nep-ent New Economics Papers
on Entrepreneurship
Issue of 2013‒01‒19
eleven papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Are Nonprofit Entrepreneurs Also “Jacks-Of-All-Trades� By Cho, In Soo; Orazem, Peter
  2. Entrepreneurial activity and the cycle: The roles of observation frequency and economic openness By André van Stel; Roy Thurik; Gerard Scholman
  3. Occupational Choice and Self-Employment - Are They Related? By Alina Sorgner; Michael Fritsch
  4. Unemployment Insurance and Entrepreneurship By Røed, Knut; Skogstrøm, Jens Fredrik
  5. Entrepreneurship and Creative Professions - A Micro-Level Analysis By Michael Fritsch; Alina Sorgner
  6. Stepping Forward: Personality Traits, Choice of Profession, and the Decision to Become Self-Employed By Michael Fritsch; Alina Sorgner
  7. Caste discrimination and barriers to microenterprise growth in Nepal By Espen Villanger
  8. A New Regime of SME Finance in Emerging Asia: Empowering Growth-Oriented SMEs to Build Resilient National Economies By Shinozaki, Shigehiro
  9. Property Rights, Extortion and the Misallocation of Talent By Ashantha Ranasinghe
  11. Identification of the risk factors of the internationalitaion process of SMEs operating in the textile industry By Lea, Kubíčková

  1. By: Cho, In Soo; Orazem, Peter
    Abstract: In Lazear (2005)’s model of entrepreneurship, individuals with more diverse academic and occupational training are more likely to become entrepreneurs, while more narrowly trained individuals become employees. We examine whether Lazear’s model can also explain which individuals become nonprofit entrepreneurs. Information on successive cohorts of college graduates from a single university from 1982-2006 show that observed diversity of academic and occupational skills increases the probability of nonprofit sector entrepreneurship, consistent with previous findings of for-profit entrepreneurs. In addition, unobservable talents that increase probability of for-profit start-ups are positively correlated with the unobservable skills that lead to nonprofit start-ups, consistent with a presumed entrepreneurial skill that underlies the Lazear’s Jacks-of-All-Trades model.
    Keywords: Entrepreneurship; Non-profit; Jacks-of-All-Trades theory; Balanced skills
    JEL: L26 L31 M5
    Date: 2013–01–10
  2. By: André van Stel; Roy Thurik; Gerard Scholman
    Abstract: We investigate the interplay between the business cycle, entrepreneurial activity and unemployment in relation to the openness of the economy. Also, we explore to what extent the observation frequency (quarterly versus annual data) influences estimation results. We take the analysis of Koellinger and Thurik (2012) – a pooled VAR model of the three macroeconomic variables – as a starting point. Using both quarterly and annual data for 19 OECD countries over the period 1998-2007, we find that in the short run (after one quarter), a country's entrepreneurial activity is stimulated when the country's business cycle is lagging the world's business cycle, whereas in the medium run (after one to two years), entrepreneurial activity is stimulated when the country's business cycle is leading the world's business cycle. This suggests that a country's business cycle position relative to the world's cycle creates different types of entrepreneurial opportunities depending on the time horizon considered. These results apply to relatively open economies only which suggests that economic openness plays a role for entrepreneurial opportunities related to a country's cyclical performance.
    Date: 2012–12–27
  3. By: Alina Sorgner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: Often, a person will become an entrepreneur only after a period of dependent employment, suggesting that occupational choices precede entrepreneurial choices. We investigate the relationship between occupational choice and self-employment. The findings suggest that the occupational choice of future entrepreneurs at the time of labor market entry is partly guided by a taste for skill variety, the prospect of high earnings, and occupational earnings risk. Entrepreneurial intentions may also emerge after gaining work experience in a chosen occupation. We find that occupations characterized by high levels of unemployment and earnings risk, relatively many job opportunities, and high self-employment rates foster the founding of an own business. Also, people who fail to achieve an occupation-specific income have a tendency for self-employment.
    Keywords: Entrepreneurial choice, occupation-specific determinants of entrepreneurship, risk preferences, taste for variety
    JEL: L26 J24 D01
    Date: 2013–01–08
  4. By: Røed, Knut (Ragnar Frisch Centre for Economic Research); Skogstrøm, Jens Fredrik (Ragnar Frisch Centre for Economic Research)
    Abstract: Based on administrative registers from Norway, we examine how unemployment insurance (UI) and active labor market programs (ALMP) affect the transition rates from unemployment to regular employment and entrepreneurship. We find that the entrepreneurship hazard is highly responsive with respect to UI incentives, and that the probability of starting up a new business increases sharply around the time of UI exhaustion. We also find that while participation in ALMP has a positive impact on the employment hazard, it has no effect on entrepreneurship. We speculate that this reflects the programs' one-sided focus on job search rather than job creation.
