nep-ent New Economics Papers
on Entrepreneurship
Issue of 2011‒02‒19
nine papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Liquidity, risk and occupational choices By Milo Bianchi; Matteo Bobba
  2. Framing the empirical findings on firm growth By Marco Capasso; Elena Cefis; Sandro Sapio
  3. Firm Size and Growth Rate Variance: the Effects of Data Truncation By Marco Capasso; Elena Cefis
  4. The Factors of Growth of Small Family Businesses: A Robust Estimation of the Behavioral Consistency in the Panel Data Models By Vladimír Benáček; Eva Michalíková
  5. Personal Bankruptcy Law, Wealth and Entrepreneurship: Theory and Evidence from the Introduction of a "Fresh Start" By Frank M. Fossen
  6. Do Regions with Entrepreneurial Neighbors Perform Better?: A Spatial Econometric Approach for German Regions By Katharina Pijnenburg; Konstantin A. Kholodilin
  7. Spatial Differentiation in Industrial Dynamics. A Core-Periphery Analysis based on the Pavitt-Miozzo-Soete Taxonomy By Marco Capasso; Elena Cefis; Koen Frenken
  8. Financing obstacles among euro area firms: Who suffers the most? By Annalisa Ferrando; Nicolas Griesshaber

  1. By: Milo Bianchi (Université Paris-Dauphine - Université Paris-Dauphine); Matteo Bobba (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We explore whether financial constraints matter and which financial constraints matter the most in the choice of becoming an entrepreneur. We exploit a randomly assigned welfare program in rural Mexico to show that cash transfers significantly increase entry into entrepreneurship, thereby providing evidence of financial constraints. We then develop a simple model to highlight how liquidity and insurance constraints respond differently to the time profile of expected cash transfers. Exploiting the cross-households variation in the timing of these transfers, we find that current occupational choices are significantly more responsive to the amount of transfers expected for the future than to the amount of transfers currently received. We interpret these findings as evidence that the program has been effective in promoting micro-entrepreneurship by enhancing the willingness to bear risk.
    Keywords: financial constraints ; entrepreneurship ; insurance, liquidity
    Date: 2010–10
  2. By: Marco Capasso; Elena Cefis; Sandro Sapio
    Abstract: This paper proposes a general framework to account for the divergent results in the empirical literature on the relation between firm sizes and growth rates, and on many results on growth autocorrelation. In particular, we provide an explanation for why traces of the LPE sometimes occur in conditional mean (i.e. OLS) autoregressions of firm size or firm growth, and in conditional median (i.e. least absolute deviation) autoregressions, but never in high or low quantile autoregressions. Based on an original empirical analysis of the population of manufacturing firms in the Netherlands between 1994 and 2004, we find that there is no peculiar role played by the median of the growth distribution, which is approximately equal to zero independent of firm size. In economic terms, this is equivalent to saying that most of the phenomena of interest for industrial dynamics can be studied without reference to the behaviour of the median firm, and many `average' relations retrieved in the literature, starting from the negative relation between average size and average growth, are driven by the few dynamic firms in the sample rather than the many stable ones. Moreover, we observe the tent shape of the empirical firm growth rate distribution and confirm the skewness-size and the variance-size relations. The identified quantile regression patterns - autoregressive coefficients above 1 for fast decliners, and below 1 for fast growers - can be obtained by assuming negative variance-size scaling and Laplace growth rate distributions, and are robust to a mild positive relationship between skewness and size. A relationship between quantile regression patterns and previous findings is therefore uncovered.
    Keywords: Firm growth; Law of Proportionate Effect; quantile regression; heterogeneity; variance-size scaling.
    JEL: L11 L25 L60
    Date: 2010–11
  3. By: Marco Capasso; Elena Cefis
    Abstract: This paper discusses the effects of the existence of natural and/or exogenously imposed thresholds in firm size distributions, on estimations of the relation between firm size and variance in firm growth rates. We explain why the results in the literature on this relationship are not consistent. We argue that a natural threshold (0 number of employees or 0 total sales) and/or the existence of truncating thresholds in the dataset, can lead to upwardly biased estimations of the relation. We show the potential impact of the bias on simulated data, suggest a methodology to improve these estimations, and present an empirical analysis based on a comprehensive dataset of Dutch manufacturing and service firms. The only stable relation between firm size and growth rate variance is negative regardless of how we define the measure of firm growth.
    Keywords: firm growth, growth rates variance; truncation; thresholds
    JEL: L25 C21
    Date: 2010–11
  4. By: Vladimír Benáček (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Eva Michalíková (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The paper quantifies the role of factors associated with the growth (or decline) of micro and small businesses in European economies. The growth is related to employment and value added in enterprises as well as to ten institutional variables. We test the data for consistency of behavioural patterns in various countries and gradually remove outlying observations, quite a unique a pproach in the panel data analysis, that can lead to erroneous conclusions when using the classical estimators. In the first part of this paper we outline a highly robust method of estimation based on fixed effects and least trimmed squares (LTS). In its second part we apply this method on the panel data of 28 countries in 2002-2008 testing for the hypothesis that micro and small businesses in Europe use different strategies for their growth. We run a series of econometric tests where we regress employment and total net production in micro and small businesses on three economic factors: gross capital returns, labour cost gaps in small relative to large enterprises and the GDP per capita. In addition, we also test the role of 10 institutional factors in the growth of familty businesses.
