nep-ent New Economics Papers
on Entrepreneurship
Issue of 2010‒02‒20
five papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. The Strength and Persistence of Entrepreneurial Cultures By Foreman-Peck, James; Zhou, Peng
  2. Seasoned Equity Offerings by Small and Medium-Sized Enterprises By Cécile Carpentier; Jean-François L'Her; Jean-Marc Suret
  3. Flexible Labor and Innovation Performance: Evidence from Longitudinal Firm-Level Data By Zhou, H.; Dekker, R.; Kleinknecht, A.
  4. A lifeline for Europe's young radical innovators By Reinhilde Veugelers
  5. Entry Barriers in Retail Trade By Fabiano Schivardi; E. Viviano

  1. By: Foreman-Peck, James (Cardiff Business School); Zhou, Peng (Cardiff Business School)
    Abstract: Becoming an entrepreneur requires both motivation and opportunity. Motivation may be determined by collective experience or 'culture', as well as by personality. Whether a culture is conducive or harmful to entrepreneurship can only be established if the influence of institutions that determine opportunity is controlled. The twentieth century United States provides a natural experiment to measure the strength and persistence of entrepreneurial cultures. Assuming immigrants bear the cultures of their birth place, comparison of revealed entrepreneurial propensities of US immigrant groups in 1910 and 2000 will reflect these backgrounds. According to this test North-western Europe, where modern economic growth is widely held to have originated, did not host unusually strong entrepreneurial cultures, rather the reverse in the case for England. The most precocious and durable entrepreneurial cultures were exhibited by those originating from Greece, Turkey and Italy, together with Jews. Max Weber's identification of nineteenth century Catholic culture as inimical to economic development is not born out in the twentieth century by the sustained entrepreneurship of Cubans and Italians. A major cultural change over the century, that by the end had initiated widespread female entrepreneurship, also ensured that this trait systematically responded less strongly to the origin background than did male entrepreneurship.
    Keywords: Entrepreneurship; Culture; Migration
    JEL: D01 J15 J23 J61
    Date: 2009–12
  2. By: Cécile Carpentier; Jean-François L'Her; Jean-Marc Suret
    Abstract: Most of the analyses of small firms’ decision to seek outside equity financing and the conditions thereof have concerned private firms. Knowledge of the risk and return of entrepreneurial ventures for outside investors is consequently limited. This paper attempts to fill this gap by examining the Canadian context, where small and medium-sized enterprises (SMEs) are allowed to list on a stock market. We analyze seasoned equity offerings launched by SMEs over the last decade. These public issuers can be considered low quality firms with poor operating performance. Managers issue equity before a large decrease in operating and stock market performance. Individual investors do not price the stocks correctly around the issue and incur significant negative returns in the years following the issue. This is particularly true for constrained issuers. We confirm that entrepreneurial outside equity attracts lemons, and that individual investors cannot invest wisely in emerging ventures. Probably as a consequence of individual investors’ lack of skill and rationality, the cost of outside equity financing of Canadian public SMEs is abnormally low. <P>La plupart des analyses de la décision et des conditions de financement des petites entreprises portent sur des entités privées. Le risque et le rendement que ces entreprises représentent pour les investisseurs sont donc très mal connus. Ce papier tente de combler cette lacune en utilisant le contexte canadien, où les petites et moyennes entreprises (PMEs) sont autorisées à s’introduire en bourse. Nous analysons les financements par fonds propres levés par ces PMEs au cours de la dernière décennie. Ces émetteurs peuvent être considérés comme des entreprises de faible qualité présentant une piètre performance opérationnelle. Les dirigeants émettent des actions juste avant une forte diminution de la performance comptable et boursière. Les investisseurs individuels n’évaluent pas correctement les actions au moment de l’émission et subissent des rendements négatifs significatifs au cours des années postérieures. Ceci est particulièrement vrai pour les émetteurs contraints financièrement. Nous confirmons que le marché du financement externe des PMEs attire des « citrons », et que les investisseurs individuels ne peuvent pas investir de façon avisée dans les entreprises en développement. Conséquence probable d’un manque d’expérience et de rationalité des investisseurs individuels, le coût des fonds propres externes est anormalement bas pour les PMEs inscrites en bourse au Canada.
    Keywords: financing decision, equity offerings, small business, long-run performance, cost of equity, financial constrain, décision de financement, financement par fonds propres, petites entreprises, coût des fonds propres, performance, contrainte financière
    JEL: G14 G32 L26
    Date: 2010–01–01
  3. By: Zhou, H.; Dekker, R.; Kleinknecht, A. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Firms with high shares of workers on fixed-term contracts have significantly higher sales of imitative new products but perform significantly worse on sales of inno¬va¬tive new products (“first on the marketâ€). High functional flexibility in “insider-outsider†la¬bor markets enhances a firm’s new product sales, as do training efforts and highly edu¬ca¬¬ted personnel. We find weak evidence that larger and older firms have higher new pro¬duct sales than do younger and smaller firms. Our findings should be food for thought to eco-nomists making unqualified pleas for the deregulation of labor markets.
    Keywords: J5;M5;O15;O31;innovation performance;new product sales;numerical flexibility;OSA longitudinal dataset;SMEs
    Date: 2010–01–21
  4. By: Reinhilde Veugelers
    Abstract: In this Policy Brief, Reinhilde Veugelers shows that Young Innovative Companies (YICs) in Europe achieve significantly higher innovative sales than other innovation-active firms, representing 36% of sales having market novelties. She also confirms that YICs are more affected by credit constraints than other innovation-active firms. If Europe is to exit the current crisis intact and fulfill its full growth potential in the medium term, the author therefore believes Europe must develop policies and incentives which are tailored to the needs of European young radical innovators.
    Date: 2009–03
  5. By: Fabiano Schivardi; E. Viviano
    Abstract: <p>The 1998 reform of the Italian retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on sectoral performance. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and lower productivity of incumbent firms. Liberalizing entry has a positive effect on investment in ICT, increases employment and compresses labor costs in large shops. In areas with more stringent entry regulation, lower productivity coupled with larger margins results in higher consumer prices.</p>
    Keywords: entry barriers; productivity growth; retail trade
    JEL: L81 L5 L11
    Date: 2009

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