nep-ent New Economics Papers
on Entrepreneurship
Issue of 2012‒01‒18
fourteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Billionaires By Leeson, Peter; Sanandaji, Tino
  2. Entrepreneurial Innovations and Taxation By Haufler, Andreas; Norbäck, Pehr-Johan; Persson, Lars
  3. Entrepreneurial Commercialization Choices and the Interaction between IPR and Competition Policy By Gans, Joshua S.; Persson, Lars
  4. The Interplay of Human and Social Capital in Shaping Entrepreneurial Performance: The Case of Vietnam By E. Santarelli; H. T. Tran
  5. Globalization, entrepreneurship and the region By Roy Thurik; David Audretsch; Isabel Grilo
  6. Examining the decision to spin off new corporate ventures By Isabel Pizarro; Julio DeCastro; Jose Luis Galán
  7. Spreading Risk: Limiting Cases By Eric Fesselmeyer; Leonard J. Mirman; Marc Santugini
  8. Knowledge networking and growth in service firms By B. SCHOONJANS; P. VAN CAUWENBERGE; H. VANDER BAUWHEDE
  9. Bootstrapping as a Resource Dependence Management Strategy and its Association with Startup Growth By T. VANACKER; S. MANIGART; M. MEULEMAN; L. SELS
  10. The Association between Venture Capitalists’ Selection and Value Adding Behavior: Evidence from Early Stage High Tech Venture Capitalists By M. KNOCKAERT; T. VANACKER
  11. The Impact of the Seed Capital Program of SERCOTEC in Chile By Claudio A. Bonilla; Christian A. Cancino
  12. We need to talk - or do we? Geographic distance and the commercialization of technologies from public research By Guido Buenstorf; Alexander Schacht
  13. Age, diversification and survival in the German machine tool industry, 1953-2002 By Alex Coad; Christina Guenther
  14. New Methods for the Analysis of Links between International Firm Activities and Firm Performance: A Practitioner’s Guide By Joachim Wagner

  1. By: Leeson, Peter (George Mason University); Sanandaji, Tino (Research Institute of Industrial Economics (IFN))
    Abstract: Existing studies of entrepreneurship focus on entrepreneurs whose individual contribution to wealth creation is typically trivial: self-employed persons. This paper investigates entrepreneurs whose individual contribution to wealth creation is enormous: billionaires. We explore the relationship between economic development, institutions, and these contrasting kinds of entrepreneurs. We find that the institutions consistent with self-employed entrepreneurs di¤er markedly from the ones consistent with billionaires. Further, only the latter are consistent with the institutions that underlie economic prosperity. Where well-protected private property rights and supporting, market-enhancing institutions flourish, so do billionaires. But self-employed entrepreneurs don't. Where private property rights are weakly protected and interventionist institutions flourish, so do self-employed entrepreneurs. But billionaires don't.
    Keywords: Billionaires; Entrepreneurship; Self-employment; Institutions
    JEL: H20 L26 L53 O17
    Date: 2012–01–02
  2. By: Haufler, Andreas (University of Munich); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: Many governments promote small businesses for the dual reasons of fostering ‘breakthrough’ innovations and employment growth. In this paper we study the effects of tax and subsidy policies on entrepreneurs’ choice of riskiness of an innovation project and on their mode of commercializing the innovation (market entry versus sale). Limited loss offset provisions in the tax system induce entrepreneurs to choose projects with too little risk and this problem arises primarily when entrepreneurs market their product themselves. When innovations reduce only the fixed costs of production this leads to a fundamental policy trade-off between the declared goals of promoting employment and innovation in small, entrepreneurial firms. When innovations reduce variable production costs, policies to promote small businesses may even be unambiguously harmful.
    Keywords: Entrepreneurship; Innovation; Corporate taxes; Firm growth
    JEL: H25 L13 M13 O31
    Date: 2012–01–02
  3. By: Gans, Joshua S. (Rotman School of Management); Persson, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: This paper examines the interaction between intellectual property protection and competition policy on the choice of entrepreneurs with respect to commercialization as well as the rate of innovation. We find that stronger intellectual property protection makes it more likely that entrepreneurs will commercialize by cooperating with incumbents rather than competing with them. Consequently, we demonstrate that competition policy has a clearer role in promoting a higher rate of innovation in that event. Hence, we identify one reason why the strength of the two policies may be complements from the perspective of increasing the rate of entrepreneurial innovation.
