nep-ent New Economics Papers
on Entrepreneurship
Issue of 2010‒10‒09
eleven papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Why Have Lending Programs Targeting Disadvantaged Small-Business Borrowers Achieved So Little Success in the United States? By Bates, Timothy; Lofstrom, Magnus; Servon, Lisa
  2. Skill-Biased Change in Entrepreneurial Technology By Poschke, Markus
  3. Is Employer-Based Health Insurance a Barrier to Entrepreneurship? By Fairlie, Robert W.; Kapur, Kanika; Gates, Susan
  4. Venture capitalists in Spain: cluster analysis of criteria used in the screening process By Ginés Hernández Cánovas; María Camino Ramón Llorens
  5. Banks versus venture capital when the venture capitalist values private benefits of control By Inci, Eren; Barlo, Mehmet
  6. Entrepreneurial Finance and the Flat-World Hypothesis: Evidence from Crowd-Funding Entrepreneurs in the Arts By Ajay Agrawal; Christian Catalini; Avi Goldfarb
  7. Regional Entrepreneurial Heritage in a Socialist and a Post-Socialist Economy By Michael Wyrwich
  8. SMEs, Entrepreneurship and Local Development in the Marche Region, Italy By Jonathan Potter; Alessandra Proto; Marco Marchese
  9. Exporting and performance: Market entry, expansion and destination characteristics By Richard Fabling and Lynda Sanderson
  10. Le développement des circuits courts alimentaires : un nouveau souffle entrepreneurial dans l'agriculture ? By Emilie Lanciano; Séverine Saleilles
  11. L'influence des caractéristiques du dirigeant et de l'équipe dirigeante sur le management financier de la PME en hyper-croissance : une approche par études de cas By Christine Teyssier

  1. By: Bates, Timothy (Wayne State University, Detroit); Lofstrom, Magnus (Public Policy Institute of California); Servon, Lisa (The New School)
    Abstract: Small business lending programs designed to move disadvantaged low-income people into business ownership have been difficult to implement successfully in the U.S. context. Based in part on the premise that financing requirements are an entry barrier limiting the ability of aspiring entrepreneurs to create small businesses, these programs are designed to alleviate such barriers for low net-worth individuals with limited borrowing opportunities. Our analysis tracks through time nationally representative samples of adults to investigate the role of financial constraints and other factors delineating self-employment entrants from nonentrants. Paying particular attention to lines of business most accessible to adults lacking college credentials and substantial personal net worth, our analysis yields no evidence that financial capital constraints are a significant barrier to small-firm creation.
    Keywords: self-employment, entrepreneurship, micro-lending
    JEL: J15 L26
    Date: 2010–09
  2. By: Poschke, Markus (McGill University)
    Abstract: In contrast to the very large literature on skill-biased technical change among workers, there is hardly any work on the importance of skills for the entrepreneurs who employ those workers, and in particular on their evolution over time. This paper proposes a simple theory of skill-biased change in entrepreneurial technology that fits with cross-country, historical and micro evidence. For this, it introduces two additional features into an otherwise standard occupational choice, heterogeneous firm model à la Lucas (1978): technological change does not benefit all potential entrepreneurs equally, and there is a positive relationship between an individual's potential payoffs in working and in entrepreneurship. If some firms consistently benefit more from technological progress than others, they stay closer to the frontier, and the others fall behind. Because wages rise for all workers, low-productivity entrepreneurs will then at some point exit and become workers. As a consequence, the entrepreneurship rate falls with income per capita, average firm size and firm size dispersion increase with income per capita, and "entrepreneurship out of necessity" falls with income per capita. The paper also documents, for two of the facts for the first time, that these are exactly the relationships prevailing in cross-country data. Quantitatively, the model fits the U.S. experience well. Using the parameters from a calibration to the U.S., the model also explains cross-country patterns quite well.
    Keywords: occupational choice, entrepreneurship, firm size, firm entry, growth, skill-biased technical change
    JEL: E24 J24 L11 L26 O30
    Date: 2010–09
  3. By: Fairlie, Robert W. (University of California, Santa Cruz); Kapur, Kanika (University College Dublin); Gates, Susan (RAND)
    Abstract: The focus on employer-provided health insurance in the United States may restrict business creation. We address the limited research on the topic of "entrepreneurship lock" by using recent panel data from matched Current Population Surveys. We use difference-indifference models to estimate the interaction between having a spouse with employer-based health insurance and potential demand for health care. We find evidence of a larger negative effect of health insurance demand on business creation for those without spousal coverage than for those with spousal coverage. We also take a new approach in the literature to examine the question of whether employer-based health insurance discourages business creation by exploiting the discontinuity created at age 65 through the qualification for Medicare. Using a novel procedure of identifying age in months from matched monthly CPS data, we compare the probability of business ownership among male workers in the months just before turning age 65 and in the months just after turning age 65. We find that business ownership rates increase from just under age 65 to just over age 65, whereas we find no change in business ownership rates from just before to just after for other ages 55-75. We also do not find evidence from the previous literature and additional estimates that other confounding factors such as retirement, partial retirement, social security and pension eligibility are responsible for the increase in business ownership in the month individuals turn 65. Our estimates provide some evidence that "entrepreneurship lock" exists, which raises concerns that the bundling of health insurance and employment may create an inefficient level of business creation.
