nep-ent New Economics Papers
on Entrepreneurship
Issue of 2011‒05‒14
twelve papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. From Laboratory to Market: On the Propensity of Young Inventors to Form a New Business By Link, Albert N.; Welsh, Dianne H. B.
  2. Materialistic Genius and Market Power: Uncovering the best innovations By Tirole, Jean; Weyl, Glen
  3. Are Self-Employed Really Happier Than Employees? An Approach Modelling Adaptation and Anticipation Effects to Self-Employment and General Job Changes By Dominik Hanglberger; Joachim Merz
  4. When does promotion focus predict entrepreneurial intentions? Only in favorable conditions By M. DER FOO; M. KNOCKAERT; T. ERIKSON
  5. Does formal business networking contribute to SME growth? – An empirical examination By B. SCHOONJANS; P. VAN CAUWENBERGE; H. VANDER BAUWHEDE
  6. Venture capital in bank - and market - based economies. By Adeline Saillard; Thomas Url
  7. Which criteria matter most in the evaluation of venture capital investments? By José Carlos Nunes; Elisabete Félix; Cesaltina Pires
  8. Has Europe Been Catching Up? An Industry Level Analysis of Venture Capital Success over 1985 - 2009 By Kraeussl, R.; Krause, S.
  9. Public Procurement and Rent-Seeking: The Case of Paraguay By Auriol, Emmanuelle; Flochel, Thomas; Straub, Stéphane
  10. A survey on tax compliance costs of Flemish SMEs: Magnitude and determinants By B. SCHOONJANS; P. VAN CAUWENBERGE; C. REEKMANS; G. SIMOENS
  11. Zeit- und Einkommensarmut von Freien Berufen und Unternehmern By Joachim Merz; Tim Rathjen
  12. Romanian SME’s sector trough crisis: the effectiveness of government policies and the present situation By Visinescu, Sorin; Micuda, Dan

  1. By: Link, Albert N. (University of North Carolina at Greensboro, Department of Economics); Welsh, Dianne H. B. (University of North Carolina at Greensboro, Department of Economics)
    Abstract: Many researchers have studied correlates of business formations. Through the case-based and statistical literature several broad categories of influence on the entrepreneurial decision to start a new business have been identified. We contribute to this literature though our statistical analysis of a unique database of young inventive scientists and engineers and their propensity toward a new business formation. Our particular focus is on young inventors starting a business based on their creative achievements. Among this group do not find empirical support for the influence of traditional variables—such as age, education, and gender—on the propensity to start a new business. Rather, we find that their entrepreneurial experience as a new business proprietor is driven by dimensions of their university laboratory research experience.
    Keywords: Entrepreneurship; business formation; patents
    JEL: L26
    Date: 2011–05–03
  2. By: Tirole, Jean (University of Toulouse); Weyl, Glen (Harvard University)
    Abstract: What is the best way to reward innovation? While prizes avoid deadweight loss, intellectual property screens out projects generating low consumer surplus per unit sold. We build a model that formalizes this trade-off and develop tools for solving the resulting multidimensional screening problem. Optimal policy generally calls for some market power but never full monopoly pricing. The appropriate degree of market power is determined by a value-weighted average of the innovation supply elasticity multiplied by the log-variance of innovation quality. This quantifies the value of the materialistic genius long associated with entrepreneurship, opening it to empirical calibration. Our results also apply to the pricing of platforms and public infrastructure.
    Date: 2010–08–15
  3. By: Dominik Hanglberger; Joachim Merz (LEUPHANA University Lüneburg,Department of Economic, Behaviour and Law Sciences, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)))
    Abstract: Empirical analyses using cross-sectional and panel data found significantly higher levels of job satisfaction for self-employed than for employees. We argue that those estimates in previous studies might be biased by neglecting anticipation and adaptation effects. For testing we specify several models accounting for anticipation and adaptation to self-employment and job changes. Based on data from the German Socio-Economic Panel Survey (SOEP) we find that becoming self-employed is associated with large negative anticipation effects. In contrast to recent literature we find no specific long term effect of self-employment on job satisfaction. Accounting for anticipation and adaptation to job changes in general, which includes changes between employee jobs, reduces the effect of self-employment on job satisfaction by 70%. When controlling for anticipation and adaptation to job changes, we find no further anticipation effect of self-employment and a weak positive but not significant effect of self-employment on job satisfaction for three years. Thus adaptation wipes out higher satisfaction within the first three years being self-employed. According to our results previous studies at least overestimated possible positive effects of self-employment on job satisfaction.
