nep-ent New Economics Papers
on Entrepreneurship
Issue of 2011‒05‒24
eighteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Entrepreneurial innovations and taxation By Haufler, Andreas; Norbäck, Pehr-Johan; Persson, Lars
  2. Show Me the Right Stuff: Signals for High Tech Startups By Annamaria Conti; Marie C. Thursby; Frank Rothaermel
  3. Understanding Small Business Heterogeneity By Erik Hurst; Benjamin Wild Pugsley
  4. Entrepreneurs from low-skilled immigrant groups in knowledge-intensive industries - company characteristics, survival and innovative performance By Mueller, Elisabeth
  5. Estimating Government Policy Preferences to Predict New Firm Formation By Mann, John; Shideler, Dave
  6. Livelihood Disruption and Venture Creation: Entrepreneurship as Technology Adoption A Comparison between Kentucky and Shaanxi Farmers By Khantachavana, Sivalai V.; Just, David R.; Pushkarskaya, Helen; Kong, Rong
  7. What motivates academic scientists to engage in research commercialization: ‘gold’, ‘ribbon’ or ‘puzzle’? By Lam, Alice
  8. The Determinants of Self-Employed Income in a Regional Economy By Swindall, Devin C.; Willis, David B.; Boys, Kathryn A.; Hughes, David W.
  9. Markets as Economizers of Information: Field Experimental Examination of the "Hayek Hypothesis" By Omar Al-Ubaydli; Peter Boettke
  10. The relationship between firm size and economic development: The Lucas hypothesis revisited By André van Stel; Emilio Congregado; Antonio Golpe
  11. Post-Socialist Culture and Entrepreneurship By Petrik Runst
  12. Help students to think outside the box with entrepreneurship education in the Colleges of Agriculture By Liang, Chyi-lyi
  13. Subjectivity in Credit Allocation to Micro-Entrepreneurs: Evidence from Brazil By Isabelle Agier; Ariane Szafarz
  14. Rural Non-farm Dynamics: Occupational Ladders and Earnings Mobility in Thailand By Chawanote, Chayanee; Barrett, Christopher B.
  15. Developing a framework for assisting entrepreneurs: A case study of the Michigan State University Product Center for Agriculture and Natural Resources By Lovgren, Adam; Peterson, Christopher H.; Ross, Brent
  16. Separation of Ownership and Control: Delegation as a Commitment Device By Aristotelis Boukouras
  17. Collaterals, Bank Monitoring and Performance: the Case of Newly Established Wine Farmers By Cadot, Julien
  18. Sozialpolitische Ziele der Gründungsförderung am Beispiel von Gründungen aus der Arbeitslosigkeit By Block, Joern; Kohn, Karsten

  1. By: Haufler, Andreas; Norbäck, Pehr-Johan; Persson, Lars
    Abstract: In many countries entrepreneurship is promoted through tax reductions for small businesses and by various government support schemes. We analyze the effects of such policies to subsidize small businesses in a setting where both the risk-return characteristics of the selected innovation project and the mode of commercialization chosen by entrepreneurs (market entry versus sale to an incumbent firm) are endogenous. We show that government programs to support small businesses foster market entry by entrepreneurs but, at the same time, give an incentive to choose low risk projects, due to the existence of limited loss o®set provisions. This points to a basic trade-off be- tween the goals of raising competition in technology-intensive markets and the desire of governments to foster risky `breakthrough' innovations.
    Keywords: business taxation; innovation; market entry
    JEL: H25 L13 M13 O31
    Date: 2011–05
  2. By: Annamaria Conti; Marie C. Thursby; Frank Rothaermel
    Abstract: We examine the potential for technology startups to use patents and founders, friends and family money (FFF money) as signals to attract business angel and venture capital funds, patents reflect technology quality and FFF money reflects founder commitment. We find that if investors value technology quality more (less) than founder commitment, the optimal mix of signals is a relatively higher (lower) use of patents than FFF money. Regardless of investor preferences, high quality founders should invest more in both signals than in the absence of private information. This investment is inversely related to the opportunity cost of investing in the signals. We test these predictions empirically and find evidence in support of this proposition. When we distinguish between venture capitalist and business angel investment, we find that patents serve as a signal for venture capitalists and FFF money is a signal for business angels (but not vice versa).
