistent with this dynamic model of financial innovation and endogenous growth than with existing models of financial development and growth. |
| Keywords: | Corporate Finance; Economic Growth; Entrepreneurship; Financial Institutions; Invention; Technological change |
| JEL: | G0 O31 O4 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7465&r=ent |
| By: | James R. Markusen; Frank Stähler |
| Abstract: | Models dealing with cross-border acquisitions versus greenfield investment usually assume that the entry of a foreign firm into a market has effects on the outputs of all domestic firms in that market, but exit or entry of local firms is not considered. The purpose of this paper is to re-examine the acquisition versus greenfield versus exporting question under fixed versus free entry assumptions for local firms. Our finding is that greenfield entry and exporting options are more attractive relative to acquisition when the local market structure adjusts to foreign entry through local entry or exit than when it is fixed. The entering foreign firm may do better or worse under free entry versus a fixed market structure depending on its optimal choice under the latter assumption. |
| JEL: | F12 F23 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15530&r=ent |
| By: | Colin Davis (Kobe University, Graduate School of Economics); Yasunobu Tomoda (Kyoto University, Institute of Economic Research) |
| Abstract: | We develop a simple model of endogenous growth and occupational choice in which skill differentiated workers choose between three types of employment activity: production, process innovation,and quality innovation. Incumbent firms invest in process innovation to reduce production costs and market entrants invest in quality improvements in order to capture the market from vintage product lines. We use this framework to examine innovation incentives for incumbent firms in an environment of creative destruction and find that there are two plausible and stable patterns of product evolution: a corner equilibrium with quality growth alone, and an interior equilibrium with both productivity growth and quality growth. We also show that the process innovation of an interior equilibrium has important policy implications for economic growth. |
| Keywords: | Process innovation;Quality innovation; Endogenous growth; Occupational choice |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:0915&r=ent |