nep-ent New Economics Papers
on Entrepreneurship
Issue of 2012‒08‒23
eighteen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. The Global Entrepreneurship Monitor (GEM) and its Impact on Entrepreneurship Research By Niels Bosma
  2. Should the focus of publicly provided small business assistance be on start-ups or growth businesses? By Greene, Francis
  3. The Effect of Early Entrepreneurship Education: Evidence from a Randomized Field Experiment By Laura Rosendahl Huber; Randolph Sloof; Mirjam van Praag
  4. Why Do Entrepreneurial Parents Have Entrepreneurial Children? By Lindquist, Matthew J.; Sol, Joeri; van Praag, Mirjam
  5. Private Equity and the Innovation Strategies of Entrepreneurial Firms: Empirical Evidence from the Small Business Innovation Research Program By Link, Albert N.; Ruhm, Christopher J.; Siegel, Donald S.
  6. Financial and organizational perspectives on small and medium-sized business groups By Enrico Guzzini; Donato Iacobucci; Peter Rosa
  7. The survival of venture capital backed companies : an analysis of the French case By Sophie Pommet
  8. Innovation and Exports of German Business Services Enterprises: First evidence from a new type of firm data By Alexander Vogel; Joachim Wagner
  9. Determinants of R&D Cooperation in Small and Medium-Sized Enterprises By Hyunbae Chun; Sung-Bae Mun
  10. Ethnic Diversity and Team Performance: A Field Experiment By Sander Hoogendoorn; Mirjam van Praag
  11. Engaging Small and Medium Enterprises in Production Networks : Firm-level Analysis of Five ASEAN Economies By Ganeshan Wignaraja
  12. Knowledge, Location, and Internationalization: Empirical Evidence for Manufacturing SMEs By Anna Lejpras
  13. Determinants of Evolutionary Change Processes in Innovation Networks – Empirical Evidence from the German Laser Industry By Muhamed Kudic; A. Pyka; Jutta Günther
  14. Business Cycles and Financial Crises: A Model of Entrepreneurs and Financiers By Kunieda, Takuma; Shibata, Akihisa
  15. The developmental role of SMEs in the Arab countries By Elasrag, Hussein
  16. Do immigrant-owned businesses grow financially? An empirical study of African immigrant-owned businesses in the South Africa By Tengeh, RK; Ballard, HB; Slabbert, AS
  17. The role of human capital in lowering barriers to engage in innovation: evidence from the Spanish innovation survey By D'Este,Pablo; Rentocchini,Francesco; Vega Jurado,Jaider M.
  18. Hoping to Win, Expected to Lose: Theory and Lessons on Micro Enterprise Development By Dean Karlan; Ryan Knight; Christopher Udry

  1. By: Niels Bosma
    Abstract: The Global Entrepreneurship Monitor (GEM) is a project carried out by a research consortium dedicated to understanding the relationship between entrepreneurship and national economic development. Since 1999 GEM reports have been a key source of comparable data across a large variety of countries on attitudes toward entrepreneurship, start-up and established business activities, and aspirations of entrepreneurs for their businesses. The growing databases increasingly allow for in-depth academic research and this is mirrored by the rapidly increasing amount of GEM-based scientific publications in a wider range of academic journals. At this point it is appropriate to provide an overview on these publications, to summarize their main contributions and to provide some directions for obtaining promising GEM-based academic contributions in the future. This publication provides a review of 89 GEM-based academic publications in SSCI-listed journals since 2004, with the objectives to highlight the particular advantages of GEM data, their quality and usability, as well as their limitations. It also recommends a number of ways in which the GEM project might evolve further and make more impact on entrepreneurship research, on entrepreneurship policy and practice, and ultimately on getting more grip on the complex relation between entrepreneurship and economic development.
    Keywords: Global Entrepreneurship Monitor, Entrepreneurial Activity, Economic Development
    JEL: E02 J24 L26 O11
    Date: 2012–05
  2. By: Greene, Francis (Warwick Business School)
    Abstract: How is New Zealand best able to maximise the potential of its enterprise population? The simple answer is that it has to ensure that the „rules of the game‟ (incentives and signals) are as good as they can be. Nonetheless, there still may be instances of market failure, suggesting grounds for publicly provided business assistance. This paper examines whether any such business assistance would be better provided to start-up or small fast growth firms. The paper presents both arguments for and against support for these two types of small firms. It finds, overall, that the arguments for supporting fast growth firms are more compelling. It then considers a range of potential policy options (e.g. the introduction of a voucher scheme, managerial training). After reviewing the evidence base, the paper recommends that there still remains a need for the stronger evaluation of public assistance programmes.
