nep-ent New Economics Papers
on Entrepreneurship
Issue of 2010‒11‒06
thirteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Are Microloans Bad for Growth? By Emerson, Patrick M.; McGough, Bruce
  2. What determines the volume of informal venture finance investment and does it vary by gender? By André van Stel; Andrew Burke; Chantal Hartog; Abdelfatah Ichou
  3. Decomposing the effects of CCTs on entrepreneurship By Lichand, Guilherme
  4. Entry, Exit, Firm Dynamics, and Aggregate Fluctuations By Gian Luca Clementi; Dino Palazzo
  5. Strategic Niche Management of Social Innovations: the Case of Social Entrepreneurship By Marten J. Witkamp; Rob P. J. M. Raven; Lambèr M. M. Royakkers
  6. Business Demography Dynamics in Portugal: a Semi-parametric Survival Analysis By Alcina Nunes; Elsa Sarmento
  8. Pedagogical Innovations for Triggering Social and Economic Entrepreneurship among Youth By Anil. K Gupta
  9. Demand as a source of entry and the survival of new semiconductor firms By Roberto Fontana; Franco Malerba
  10. Growth through Heterogeneous Innovations By Ufuk Akcigit; William R. Kerr
  11. R&D, Innovation and Liquidity Constraints By Maria Luisa Mancusi; Andrea Vezzulli
  12. Co-innovation by KIBS in Environmental Services: A Resource-based View By Carolina Castaldi; Jan Faber; Maikel Kishna
  13. The Internationalization of Small and Medium Enterprises in Regional and Global Value Chains By Hank Lim; Fukunari Kimura

  1. By: Emerson, Patrick M. (Oregon State University); McGough, Bruce (Oregon State University)
    Abstract: This paper constructs a two-period overlapping generations model of human capital investment decisions where a microloan program designed to finance entrepreneurial activities is active. It is shown that, in the presence of human capital externalities (social returns to education) there exists a range of microloan amounts that are growth depressing and welfare decreasing through their affect on the opportunity cost of schooling. By increasing the opportunity cost of schooling, microloans divert investment away from human capital: by failing to internalize the social returns to education, households’ individually optimal investment decisions in the face of microcredit availability act to depress the growth of the economy and result in sub-optimal welfare outcomes.
    Keywords: microloans, growth, human capital
    JEL: E24 O10 O40
    Date: 2010–10
  2. By: André van Stel; Andrew Burke; Chantal Hartog; Abdelfatah Ichou
    Abstract: In this paper we address the question, what determines the volume of informal venture finance investment and does it vary by gender? We estimate a Heckman selection model enabling us to jointly investigate the determinants of both the prevalence and the investment volumes of informal investors. Our models use data on 126,189 individuals in 21 highly developed countries in the period 2002-2006. We delve deeper into the finding of Burke et al (2010) that 'the demand for informal venture finance tends to generate its own supply'. We find that this effect is over two and half times stronger for females than for males. We also find evidence that risk aversion reduces the number of females who choose to become informal investors but increases the amount of investment per female informal investor. We also discover that experience in entrepreneurship has a stronger effect in raising the supply of informal venture finance for females than males. We believe that this difference is due to a moderating effect of lower female entrepreneurial confidence which bolsters the human and financial capital accumulation effect turning entrepreneurs into informal venture finance investors. To our knowledge, this is the first paper to move analysis of the supply of informal venture finance investment beyond estimating the propensity for a person to become an informal investor and estimate the core concern which is the total supply of venture finance.
    Date: 2010–10–28
  3. By: Lichand, Guilherme
    Abstract: Conditional cash transfers boosted a major reduction in poverty and a significant decrease in inequality in developing countries over the past decade. However, their success in promoting economic development is challenged by the claim that they deal with short-term poverty relief without providing the poor with the tools for breaking away from poverty by their own means. This claim, however, could be dismissed if conditional cash transfers had an effect on entrepreneurship. This paper assesses whether Bolsa-Familia increases the probability of starting a new venture in Brazil, decomposing its potential effects into three channels: alleviation of the wealth constraint, insurance against negative outcomes of risky activities, and reduction of the labor supply of children (through the effect of the conditionality). The effect of each of these channels is separately estimated using data from National Household Surveys in 2004 and 2006, for which the households of transfer beneficiaries can be identified. The results indicate that entrepreneurship is indeed stimulated by the program in urban areas throughout the insurance and wealth constraint alleviation effects, notwithstanding that new ventures are typically secondary sources of income. Finally, the conditionality seems not to have an impact on the level of entrepreneurship.
