nep-ent New Economics Papers
on Entrepreneurship
Issue of 2010‒03‒28
eighteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Hybrid Entrepreneurship By Folta, Timothy B.; Delmar, Frédéric; Wennberg, Karl
  2. Academic Entrepreneurship: What are the Factors Shaping the Capacity of Academic Researchers to Identify and Exploit Entrepreneurial Opportunities? By Pablo D'Este; Surya Mahdi; Andy Neely
  3. Toward a Theory of Public Entrepreneurship By Peter G. Klein; Joseph T. Mahoney; Anita McGahan; Christos N. Pitelis
  4. The Effect of Firm Compensation Structures on Employee Mobility and Employee Entrepreneurship of Extreme Performers By Seth Carnahan; Rajshree Agarwal; Benjamin Campbell; April Franco
  5. The More Business Owners the Merrier? By André van Stel; Mirjam van Praag
  6. Factors Influencing the Entrepreneurial Engagement of Opportunity and Necessity Entrepreneurs By Roy Thurik; Ingrid Verheul; Jolanda Hessels; Peter van der Zwan
  7. Human capital and start-up success of nascent entrepreneurs By Jolanda Hessels; U. Brixy
  8. How Long Does it Take to Become an Entrepreneurial Society - The Case of German Convergence in Self-Employment By Yvonne Schindele
  9. Old Wine in New Bottles: The Effect of Previous Co-Worker Experience on the Survival of New Firms By Bram Timmermans
  10. Venture capital and innovation at the firm level By Pere Arqué Castells
  11. Start-Up Subsidies for the Unemployed: Long-Term Evidence and Effect Heterogeneity By Marco Caliendo; Steffen Künn
  12. Non-Compete Covenants: Incentives to Innovate or Impediments to Growth By Sampsa Samila; Olav Sorenson
  13. Growth and Capital Flows with Risky Entrepreneurship By Damiano Sandri
  14. On the Determinants of the Reach of Innovation-related Collaboration in Small Firms By Mark Freel; Jeroen P.J. de Jong; Tyler Chamberlin
  15. Determinants of R&D cooperation in Japanese high-tech start-ups By Okamuro, Hiroyuki; Kato, Masatoshi; Honjo, Yuji
  16. Entrepreneurship in Transition Economies: The Role of Institutions and Generational Change By Estrin, Saul; Mickiewicz, Tomasz
  17. On the impact of trade on industrial structures : The role of entry cost heterogeneity By OYAMA, Daisuke; SATO, Yasuhiro; TABUCHI, Takatoshi; THISSE, Jacques-Franois
  18. Product and process innovation and the decision to export : firm-level evidence for Belgium By VAN BEVEREN, Ilke; VANDENBUSSCHE, Hylke

  1. By: Folta, Timothy B. (Krannert School of Management); Delmar, Frédéric (Research Institute of Industrial Economics (IFN)); Wennberg, Karl (Imperial College Business School)
    Abstract: In contrast to previous efforts to model the individual’s movement from wage work into entrepreneurship, we consider that individuals might transition incrementally by retaining their wage job while entering into self-employment. We show that these hybrid entrepreneurs represent a significant share of all entrepreneurial activity. Theoretical arguments are proposed to suggest why hybrid entrants are distinct from self-employment entrants, and why hybrid entry may facilitate subsequent entry into full self-employment. We demonstrate that there are significant theoretical and empirical consequences for this group and our understanding of self-employment entry and labor market dynamics. Using matched employee-employer data over eight years, we test the model on a population of Swedish wage earners in the knowledge-intensive sector.
    Keywords: Hybrid entrepreneurship; Self-employment; Labour market dynamics; Transition determinants; Employee-employer data
    JEL: H39 J24 L26
    Date: 2010–03–11
  2. By: Pablo D'Este; Surya Mahdi; Andy Neely
    Abstract: This paper aims at improving our understanding of the attributes of academic researchers that influence the capacity to identify and exploit entrepreneurial opportunities. We investigate a number of factors highlighted in the literature as influencing the entrepreneurial activities undertaken by academics. Our results show that identification and exploitation of entrepreneurial opportunities are shaped by different factors. While identification of commercial opportunities is driven by prior entrepreneurial experience and the excellence of the academic work, exploitation of entrepreneurial opportunities is driven by the extent of previous collaboration with industry partners, cognitive integration and prior entrepreneurial experience.
