nep-ent New Economics Papers
on Entrepreneurship
Issue of 2013‒03‒16
seventeen papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Billionaires By Sanandaji, Tino; Leeson, Peter
  2. Billionaire Entrepreneurs: A Systematic Analysis By Henrekson, Magnus; Sanandaji, Tino
  3. House Prices, Collateral and Self-Employment By Manuel Adelino; Antoinette Schoar; Felipe Severino
  4. SME registration evidence from a randomized controlled trial in Bangladesh By De Giorgi, Giacomo; Rahman, Aminur
  5. Business, Bankruptcy, and Beliefs: The Financial Demise of NBA Stars By Henry, Ruby
  6. Does Forced Solidarity Hamper Investment in Small and Micro Enterprises? By Grimm, Michael; Hartwig, Renate; Lay, Jann
  7. Self-Employment and Economic Performance: A Geographically Weighted Regression Approach for European Regions By Katharina Pijnenburg
  8. Institutions and Venture Capital By Lerner, Josh; Tåg, Joacim
  9. Which form of venture capital is most supportive of innovation? Evidence from European biotechnology companies By Bertoni, Fabio; Tykvová, Tereza
  10. Entrepreneurship, Institutions and Economic Dynamism: Lessons from a Comparison of the United States and Sweden By Braunerhjelm, Pontus; Henrekson, Magnus
  11. Hierarchies, the Small Firm Effect, and Entrepreneurship: Evidence from Swedish Microdata By Tåg, Joacim; Åstebro, Thomas; Tho, Peter
  12. Entrepreneurial Commercialization Choices and the Interaction between IPR and Competition Policy By Gans , Joshua; Persson, Lars
  13. Micro-Entrepreneurship Training and Asset Transfers: Short Term Impacts on the Poor By Claudia Martínez A.; Esteban Puentes; Jaime Ruiz-Tagle
  14. Banking towards development: Evidence from the Spanish banking expansion plan By Pere Arqué-Castells; Elisabet Viladecans-Marsal
  15. Financial constraints and the failure of innovation projects By Agustí Segarra; José García-Quevedo; Mercedes Teruel
  16. Are large innovative firms more efficient? By Sánchez, Rosario/R; Diaz, M. Angeles
  17. Impact of the Euro 2012 on the Pomeranian Region and Its Small and Medium Enterprises in Terms of Competitiveness By Zawadzki, Krystian; Wasilczuk, Julita

  1. By: Sanandaji, Tino (Research Institute of Industrial Economics and Harris School of Public Policy Studies, University of Chic); Leeson, Peter (George Mason University)
    Abstract: Existing studies of entrepreneurship focus on entrepreneurs whose individual contribution to wealth creation is typically trivial.
    Keywords: Billionaires; entrepreneurship; self-­ employment; institutions
    JEL: L26 L53 O17
    Date: 2013–08–13
  2. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Sanandaji, Tino (Research Institute of Industrial Economics (IFN))
    Abstract: The overwhelming majority of self-employed individuals are not entrepreneurial in the Schumpeterian sense. In order to unmistakably identify Schumpeterian entrepreneurs we focus on self-made billionaires (in USD) on Forbes Magazine’s list who became wealthy by founding new firms. In this way we identify 996 billionaire entrepreneurs in over fifty countries in the 1996–2010 period. To our knowledge this is the first systematic cross-country study of billionaire entrepreneurs, an economically important group. We demonstrate that the common practice of relying on self-employment and related measures to proxy for entrepreneurship often gives rise to misleading inferences. Interestingly the rate of billionaire entrepreneurs per capita correlates negatively with self-employment rates. Countries with higher income, higher trust, lower taxes, more venture capital investment and lower regulatory burdens have higher entrepreneurship rates but less self-employment.
    Keywords: Entrepreneurship; Innovation; Institutions; Regulation; Self-employment
    JEL: L50 M13 O31 P14
    Date: 2013–03–06
  3. By: Manuel Adelino; Antoinette Schoar; Felipe Severino
    Abstract: This paper documents the role of the collateral lending channel to facilitate small business starts and self-employment in the period before the financial crisis of 2008. We document that between 2002 and 2007 areas with a bigger run up in house prices experienced a strong increase in employment in small businesses compared to employment in large firms in the same industries. This increase in small business employment was particularly pronounced in (1) industries that need little startup capital and can thus more easily be financed out of increases in housing as collateral; (2) manufacturing industries where goods are shipped over long distances, which rules out that local demand is driving the expansion. We show that this effect is separate from an aggregate demand channel that relies on home equity based borrowing leading to increased demand and employment creation.