    Keywords: Economic development; enterprise policy; business assistance; entrepreneurship
    JEL: L26 O10 O25 O38
    Date: 2012–05–01
  3. By: Laura Rosendahl Huber (University of Amsterdam); Randolph Sloof (University of Amsterdam); Mirjam van Praag (University of Amsterdam)
    Abstract: The aim of this study is to analyze the effectiveness of early entrepreneurship education. To this end, we conduct a randomized field experiment to evaluate a leading entrepreneurship education program that is taught worldwide in the final grade of primary school. We focus on pupils' development of relevant skill sets for entrepreneurial activity, both cognitive and non-cognitive. The results indicate that cognitive entrepreneurial skills are unaffected by the program. However, the program has a robust positive effect on non-cognitive entrepreneurial skills. This is surprising since previous evaluations found zero or negative effects. Because these earlier studies all pertain to education for adolescents, our result tentatively suggests that non-cognitive entrepreneurial skills are best developed at an early age.
    Keywords: Skill formation; field experiment; entrepreneurship education; entrepreneurship
    JEL: L26 I21 J24 C93
    Date: 2012–04–20
  4. By: Lindquist, Matthew J. (SOFI, Stockholm University); Sol, Joeri (University of Amsterdam); van Praag, Mirjam (University of Amsterdam)
    Abstract: Parental entrepreneurship is a strong, probably the strongest, determinant of own entrepreneurship. We explore the origins of this intergenerational association in entrepreneurship. In particular, we identify the separate effects of pre- and post-birth factors (nature and nurture), by using a unique dataset of Swedish adoptees. Its unique characteristic is that it not only includes data on occupational status for the adoptees and their adoptive parents, but also for their biological parents. Moreover, we use comparable data on entrepreneurship for a large, representative sample of the Swedish population. Based on the latter sample, and consistent with previous findings, we show that parental entrepreneurship increases the probability of children's entrepreneurship by about 60%. We further show that for adoptees, both biological and adoptive parents make significant contributions. These effects, however, are quite different in size. The effect of post-birth factors (adoptive parents) is approximately twice as large as the effect of pre-birth factors (biological parents). The sum of these two effects for adopted children is almost identical to the intergenerational transmission of entrepreneurship for own-birth children. We explore several candidate explanations for this important post-birth effect and present suggestive evidence in favor of role modeling.
    Keywords: occupational choice, intergenerational mobility, self-employment, entrepreneurship, adoption, role model
    JEL: J24 J62 L26
    Date: 2012–07
  5. By: Link, Albert N. (University of North Carolina at Greensboro, Department of Economics); Ruhm, Christopher J. (University of Virginia); Siegel, Donald S. (University at Albany, SUNY)
    Abstract: There is great interest in evaluating the impact of private equity investments on innovation and economic growth. However, there is no direct empirical evidence on the effects of such transactions on the innovation strategies of entrepreneurial firms. We fill this gap by examining a rich project-level data set consisting of entrepreneurial firms receiving Small Business Innovation Research (SBIR) program research awards. We find that SBIR firms attracting private equity investments are significantly more likely to license and sell their technology rights and engage in collaborative research and development agreements. Our results suggest that private equity investments accelerate the development and commercialization of research-based technologies, thus contributing to economic growth. We conclude that both public investments and private investments are key to innovation performance.
    Keywords: Private equity; Innovation; Entrepreneurship; SBIR
    JEL: G24 G34 L26 O31 O33 O38
    Date: 2012–08–02
  6. By: Enrico Guzzini (Università degli Studi eCampus, Italy); Donato Iacobucci (Dept. of Information Engineering Università Politecnica delle Marche, Italy); Peter Rosa (Centre for Entrepreneurship Research, University of Edinburgh, Scotland, UK)
    Abstract: Most theories seeking to explain why business groups are formed are focused on large firms, but in recent years there is growing interest on why business groups are formed in the small firms sector. In this paper we contrast two theoretical perspectives that may account for business group formation, both based on the idea that business groups allow entrepreneurs to differentiate the ownership structure of new activities from the established one(s). These are the financial perspective and the organizational/entrepreneurial perspective. Theoretical propositions derived from these perspectives are tested using data on Italian business groups. The empirical results show that the financial and the organizational perspectives can be seen as complementary in explaining business groups in the small business sector. Specifically, the financial explanation is in accordance with the data in predicting the prevalence of capital intensive firms in business groups while the organizational explanation is in accordance with the data in predicting the presence of knowledge intensive firms in business groups. Furthermore, the organizational perspective seems more appropriate when the diversification strategies of business groups are concerned and when explaining the ownership structure of controlled companies.