    Keywords: Academic entrepreneurship; Opportunity identification; Opportunity exploitation; Spin-offs; Patenting; University-business collaboration
    Date: 2010
  3. By: Peter G. Klein; Joseph T. Mahoney; Anita McGahan; Christos N. Pitelis
    Abstract: This paper explores innovation, experimentation, and creativity in the public domain and in the public interest. Researchers in various disciplines have studied public entrepreneurship, but there is little work in management and economics on the nature, incentives, constraints and boundaries of entrepreneurship directed to public ends. We identify a framework for analyzing public entrepreneurship and its relationship to private entrepreneurial behavior. We submit that public and private entrepreneurship share essential features but differ critically regarding the definition and measurement of objectives, the nature of the selection environment, and the opportunities for rent-seeking. We describe four levels of analysis for studying public entrepreneurship, provide examples, and suggest new research directions.
    Keywords: Entrepreneurship, public administration, political economy, institutions, transaction costs
    Date: 2010
  4. By: Seth Carnahan; Rajshree Agarwal; Benjamin Campbell; April Franco
    Abstract: Previous studies of employee entrepreneurship have not considered the rewards available to potential entrepreneurs inside of their current organizations. This study hopes to fill this gap by investigating how the firm’s compensation structure, an important strategic decision closely scrutinized by human resource management, affects the mobility and entrepreneurship decisions of its employees, particularly those employees at the extreme ends of the performance distribution. Using a comprehensive U.S. Census data set covering all employees in the legal services industry across ten states for fifteen years, we find that high performing employees are less likely to leave firms with highly dispersed compensation structures. However, if high performers do leave employers that offer highly disperse compensation structures, they are more likely to join new firms. Less talented employees, on the other hand, are more likely to leave firms with greater pay dispersion. Unlike high performers, we find that low performers are less likely to move to new ventures when departing firms with highly disperse compensation structures.
    Date: 2010–03
  5. By: André van Stel; Mirjam van Praag
    Abstract: Policy in developed countries is often based on the assumption that higher business ownership rates induce economic value. Recent microeconomic empirical evidence casts doubts on the validity of this assumption or, at least, leads to a more nuanced view: Especially the top performing business owners are responsible for the value creation of business owners. Other labor market participants would contribute more to economic value creation as an employee than as a business owner consistent with microeconomic occupational choice theory. This would translate at the macrolevel in the existence of an 'optimal' business ownership rate thereby replacing the dictum of 'the more business owners, the merrier'. We attempt to establish whether there is such an optimal level, while investigating the role of tertiary education. Two findings stand out. First, by estimating extended versions of traditional Cobb Douglas production functions on a sample of 19 OECD countries over the period 1981-2006, we find indeed robust evidence of an optimal business ownership rate (at around 12.5%, on average). Second, the relation between business ownership and macroeconomic productivity is steeper for countries with higher participation rates in tertiary education. Thus, the optimal business ownership rate tends to decrease with tertiary education levels. This is consistent with microeconomic theory and evidence showing that entrepreneurs with superior levels of human capital run larger firms.
    Date: 2010–03–18
  6. By: Roy Thurik; Ingrid Verheul; Jolanda Hessels; Peter van der Zwan
    Abstract: This paper investigates determinants of engagement in various stages of the entrepreneurial process while considering an individual's start-up motivation using 2007 survey data for 27 European countries and the US. Next to opportunity and necessity start-up motivations, we take into account individuals driven by a combination of both motivations. We observe that opportunity- and necessitydriven entrepreneurs as well as those with mixed start-up motivations have different profiles. Furthermore, they differ concerning the factors that inspire or hinder them to engage in the entrepreneurial process more fully ('to climb the entrepreneurial ladder'). For example, entrepreneurship-specific education, selfemployed parents, risk tolerance, perception of lack of financial support, and living in a metropolitan area are important variables in determining entrepreneurial engagement and failure for opportunity-driven individuals, but they are not (or less) important for necessity-driven individuals.
    Date: 2010–03–18
  7. By: Jolanda Hessels; U. Brixy
    Abstract: We explore the role of human capital aspects in explaining whether nascents succeed in the start-up of a new venture. The data used are based on a survey among nascent entrepreneurs in Germany and the Netherlands supplemented by follow-up interviews one year after the first contact. Applying multinomial probit estimations we find that several human capital aspects are related to the probability of getting the business started. For example, a high general degree of human capital (i.e. holding a university degree) lowers the likelihood to succeed in the start-up of the venture, whereas recent employment experience (as opposed to being unemployed or out of the labor force) increases start-up success. Furthermore, we find that specialists are more likely to succeed in getting their business started than generalists.
