nep-ent New Economics Papers
on Entrepreneurship
Issue of 2010‒10‒30
eleven papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Corruption as a Barrier to Entry: Theory and Evidence By Campos, Nauro F.; Estrin, Saul; Proto, Eugenio
  2. Financing constraints and unemployment: evidence from the Great Recession By Burcu Duygan-Bump; Alexey Levkov; Judit Montoriol-Garriga
  3. Effectiveness of Public R&D Subsidies in East Germany – Is it a Matter of Firm Size? By Janina Reinkowski; Björn Alecke; Timo Mitze; Gerhard Untiedt
  4. Product Market Regulation: Extending the Analysis Beyond OECD Countries By Anita Wölfl; Isabelle Wanner; Oliver Röhn; Giuseppe Nicoletti
  5. New Challanges for Industrial Policy By Naudé, Wim
  6. Supporting Women Entrepreneurs in Tunisia By Drine, Imed; Grach, Mouna
  7. Small and Medium Enterprises in Japan: Surviving the Long-Term Recession By Shuji Uchikawa
  8. Internationalization strategy and performance of small and medium sized enterprises By Jonas Onkelinx; Leo Sleuwaegen
  9. Firm Size Distribution under Horizontal and Vertical R&D By Pedro Mazeda Gil; Fernanda Figueiredo
  10. Entry cost, financial friction, and cross-country differences in income and TFP By Lei Fang
  11. Management Entrepreneurial et Orientation Entrepreneuriale : Deux concepts aussi différents ? By K. Randerson; A. Fayolle

  1. By: Campos, Nauro F. (Brunel University); Estrin, Saul (London School of Economics); Proto, Eugenio (University of Warwick)
    Abstract: Conventional wisdom depicts corruption as a tax on incumbent firms. This paper challenges this view in two ways. First, by arguing that corruption matters not so much because of the value of the bribe ("tax"), but because of another less studied feature of corruption, namely bribe unavoidability. Second, we argue that the social costs of corruption arise not because corruption hurts incumbent firms, but mostly because it acts as a powerful barrier to the entry of new firms. Corruption sands and greases in tandem: it helps incumbent firms (on balance) and it hurts potential entrants. We put forward a model in which a bureaucrat chooses entry barriers to optimize bribe revenues. When the capacity to collect bribes is high, it is optimal to allow high levels of oligopoly power to incumbents. Conversely, the more avoidable are the bribes, the more firms are allowed into the market. These ideas are tested using a unique, representative sample of Brazilian manufacturing firms. Consistently with our theoretical model, we show that corruption (a) is ranked as the most important barrier to entry (above finance, taxes and regulation) and (b) while bribes' unavoidability is positively related to firm performance, the size of the bribe is not.
    Keywords: corruption, barriers to entry, firm performance
    JEL: O12 D23 K20 O17 K30
    Date: 2010–10
  2. By: Burcu Duygan-Bump; Alexey Levkov; Judit Montoriol-Garriga
    Abstract: This paper exploits the differential financing needs across industrial sectors and provides strong empirical evidence that financing constraints of small businesses are important in explaining the unemployment dynamics around the Great Recession. In particular, we show that workers in small firms are more likely to become unemployed during the 2007-2009 financial crisis if they work in industries with high external financing needs. According to our estimates, eliminating financial constraints of small firms could add up to 850,000 jobs to the economy. We suggest that policies aimed at making credit available to small businesses would significantly help stabilize the labor markets and economic activity in the U.S.
    Keywords: Unemployment ; Small business - Finance ; Recessions ; Financial crises - United States
    Date: 2010
  3. By: Janina Reinkowski; Björn Alecke; Timo Mitze; Gerhard Untiedt
    Abstract: This paper analyses the impact of public subsidies on private sector research and development (R&D) activity for East German firms. Using propensity score matching, our empirical results indicate that subsidized firms indeed show a higher level of R&D intensity and a higher probability for patent application compared to non-subsidized firms for our sample year 2003. On average we find an increase in the R&D intensity of about 3.7 percentage points relative to non-subsidized firms. The probability for patent applications rises by 21 percentage points. These results closely match earlier empirical results for East Germany. Given the fact that the East German innovation system is particularly driven by small and medium sized enterprises (SME), we put a special focus on the effectiveness of the R&D subsidies for this latter subgroup. Here no previous empirical evidence is available so far. Our findings indicate that policy effectiveness also holds for private R&D activity of SMEs, where the highest increase in terms of R&D intensity is estimated for micro businesses with up to 10 employees.
