nep-ent New Economics Papers
on Entrepreneurship
Issue of 2010‒04‒11
six papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Financial Development and Selection into Entrepreneurship: Evidence from Italy and US By M.Deidda
  2. Entrepreneurship Propelling Economic Changes in China By Gregory C. Chow
  3. On the mechanics of firm growth By Erzo G.J. Luttmer
  4. The effect of grant receipt on start-up size: Evidence from plant level data By Sourafel Girma; Holger Görg; Aoife Hanley; Eric Strobl
  5. Small business groups enhance performance and promote stability, not expropriation. Evidence from French SMEs By Anaïs Hamelin
  6. The Outcomes of Individual-level Technology Transfer and the Role of Research Collaboration Networks By Tuomo Nikulainen

  1. By: M.Deidda
    Abstract: The existence of capital market imperfections causes business investment decisions to be strongly dependent on households' private wealth allocation. I claim that if a link exists between private wealth and business decisions, it should be stronger in countries with less developed capital markets. Here, I test this theoretical prediction assessing the relationship between initial household net wealth and the probability of switching to entrepreneurship in Italy and the United States, using household-level data from the Survey of Household Income and Wealth (SHIW) and the Panel Survey of Income Dynamics (PSID). Although Italy and the United States are both developed countries, there are striking differences between the two in terms of transaction costs, downpayment requirements and participation in financial markets. I formulated several theoretical predictions, which are then compared with the data at hand. First of all, I argue that initial wealth should matter more for potential Italian entrepreneurs, who may encounter greater difficulties than their US counterparts in obtaining sufficient funds from a bank or financial institution to start a business. From this perspective, "informal markets" (i.e. help from friends or relatives) should play a more significant role for potential entrepreneurs in Italy, especially for those who are more likely to be constrained. Secondly, I claim that a well developed financial market, by reducing household exposure to financial risk, would positively affect transition into entrepreneurship. Therefore, I fill a gap in the literature introducing a portfolio diversification index, calculated as the inverse of the Herfindhal index, in order to assess the level of financial sophistication. Last but not least, I simultaneously estimate the probability of switching to entrepreneurship and changes in net wealth. Using a sample selection model with endogenous switching makes it possible to deal with endogeneity issues, related to the fact that households may actually accumulate assets prior to setting up a business.
    Keywords: entrepreneurship; business start up; financial development
    JEL: E21 G20 L26
    Date: 2010
  2. By: Gregory C. Chow (Princeton University)
    Abstract: The most important aspect of the Chinese economy today is its rapid changes. The changes are propelled by the Chinese entrepreneurs. This essay is an attempt to understand who the entrepreneurs are, the environment in which they work, whether the dynamic changes will continue and what policies can be proposed to improve the changes.
    Keywords: China, entrepreneurship, economic reform
    JEL: D12 F14 H32 L26 N85
    Date: 2010–03
  3. By: Erzo G.J. Luttmer
    Abstract: The Pareto-like tail of the size distribution of firms can arise from random growth of productivity or stochastic accumulation of capital. If the shocks that give rise to firm growth are perfectly correlated within a firm, then the growth rates of small and large firms are equally volatile, contrary to what is found in the data. If firm growth is the result of many independent shocks within a firm, it can take hundreds of years for a few large firms to emerge. This paper describes an economy with both types of shocks that can account for the thick-tailed firm size distribution, high entry and exit rates, and the relatively young age of large firms. The economy is one in which aggregate growth is driven by the creation of new products by both new and incumbent firms. Some new firms have better ideas than others and choose to implement those ideas at a more rapid pace. Eventually, such firms slow down when the quality of their ideas reverts to the mean. As in the data, average growth rates in a cross section of firms will appear to be independent of firm size, for all but the smallest firms.
    Date: 2010
  4. By: Sourafel Girma; Holger Görg; Aoife Hanley; Eric Strobl
    Abstract: In this paper we use plant level data on the start-up size of new plant entries and detailed information on the grants received by such plants in order to investigate whether grant receipt encourages plants to start-up with more employment than without support. The data relate to manufacturing plants in the Republic of Ireland, where industrial policy has a long history of using discretionary grants to encourage employment growth. We use a matching procedure to deal with the issue of selectivity into grant receipt, and a quantile regression estimator to allow for different effects of grants on plants depending on their position in the start-up size distribution. Our results provide evidence that grants do indeed encourage plants to start-up larger. We also find that this effect is generally higher for foreign than for domestic plants, and that it differs for plants at different quantiles of the start-up size distribution
    Keywords: grants, subsidies, entry, start-up size
    JEL: H2 L2
    Date: 2010–03
  5. By: Anaïs Hamelin (LaRGE Research Center, Université de Strasbourg)
    Abstract: This paper investigates the influence of a firm’s distance from control on its performance, using a unique firm level data set on small business ownership, as well as balance sheet information. This study fills a gap in the empirical governance literature by investigating whether or not there is an expropriation of minority shareholders in small business groups. Contrary to what is usually observed for large business groups, results show a positive relationship between the separation of control from ownership and firm performance. Results also underline that tunneling is used to promote controlling shareholders’ profit stability rather than profit maximization in small business groups.
    Keywords: Ownership, Control, Tunneling, Small Business, Performance.
    JEL: G32 G34
    Date: 2010
  6. By: Tuomo Nikulainen
    Abstract: This paper discusses the outcomes of university-industry interaction from the perspective of an individual academic researcher. Two contributions are made to the extant literature. First, in the existing research, the focus has mostly been on outcomes such as university-based patenting, licensing revenues, invention disclosures to technology transfer offices, and academic entrepreneurship. This narrow focus has excluded intangible outcomes, such as the identification of new research ideas and commercial opportunities, from the discussion. Therefore, in this paper, both intangible and tangible outcomes are taken into account, and the empirical analysis identifies unique individual-level factors related to the different types of outcomes. Second, in the extant literature, it is argued that a boundary-spanning position within different types of networks is related to higher performance and the identification of unique ideas. This aspect is analysed by identifying the role of a boundary-spanning position in research collaboration networks with respect to the different outcomes. The empirical results show that the different outcomes are clearly related to different individual-level factors, and that a boundary-spanning position in research collaboration networks is related to both intangible and tangible outcomes.
    Keywords: technology transfer, university-industry interaction, individual researchers, research collaboration, research networks, boundary spanning, nanotechnology
    JEL: O31 O33
    Date: 2010–03–25

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