    Keywords: entrepreneurship, self-employment, unemployment
    JEL: L26 J65 M13
    Date: 2013–01
  5. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Alina Sorgner (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: It has widely been recognized that creativity plays an immense role not only for arts, sciences, and technology, but also for entrepreneurship, innovation, and thus, economic growth. We analyze the level and the determinants of self-employment in creative professions at the level of individuals. The analysis is based on the representative micro data of the German Socio-Economic Panel (SOEP). The findings suggest that people in creative professions appear more likely to be self-employed and that a high regional share of people in the creative class increases an individual's likelihood of being an entrepreneur. Investigating the determinants of entrepreneurship within the creative class as compared to non-creative professions reveals only some few differences.
    Keywords: Entrepreneurship, new business formation, creativity, creative class
    JEL: L26 Z1 D03
    Date: 2013–01–10
  6. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Alina Sorgner (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We argue that entrepreneurial choice proceeds in at least in two steps, with vocational choice nearly always preceding choice of employment status, whether that be self-employment or dependent employment. Since the two decisions are interrelated, analysis of entrepreneurial choice as a single act may lead to inconsistent estimates of the factors that determine the decision to launch a business venture. Our empirical analysis utilizes a bivariate probit model that jointly estimates both decisions. The results support our argument that entrepreneurial choice is a two-stage decision process.
    Keywords: Entrepreneurial choice, vocational choice, personality traits
    JEL: L26 J24 D01
    Date: 2013–01–10
  7. By: Espen Villanger
    Abstract: Studies of microbusiness in poor countries find high marginal returns to capital but also lack of investments. This paper analyzes how caste-based segmentation in the capital and labor markets can act as obstacles to investment in microbusiness in rural in Nepal and also explain high marginal returns to capital. Using a household survey purposively designed for assessing caste as a barrier to microbusiness growth, we find that segmentation leads to inefficient allocation of entrepreneurial talent, labor and capital. This, in turn, leads to lower wages and smaller and less profitable businesses for low castes (Dalits) and lower economic growth of the local economy. The study covers a range of barriers to doing business and finds that in addition to caste segmentation, access to capital and lack of skills and knowledge are the main constraints to doing microbusiness in the studied areas.
    Date: 2012
  8. By: Shinozaki, Shigehiro (Asian Development Bank)
    Abstract: Small and medium enterprises (SMEs) stimulate domestic demand through job creation, innovation, and competition; thus, they can be a driving force behind a resilient national economy. In addition, SMEs involved in global production supply chains have the potential to encourage international trade. Prioritizing SME development is therefore critical for promoting inclusive economic growth in most economies in Asia. Adequate access to finance is crucial for SMEs to survive and eventually grow beyond their SME status. In Asia, the reality is that SMEs have poor access to finance. It is one of the core factors impeding SME development. Information asymmetry between lenders and SME borrowers increases adverse selection and moral hazard risks for financial institutions, and is responsible for widening the supply–demand gap in SME financing. Given the diversified nature of SMEs, there is no one-size-fits-all financing solution. The improvement of lending efficiency and the diversification of financing modalities can help expand SMEs’ access to finance, particularly given the largely bankcentered financial system in Asia. This paper discusses a new regime of SME finance amid an era of global imbalances, with empirical analyses of bank financing for SMEs in select Asian countries.
    Keywords: Global imbalances; financial inclusion; access to finance; growth-oriented SMEs; SME finance; supply–demand gap; diversified financing
    JEL: F43 G01 G21 M13
    Date: 2012–12–01
  9. By: Ashantha Ranasinghe (University of Toronto)
    Abstract: How do institutions affect resource misallocation? This paper focuses on a particular class of institutions, namely property rights, and their relation to extortion. Motivated by empirical evidence that there are differences in extortion rates across establishments, both within and across countries, I examine whether extortion is an important channel for understanding resource misallocation. I construct a model in which agents choose between entrepreneurship and working, and where a criminal group can extort entrepreneur capital. While property rights are common across agents, extortion rates arise endogenously as an inverted `u' shape in agent's ability. In economies characterized by weak property rights, extortion is prevalent and resource misallocation can generate TFP and output losses of 10 and 30 percent. TFP and output losses arise from two channels: selection and misallocation. Extortion affects selection by altering the ability threshold required for entry into entrepreneurship, while misallocation occurs because entrepreneurs operate below the optimal scale. As property rights decrease, extortion rates are higher and TFP and output losses from selection and misallocation are magnified.
