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on Entrepreneurship |
| By: | Hvide, Hans K. (University of Bergen); Panos, Georgios A. (University of Stirling) |
| Abstract: | A tradition from Knight (1921) argues that more risk tolerant individuals are more likely to become entrepreneurs, but perform worse. We test these predictions with two risk tolerance proxies: stock market participation and personal leverage. Using investment data for 400,000 individuals, we find that common stock investors are around 50 percent more likely to subsequently start up a firm. Firms started up by stock market investors have about 25 percent lower sales and 15 percent lower return on assets. The results are similar using personal leverage as risk tolerance proxy. We consider alternative explanations including unobserved wealth and behavioral effects. |
| Keywords: | entrepreneurial entry, entrepreneurial performance, firm entry, firm performance, firm productivity, firm survival, overconfidence, risk aversion, risk tolerance, stock market participation |
| JEL: | L26 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7206&r=ent |
| By: | Niels Bosma; Sander Wennekers; Erik Stam |
| Abstract: | In this paper, we argue that institutions affect the allocation of entrepreneurship across new and established organizations. This is confirmed by empirical analysis of the Global Entrepreneurship Monitor (GEM) data on early-stage (independent) entrepreneurial activity and entrepreneurial employee behavior. Most comparative international research on entrepreneurship has focused on independent new ventures and has ignored the pursuit of entrepreneurial opportunities within established organizations (intrapreneurship). However, in developed economies the prevalence of entrepreneurial employee behavior is on average found to be in the same order of magnitude as that of independent entrepreneurial activity. At the same time prevalence rates of these two types of entrepreneurship vary substantially between countries. We analyze the allocation of entrepreneurial activity across early-stage independent entrepreneurial activity (entrepreneurship in new organizations) and entrepreneurial employee activity (entrepreneurship in established organizations) in 36 countries, taking into account effects of the level of economic development as well as the formal and informal institutional setting. We find that labor market institutions and the extent to which societies value autonomy affect the allocation of entrepreneurship across new and established organizations. |
| Date: | 2013–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:eim:papers:h201213&r=ent |
| By: | Johannes Martin |
| Abstract: | Using data of the German Socio-Economic Panel (GSOEP) earnings differentials between self-employed and wage-employed workers in the German labor market are explored. Previous research based on US data reports lower incomes for entrepreneurs. In contrast to that, the findings of this contribution suggest the opposite for German entrepreneurs. They have considerably higher earnings than wage-employed workers. Furthermore, there is a significant and positive effect on earnings when entering self-employment. This holds true when it is also taken into account that workers usually report a smaller firm size and work longer after beginning an entrepreneurial occupation. |
| Keywords: | Self-employment, Human Capital, Earnings, GSOEP, Entrepreneurship |
| JEL: | L26 J31 J32 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp537&r=ent |
| By: | Michael Fritsch; Alina Sorgner |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp539&r=ent |
| By: | Michael Fritsch; Alina Sorgner |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp538&r=ent |
| By: | Elisabeth Bublitz (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Michael Wyrwich (School of Economics and Business Administration, Friedrich-Schiller-University Jena) |
| Abstract: | Being a "jack-of-all-trades" increases the probability of running an entrepreneurial venture successfully; but what happens to "jack-of-few-trades" who lack sufficient skills? This paper investigates a possible compensation mechanism between balanced skills and cities, and how this compensatory measure relates to performance. Specifically, we test and find support for the idea put forward by Helsley and Strange (2011) that high market thickness, such as that found in cities, can compensate for a lack of entrepreneurial skill balance. The results indicate that entrepreneurs with low skill balance benefit more from locating in cities than their counterparts with high skill balance. Innovative firms do not differ from other businesses in this respect. |
| Keywords: | Agglomeration, Entrepreneurship, Balanced Skills, Thick Markets, Urban Diversity |
| JEL: | R1 L26 J24 O31 |
| Date: | 2013–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2013-010&r=ent |
| By: | Spyros Arvanitis (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Tobias Stucki (KOF Swiss Economic Institute, ETH Zurich, Switzerland) |
| Abstract: | In this study we investigate the impact of early stage venture capital on innovation activities of Swiss start-ups. This is done based on a cohort of start-ups that is representative of all firms founded in Switzerland in 1996/97 as recorded by a census of the Swiss Federal Statistical Office for this period. We analyze not only the impact of early stage venture capital on innovation performance 3 years after firm foundation but also 6 and 9 years after firm start, respectively, for those firms that survived so long and reported continuously innovation activities (persistence of innovation). The results support neither the hypothesis of a positive impact on initial innovation activities nor the hypothesis of a positive time-persistent effect on innovation performance of start-ups. |
| Keywords: | venture capital, start-ups, innovation performance |
| JEL: | L20 O31 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:13-332&r=ent |
| By: | Sina T. Ates (Department of Economics, University of Pennsylvania); Felipe E. Saffie (Department of Economics, University of Pennsylvania) |
| Abstract: | In the classical literature of innovation-based endogenous growth, the main engine of long run economic growth is firm entry. Nevertheless, when projects are heterogeneous, and good ideas are scarce, a mass-composition trade off is introduced into this link: larger cohorts are characterized by a lower average quality. As one of the roles of the financial system is to screen the quality of projects, the ability of financial intermediaries to detect promising projects shapes the strength of this trade-off. In order to study this relationship, we build a general equilibrium endogenous growth model with project heterogeneity and financial screening. To illustrate the relevance of the mass and composition margins we apply this framework to two important debates in the growth literature. First, we show that corporate taxation has only a weak effect in growth, but a strong effect on firm entry, both well known empirical regularities. A second illustration studies the effects of financial development in growth. A word of caution arises: for economies that are characterized by high rates of firm creation, domestic credit should not be used as a proxy of financial development, in contrast to most of the empirical literature. |
| Keywords: | Growth, Firm Entry, Project Heterogeneity, Financial Selection, Entrepreneurship, Financial Development |
| JEL: | O3 O1 H3 |
| Date: | 2013–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:13-011&r=ent |
| By: | M. Grazzi; N. Jacoby; T. Treibich |
| Abstract: | If the relation between investment and economic growth is well established in the macroeconomic literature, the existence of a similar link at the level of the firm has been challenged by empirical work. This paper investigates the channels linking investment and firm performance in the French and Italian manufacturing industries. It does so by putting forth a novel methodology to identify investment spikes that corrects for size dependence. While maintaining the desired properties of a spike measure, our chosen proxy retrieves the expected relation between investment and firm performance. Ex-ante, more efficient and fast growing firms display a higher probability to invest; in turn, after an investment spike has taken place the group of investing firms shows further gains in performance. Finally, expansionary investment episodes, as proxied by the opening of new plants, have a negative effect on profitability while they are associated with higher sales and employment levels. |
| JEL: | C14 D22 D24 D92 E22 L11 L23 L60 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp869&r=ent |