    Keywords: Entrepreneurs; Innovation; Commercialization; Intellectual property law; Competition law
    JEL: O31
    Date: 2012–01–03
  4. By: E. Santarelli; H. T. Tran
    Abstract: This study investigates the effects of human capital, social capital and their interaction on the performance of 1,398 Vietnamese new-born firms. Operating profit is used as the measure of success. Human capital is captured by individual-level professional education, start-up experience, and learning. Whereas the first two dimensions of human capital are measured with traditional indicators, we define learning as ability to accumulate knowledge to conduct innovation activities (new product introduction, product innovation and process innovation). Social capital is measured as benefits obtained from personal strong-tie and weak-tie networks. Key findings are three-fold: (i) human capital strongly predicts firm success, with learning exerting a statistically significant positive impact on operating profit; (ii) benefits from weak ties outweigh those from strong ties; (iii) interaction of human capital and social capital displays a statistically significant positive effect on new-firm performance.
    JEL: L26 L25 L14 J24 O53
    Date: 2012–01
  5. By: Roy Thurik; David Audretsch; Isabel Grilo
    Abstract: The present document analyzes the linkages between globalization, entrepreneurship and the role of regions. After dealing with the meaning of globalization, the regional dimension of the response to globalization is described where downsizing, knowledge spillovers and agglomeration are the essential phenomena. Next, it is shown how these developments have led to the emergence of new entrepreneurial activities. Subsequently, more details are given on the effects of the information and communication (ICT) revolution on the organization of industry in a globalized economy. Finally, it is concluded that policies promoting both knowledge investments as well as entrepreneurship have become prominent for many regions in the most developed countries.  
    Date: 2012–01–09
  6. By: Isabel Pizarro (Department of Business Administration, Universidad Pablo de Olavide); Julio DeCastro (Department of Strategic Management & Entrepreneurship Instituto de Empresa, Madrid); Jose Luis Galán (Department of Business Administration, Universidad de Sevilla)
    Abstract: When developing a new venture, a company is faced with the problem of balancing between its autonomy and its control. Utilizing both transaction-cost and resource-based theories, we analyze how entrepreneurial managers’ perceptions of the strategic relationship between firm and corporate venture (CV) determine the choice of internalizing or externalizing the CV. The results indicate that managers would encourage externalization of a CV if its near-term profitability forecast were low; if the risks involved were high; or if the technological synergies with the firm were low. For high market relatedness, managers would encourage internalization of the CV when the importance of the new competences is high
    Keywords: Corporate ventures; internalization; spin off; strategic importance; operational relatedness
    Date: 2011–11
  7. By: Eric Fesselmeyer; Leonard J. Mirman; Marc Santugini
    Abstract: We show that a large number of agents sharing risk does not remove concern for risk (through risk spreading) when entrepreneurial activity is not insignificant in the economy.
    Keywords: Arrow-Lind Theorem, Entrepreneurial activity, Portfolio diversification, Risk-aversion, Risk-neutrality, Risk-taking
    JEL: D81 G10
    Date: 2012
    Abstract: This paper empirically assesses whether knowledge networking affects the growth of small service firms. More specifically, using a large, unbalanced panel data set for the period 1992- 2009, we investigate whether participation in a knowledge network called PLATO is positively related to service firm growth. Our results show that knowledge networking has a highly significant positive effect on the growth in net assets and added value of service firms. Furthermore, we demonstrate that the positive effect of knowledge networking on firm growth is significantly larger for service than for manufacturing firms, indicating that industry drives networking success.
    Keywords: networking, growth, service sector, SME, knowledge
    Date: 2011–10
    Abstract: This paper studies the association between bootstrapping and startup growth. Bootstrapping reduces a startup’s dependence on financial investors, but may create new dependencies. Drawing upon resource dependence theory, we hypothesize that when bootstrapping does not create new strong dependencies it will benefit startup growth, especially when dependence from financial investors is high. However, when bootstrapping creates new strong dependencies it will constrain growth, especially when dependence from financial investors is low. We use a longitudinal database of 205 Belgian startups comprising data from both questionnaires and yearly financial accounts. Findings broadly confirm our hypotheses. Theoretical and managerial implications are discussed.