    Keywords: Family business, robust estimator, LTS, fixed effects
    JEL: C01 C23 C51 C82 F21 F40
    Date: 2011–02
  5. By: Frank M. Fossen
    Abstract: A personal bankruptcy law that allows for a "fresh start" after bankruptcy reduces the individual risk involved in entrepreneurial activity. On the other hand, as risk shifts to creditors who recover less of their credit after a debtor's bankruptcy, lenders may charge higher interest rates or ration credit supply, which can hamper entrepreneurship. Both aspects of a more forgiving personal bankruptcy law are less relevant for wealthy potential<br /> entrepreneurs who still risk losing their wealth, but tend not to face higher interest rates because they provide collateral. This paper illustrates these effects in a model and tests the hypotheses derived by exploiting the introduction of a "fresh start" policy in Germany in 1999 as a natural experiment, based on representative household panel data. The results indicate that the insurance effect of a more forgiving personal bankruptcy law exceeds the interest effect and on balance encourages less wealthy individuals to enter into entrepreneurship.
    Keywords: Personal bankruptcy law, insolvency, entrepreneurship, fresh start
    JEL: K35 G33 L26
    Date: 2011
  6. By: Katharina Pijnenburg; Konstantin A. Kholodilin
    Abstract: We use a neoclassical production function to analyze the effects of knowledge spillovers via entrepreneurship on economic performance of 337 German districts. To take the spatial dependence structure of the data into account, we estimate a spatial Durbin model. We highlight the importance of the choice of the appropriate weight matrix. We find positive knowledge spillover effects via entrepreneurship within a certain region. Between regions, entrepreneurship as a vehicle by which knowledge spills over and contributes to economic performance depends largely on the choice of the weight matrix. We see this as evidence for regionally bounded knowledge spillover effects via entrepreneurship.
    Keywords: Entrepreneurship capital, regional output, spatial weight matrix
    JEL: C21 M13 R11
    Date: 2011
  7. By: Marco Capasso; Elena Cefis; Koen Frenken
    Abstract: We compare the industrial dynamics in the core, semi-periphery and periphery in The Netherlands in terms of firm entry-exit, size, growth and sectoral location patterns. The contribution of our work is to provide the first comprehensive study on spatial differentiation in industrial dynamics for all firm sizes and all sectors, including services. We find that at the aggregate level the spatial pattern of industrial dynamics is consistent with the spatial product lifecycle thesis: entry and exit rates are highest in the core and lowest in the periphery, while the share of persistently growing firms is higher in the periphery than in the core. Disaggregating the analysis to the sectoral level following the Pavitt-Miozzo-Soete taxonomy, findings are less robust. Finally, sectoral location patterns are largely consistent with the spatial product lifecycle model: Fordist sectors are over-represented in the periphery, while sectors associated with the ICT paradigm are over-represented in the core, with the notable exception of science-based manufacturing.
    Keywords: Entry, exit, spatial product lifecycle, Fordist paradigm, ICT paradigm
    JEL: L25 L26 L60 L80 O18 O33 R10
    Date: 2010–11
  8. By: Annalisa Ferrando (European Central Bank, DG-Economics, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Nicolas Griesshaber (Berlin Graduate School of Social Sciences (BGSS), Unter den Linden 6, 10099 Berlin, Germany.)
    Abstract: In this study we investigate the determinants of financing obstacles using survey data on a sample of around 5000 firms from the euro area countries. This completely new survey – started at the end of 2009 - gives us the opportunity to test whether firm characteristics such as size, age, economic branch, financial autonomy and ownership are valid predictors of financing obstacles also during the recent financial crisis. Our results show that only age and ownership are robust explanatory variables for firms’ perceived financing obstacles while mixed results are found for size and economic branches. JEL Classification: E22, G30, G10, O16, K40.
    Keywords: Financial Crisis, Financing Constraints, Small and Medium-Sized Enterprises, Survey Data.
    Date: 2011–02
  9. By: Gaelle Dechamp (COACTIS - Université Lumière - Lyon II : EA4161 - Université Jean Monnet - Saint-Etienne); Berangere Szostak (COACTIS - Université Lumière - Lyon II : EA4161 - Université Jean Monnet - Saint-Etienne)
    Abstract: This article develops the idea put forward by Washington and Ventresca (2004) that institutions can sustain an emergent strategy in a given field. Ordinarily considered as stable elements of that field, these institutions may be subject to change. This theoretical approach is the object of a case study set in the framework of a contest. Organized by the General Council of the Loire and aimed at SME located in its constituency, the contest goal is to encourage innovation through design. By design, one must understand a creation produced by Man for industrial and commercial use. An emergent strategy is defined as new when situated within a defined context and a specific period of time. An exploratory case study has been conducted in order to help understand how this integration works. It takes into account qualitative data such as the RFID patch project led by the DOING Company within the framework of “Design Concept” Contest. Based on the mechanisms formulated by Washington and Ventresca (2004), this analysis has been elaborated to illustrate how an emergent strategy can be successfully incorporated. Several empirical questions subsequently follow: “What are the characteristics that allow business managers settled in the Loire district to adopt a design strategy? Which fields of activity in the Loire area are the most inclined to be compatible with the design strategy? Which business projects are the most eligible for partnership with designers? How will the General Council choose the subjects for the contest in order to initiate change within institutions?
    Date: 2011–02–02

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