nep-ent New Economics Papers
on Entrepreneurship
Issue of 2010‒05‒22
eight papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Migration, wages, and parental background: Obstacles to entrepreneurship and growth in East Germany By Zoë Kuehn
  2. The Circulation of Ideas in Firms and Markets By Thomas Hellman; Enrico Perotti
  3. Entrepreneurial growth expectations and information flows in networks. By Daskalopoulou, Irene; Petrou, Anastasia
  4. A Control Group Study of Incubators’ Impact to Promote Firm Survival By Michael Schwartz
  5. Small and Medium Enterprises in Japan: Surviving the Long-Term Recession By Uchikawa, Shuji
  6. Clusters, Transnational Entrepreneurs and the Emergence of New Global Production Patterns. The Palanpuris and the Reorganization of Diamond Manufacturing By Henn, Sebastian
  7. Will the crisis affect the economic recovery in eastern European countries ? evidence from firm level data By Correa, Paulo; Iootty, Mariana
  8. Learning-by-Exporting and Destination Effects: Evidence from African SMEs By Boermans, Martijn Adriaan

  1. By: Zoë Kuehn (Universidad Carlos III de Madrid)
    Abstract: For the last decade, the East German economy has been suffering from high unemployment and low economic growth. Policy makers often point to the lack of entrepreneurship as one of East Germany\'s main problems. This paper addresses the question of how East Germany\'s integration into an established economy, West Germany, may have hindered a fruitful development of entrepreneurship and how this may have affected economic growth. I build a model economy that places Lucas\'s (1978) span-of-control model into an overlapping-generations framework. Following Hassler and Rodríguez Mora (2000) managerial knowhow is defined as a combination of two factors, innate talent and entrepreneurial parental background, and growth depends on the innate talent of entrepreneurs. In East Germany, the lack of entrepreneurial parental background makes talent the decisive factor in occupational choice and more talented entrepreneurs should contribute to high growth rates. However, three key aspects of its integration into West Germany inhibit this mechanism: 1) the unrestricted mobility of East Germans to the West, 2) the policy of fixing East German wages as fractions of West German wages, and 3) the importance of parental background for entrepreneurship in West Germany. Counterfactual experiments show that eliminating any of these three aspects leads to more entrepreneurs, less unemployment, and higher economic growth in East Germany.
    Keywords: entrepreneurship; allocation of talent; social mobility; transition
    JEL: F15 E24 J22
    Date: 2010–05–12
  2. By: Thomas Hellman (University of British Columbia); Enrico Perotti (University of Amsterdam)
    Abstract: Novel early stage ideas face uncertainty on the expertise needed to elaborate them, which creates a need to circulate them widely to find a match. Yet as information is not excludable, shared ideas may be stolen, reducing incentives to innovate. Still, in idea-rich environments inventors may share them without contractual protection. Idea density is enhanced by firms ensuring rewards to inventors, while their legal boundaries limit idea leakage. As firms limit idea circulation, the innovative environment involves a symbiotic interaction: firms incubate ideas and allow employees to leave if they cannot find an internal fit; markets allow for wide circulation of ideas until matched and completed; under certain circumstances ideas may be even developed in both firms and markets.
    Keywords: Ideas, Innovation, Entrepreneurship, Firm Organization, Start-Ups
    JEL: D83 L22 M13 O31
    Date: 2010–05
  3. By: Daskalopoulou, Irene; Petrou, Anastasia
    Abstract: The study analyzes entrepreneur’s expectations regarding future growth by analyzing the relationship between information flows from networks and the perceived risk of decisions associated with the future size of a firm. The main proposition is that growth expectations might be the outcome of superior judgment stemming from privileged information derived from networks. To provide evidence in support of this hypothesis a sample selection model is estimated using a two-step estimation procedure. Cross-section questionnaire data are used in the empirical analysis. Evidence is provided on the role of inter-firm contacts and relationships as a mechanism able to assist entrepreneurs in better assessing and even reduce the risk and uncertainty associated with their present and future decisions regarding firm growth. The study provides evidence on the factors affecting expected growth rates while it explicitly formulates and tests the hypothesis that expectations regarding growth might be the outcome of superior judgment stemming from privileged information derived from networks. Analysis indicates that networks are indeed information mechanisms, however, such information should be specific to problem solving firm processes. Better informed entrepreneurs are those that foresee higher growth in the future, yet they are not blocked in only local networking.
    Keywords: small firms; expected growth; networks; information; Greece.
