nep-ent New Economics Papers
on Entrepreneurship
Issue of 2010‒09‒03
eight papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Josh Lerner: Recipient of the 2010 Global Award for Entrepreneurship Research By Braunerhjelm, Pontus; Parker, Simon
  2. The Social Capital of Venture Capitalists and Its Impact on the Funding of Start-Up Firms By Alexy, O.; Block, J.H.; Sandner, P.G.; Wal, A.L.J. Ter
  3. Spinoffs and Entrepreneurial Talent By Mili Shrivastava
  4. The Impact of Firm Entry Regulation on Long-living Entrants By Susanne Prantl
  5. Entry and Incumbent Innovation By Philipp Weinscheink
  6. The effects of business environments on development : surveying new firm-level evidence By Xu, Lixin Colin
  7. R&D Strategy of Small and Medium Enterprises in India By Jaya Prakash Pradhan
  8. Towards a New Agenda for the Study of Business Internationalization: Integrating Markets, Institutions and Politics By Rodrigues, S.B.

  1. By: Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Parker, Simon (University of Western Ontario, London, ON, Canada.)
    Abstract: This article describes the academic contributions of the 2010 recipient of the Global Award for Entrepreneurship Research, Professor Josh Lerner of the Harvard Business School. Lerner’s empirical research on the inter-relationship between venture capital, innovation and entrepreneurship has greatly extended and improved our understanding of one of the major drivers of growth in modern economies. The first part of this article explains Lerner’s contributions as regards the structure and organization of the venture capital industry. Later, his most important publications on entrepreneurship, innovation and intellectual property rights are surveyed. Several aspects of Lerner’s policy-oriented work are then outlined, before the article closes with a brief conclusion.
    Keywords: Global Award; Venture capital; Patent; Entrepreneurship; Innovation
    JEL: G24 L26 O31
    Date: 2010–08–25
  2. By: Alexy, O.; Block, J.H.; Sandner, P.G.; Wal, A.L.J. Ter
    Abstract: How does the social capital of venture capitalists (VCs) affect the funding of start-ups? Extant entrepreneurship literature conceptualizes a substitute effect between the social and financial capital that new firms attain from their investors. On the contrary, by building on the rich social capital literature, we hypothesize a positive effect of VCs’ social capital, derived from past syndication, on the amount of money that start-ups receive. Specifically, we argue that both structural aspects of VCs’ social network, such as the number of connections and the spanning of structural holes, and relational aspects, such as the diversity of network partners’ attributes, provide VCs with superior access to information about current investment objects and opportunities to leverage them in the future, increasing their willingness to invest in these firms. Our empirical results, derived from a novel dataset containing more than 5,000 funding rounds in the Internet and IT sector, strongly confirm our hypotheses. Both structural and relational attributes of VCs’ syndication networks have a significant influence on the funds received by start-up firms, highlighting the importance of a social capital perspective on new venture funding. We discuss the implications of our findings for theories of venture capital and entrepreneurship, showing that the role and effect of VCs’ social capital on start-up firms is much more complex than previously argued in the literature.
    Keywords: venture capital;social capital;start-ups;social networks;structural holes
    Date: 2010–06–26
  3. By: Mili Shrivastava (Graduate College "The Economics of Innovative Change" and Entrepreneurship, Growth and Public policy group, Max Planck Institute of Economics, Jena, Germany)
    Abstract: Spinoffs firms are an important source of industry dynamics and innovation. While an emerging body of literature identifies strategic disagreements and ideas as determinants of spinoffs, neither of them can completely explain the spinoff process. Mere disagreements or brilliant flashes of ideas do not always lead to spinoffs. This study brings individual level determinants at the forefront in spinoff formation. Based on insights from the occupational choice theory, we argue that spinoff process is a distinctive class of entrepreneurial entrants and entrepreneurial talent is a major determinant in formation of spinoffs. Entrepreneurial talent modulates the impact of strategic disagreements and ideas on the decision to spi
    Keywords: Spinoffs, Entrepreneurship, Occupational choice, Disagreements
    JEL: D00 J24 L2
    Date: 2010–08–25
  4. By: Susanne Prantl (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: What is the impact of firm entry regulation on sustained entry into self-employment? How does firm entry regulation influence the performance of long-living entrants? In this paper, I address these questions by exploiting a natural experiment in firm entry regulation. After German reunification, East and West Germany faced different economic conditions, but fell under the same law that imposes a substantial mandatory standard on entrepreneurs who want to start a legally independent firm in one of the regulated occupations. The empirical results suggest that the entry regulation suppresses long-living entrants, not only entrants in general or transient, short-lived entrants. This effect on the number of long-living entrants is not accompanied by a counteracting effect on the performance of long-living entrants, as measured by firm size several years after entry.