    Keywords: Labor Policies,Rural Poverty Reduction,Economic Theory&Research,Services&Transfers to Poor,Emerging Markets
    Date: 2010–10–01
  4. By: Gian Luca Clementi (Department of Economics, Stern School of Business, New York University and RCEA); Dino Palazzo (Department of Finance and Economics, Boston University School of Management)
    Abstract: How important are firm entry and exit in shaping aggregate dynamics? We address this question by characterizing the equilibrium allocation in Hopenhayn (1992)’s model of equilibrium industry dynamics, amended to allow for investment in physical capital and aggregate fluctuations. We find that entry and exit propagate the effects of aggregate shocks. In turn, this results in greater persistence and unconditional variation of aggregate time-series. In the aftermath of a positive productivity shock, the number of entrants increases. The new firms are smaller and less productive than the incumbents, as in the data. As the common productivity component reverts to its unconditional mean, the new entrants that survive become progressively more productive, keeping aggregate efficiency higher than in a scenario without entry or exit. We also find that both the mean and variance of the cross-sectional distribution of firm–level productivity are counter–cyclical, in spite of the assumption that innovations to firm–level productivity are i.i.d. and orthogonal to aggregate shocks. This happens because of selection: the idiosyncratic productivity of the marginal entrant is lower in expansion than during recessions. Since idiosyncratic productivity is mean–reverting, mean and variance of the distribution of productivity growth are pro–cyclical.
    Keywords: Selection, Propagation, Persistence, Survival, Reallocation
    JEL: D21 D92 E32 L11
    Date: 2010–01
  5. By: Marten J. Witkamp; Rob P. J. M. Raven; Lambèr M. M. Royakkers
    Abstract: Strategic niche management (SNM), a tool to understand and manage radical socio-technical innovations and facilitate their diffusion, has always departed from a technical artefact. Many radical innovations, however, do not revolve around such an artefact. Social entrepreneurship is a new business model that combines a social goal with a business mentality and is heralded as an important new way to create social value such as sustainability. This study examines if and how SNM can be applied to such a social innovation. It identifies theoretical and practical limitations and proposes solutions. The main conclusion is that SNM can be used to analyse radical social innovation, although it requires rethinking the initial entry point for research and management. Exemplifying quotes are proposed as an alternative. Second, this paper suggests using values to describe niche-regime interaction as a better way to anticipate future niche-regime interactions.
    Keywords: Multi-Level Perspective, Social Entrepreneurship, Social Innovation, Socio-technical Regime, Strategic Niche Management, Value
    Date: 2010–07
  6. By: Alcina Nunes (Escola Superior de Tecnologia e de Gestão do Instituto Politécnico de Bragança); Elsa Sarmento (Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação)
    Abstract: We address the post-entry performance of new Portuguese firms by investigating the structural characteristics of the hazard and survival functions, using semi-parametric survival analysis for the total economy and its broad sectors. In order to approach the prevalence of some stylized facts and determinants of new firm survival, a new entrepreneurship database was produced, using the administrative data of Quadros de Pessoal, following the Eurostat/OECD´s internationally comparable business demography methodology. In line with the literature, we find that firms that start small and experience faster post-entry growth, face a higher probability of survival. Firm’s current size dimension matters particularly for the Services sector probability of survival. In industries characterized by high entry rates, post-entry survival is more difficult. This happens mostly in Agriculture and the Construction sectors in Portugal. We find a different result from the literature, for the effect of industry growth in survival rates. Firms operating in industries which are growing faster, seem to suffer from a higher probability of failure. The combined effect of turbulence and entry and growth variables help explaining this unexpected effect of industry growth on survival probabilities. By correcting heterogeneity, we obtain stronger magnitudes of the hazard ratios found previously
    Keywords: Entrepreneurship, Business, Demography, Business Survival, Performance Determinants, Micro-data
    JEL: C14 C41 L25 L26
    Date: 2010–09
  7. By: Alcina Nunes (Escola Superior de Tecnologia e de Gestão do Instituto Politécnico de Bragança); Elsa Sarmento (Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação)
    Abstract: We address the post-entry performance of new Portuguese firms by investigating the structural characteristics of the hazard and survival functions, using non-parametric survival analysis. In order to approach prevalence of some stylized facts and determinants of new firm survival, we produced a new entrepreneurship database, using the administrative data of Quadros de Pessoal, following the Eurostat/OECD´s internationally comparable business demography methodology. This allowed the computation of a comprehensive array of entrepreneurship indicators on employer enterprise and survival dynamics in Portugal, over a period of 18 years, disaggregated in dimensions such as sectors, regions and size classes
    Keywords: Entrepreneurship, Business Demography, Business Survival, Performance Determinants, Micro-data
    JEL: M13 M20
    Date: 2010–09
  8. By: Anil. K Gupta
    Abstract: Recent economic meltdown triggered worldwide search for viable options for generating employment through entrepreneurial opportunities for the youth. Not many countries succeeded although India has fared much better. In this paper the author discuss the challenges faced by India soon after meltdown and the strategies that could work. While many ideas have still potential to influence the pedagogy and the content of educational programmes in the short term, some have value for longer term entrepreneurial revolution. [W.P. No. 2010-10-02]
    Keywords: economic, entrepreneurial, ideas, potential
    Date: 2010
  9. By: Roberto Fontana (KITeS - Bocconi University, Milan, Italy and Department of Economics, University of Pavia, Pavia, Italy); Franco Malerba (KITeS - Bocconi University, Milan, Italy)
    Abstract: The performance of new companies coming from the demand side of the semiconductor industry is examined and it is compared with the performance of entrants coming from the semiconductor industry itself and with other types of entrants. By using a dataset of more than one thousand start-ups founded between 1997 and 2007 around the world, the paper shows that start-ups with a background in application sectors perform survive longer than spin-offs from the semiconductor industry itself or than inexperienced firms founded by people previously active in university or services. These results point strongly to the major role of demand not just as a source of innovations, but also as a major driver of entry into an industry and of successful performance of new firms.