    Keywords: Propensity score matching; R&D subsidies; East Germany; SME
    JEL: C14 C21 O32 O38
    Date: 2010–09
  4. By: Anita Wölfl; Isabelle Wanner; Oliver Röhn; Giuseppe Nicoletti
    Abstract: In this paper the recently updated product market regulation (PMR) indicators are extended to a larger set of countries including several non-OECD members. It investigates regulatory patterns in this extended set of countries as compared to the OECD countries and analyses the link between regulation and growth. On average, regulation is more restrictive of competition in non-member countries than in the OECD area. However, there exists considerable heterogeneity within this country grouping as concerns the level of the regulatory stance and its composition as well as the potential past evolution of regulatory processes. Furthermore, growth regressions provide evidence that less restrictive product market regulation is conducive to growth. An improvement of ½ index points of barriers to entrepreneurship would translate into approximately a 0.4% higher average annual rate of GDP per capita growth. However, the results also suggest that for countries that are less advanced, the potential growth benefits of enhancing product market competition may be impaired by other structural weaknesses. In particular, some restrictions of foreign trade and investment might be beneficial for growth in early stages of development.<P>La réglementation des marchés de produits : étendre l'analyse au-delà des pays de l'OCDE<BR>Dans cet article, les indicateurs de réglementation des marchés de produits, qui ont été récemment mis à jour, sont étendus à de nombreux pays, dont plusieurs pays non-membres. Cet article examine la réglementation dans cet ensemble de pays et analyse le lien entre la réglementation et la croissance. En moyenne, la réglementation est plus restrictive pour la concurrence dans les pays non-membres vis-à-vis de la zone OCDE. Toutefois, il existe une hétérogénéité considérable au sein de ce groupe de pays en ce qui concerne le niveau de réglementation et sa composition ainsi que l'évolution potentielle des processus de réglementation dans le passé. En outre, des estimations économétriques mettent en évidence qu'une réduction des obstacles à la concurrence est favorable à la croissance. Une amélioration d'un ½ point des obstacles à l'entrepreneuriat se traduirait par un taux annuel moyen de croissance du PIB par habitant qui serait d'environ 0,4% plus élevé. Cependant, les résultats suggèrent également que pour les pays moins avancés dans leur développement économique, les avantages potentiels de croissance résultant d'un renforcement de la concurrence sur les marchés de produits peuvent être altérés par d'autres faiblesses structurelles. En particulier, certaines restrictions au commerce international et à l'investissement étranger pourraient être favorables pour la croissance dans les premiers stades de développement.
    Keywords: product market regulation, growth regressions, réglementation du marché des produits, estimations économétriques
    JEL: K20 L51 O11 O43
    Date: 2010–10–06
  5. By: Naudé, Wim
    Abstract: This paper calls for a fresh look at industrial policies in the light of recent trends and developments in the global economy. In particular, five new challenges and their implications for industrial policies are discussed. These have been neglected in the debate on industrial policy and include (i) the increasing globalization of the world economy, most pertinently the rise of global production sharing, (ii) the recent crises in food, fuel and financial markets, (iii) climate change, (iv) the rise of China and India, and (v) the rise of the ‘entrepreneurial economy’. Directions for further research are outlined. This paper is a follow-up to the earlier WIDER Working Paper entitled ‘Industrial Policy: Old and New Issues’.
    Keywords: industrial policy, structural transformation, development, financial crisis, climate change
    Date: 2010
  6. By: Drine, Imed; Grach, Mouna
    Abstract: Whether policy support should be designed differently for women entrepreneurs is a particularly relevant question. To answer this, and to inform the design of policies to provide appropriate support for women entrepreneurs, the paper compares male and female perceptions of typical entrepreneurship support services, such as government provision of information, training and funding. The focus is on Tunisia, a developing country characterized by high level of unemployment, particularly of women. Based on a survey of 50 men and 50 women entrepreneurs in the regions of Sfax, Sousse and Tunis, our results suggest that existing support services are inadequate for promoting female entrepreneurship. Accordingly we discuss support measures specifically designed for women entrepreneurs.