    Date: 2012
  10. By: Lea, Kubíčková; Lenka, Procházková
    Abstract: In context of discussionsabout the Czech foreign trade development, questions of the Czech enterprises’ability to participate in the internationalization processare often considered. The main aim of this article is to present various points of view on the globalization and enterprise internationalization processwith a special accent on the analysis of the specifics in the internationalization process of small- and medium-sized enterprises (SMEs). Those enterprises represent a significant part of the Czech economy because they considerably contribute to the creation of vacancies and GDP; they are a source of innovation and technological progress and the factors of their successful functioning in foreign trades differ from the large-sized enterprises.For this reason, SMEshave been more frequently analysed in an effort to identify key factors, which involvetheir ability to succeed in international activities. Those factors could positively influence other SMEs in their plans to participate in the foreign trade. However, not all the enterprises have equal conditions for entering the foreign marketfield.In some business spheres, the export of SMEs is supported, which is considerably helpful, mainly in case of enterprises with insufficient funds. Some of the other spheresfacilitate access to the foreign market because of their sort ofproduction. Besides analysing the internationalization process of SMEs, this article is also focused on identification of both key factors of success and risk factors of the process.Determinants of SMEs success in the foreign market were examined using several extensive researches among Czech small and medium-sized enterprises of various business spheres. Results of the research have produced interesting information. It was discovered that all SMEs, although they operate in different business spheres, share similar problems concerning the internationalization process. Key factors, which determine success of Czech small and medium-sized enterprises in the internationalization process, are analogous in spite of diverse business spheres, but nevertheless every particular branch has a strong effect on an opportunity and willingness of SMEs to participate in the internationalization process.
    Keywords: SMEs; internationalization; success; keyfactors; successevaluation
    JEL: M20
    Date: 2012
  11. By: Lea, Kubíčková
    Abstract: Small and medium sized companies (SMEs) are very important subjects playing the dominant role in most of economics – they are considered as a factor of social stability and of the economic development in the Czech Republic as well as in the whole EU. SMEs share of employment since 2002 is more than 61%, GNP share is about 35% and their import share is continuously increasing, from 2004 it is more than 50%. The paper deals with SMEs operating in the textile industry and is focused on the internationalization process of SMEs. In recent years the Czech companies have to face significant competition coming from Asian countries and therefore the big rivalry in the domestic market leads Czech companies to efforts to succeed in foreign markets. All companies entering foreign market have to face many risks, for small and medium-sized enterprises is even more difficult to deal with these risks because they often have less experience and finance than large companies. Internationalization of the firms is generally defined as the involvement in the international environment. The process of internationalization can be also defined as “the process of increasing involves in international operations” (Welch, Luostarinen; 1988). The process essentially involves the adaption of firm operations like strategy, structure, resources etc., to perfectly fit the international environments. Furthermore, the degree of internationalization can be measured as foreign sales relative to total sales. (Welch, Luostarinen; 1988).The internationalization process is defined in the literature in many ways; there is a countless variety of different approaches and models of internationalization process of companies. Like all processes in the firm also the international process is accompanied by risks. The main aim of this paper is to identify the key risk factors of this process - knowing the risk factors it is possible to propose to SMEs the way how to reduce or eliminate possible risks in their activities on foreign markets. To reveal the key risk there was conducted the survey in the last half of 2011 and in 2012 among 803 Czech SMEs operating in the textile industry, 161 responses were processed and evaluated. The obtained data were analyzed by statistical method. Potential risks of entry into foreign market were rated according to their impact on businesses. According to processed responses the greatest influences on the process of successful internationalization have a shortage of capital, lack of the information on foreign markets and high transportation costs. Other factors that may impede the successful internationalization are language barriers, inexperience of management with the internationalization and high prices of products. Furthermore, a survey has investigated what factors cause that some SMEs are able to enter the foreign market, but after some time they are not successful there. It was found that the main factors of failure of SMEs are the unreliable and incompetent management, lack of promotion of the products and lack of contacts abroad. Based on these findings there some proposals were suggested to eliminate or reduce the impact of these risk factors.
    Keywords: Internationalization; small and medium-sized enterprises; crucial key factors; internationalization process; textile industry
    JEL: F18 L10 F02
    Date: 2012

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