    Keywords: job satisfaction, self-employment, hedonic treadmill model, adaptation, anticipation, fixed-effects panel estimations, German Socio-Economic Panel (SOEP)
    JEL: J23 J28 J81
    Date: 2011–03
    Abstract: We investigate the effects of promotion focus on the entrepreneurial intentions of a group of 208 research scientists based in a university in Norway. Previous researchers have suggested that the risk taking and creativity which promotion focus is linked to should predict entrepreneurial behavior. However, the results supported our assertion that promotion focus by itself does not predict entrepreneurial intentions. Instead, these predictions depend on the promotion focus together with family and environmental conditions. Our study also shows that under some circumstances, specifically intellectual property engagement, individuals low in promotion focus report higher entrepreneurial intentions than their high promotion focused counterparts. Our study provides a new perspective on promotion focus effects, showing the joint individual and environment factors, not either factor alone, to predict entrepreneurial intentions. We discuss implications for multi-level and self-regulation research.
    Date: 2011–02
    Abstract: This paper provides new empirical evidence on the impact of formal business networking on SME growth. More specifically, using a large, unbalanced panel data set of Flemish SMEs over the period 1992-2008, we examine whether participation in a government-supported program aimed at intense guidance for small business managers affects SME growth. We find that this objective measure of formal business networking is significantly positively correlated with net asset and value added growth. These results confirm that formal business networking contributes to company success.
    Date: 2011–02
  6. By: Adeline Saillard (Centre d'Economie de la Sorbonne - Paris School of Economics); Thomas Url (WIFO - Austrian Institute of Economic Research)
    Abstract: The determinants of venture capital investment have attracted a significant amount of attention from both academics and policymakers. We use a version of the KeuschniggÑ Nielsen model for venture-capital-financed projects to condition our analysis on a reasonable set of exogenous variables but we focus on one determinant : financial market structure. The type of financial market structure (bank -or market-based) contributes substantially to explaining differences among countries with respect to the extent of venture capital investments in the initial business stages. We will use the cross country and time series variation from a panel of 19 industrial countries to support the hypothesis that venture capital thrives within market-based financial systems and is confined to an ancillary role in bank-based systems.
    Keywords: Venture capital, financial market structure, local stock markets, panel data.
    JEL: G24 O16 O50
    Date: 2011–04
  7. By: José Carlos Nunes (Escola Superior de Gestão e Tecnologia de Santarém, Instituto Politécnico de Santarém, Santarém, Portugal); Elisabete Félix (CEFAGE-UE, Departamento de Gestão, Universidade de Évora, Évora, Portugal); Cesaltina Pires (CEFAGE-UE, Departamento de Gestão, Universidade de Évora, Évora, Portugal)
    Abstract: This study identifies the importance assigned to the various criteria used by the Portuguese Venture Capitalists (VCs) to evaluate and select early stage venture capital projects. The data was collected through a questionnaire answered by 20 Portuguese VCs. We use descriptive statistics techniques and non-parametric tests to identify the most valued criteria and test differences in the importance assigned to the criteria of several types of VCs and investments. The study reveals that the personality and experience of the entrepreneur and of the management team are the most valued groups of criteria. VCs with a majority of private share capital value more the personality of the entrepreneur and management team than the companies with a majority of public share capital. Additionally, the VCs that did not yet internationalize consider the personality of the entrepreneur and management team and the financial aspects, to be more important than the VCs that have already expanded abroad.
    Keywords: Venture capital; Evaluation criteria; Early-stage investments; Internationalization.
    JEL: G24 G32
    Date: 2011
  8. By: Kraeussl, R.; Krause, S.
    Abstract: After nearly two decades of U.S. leadership in the 1980s and 1990s, are Europe's venture capital markets in the 2000s finally catching up regarding the provision of financing and successful exits, or is the performance gap as wide as ever? Are we amidst overall dismal performance of the venture capital experience without any encouraging news? We attempt to answer these questions by tracking down over 40,000 venture capital--backed firms of six industries in 13 European countries and the U.S., and determine which type of exit - if any - each particular firm's investors have chosen between 1985 and 2009. Our empirical findings suggest that: (i) in terms of the number of venture capital-backed firms successfully going public, European venture capitalists have closed the gap with respect to the U.S., albeit as a result of a worse initial public offering performance overall; (ii) Europe continues to lag behind the U.S. by means of mergers and acquisitions, and in successful exits of seed/start-up and early stage firms, (iii) average investment and R&D are important determinants of venture capital success, but only have a positive impact after 2000; and (iv) idiosyncratic differences across industries seem to be more relevant than country-specific characteristics in explaining differences in performance.