    Keywords: business groups; pyramids; small businesses; ownership; diversification
    Date: 2012–06
  7. By: Sophie Pommet (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université de Nice Sophia Antipolis (UNS))
    Abstract: We analyze the impact of venture capital on firm performance ; more precisely, we investigate whether venture capital adds value to innovative French companies in terms of increasing their survival time. To this end, we use a hand-collected data set based on a sample of 139 French companies that went public at the "Nouveau Marché" between 1996 and 2002 to compare the survival rates of venture capital backed and non-venture capital backed companies. We develop two sets of econometric models to evaluate the factors that a ffect the fate of French initial public offerings. First, we estimate a discrete time duration model to explain the probability of exit. Second, we apply a competing risk model to account for heterogeneity in rm exit (liquidation versus merger/acquisition). Contrary to common wisdom, the estimates show that venture capital backed companies have a lower survival rate than non-venture capital backed companies and have a higher probability of being liquidated than other firms. Our results are comparable to those ob- tained in previous studies on Germany and Belgium which show that receiving venture capital does not improve firm survival.
    Keywords: venture capital, survival, innovation, France
    Date: 2011
  8. By: Alexander Vogel (Leuphana University Lueneburg, Germany); Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper contributes to the literature by providing the first evidence on the link between innovation activities (measured by the share of engineers and scientists in the workforce) and exports of German business services firms based on a large representative longitudinal sample of enterprises. The data combine for the first time information at the firm-level that is taken from data produced by the Statistical Offices and by the Federal Labour Agency. We document that R&D activities are positively linked with exports, and that this link is present when observed firm characteristics (including firm size, productivity, and human capital intensity) and unobserved time-invariant firm characteristics are controlled for. From an economical point of view the effect is, however, rather small. Furthermore, we find some evidence for self-selection of innovative services firms on export markets. We have to admit, however, that the panel is too short, and that the number of firms that start to export and start to perform R&D during the period under investigation is too small, for any convincing attempt to investigate the direction of the causal link between exports and innovation activities.
    Keywords: Innovation, export, business services, Germany
    JEL: F14
    Date: 2012–08
  9. By: Hyunbae Chun (Department of Economics, Sogang University, Seoul); Sung-Bae Mun (Korea Information Society Development Institute, Kwachun, Kyunggi-do, 427-710 Korea)
    Abstract: We investigate the determinants of R&D cooperation in small and medium-sized enterprises (SMEs). Using firm-level data from the 2002 Korean Innovation Survey and applying a probit model with sample selection, we find that incoming spillovers of knowledge have a significant and positive impact on SMEs¡¯ decisions to engage in R&D cooperation. In particular, the effect of knowledge spillovers on R&D cooperation is much larger for smaller firms. Despite the importance of external knowledge for SMEs, the estimation results suggest that SMEs may be at a disadvantage in establishing external R&D linkages because of their absolute size limitations.
    Keywords: R&D Cooperation, Small and Medium-Sized Enterprises, Spillovers
    JEL: L20 O32
    Date: 2012
  10. By: Sander Hoogendoorn (University of Amsterdam); Mirjam van Praag (University of Amsterdam)
    Abstract: One of the most salient and relevant dimensions of team heterogeneity is ethnicity. We measure the causal impact of ethnic diversity on the performance of business teams using a randomized field experiment. We follow 550 students who set up 45 real companies as part of their curriculum in an international business program in the Netherlands. We exploit the fact that companies are set up in realistic though similar circumstances and that we, as outside researchers, had the unique opportunity to exogenously vary the ethnic composition of otherwise randomly composed teams. The student population consists of 55% students with a non-Dutch ethnicity from 53 different countries of origin. We find that a moderate level of ethnic diversity has no effect on team performance in terms of business outcomes (sales, profits and profits per share). However, if at least the majority of team members is ethnically diverse then more ethnic diversity has a positive impact on the performance of teams. In line with theoretical predictions, our data suggest that this positive effect could be related to the more diverse pool of relevant knowledge facilitating (mutual) learning within ethnically diverse teams.