    Date: 2010–04
  10. By: Ufuk Akcigit (Department of Economics, University of Pennsylvania); William R. Kerr (Department of Economics, Harvard University)
    Abstract: We study how exploration versus exploitation innovations impact economic growth through a tractable endogenous growth framework that contains multiple innovation sizes, multi-product firms, and entry/exit. Firms invest in exploration R&D to acquire new product lines and exploitation R&D to improve their existing product lines. We model and show empirically that exploration R&D does not scale as strongly with firm size as exploitation R&D. The resulting framework conforms to many regularities regarding innovation and growth differences across the firm size distribution. We also incorporate patent citations into our theoretical framework. The framework generates a simple test using patent citations that indicates that entrants and small firms have relatively higher growth spillover effects.
    Keywords: : Endogenous Growth, Innovation, Exploration, Exploitation, Research and Development, Patents, Citations, Scientists, Entrepreneurs.
    JEL: O31 O33 O41 L16
    Date: 2010–10–27
  11. By: Maria Luisa Mancusi (KITeS, Bocconi University, Milan, Italy); Andrea Vezzulli (Department of Management, University of Bologna, Bologna, Italy and KITeS, Bocconi University, Milan, Italy)
    Abstract: We study the effect of financing constraints on the decision to do R&D and on the level of R&D investment using survey data and complete financial accounting data on a large number of Italian manufacturing SMEs from 2001 to 2003. We use a direct indicator of credit constraints and employ an econometric approach allowing for the existence of binding financing constraints to be endogenously determined. We find that there is a significantly negative effect on the probability to set up R&D activities due to the presence of financing constraints, ceteris paribus. We also find that ignoring the endogeneity of the financing constraints indicator and the sample selection originating from firms not interested in doing R&D induces a bias in the estimated effect, which turns out to be positive and significant. We find the same result when studying the effect of liquidity constraints on R&D spending and are able to show that its reduction of liquidity constraints is largely to be associated with the reduction in the likelihood to do R&D (the R&D participation decision), rather than with a reduced level of investment. Finally, but importantly, firms that are both young and small appear to have additional difficulties in obtaining financing - even after controlling for both size and age - and disply a higher probability of being subject to credit constraints, ceteris paribus.
    Keywords: R&D, financing constraints, bivariate probit, IV Tobit
    JEL: G32 C35 O31
    Date: 2010–05
  12. By: Carolina Castaldi; Jan Faber; Maikel Kishna
    Abstract: This paper investigates the ability of knowledge intensive business firms (KIBS) to engage in co-innovation with client firms. Co-innovation relates to KIBS competitive advantage as knowledge creators and sources of innovation. We propose a resource-based model where knowledge-related resources and capabilities explain why certain KIBS firms are able to co-innovate. We explore the model on a sample of Dutch environmental investigation firms. Our exploratory results confirm the expected dominant role played by the learning capabilities of KIBS firms in explaining their ability to co-innovate.
    Keywords: KIBS, co-innovation, resource-based, knowledge
    Date: 2010–03
  13. By: Hank Lim; Fukunari Kimura (Asian Development Bank Institute)
    Abstract: Production networks and the regional division of labor have been established in East Asia resulting in massive vertical intra-industry trade in parts and components within the region. This phenomenon is known as cross-border production sharing or the fragmentation of production processes into many stages across different countries. New development strategies claim that participation in international production and distribution networks is the key to accelerating economic development in the era of globalization. This process suggests that vertical input-output linkages between local firms and multinational corporations are the most powerful channels to accelerate technology transfers and spillovers. Given the trends of globalization and economic integration in East Asia, there is significant potential for the small and medium enterprise (SME) sector to increase its contribution to the region’s development through greater participation in global value chains. However, multiple market failures exist with regard to the development of SMEs and local entrepreneurship. These risks can be mitigated by proper policy measures such as strengthening technological and human resource capabilities through better networking and facilitating access to financing for SMEs. Despite many distortions and inefficiencies in implementing regional economic integration schemes in East Asia, there are many cumulative positive effects contributing to the emerging trend internationalization of SMEs in the region. This process can be significantly strengthened by creating a positive business environment through the standardization of products and services, rules and regulations, and a seamless market infrastructure in the region.
    Keywords: East Asia, production networks, input-output linkages, SME
    JEL: D20
    Date: 2010

This nep-ent issue is ©2010 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.