    Date: 2010–03–18
  8. By: Yvonne Schindele (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: Since the beginning of the transformation of East Germany from a socialist planned economy to a market economy, there has been an ambitious political goal of fostering entrepreneurial activity in that part of the country. One of the most-hoped for results of this undertaking is the anticipated contribution of small and new firms to solving the economic, social, and political problems of East Germany, thereby narrowing the gap between East and West Germany. This paper uses panel data from 1992 to 2005 on 97 German regions to analyze recent convergence in self-employment rates. An astonishing catching-up process is observed for East German regions during the period under study. However, the general convergence between East and West Germany observed during the first years after reunification has not been maintained. In short, some East German regions have achieved convergence with West German self-employment rates and some have not.
    Keywords: Entrepreneurship, regional convergence, self-employment, regional devel- opment, transition, Germany
    JEL: L26 M13 O1 O18 O47 R11
    Date: 2010–03–17
  9. By: Bram Timmermans
    Abstract: The aim of the paper is to investigate the effect of previous co-worker experience on the survival of new established firms. For the empirical analysis I use the Danish Integrated Database of Labor Market Research (IDA). This longitudinal employer-employee database allows me to identify co-worker experience among all members of the firm. In addition, I will make a distinction between ordinary start-ups and entrepreneurial spin-offs. The results show that previous co-worker experience has a positive effect on new firm survival. This effect appears to be valid predominantly for ordinary start-ups then for spin-offs.
    Date: 2010
  10. By: Pere Arqué Castells (Universitat de Barcelona & IEB)
    Abstract: This paper studies the relationship between venture capital (VC) and innovation using a self-collected dataset containing 119 innovative, VC-funded firms and 164,486 controls that operate in Spain. Probit model estimates indicate that firms that have applied for at least one patent are significantly more likely to obtain VC investments. However, when implementing a matching approach to correct for selectivity, no evidence is found of a significant impact of VC on firms’ patenting activity. Rather, evidence is found of a positive effect of VC on the sales growth of funded firms. These results suggest that, rather than having an impact on innovation activities, venture capitalists (VCs) focus on the commercialization of existing products. A finer breakdown by ownership and investment stage also provides evidence that private VCs and early stage investments are notably more effective at stimulating sales than public VCs and late stage investments respectively.
    Keywords: Venture capital, innovation, patents, matching estimator
    JEL: G24 O32
    Date: 2010
  11. By: Marco Caliendo; Steffen Künn
    Abstract: Turning unemployment into self-employment has become an increasingly important part of active labor market policies (ALMP) in many OECD countries. Germany is a good example where the spending on start-up subsidies for the unemployed accounted for nearly 17% of the total spending on ALMP in 2004. In contrast to other programs-like vocational training, job creation schemes, or wage subsidies-the empirical evidence on the effectiveness of such schemes is still scarce; especially regarding long-term effects and effect heterogeneity. This paper aims to close this gap. We use administrative and survey data from a large sample of participants in two distinct start-up programs and a control group of unemployed individuals. We find that over 80% of participants are integrated in the labor market and have relatively high labor income five years after start-up. Additionally, participants are much more satisfied with their current occupational situation compared to previous jobs. Based on conditional propensity score matching methods we estimate the long-term effects of the programs against non-participation. Our results show that both programs are effective with respect to income and employment outcomes in the long-run. Moreover, we consider effect heterogeneity with respect to several dimensions and show that start-up subsidies for the unemployed tend to be most effective for disadvantaged groups in the labor market.
    Keywords: Start-up subsidies, self-employment, evaluation, long-term effects, effect heterogeneity
    JEL: J68 C14 H43
    Date: 2010
  12. By: Sampsa Samila; Olav Sorenson
    Abstract: We find that the enforcement of non-compete clauses significantly impedes entrepreneurship and employment growth. Based on a panel of metropolitan areas in the United States from 1993 to 2002, our results indicate that, relative to states that enforce non-compete covenants, an increase in the local supply of venture capital in states that restrict the scope of these agreements has significantly stronger positive effects on (i) the number of patents, (ii) the number of firm starts, and (iii) employment. We address potential endogeneity issues in the supply of venture capital by using endowment returns as an instrumental variable. Our results point to a strong interaction between financial intermediation and the legal regime in promoting entrepreneurship and economic growth.