    Keywords: entrepreneurship, health insurance, medicare, job lock
    JEL: L26 I1
    Date: 2010–09
  4. By: Ginés Hernández Cánovas (Universidad Politécnica de Cartagena); María Camino Ramón Llorens (Dpto. Economía Financiera y Contabilidad)
    Abstract: This paper uses a survey dataset of 51 Venture Capital Companies to address a segmentation of the venture capital industry. Our paper yields two specific contributions. First, we analyze in a Continental European bank-based system the most important investment criteria identified by previous empirical literature. Second, we show that existing differences in the use of the investment criteria depend on the specific characteristics of the venture capital companies. Therefore, the same business proposal might obtain different decisions depending on the venture company that the entrepreneur approaches. Our paper provides a better insight into the screening process of venture capitalists and the results have clear implications for entrepreneurs and venture capital companies. The knowledge of what investment criteria are most important to venture capitalists might help entrepreneurs to elaborate better proposals, addressing them to the most suitable venture capital company. El presente estudio usa una encuesta postal realizada a 51 entidades de capital riesgo (ECR) con el objetivo de establecer diferentes tipologías de gestores y de empresas en la industria del capital riesgo. Nuestro trabajo realiza dos contribuciones específicas. En primer lugar, analizamos para el modelo bancario de la Europa Continental aquellos criterios de selección de inversiones más importantes identificados en la literatura empírica previa. En segundo lugar, mostramos que las diferencias en el uso de los criterios de selección de inversiones dependen de las características de las ECR. Por tanto, una misma propuesta de negocio podría obtener diferentes respuestas según la ECR que la evalúe. Nuestro trabajo proporciona una mejor comprensión del proceso de selección realizado por los gestores, y los resultados tienen claras implicaciones tanto para los empresarios como para las ECR. Conocer cuáles son los principales criterios de selección de inversiones podría ayudar a los empresarios a elaborar mejores propuestas, y buscar la financiación en ECR más adecuadas.
    Keywords: capital riesgo, análisis de conglomerados, toma de decisiones venture capital, cluster analysis, screening criteria, decision-making
    JEL: G24
    Date: 2010–09
  5. By: Inci, Eren; Barlo, Mehmet
    Abstract: If control of their firms allows entrepreneurs to derive private benefits, it also allows other controlling parties. Private benefits are especially relevant for venture capitalists, who typically get considerable control in their portfolio firms, but not for banks, which are passive loan providers. We incorporate this difference between banks and venture capital and analyze entrepreneurs' financing strategy between the two. We find that, in all strict Nash Equilibria, entrepreneurs who value private benefits more choose banks while the rest choose venture capital. Thus, bank-financed entrepreneurs allocate more resources to tasks that yield private benefits while VC-backed entrepreneurs have higher profitability.
    Keywords: bank; control; entrepreneurship; private benefit; venture capital
    JEL: L26 G32 G24 M13 G21
    Date: 2010–07–27
  6. By: Ajay Agrawal (University of Toronto); Christian Catalini (University of Toronto); Avi Goldfarb (University of Toronto)
    Abstract: We examine the geography of early stage entrepreneurial finance in the context of an internet marketplace for funding new musical artist-entrepreneurs. A large body of research documents that investors in early-stage projects are disproportionately co-located with the entrepreneur. Theory predicts this will be particularly true of artist-entrepreneurs with preliminary-stage projects, difficult-to-contract-for effort, difficult-to-observe creativity, negligible tangible assets, and limited reputations. At the same time, however, observers of the spatial effects of the internet and related technologies report that many economic activities have become much less geographically dependent. At an aggregate level, the internet marketplace we examine does indeed demonstrate a spatial transformation of the entrepreneurial finance process: the average distance between investors and artist-entrepreneurs is 4,831 km. However, geography still matters; investors are disproportionately likely to be local and, conditional on investing, local investors invest more. This apparent role for proximity is strongest before entrepreneurs visibly accumulate capital. Within a single round of financing, local investors are more likely to engage earlier in the funding cycle. However, this difference in the timing of investment is almost entirely explained by a particular type of investor, whom we characterize as ``family, friends, and fans." We conjecture that these individuals, who are disproportionately co-located with the entrepreneur, have offline information about the entrepreneur and therefore derive less new information from observing the aggregate financing raised. We speculate that the path-dependent role of this offline network in conveying information to the online community limits the ``flat world'' potential of these communication technologies.