    JEL: G24
    Date: 2011–05
  3. By: Erik Hurst; Benjamin Wild Pugsley
    Abstract: In this paper, we show that substantial heterogeneity exists among U.S. small businesses owners with respect to their ex-ante expectations of future performance, their ex-ante desire for future growth, and their initial motives for starting a business. Specifically, using new data that samples early stage entrepreneurs just prior to business start up, we show that few small businesses intend to bring a new idea to market. Instead, most intend to provide an existing service to an existing customer base. Further, using the same data, we find that most small businesses have no desire to grow big or to innovate in any observable way. We show that such behavior is consistent with the industry characteristics of the overwhelming majority of small businesses, which are concentrated among skilled craftsmen, lawyers, real estate agents, doctors, small shopkeepers, and restaurateurs. Lastly, we show non pecuniary benefits (being one’s own boss, having flexibility of hours, etc.) play a first-order role in the business formation decision. We conclude by discussing how failing to acknowledge the ex-ante heterogeneity can lead to biased inferences of the importance of entrepreneurial talent, entrepreneurial luck, and financial frictions from the ex-post distribution of firm size.
    JEL: L21 L25 L26
    Date: 2011–05
  4. By: Mueller, Elisabeth
    Abstract: This paper analyzes how companies of immigrant entrepreneurs in knowledgeintensive industries differ from companies of native entrepreneurs with respect to start-up characteristics, firm survival and innovative performance. I focus on immigrants from the 'recruitment countries' of south and southeast Europe, who arrived in Germany mainly in the 1970s to fill labor shortages. They are the largest immigrant group in Germany and can be reliably identified via ethnic name coding. Immigrant entrepreneurs are less than half as likely to found a company in a knowledge-intensive industry as native entrepreneurs. Firms owned exclusively by immigrants tend to be smaller and have higher exit rates. After controlling for resources, I found no differences in patenting activity compared to firms owned exclusively by natives. Firms in mixed immigrant/native ownership have no size disadvantage. In that group, exit rates are higher in services but not in manufacturing, and, again, there are no differences in patenting when resources are taken into account. The lower participation of immigrant entrepreneurs in knowledge-intensive industries can be explained by lower education levels, while smaller firm sizes suggest more limited access to capital. --
    Keywords: immigrants,innovation,entrepreneurship,knowledge-intensive industries
    JEL: O32 O34 M13 J15
    Date: 2011
  5. By: Mann, John; Shideler, Dave
    Keywords: Entrepreneurship, Entrepreneurial Climate, Subsistance, Discretionary Spending, Community/Rural/Urban Development, Public Economics,
    Date: 2011
  6. By: Khantachavana, Sivalai V.; Just, David R.; Pushkarskaya, Helen; Kong, Rong
    Abstract: In the US, The Tobacco Transition Payment Program, also called the "tobacco buy-out," helps tobacco quota holders and producers transition to the free market. In China, the transaction of Land Use Rights providing farmersâ ability to buy or sell Land Use Rights has been seriously considered by the Chinese government. The uncertainty in household income and changes in economic environment during the US Tobacco Transition Payment Program and the Chinese Land Use Rights Regime lead many individuals into entrepreneurial activities. Entrepreneurship often means making changes in livelihood activities that involve substantial risks to income. While the rewards may be substantial, transactions costs may make decisions irreversible. This paper draws a comparison between entrepreneurship and technology adoption. Adopting a new production technology also involves substantial risks. The economics of technology adoption is a well developed literature with many accepted and testable models. Most prominent are the theories of learning by using and learning by doing. We review the technology adoption literature, drawing out lessons for entrepreneurship research. We then apply an âentrepreneurship as technology adoptionâ model to a unique dataset collected in Kentucky, US and in Shaanxi province, China. Using a sample of 702 Kentucky farmers at the time of the buyout and 730 Chinese farmers, we test several of the implications of this model and compare significant results between Kentucky and Shaanxi farmers. This study finds that both farmers in Kentucky and Shaanxi with a strong social network are more likely to become entrepreneurs. Kentucky farmers with low income are more likely to start new businesses. The finding supports the âpushâ hypothesis as farmers with low income are pushed into starting a new business. The human capital factor is strongly associated with Shaanxi farmerâs entrepreneurial decision.
    Keywords: Farm Management, Research and Development/Tech Change/Emerging Technologies,
    Date: 2011
  7. By: Lam, Alice
    Abstract: This paper employs the three concepts of ‘gold’ (financial rewards), ‘ribbon’ (reputational/career rewards) and ‘puzzle’ (intrinsic satisfaction) to examine the extrinsic and intrinsic aspects of scientists’ motivation for pursuing commercial activities. The study is based on 36 individual interviews and an on-line questionnaire survey of 735 scientists from five major UK research universities. It finds that there is a diversity of motivations for commercial engagement, and that many do so for reputational and intrinsic reasons and that financial rewards play a relatively small part. The paper draws on self-determination theory in social psychology to analyse the relationship between scientists’ value orientations with regard to commercial engagement and their personal motivations. It finds that those with traditional beliefs about the separation of science from commerce are more likely to be extrinsically motivated, using commercialization as a means to obtain resources to support their quest for the ‘ribbon’. In contrast, those identify closely with entrepreneurial norms are intrinsically motivated by the autonomy and ‘puzzle-solving’ involved in applied commercial research while also motivated by the ‘gold’. The study highlights the primacy of scientists’ self motivation, and suggests that a fuller explanation of their commercial behaviour will need to consider a broader mix of motives to include the social and affective aspects of intrinsic motivation. In conclusion, the paper argues that policy to encourage commercial engagement should build on reputational and intrinsic rather than purely financial motivations.