    JEL: G24 K31 L26 O43
    Date: 2010
  13. By: Damiano Sandri
    Abstract: This paper shows that the behavior of entrepreneurs facing incomplete financial markets and risky investment can explain why growth accelerations in developing countries tend to be associated with current account improvements. The uninsurable risk of losing invested capital forces entrepreneurs to rely on self-financing, so that when business opportunities open up entrepreneurs increase saving to finance the investment that produces growth. The key insight is that saving has to rise more than investment to allow also for the accumulation of precautionary assets. Plausibly calibrated simulations show that this net saving increase can sustain large and persistent net capital outflows.
    Keywords: Capital flows , Capital outflows , Economic growth , Economic models , Financial risk , Private investment , Private savings , Private sector ,
    Date: 2010–02–18
  14. By: Mark Freel; Jeroen P.J. de Jong; Tyler Chamberlin
    Abstract: This paper takes as its starting point an item of relatively recent academic orthodoxy: the insistence that ‘…interactive learning and collective entrepreneurship are fundamental to the process of innovation’ (Lundvall, 1992, p. 9). From this, academics have frequently taken “interactive” to imply “inter-organisational” and, whilst one might be concerned by this too casual conflation, there is a growing consensus that firms’ embeddedness in collaborative networks matters for their innovative performance (Gilsing et al., 2008).
    Date: 2010
  15. By: Okamuro, Hiroyuki; Kato, Masatoshi; Honjo, Yuji
    Abstract: This paper explores the determinants of R&D cooperation in Japanese hightech start-ups. Using a sample from an original survey conducted in 2008, we examine the effects of founder-, firm-, and industry-specific characteristics on R&D cooperation by the type of partners. Our findings indicate that founder-specific characteristics, such as educational background, academic affiliation, and prior innovation output, are fairly important in determining R&D cooperation with universities and public research institutes. We also provide evidence that founders' work experience and prior innovation output have positive and significant effects on R&D cooperation with business partners. With respect to firm-specific characteristics, it is found that firms investing more in R&D tend to engage in R&D cooperation, regardless of the type of partners. Furthermore, it is found that independent firms are less likely to cooperate on R&D with universities and public research institutes, than subsidiaries and affiliated firms.
    Keywords: Start-up, R&D cooperation, Founder, University, Business partner
    JEL: L14 M13 O32
    Date: 2009–11
  16. By: Estrin, Saul (London School of Economics); Mickiewicz, Tomasz (University College London)
    Abstract: The transition economies have lower rates of entrepreneurship than are observed in most developed and developing market economies. The difference is even more marked in the countries of the former Soviet Union than those of Central and Eastern Europe. We link these differences partly with the legacy of communist planning, which needs to be replaced with formal market-supporting institutions. But many of these developments have now taken place, yet entrepreneurial activity still remains low in many places. To analyse this longer term issue, we highlight the necessarily slow pace of development of new informal institutions and the corresponding social attitudes, notably rebuilding the generalised trust. We argue that changes are even slower in the former Soviet Union than Central and Eastern Europe because communist rule was much longer, leading to a lack of institutional memory. We posit that changes in informal institutions may be therefore delayed until after full generational change.
    Keywords: entrepreneurship, formal and informal sectors, shadow economy, institutional arrangements, comparative studies of countries
    JEL: L26 O17 O57
    Date: 2010–03
  17. By: OYAMA, Daisuke (Graduate School of Economics, Hitotsubashi University, Japan); SATO, Yasuhiro (Graduate School of Economics, Hitotsubashi University, Japan); TABUCHI, Takatoshi (Faculty of Economics, University of Tokyo, Japan); THISSE, Jacques-Franois (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Keywords: entrepreneurship, trade liberalization, externality, heterogeneity, stability
    JEL: F12 F16 J24 O14 R12
    Date: 2009–08–01
  18. By: VAN BEVEREN, Ilke (Katholieke Universiteit Leuven, LICOS and Lessuis, Antwerpen, Belgium); VANDENBUSSCHE, Hylke (UniversitŽ catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium and KULeuven, LICOS, B- 3000 Leuven, Belgium)
    Abstract: Using data from the Community Innovation Survey for Belgium in two consecutive periods, this paper explores the relationship between firm-level innovation activities and the propensity to start exporting. To measure innovation, we include indicators of both innovative effort (R&D activities) as well as innovative output (product and process innovation). Our results suggest that the combination of product and process innovation, rather than either of the two in isolation, increases a firmÕs probability to enter the export market. After controlling for potential endogeneity of the innovation activities, only firms with a sufficiently high probability to start exporting engage in product and process innovation prior to their entry on the export market, pointing to the importance of self-selection into innovation
    Keywords: exports, product innovation, process innovation, self-selection, firm heterogeneity
    JEL: D24 F14 L25 O31 O33
    Date: 2009–12–01

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