    Keywords: Venture capital, private equity, success rates, performance, IPOs.
    JEL: G24 G3
    Date: 2011
  9. By: Auriol, Emmanuelle (TSE); Flochel, Thomas (University of Edinburgh); Straub, Stéphane (TSE)
    Abstract: A model of entrepreneurial choices in an economy with a corrupt public procurement sector is built, providing predictions along two main dimensions. First, corruption is more frequent in sectors where public institutions are large buyers. Second, firms favoured with corrupt contracts enjoy extra returns, so that procurement related activities attract the best entrepreneurs. A large scale microeconomic database, including all public procurement operations over a 4 year period in Paraguay, amounting annually to approximately 6% of the country’s GDP, is then used to corroborate these predictions.
    Keywords: Procurement, Corruption, Rent-seeking, Development
    JEL: H57 D73 D72 O5
    Date: 2011–02–18
    Abstract: This study presents survey evidence on the magnitude and determinants of tax compliance costs in Flemish small and medium-sized enterprises (SMEs). Data were obtained from an internet questionnaire among members of a professional network of Flemish entrepreneurs, called VOKA. Analyzing a sample of 151 Flemish SMEs, we find that the tax compliance costs – exceeding over seven percent of gross added value – are relatively high. VAT, labor taxes and corporate taxes are the main components of tax compliance costs. In addition, our evidence confirms the regressivity hypothesis, according to which smaller companies face relatively higher compliance costs. Furthermore, industry, age and the proportion of blue-collar workers prove to be determining factors of relative compliance costs. Our study concludes by formulating a number of policy recommendations that might contribute to lower compliance costs.
    Date: 2011–02
  11. By: Joachim Merz; Tim Rathjen (LEUPHANA University Lüneburg,Department of Economic, Behaviour and Law Sciences, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)))
    Abstract: It is common sense that (liberal) professions and entrepreneurs (tradesmen) as self-employed are rich by money and, because of their independence and time sovereignty, are rich by time, too. This study tries to shed empirically based light on the issue and the well-being situation of the professions and entrepreneurs in particular by asking not only about income poverty but also about time poverty within the framework of a new interdependent multidimensional poverty approach. Database is the German Socio-Economic Panel (GSOEP) for the evaluation of the substitution/trade-off of genuine leisure time and income as well as the German Time Use Surveys (GTUS) 1991/92 and 2001/02 for the actual poverty analyses. Altogether, compared to employees a particular concernment of multidimensional time and income poverty of professions and notably entrepreneurs is identified; a result which is in contrast to common valuation. A remarkable percentage of the not income poor but time poor employees in general, and professions as well as entrepreneurs in particular, is not able to compensate their time deficit by income. These individuals are neglected in the poverty and well-being discussion so far, in the discussion about the “woorking poor” as well as in the discussion concerning time stress and time presure in generall, and for professions as well as entrepreneurs in particular.
    Keywords: Liberal professions (Freie Berufe), entrepreneurs, aelf-employed, interdependent multidimensional time and income poverty, time and income substitution, extended economic well-being, satisfaction/happiness, CES welfare function estimation, working poor, German Socio-Economic Panel, German Time Use Survey 2001/02
    JEL: D31 D13 J22
    Date: 2011–03
  12. By: Visinescu, Sorin; Micuda, Dan
    Abstract: SMEs play a crucial role in modern societies; being regarded as the foundation of a global competitive economy. Entire economic concepts evolved based on the SMEs sector evolution like entrepreneurship, innovation, competitiveness, etc. The current paper is aimed at presenting the current state and role of the SME sector in Romanian economy, in light of the challenges imposed by the global financial and economic crisis and the reaction measures taken (or not taken) by the Romanian authorities.
    Keywords: financial crisis; government policies; SME’s
    JEL: L21 G38
    Date: 2011–05

This nep-ent issue is ©2011 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.