    JEL: D21 O18 D83 O12
    Date: 2010
  4. By: Michael Schwartz
    Abstract: It is widely unclear as to whether start-up firms supported by publicly-initiated incubator initiatives have higher survival rates than comparable start-up firms that have not received support by such initiatives. This paper contributes to the underlying discussion by performing an empirical analysis of the long-term survival of 371 incubator firms (after their graduation) from five German incubators and contrasting these results with the long-term survival of a control group of 371 comparable non-incubated firms. The analysis covers a 10-year time span. To account for the problem of selection bias, a non-parametric matching approach is applied to identify an appropriate control group. For neither of the five incubator locations we find statistically significant higher survival probabilities for firms located in incubators compared to firms located outside those incubator organizations. For three incubator locations the analysis even reveals statistically significant lower chances of survival for those start-ups having received support by an incubator. We therefore arrive at the conclusion that being located in an incubator – contrasting the widespread rhetoric of policy actors and incubator stakeholders – does not increase the chances of long-term business survival.
    Keywords: business incubators, firm survival, control group, matching, survival analy- sis, technology policy
    JEL: L26 O38 M13 C41
    Date: 2010–05
  5. By: Uchikawa, Shuji (Asian Development Bank Institute)
    Abstract: The relationship between large enterprises (LEs) and small and medium enterprises (SMEs) in Japan has undergone major changes during the long-term recession since 1991. While SMEs still play the important role of supplying parts and components to LEs through subcontracting, many LEs have started to reduce the number of their suppliers and the components they use in manufacturing. While efficient SMEs selected by LEs were able to expand their businesses, inefficient SMEs lost customers. The regression results in this study suggest that the decrease in number of establishments—specifically, the exit of inefficient SMEs—might improve total factor productivity growth rates. The traditional business model of being dependent on certain LEs and doing business within the cluster is not functioning as well as it used to. Heavy dependence on certain industries and highly segmented and specialized production processes prevent the clusters from adjusting to the new business environment. Some SMEs are still able to create new business by taking advantage of more flexible divisions of labor. SME policies must encourage diversification and collaboration that cut across traditional industry groupings to form a flexible division of labor.
    Keywords: japan sme recession; japan sme restructuring
    JEL: L60 O14 O25
    Date: 2009–11–27
  6. By: Henn, Sebastian
    Abstract: For a few years now, the concept of transnational entrepreneurship (TE) has gained in importance in social sciences. It focuses on individuals having migrated from one country to another, thereby maintaining business-related linkages with their home countries. These transnational entrepre-neurs are said to maximize their resource bases by engaging simultaneously in two or more so-cially embedded environments. Though the concept explicitly refers to cross-border activities of mostly smaller sized enterprises, it has not found its way into the debate on the change of spatial production patterns so far. One reason for the disregard of the approach is that TE-studies up to now clearly have adopted a micro perspective which has not accounted for regional aspects. The paper aims at closing this research gap. Using the example of diamond manufacturing, it will show that transnational entrepreneurs are able to significantly contribute to the change of tradi-tionally grown regional production patterns and therefore asks for a deeper consideration of these actors in future research on globalization issues.
    Keywords: Transnational Entrepreneurship; Clusters; Diamond Manufacturing; Palanpuris
    JEL: F22 B52 F23 R12
    Date: 2010–05–12
  7. By: Correa, Paulo; Iootty, Mariana
    Abstract: Two sources of growth are firm learning and innovation. Using a unique panel data for 1,686 firms in six countries (Bulgaria, Hungary, Latvia, Lithuania, Romania, and Turkey), this paper applies panel data estimatorsand Juhn-Murphy Pierce decomposition in order to identify the effects of the global economic crisis on sales growth of innovative and young enterprises in Eastern European countries. The results show that innovative and young firms were significantly more affected by the crisis than non innovative and older enterprises. The authors interpret these results as an indication that the achievement of pre-crisis growth rates in those countries may be difficult.
    Keywords: Microfinance,Achieving Shared Growth,E-Business,Small Scale Enterprise,Economic Growth
    Date: 2010–04–01
  8. By: Boermans, Martijn Adriaan
    Abstract: Vast empirical evidence underscores that exporting firms are more productive than non-exporters. As governments accordingly pursue export-promoting policies we are interested in the firmness of these conclusions with respect to African small and medium sized enterprises (SMEs) and the influence of the destination of export trade. Using a micro-panel dataset from five African countries we confirm the self-selection. We apply propensity scores to match exporters and use a difference-in-difference methodology to test if African SMEs experience productivity gains because of export participation. Results indicate that African firms significantly learn-by-exporting. Manufacturers obtain significant performance improvements due to internationalization although this effect is moderated by export destination. Firms that export outside Africa become more capital intensive and at the same time hire more workers. In contrast we find evidence that exporters within the African region significantly downsize in capital intensity. Results regarding skill-bias of internationally active firms are mixed, where exporters within the region expand in size and hire more relatively unskilled workers.
    Keywords: learning-by-exporting; destination effects; firm-level; Africa; propensity scores
    JEL: D21 O55 F14 O12 L60
    Date: 2010–03–21

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