    Keywords: Firm entry regulation, sustained entry, self-employment, firm size
    JEL: K20 L25 L26 L50 M13 P52
    Date: 2010–07
  5. By: Philipp Weinscheink (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: We explore how the threat of entry influences the innovation activity of an incumbent. We show that the incumbent’s investment is hump-shaped in the entry threat. When the entry threat is small and increases, the incumbent invests more to deter entry, or to make it unlikely. This is due to the entry deterrence effect. However, when the threat becomes huge, entry can no longer profitably be deterred or made unlikely and the investment becomes small. Then the Schumpeterian effect dominates. These results turn out to be very robust.
    Date: 2010–05
  6. By: Xu, Lixin Colin
    Abstract: In the past decade, the World Bank has promoted improving business environments as a key strategy for development, which has resulted in a significant amount of investment in collecting firm-level investment climate surveys across countries. What lessons have emerged from the papers using these new data? The key finding is that the effects of business environments are heterogeneous and depend crucially on industry, initial conditions, and complementary institutions. Some elements of the business environment, such as labor flexibility, low entry and exit barriers, and a reasonable protection from the"grabbing hands"of the government, seem to matter a great deal for most economies. Other elements, such as infrastructure and contracting institutions (courts and access to finance), hinge on their initial status and the size of the market.
    Keywords: Environmental Economics&Policies,Labor Policies,Debt Markets,Emerging Markets,Access to Finance
    Date: 2010–08–01
  7. By: Jaya Prakash Pradhan
    Abstract: The liberalization of economic policies in the last two decades and intensifying market competition tend to be a cause of policy concern for the survival of SMEs in emerging economies like India. These SMEs account for the largest chunk of industrial units and employment in the national economy. Yet, most of them are competing with deeply inadequate resources, especially by means of weak technological capabilities. The present study has provided not only preliminary estimates on SME R&D investments in Indian manufacturing and their broad trends and patterns, but also contributed to the understanding of factors driving the SME in-house R&D activities. It shows that Indian SMEs continue to be vulnerable among all firms as they have the lowest incidence of doing in-house R&D and their R&D intensities have fallen in the last decade. Based on the results from three-step Censored Quantile Regression, this study has suggested a set of useful policy implications for enhancing SME R&D.
    Keywords: SMEs; R&D; Business Groups; Foreign Firms.
    JEL: L11 L22 F23
    Date: 2010–08–14
  8. By: Rodrigues, S.B.
    Abstract: Business is becoming increasingly international. At the same time, governments are intervening more in the conduct of business. A further development is the growing significance of emerging economies, many of which have a tradition of active government involvement with business. Taken together, these trends make it imperative to understand the relationships between firms and their institutional contexts. Conventional theories adopt an over-rationalized view of these relationships international business. Their apolitical perspective misses the fact that in order to build and maintain international operations, firms need to develop political relations with governments and institutions in home countries and abroad. The aim of this lecture is to develop an alternative perspective with particular reference to the internationalization of firms, large and small. This considers how multinationals gain international positions through bargaining power with foreign governments. By contrast, SMEs face liabilities in dealing with foreign governments and instead often have to achieve internationalization through networking with other SMEs, with domestic communities and support agencies via various forms of social innovation. The lecture concludes that political and social innovation perspectives open new research avenues in the field of international business.
    Keywords: multinationals;small and medium enterprises;politics;markets;institutions;bargaining power;influence;social innovation;internationalization;evolution;co-evolution;environment
    Date: 2010–06–17

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