    Keywords: Ethnic diversity; team performance; field experiment; entrepreneurship; (mutual) learning
    JEL: J15 L25 C93 L26 M13 D83
    Date: 2012–07–13
  11. By: Ganeshan Wignaraja (Asian Development Bank Institute (ADBI))
    Abstract: The Association of Southeast Asian Nations JEL Classification : F10, F23, O14 (ASEAN) small and medium enterprises (SMEs) are under scrutiny for their engagement in production networks following recent emphasis on increasing intra-regional trade, rebalancing, and inclusive growth in Asia. Using a data set covering 5,900 firms in five ASEAN economies at different stages of development, this paper analyses the participation of SMEs in production networks, determinants, and policy implications. It finds that although large firms dominate production network engagement in ASEAN economies, there are signs that SMEs have modestly increased their participation since the late-1990s. This is linked to firm-specific factors (e.g., firm size, foreign ownership, skills, technological capabilities, and access to credit) as well as a supportive business environment. Tackling residual supply-side and policy constraints can further the participation of ASEAN SMEs in production networks.
    Keywords: Small and medium enterprises, SMEs, Production Networks, ASEAN, intra-regional trade, Business Environment
    JEL: F10 F23 O14
    Date: 2012–06
  12. By: Anna Lejpras
    Abstract: This paper investigates the links between locational conditions, innovative capabilities and internationalization of manufacturing SMEs. Two modes of foreign market servicing are explored: exporting activity and relocating of selected business activities abroad. The empirical analysis employs two probit models based on survey of about 3,000 firms. The results reveal that the outputs of SMEs' innovative activities-i.e., product innovations and patent applications-enhance exporting propensity as expected. Nevertheless, the input-side indicator-R&D intensity-appears to exert no impact. Further, the locational factor proximity to research institutions promotes SMEs' engagement in exporting. Regarding the determinants of selective relocations abroad, the findings show that SMEs with a high degree of R&D are less likely to separate production from other operations and relocate it abroad. Moreover, manufacturing SMEs assessing the proximity to research facilities, as well as support from various regional authorities and other bodies as important and good-quality locational conditions, exhibit a significantly lower likelihood to relocate selected activities abroad. Indeed, emphasizing the role of institutional setting in firm activity, our findings coincide in this respect with the previous literature focused on innovative milieu, learning regions and regional innovation systems.
    Keywords: Export, innovation, location, manufacturing SMEs, selective relocation abroad
    JEL: R30 O30 M16 L25
    Date: 2012
  13. By: Muhamed Kudic; A. Pyka; Jutta Günther
    Abstract: We seek to understand the relationship between network change determinants, network change processes at the micro level and structural consequences at the overall network level. Our conceptual framework considers three groups of determinants – organizational, relational and contextual. Selected factors within these groups are assumed to cause network change processes at the micro level – tie formations and tie terminations – and to shape the structural network configuration at the overall network level. We apply a unique longitudinal event history dataset based on the full population of 233 German laser source manufacturers and 570 publicly-funded cooperation projects to answer the following research question: What kind of exogenous or endogenous determinants affect a firm’s propensity and timing to cooperate and enter the network? Estimation results from a non-parametric event history model indicate that young micro firms enter the network later than small-sized and large firms. An in-depth analysis of the size effects for medium-sized firms provides some unexpected yet quite interesting findings. The choice of cooperation type makes no significant difference for the firms’ timing to enter the network. Finally, the analysis of contextual determinants shows that cluster membership can, but do not necessarily, affect a firm’s timing to cooperate.
    Keywords: network evolution, timing of network entry, innovation networks, German laser industry
    JEL: B52 D85 O32
    Date: 2012–07
  14. By: Kunieda, Takuma; Shibata, Akihisa
    Abstract: A dynamic general equilibrium model with infinitely lived entrepreneurs and financiers is developed to investigate a possible mechanism that explains business cycles and a financial crisis. The highest growth rate is achievable only if financiers coexist with entrepreneurs, given a certain extent of financial market imperfections. However, if financiers coexist with entrepreneurs, the economy is highly likely to go into a financial crisis for some parameter values. These two-sided implications of the coexistence of entrepreneurs and financiers explain why both instability and high growth are frequently observed in modern economies.
    Keywords: Endogenous business cycles; Financial crisis; Economic boom; Financial market imperfections
    JEL: E32 O16 O40
    Date: 2012–07–12
  15. By: Elasrag, Hussein
    Abstract: Small and medium enterprises (SMEs) have become one of the key instruments to face economic and social problems and achieve development objectives in most industrial and developing countries. SME contributions to employment creation, productivity improvement, and income generation are underutilized in the Arab countries at a time when economic transformation is shifting the onus for productivity from the public sector to the private sector. Population growth and economic restructuring in many Arab countries make the creation of substantial new employment opportunities a necessity. To do so, Arab enterprises must favorably face increased competition in both local and export market through improvements in product quality and work place efficiency. Sheer survival in theses business conditions forces both large companies and SMEs to restructure themselves in order to meet the global competition. Statistics show that SMEs represent 90% of total companies in the vast majority of economies worldwide and provide 40-80% of total job opportunities in addition to contributing largely to GDPs of many countries. The aim of this research is to study The developmental role of SMEs in the Arab countries.