    Keywords: Entrepreneurial nance, crowd-funding, internet, family and friends, local bias, social networks
    JEL: R12 Z1 L17 G21 G24
    Date: 2010–09
  7. By: Michael Wyrwich
    Abstract: This paper sheds light on regional differences of self-employment in a socialist economy on the eve of its transition toward a market economy and differences with regard to start-up activities after transition. It shows that regions with a long entrepreneurial tradition have higher self-employment rates than regions where these traditions played only a minor role before the introduction of a socialist centrally planned economy. These regions have also higher start-up rates after transition. It seems entirely likely that some regions have a certain entrepreneurial heritage that is an important resource embedded in the region. Even the introduction of socialism did not eradicate or reverse the geography of private sector activity. It is recommended that policy should stimulate and activate region-specific entrepreneurial potentials to attain a sustainable regional development.
    Keywords: Entrepreneurial Culture; Transition
    JEL: L26 P25 R11
    Date: 2010
  8. By: Jonathan Potter; Alessandra Proto; Marco Marchese
    Abstract: The Marche region is one of the most industrialised regions in Italy and is considered a region of excellence, not only for its economic performance, but also for its cultural, natural and social richness. Marche belongs to what has come to be called the “Third Italy”: a model of development based on small and medium-sized enterprises (SMEs) located in industrial districts. Its economy is driven by the performance of a myriad of SMEs, which have been characterised by a high level of creativity and innovation in the past…
    Date: 2010–07
  9. By: Richard Fabling and Lynda Sanderson (Reserve Bank of New Zealand)
    Abstract: We examine the effect of export market entry on New Zealand firm performance. Our novel contribution to the literature is the treatment of export status as an incremental process, in which firms may export to one or more markets with each of these markets providing additional potential for learning to occur. Focussing on new markets provides several benefits. Since we use matching techniques to account for self-selection, controlling for firm export histories reduces the problem of selection on unobservables (such as managerial preferences) which would confound a causal interpretation. Also, most new market entry is undertaken by incumbent exporters, providing a large number of events on which to test the learning-by-exporting (LBE) hypothesis.
    JEL: C23 D10 R20
    Date: 2010–01
  10. By: Emilie Lanciano (COACTIS - Université Lumière - Lyon II : EA4161 - Université Jean Monnet - Saint-Etienne); Séverine Saleilles (COACTIS - Université Lumière - Lyon II : EA4161 - Université Jean Monnet - Saint-Etienne)
    Abstract: L'entrepreneuriat est une discipline encore peu présente dans les travaux portant sur le secteur agricole. Pourtant, elle pourrait permettre d'appréhender les mutations actuelles de ce secteur face à la crise : tendance à la surenchère productive et à la croissance, d'une part, et tendance à la diversification d'autre part. C'est sur cette deuxième voie, et en particulier sur celle de la commercialisation en circuits courts que nous avons choisi de nous pencher dans le cadre d'un projet de recherche partenariale et pluridisciplinaire. En effet, pour répondre à une demande de consommation locale croissante, de plus en plus d'agriculteurs optent pour des circuits de commercialisation courts. Cela implique de redécouvrir le marché, d'être capable de saisir des opportunités et d'adapter en conséquence ses activités. Le développement des circuits courts alimentaires constituerait-il un nouveau souffle entrepreneurial dans l'agriculture ? En confrontant le cas des agriculteurs en circuits courts aux deux courants majeurs en entrepreneuriat, nous montrons en quoi le choix de ce type de développement constitue un acte entrepreneurial et nous identifions un ensemble de pistes de recherche et de pistes de réflexion pour la pratique autour de cette réconciliation entre entrepreneuriat et agriculture.
    Keywords: entrepreneur, Développement local, Agriculture
    Date: 2010–10–27
  11. By: Christine Teyssier (COACTIS - Université Lumière - Lyon II : EA4161 - Université Jean Monnet - Saint-Etienne)
    Abstract: Plusieurs études récentes montrent que les caractéristiques des dirigeants de PME en hyper-croissance (histoires et expériences professionnelles, aptitudes managériales et motivations personnelles au regard de la croissance de leur entreprise) de même que la composition des équipes dirigeantes et les interactions entre les membres, seraient des facteurs clés dans la mise en place de dispositifs spécifiques de management financier, et donc de soutien à l'hyper-croissance. Nous adoptons une méthodologie qualitative basée sur trois études de cas de PME industrielles en hyper-croissance de la région Rhône-Alpes, afin de mieux comprendre les modalités du management financier dans ce type d'entreprise. Nous validons les hypothèses selon lesquelles les expériences professionnelles antérieures du dirigeant et la composition de l'équipe dirigeante sont des facteurs explicatifs aux différences de management financier observées entre les PME en hyper-croissance. Plus précisément, nous montrons que les dirigeants plus expérimentés mettent en place, de façon proactive, des dispositifs de "protection" contre les risques d'une trop grande pression financière pouvant être engendrée par la forte croissance, donnant alors une impression de relative "sérénité" financière au sein de leur entreprise.
    Keywords: Hyper-croissance ; Finance ; Caractéristiques du dirigeant
    Date: 2010–07–06

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