    Keywords: entrepreneurship, gender, women entrepreneurs, Africa
    Date: 2010
  7. By: Shuji Uchikawa
    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. [ADBI Working Paper 169]
    Keywords: large enterprises, small and medium enterprises, SMEs, productivity, business environment, labor
    Date: 2010
  8. By: Jonas Onkelinx (Vlerick Leuven Gent Management School); Leo Sleuwaegen (Vlerick Leuven Gent Management School; K.U.Leuven)
    Abstract: Focusing on the timing and geographical scope of import and export activities of Belgian small and medium sized enterprises (SMEs), the paper analyzes the importance, structural features and performance implications of firms that recently started to export following the geographical configuration of their international trade operations and their year of establishment. The analysis allows us to separate firms that started to export in the period 1998-2005 into four distinct groups: born internationals, i.e. firms which were established less than five years before their first year of exporting and exporting to less than five countries in the same region (regional focus), born globals; young firms but with a more internationally diversified export portfolio, born again globals, i.e. firms similar to born globals but established longer than five years before their first exports and traditional internationalizers, firms established more than five years before their first export operations characterized by a narrow geographical scope of their exports. We find SME export growth to be driven by a small group of born global firms, accounting for 60 per cent of the total increase in SME exports between 1998 and 2005. Analyzing the structural feature of the different types of firms, we find born globals to be more productive and characterized by a higher R&D spending and intangible asset intensity compared to other types of traders. We next test if the typology matters for the observed export performance differences across firms over time. We find that born globals grow faster in terms of export sales, have a stronger commitment to export markets and are more likely to continue exporting. Born globals also have the highest failure rate, traditional internationalizers the lowest. These findings suggest strong risk/return tradeoffs among the strategies chosen by the different types of firms. Performing a dynamic analysis of changes in trade configurations of firms over the observation period, we investigate how these changes have an impact on performance. Specific attention is paid to firms that stop importing/exporting. Especially firms that move from being exporters to become two-way traders, i.e. also starting to import goods from other countries show the most marked increases in turnover and productivity. The final part of the study analyzes the relationship between export and import activities to particular countries following the sequence in which they occur. We find that the probability to start importing from a country is 4 times higher for firms already exporting to that country than for trading SMEs without prior export experience in that country.
    Date: 2010–10
  9. By: Pedro Mazeda Gil (CEF.UP, Faculdade de Economia, Universidade do Porto); Fernanda Figueiredo (CEAUL, Faculdade de Economia, Universidade do Porto)
    Abstract: This paper studies the firm size distribution arising from an endogenous growth model of quality ladders with expanding variety. The probability distribution function of a given cohort of firms is a Poisson distribution that converges asymptotically to a normal of log size. However, due to firm entry propelled by horizontal R&D, the total distribution - i.e., when the entire population of firms is considered - is a mixture of Poisson distributions which is systematically right skewed and exhibits a fatter upper tail than the normal distribution of log size. Our theoretical results qualitatively match the empirical evidence found both for the cohort and the total distribution, and which has been presented as a challenge for theory to explain. Moreover, by obtaining a total distribution with a gradually falling variance over a long time span, the model is able to address complementary empirical evidence that points to a total distribution subtly evolving over time.
    Keywords: Firm size distribution; Skewness; Heavy tails; Endogenous growth; Horizontal and vertical R&D
    JEL: O41 O38 L11
    Date: 2010–10
  10. By: Lei Fang
    Abstract: This paper develops a model to assess the quantitative effect of entry cost and financial friction on cross-country income and total factor productivity (TFP) differences. The main focus is on the interaction between entry cost and financial friction. The model is calibrated to match establishment-level statistics for the U.S. economy assuming a perfect financial market. The quantitative analysis shows that entry costs and financial frictions together can generate a factor ten of the differences in income per capita and a factor five of the differences in TFP, and a large part of the differences are accounted for by the interaction between entry cost and financial friction. The main mechanism is that financial friction amplifies the effect of entry cost by boosting the effective entry cost.
    Date: 2010
  11. By: K. Randerson (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II); A. Fayolle (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Le management entrepreneurial (Stevenson et Gumpert, 1985) peut-il être assimilé à l'orientation entrepreneuriale (Miller, 1983 ; Covin et Slevin, 1988, 1989, 1991 ; Lumpkin et Dess, 1996), concept développé et largement utilisé pour mesurer l'intensité entrepreneuriale d'une organisation ? Nous démontrons que ces deux concepts sont distincts bien que conduisant tous deux vers l'entrepreneuriat organisationnel (Brown et al, 2001). Nous soulignons que le caractère dynamique de ce type d'entrepreneuriat appelle à des recherches qualitatives supplémentaires afin de donner un contenu au concept. Ceci permettrait, notamment, aux praticiens d'identifier les mécanismes et processus qui maintiennent l'intensité entrepreneuriale à un bon niveau et d'agir sur ces derniers quand cette intensité fait défaut. Ce contenu donnerait au monde académique un matériau pour réexaminer l'opérationnalisation de l'orientation entrepreneuriale, nécessité soulignée par Basso et al (2010).
    Keywords: Management Entrepreneurial ; Orientation Entrepreneuriale; entrepreneuriat organisationne mode de management favorisant l'entrepreneuriat organisationnel
    Date: 2010

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