    Keywords: Academic scientists; entrepreneurial university; motivation; scientific norms and values; self-determination theory; research commercialization; knowledge transfer
    JEL: L2 I23 O31
    Date: 2010–12
  8. By: Swindall, Devin C.; Willis, David B.; Boys, Kathryn A.; Hughes, David W.
    Abstract: Supporters claim that entrepreneurship is critical to building and sustaining the regional economies of urban and rural areas across the nation. Proponents argue that economic development practices that enhance and support entrepreneurship are essential because they cultivate innovation which, in turn, creates new jobs, new wealth, and a better quality of life. However, South Carolinaâs real self-employed per capita income has decreased over the last decade. This downward trend highlights the need to examine the drivers of entrepreneurial income. The income of self-employed workers, as opposed to the number of self-employed, is critical to economic development because a major goal of economic policy is to increase incomes not just employment. Identifying and quantifying the personal, cultural, and economic factors that influence self-employed income provides policy makers with another tool to enhance economic development policies. This study uses data from the American Community Survey for South Carolina in both an ordinary regression approach and a quantile regression approach to investigate the relationship between individual entrepreneurial income and individual personal attributes, social/institutional assets available to the entrepreneur, and the regional economic environment the entrepreneur operates within. Personal attributes, such as education and sex, and the importance of self-employed income to total family income are significant variables in explaining income variation among self-employed individuals.
    Keywords: Self-employed income, entrepreneurship, quantile regression, Community/Rural/Urban Development, Consumer/Household Economics, Labor and Human Capital, R11, R12,
    Date: 2011
  9. By: Omar Al-Ubaydli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Peter Boettke (Department of Economics, George Mason University)
    Abstract: The work of Friedrich Von Hayek contains several testable predictions about the nature of market processes. Vernon Smith termed the most important one the ‘Hayek hypothesis’: equilibrium prices and the gains from trade can be achieved in the presence of diffuse, decentralized information, and in the absence of price-taking behavior and centralized market direction. Vernon Smith tested this by surveying data on laboratory experimental markets and found strong support. We repeat this exercise using field experimental market data. Using field experiments allows us to test several other predictions. Generally speaking, we find support for Hayek’s theories.
    Keywords: price dynamics, entrepreneurs, field experiment, market process
    JEL: B53 C90 D40 D51 D61 D82 L26
    Date: 2011–05
  10. By: André van Stel; Emilio Congregado; Antonio Golpe
    Abstract: In his seminal article, Lucas (1978) predicted that the average size of firms would continue to increase with progressive economic development. However, since 1978, self-employment rates have increased in many industrialized countries. This raises the question to what extent the Lucas hypothesis is still true in modern times. In this paper we test the Lucas hypothesis for 23 OECD countries, using data on GDP per capita and the employment to self-employment ratio (a proxy for average firm size) over the period 1972-2008. Using modern econometric techniques which allow for the presence of structural breaks, we find considerable support for the Lucas hypothesis: for 15 out of 23 countries we find a significantly positive relation between GDP per capita and the employment to self-employment ratio. Our results suggest that, notwithstanding the rise of self-employment observed in many countries over the last few decades, economies of scale and scope continue to play an important role in many advanced economies.  
    Date: 2011–05–13
  11. By: Petrik Runst
    Abstract: In this paper it is argued that locus of control beliefs and preferences concerning state action negatively affect the formation of new firms in former socialist countries. For this purpose Kirzner's theory of costless entrepreneurship is reviewed and criticized. German reunification, in which the formerly Socialist East joined the Federal Republic of Germany, represents an intriguing natural experiment in which the formal institutional structure of one nation was almost fully transplanted into another. Traditional as well as psychological factors are examined. The results suggest that about one third of the east-west gap in new self-employment can be explained by inert informal institutions.
    Keywords: Psychology of Entrepreneurship, Self-Employment, Transitional Economies, East Germany
    JEL: D00 J24 O12 P20
    Date: 2011
  12. By: Liang, Chyi-lyi
    Abstract: This paper presents a sample road map of creating and implementing a successful entrepreneurship curriculum in the College of Agriculture.