    Date: 2011–09
    Abstract: Building upon self-efficacy and collective effort theories, we study the association between the selection behavior of venture capitalists and their involvement in value adding activities. We argue that investors, who prioritize different characteristics of a business proposal during selection, will be more or less confident of their own abilities and the abilities of entrepreneurial teams to effectively add value to portfolio companies and hence will be more or less involved in providing value adding activities. In order to test this claim, we use a stratified sample comprising 68 European early stage high tech venture capitalists. Results show that venture capitalists, who focus on entrepreneurial team characteristics or financial criteria during selection are less involved in value adding activities compared to their peers, who focus on technological criteria. We discuss these findings from a theoretical and practical perspective.
    Keywords: venture capital, value adding behavior, selection behavior, self-efficacy theory,collective effort theory
    JEL: G24 L26 O32 D81
    Date: 2011–09
  11. By: Claudio A. Bonilla; Christian A. Cancino
    Abstract: This paper seeks to measure the impact on small businesses in Chile of the Seed Capital Program implemented by Chile's Technical Cooperation Services (Servicio de Cooperación Técnica SERCOTEC). The results are mixed. On the one hand, the impact of sales is positive but its statistical significance depends on the model used. With regard to the number of employees, however, the results are positive and statistically significant regardless of the model used. The results also show that participating in the program has no incidence on the probability of later obtaining financing. This study highlights the importance of differentiating between productive development programs and social programs. It also suggests improvements in public policy to develop entrepreneurship in small businesses in Chile. These suggestions may also be interesting for other countries in the region facing similar challenges in terms of developing private entrepreneurship as a vehicle to generate economic development.
    Keywords: Financial Sector :: Financial Services, Private Sector :: SME, Private Sector :: Microbusinesses & Microfinance, Small and medium enterprise, entrepreneurship, productive development, SMEs
    JEL: O20 O25 O22
    Date: 2011–12
  12. By: Guido Buenstorf (Institute of Economics and International Center for Higher Education Research (INCHER-Kassel), University of Kassel); Alexander Schacht (Graduate College "The Economics of Innovative Change", Friedrich Schiller University Jena)
    Abstract: Using a new dataset with detailed geographic information about licensing activities of the Max Planck Society, Germany's largest non-university public research organization, we analyze how the probability and magnitude of commercial success are affected by geographic distance between licensors and licensees. Our evidence suggests that proximity is not generally associated with superior commercialization outcomes. A negative association between distance and commercialization success is identified only for the specific cases of, first, spin-off licensees located outside Germany and, second, foreign licensees within the subsample of inventions with multiple licensees.
    Keywords: academic inventions, licensing, spin-off entrepreneurship, geographic distance
    JEL: L24 L26 O34 R30
    Date: 2012–01–06
  13. By: Alex Coad; Christina Guenther
    Abstract: We focus on the relationship of age and diversification patterns of German machine tool manufacturers in the post war era. Based on trade journals we track the entire firm populations' product portfolio development throughout each firm's lifetime. We distinguish between 'minor diversification' and 'major diversification', where these two concepts refer to adding a new product variation within a familiar submarket, or expanding the product portfolio into new submarkets. Our analysis reveals four main insights. First, we observe that firms have lower diversification rates as they grow older, and that eventually diversification rates even turn negative for old firms on average. Second, we find that product portfolios of larger firms tend to be more diversified. Third, with respect to consecutive diversification activities, quantile autoregression plots show that firms experiencing diversification in one period are unlikely to repeat this behavior in the following year. Fourth, survival estimations reveal that diversification activities reduce the risk of exit controlling for various additional firm and industry specific fixed effects and business cycles. These results are interpreted using the Penrosean growth theory.
    Keywords: Diversification, industry evolution, firm age, firm growth, machine tools
    JEL: L20 L25
    Date: 2012–01–03
  14. By: Joachim Wagner (Institute of Economics, Leuphana University of Lüneburg, Germany)
    Abstract: This paper is a non-technical introduction to the use of three micro-econometric tools that have only recently been applied in empirical investigations of the links between international firm activities and firm performance. It shows why it is important to use these methods, how to use them in practice and which new insights are found in empirical applications. Topics include the role of extremely different firms (or outliers) in the computation of performance premia of internationally active firms; different performance premia over the distribution of the performance variable when unobserved heterogeneity matters; and the analysis of causal effects of different intensities of international firm activity on firm performance.
    Keywords: Robust fixed effects estimation, fixed-effects quantile regression, generalized propensity score, international firm activity, firm performance
    JEL: F14 C21 C23
    Date: 2012–01

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