    Keywords: Small and medium enterprises ;Arab countries;oil revenues
    JEL: E24 D20 E00 H3
    Date: 2012–08
  16. By: Tengeh, RK; Ballard, HB; Slabbert, AS
    Abstract: Given the fact that numerous challenges prohibit African immigrants from availing financial capital for the purpose of starting a business in South Africa, this paper sets out to investigate whether those that succeeded experienced a significant increment in their financial capital three or more years after start-up. This paper was designed within the quantitative and qualitative research paradigms. A triangulation of three methods was utilised to collect and analyze the data. From a quantitative perspective, the survey questionnaire was used. To complement the quantitative approach, personal interviews and focus groups were utilised as the methods within the qualitative approach paradigm. The primary data collection instrument used was the survey questionnaire which was complemented by personal interviews and focus group debates. The results revealed that the majority (71,1%) African immigrants had an estimated start-up financial in the range of R 1 000 and R 5 000, which tended to vary across the different ethnic groups studied. After three of more years, the estimated financial capital of the majority (39,3%) of the respondents moved to a new range of R 50 001 to R 100 000. Noting a disparity in capital growth exhibited by the different ethnic groups, it was found that all the Ethiopians who started with a capital within the range of R1 000-R5 000 moved into a new capital range (R50 001- R100 000) three or more years after business start-up. Although the absolute migration in terms of capital demonstrated by the Ethiopians is not into the highest capital range, they were nonetheless the only country that experienced this phenomenal growth. In terms of occupying the highest capital range (R250 001- R500 000), 11,1% of Cameroonians moved into that range followed by 7,4% of Somalians. Using an increase in financial capital (generated by ploughing back profits) as a proxy for growth, we were able to prove that these African immigrants owned business grow and the rate of growth varied across the different ethnic groups studied.
    Keywords: Immigrant entrepreneurship; immigrant-owned businesses; financial capital; financial growth; African immigrants; business start-up resources and South Africa
    JEL: M1 A19 J61 A10
    Date: 2012
  17. By: D'Este,Pablo; Rentocchini,Francesco; Vega Jurado,Jaider M.
    Abstract: This paper focuses on the role of human capital in attenuating the barriers that block firms from engaging in innovation activities. The paper distinguishes between firms facing deterring barriers to innovation (firms deterred from engaging in innovation activities) and firms confronting revealed barriers (firms that experience barriers alongside their engagement in innovation activities). We investigate whether human capital has a particularly strong impact in lowering barriers among the former group of firms, since a strong skill base is likely to compensate for the lack of previous experience in innovation-related activities or the necessary complementary assets associated to innovation. We draw on four waves of the Spanish Innovation Survey and examine the impact of human capital on three types of obstacles to innovation: cost, knowledge and market obstacles. Results reveal that human capital has a significant impact in attenuating deterring barriers to innovation associated to knowledge shortages and market uncertainties.
    Keywords: Barriers to innovation, Innovative firms, Human Capital
    JEL: O31 O32 O33
    Date: 2012–08–03
  18. By: Dean Karlan; Ryan Knight; Christopher Udry
    Abstract: Many basic economic theories with perfectly functioning markets do not predict the existence of the vast number of microenterprises readily observed across the world. We put forward a model that illuminates why financial and managerial capital constraints may impede experimentation, and thus limit learning about the profitability of alternative firm sizes. The model shows how lack of information about one’s own type, but willingness to experiment to learn one’s type, may lead to short-run negative expected returns to investments on average, with some outliers succeeding. To test the model we put forward first a motivating experiment from Ghana, and second a small meta-analysis of other experiments. In the Ghana experiment, we provide inputs to microenterprises, specifically financial capital (a cash grant) and managerial capital (consulting services), to catalyze adoption of investments and practices aimed towards enterprise growth. We find that entrepreneurs invest the cash, and take the advice, but both lead to lower profits on average. In the long run, they revert back to their prior scale of operations. The small meta analysis includes results from 18 other experiments in which either capital or managerial capital were relaxed, and find mixed support for this theory.
    JEL: D21 D24 D83 D92 L20 M13 O12
    Date: 2012–08

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