    Keywords: College of Agriculture, Entrepreneurship Education, Curriculum Development, Teaching/Communication/Extension/Profession, Q0,
    Date: 2011
  13. By: Isabelle Agier; Ariane Szafarz
    Abstract: This paper estimates the impact of loan officers' subjectivity on microcredit granting by exploiting an exceptionally detailed database from a Brazilian microfinance institution. Loan officers collect field data, meet with applicants, and make recommendations to the credit committee that in turn has the final say on both loan approval and loan size. The loan officers' subjectivity is captured through the lens of disparate treatment based on gender. Indeed, our estimations show that an unfair gender gap is observed in loan size, and that this gap is almost exclusively attributable to the loan officers. We interpret this finding as evidence that, despite monitoring and wage incentivization, microcredit officers keep letting their subjective preferences interfere with loan granting. We conclude by suggesting alternative means to curb subjectivity in credit allocation to micro-entrepreneurs.
    Keywords: Subjectivity Loan Size; Microcredit; Gender; Loan Officer; Entrepreneurs
    JEL: O16 D82 J33 L31
    Date: 2011–05
  14. By: Chawanote, Chayanee; Barrett, Christopher B.
    Abstract: This study explores occupational and earnings dynamics of rural non-farm economy (RNFE) in Thailand. Using occupational transition matrices, we finds significant occupational transitions in rural Thailand, mainly involving moving to non-farm employment, rather than starting businesses. Moreover, results from conditional micro mobility regressions show that transitions into the RNFE are associated with statistically significant earnings gains while transitions into farming are associated with earnings losses. The cumulative distribution of income indicates that non-farm employersâ earnings distribution stochastically dominates the others, signaling an occupational ladder. However, only a small number of individuals become non-farm employers, reflecting the difficulty involved in starting, expanding or even keeping a rural non-farm business.
    Keywords: earnings mobility, non-farm employment, non-farm business, occupational choice, Community/Rural/Urban Development, International Development, Labor and Human Capital,
    Date: 2011–05–04
  15. By: Lovgren, Adam; Peterson, Christopher H.; Ross, Brent
    Keywords: Agribusiness, Teaching/Communication/Extension/Profession,
    Date: 2011
  16. By: Aristotelis Boukouras (Georg-August-University Göttingen)
    Abstract: This paper provides a theoretical model for explaining the separation of ownership and control in firms. An entrepreneur hires a worker, whose effort is necessary for running a project. The worker\'s effort determines the probability that the project will be completed on time, but the worker receives some unobservable benefit by continuing his employment in the project. Thus, motivating the worker requires an efficiency wage which is inflated by the private benefit. The entrepreneur would pay out a smaller wage if he could commit to terminate the project if a delay occurs, but this threat is not credible, because the project has positive continuation value. We show that hiring a manager can solve this time-inconsistency issue and reduce the efficiency wage. We extend the model to include managerial moral hazard and we examine the conditions under which separation of ownership and control is more likely to happen. The model is consistent with many of the findings of the empirical literature, while it generates some new predictions too.
    Keywords: control structure; delegation; efficiency wage; entrepreneur; managerial contract; moral hazard; organizational hierarchy; private benefits; separation of owner-ship and control; time-inconsistency
    JEL: D86 G34 J31 L22 L26
    Date: 2011–05–10
  17. By: Cadot, Julien
    Abstract: This research aims at identifying the incentives associated to collaterals in an asymmetric information context and when the bank is the main financial partner of the entrepreneurs, which is typically the case for most farms and especially in the wine sector. In one hand, collaterals may reduce the risk of overinvestment by entrepreneurs and so reduce the risk of repayment default. In the other hand, to contract collaterals may lead the bank to reduce the monitoring effort. In this paper we test these two hypotheses in taking into account the fact that entrepreneurs can benefit from a banking relationship or not. Our results confirm that collateralsâ incentives depend on the bank monitoring. Moreover, this emphasizes the uniqueness of land mortgages. Besides, our results confirm that the revenue constraint is binding and thus, make critical the question of financial resources for newly established wine farmers.
    Keywords: Collaterals, incentives, bank monitoring, Agricultural Finance, G32, G33, G35,
    Date: 2011
  18. By: Block, Joern; Kohn, Karsten
    Abstract: Support of business start-ups is partially motivated by social policy objectives. The paper discusses these social policy objectives on a conceptual and empirical basis. Its focus is on start-ups out of unemployment. Implications for the design and the evaluation of socially motivated start-up subsidies are discussed.
    Keywords: Start-up subsidies; social policy; entreprenership; unemployment
    JEL: J01 M13
    Date: 2011–05–06

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