    JEL: E24 G01 G30
    Date: 2013–03
  4. By: De Giorgi, Giacomo; Rahman, Aminur
    Abstract: Informality is pervasive in developing countries. In Bangladesh, the majority of firms are informal and as such they might not have access to prime markets, while lowering the tax base. The authors implemented an information campaign on registration, including both the step-by-step procedures and the potential benefits from registration. They find that the treatment made firms more aware of the procedures, but had no impact on actual registration. The results point toward potentially low benefits and high indirect costs of registration as the main barriers to formality (e.g. access to markets, taxation, labor and product regulations).
    Keywords: E-Business,Economic Theory&Research,Microfinance,Access to Finance,Technology Industry
    Date: 2013–03–01
  5. By: Henry, Ruby (Rutgers University)
    Abstract: The financial troubles of professional athletes are an ongoing topic of intrigue. In general, the zealousness brought to private equity schemes are a common factor in observed financial insolvency. Considering the behavioral attribute of self-confidence I propose a simple model which explains entrepreneurial activity and adverse financial outcomes. The model implies that investment effort increases with self-confidence, while promoting financial solvency. Constructing a unique database of NBA players affords a singular opportunity to measure confidence directly from behavior, avoiding bias from self-reported surveys. In addition, I observe for-profit business ventures and use this data to test the model's implications for the outcomes of both entrepreneurial activity (investment effort) and bankruptcy. Without correcting for endogeneity it does appear that starting businesses causes bankruptcy. After using charitable foundations as an instrument, however, the data confirms the model's prediction – that investment effort is associated with financial solvency. That said, I also find that the effect of confidence on bankruptcy to be non-monotonic. Having some confidence decreases the probability of bankruptcy, but high levels increase this probability.
    Keywords: self-confidence, bankruptcy, athletes, entrepreneurs influence, entrepreneurship
    JEL: D10 I20 J13
    Date: 2013–02
  6. By: Grimm, Michael (University of Passau); Hartwig, Renate (University of Passau); Lay, Jann (German Institute of Global and Area Studies (GIGA))
    Abstract: Sharing is a norm in many societies. We present a theoretical model on the trade-off between sharing and investment which we test on data from tailors in Burkina Faso. The empirical results support the idea that there are two behavioural patterns: entrepreneurs following an 'insurance regime' comply with sharing norms, are insured but reduce investment in their firm, whereas entrepreneurs in the 'growth regime' are not insured but take undistorted investment decisions. The choice of regime depends on the redistributive pressure, the willingness to take risk, and the return on investment.
    Keywords: forced solidarity, informal insurance, investment, micro and small enterprises, sharing, Sub-Saharan Africa
    JEL: D13 D22 D92 O12 O43
    Date: 2013–02
  7. By: Katharina Pijnenburg
    Abstract: The self-employment rate includes entrepreneurs out of opportunity and entrepreneurs out of necessity. While the effect of opportunity entrepreneurs on economic development should be positive, there should be no or a negative effect of necessity entrepreneurship. We use a geographically weighted regression (GWR) approach to analyze whether the effect of self-employment on economic development is heterogeneous across European NUTS-2 regions. We find that regions having a significant positive effect of self-employment on economic development in the GWR estimation have, on average, a lower self-employment rate than regions with a significant negative effect. The concept of equilibrium rate of entrepreneurship is applied in an attempt to estimate a level of the self-employment rate from which relatively more entrepreneurs are self-employed out of necessity than out of opportunity. We find that in regions where the self-employment rate is above the equilibrium rate, self-employment has indeed a negative effect, while in regions where it is below the equilibrium rate the effect is positive.
    Keywords: self-employment, economic performance, geographically weighted regression
    JEL: C21 L26 R11
    Date: 2013
  8. By: Lerner, Josh (Harvard Business School); Tåg, Joacim (Research Institute of Industrial Economics)
    Abstract: We survey the literature on venture capital and institutions and present a case study comparing the development of the venture capital market in the US to Sweden. Our literature survey underscores that the legal environment, financial market development, the tax system, labor market regulations, and public spending on research and development correlates with venture capital activities across countries. Our case study suggests these institutional differences led to the later development of an active venture capital market in Sweden compared to the US. In particular, a later development of financial markets and a heavier tax burden for entrepreneurs have played a key role.
    Keywords: Financial market development; Institutions; IPOs; Labor markets; Legal environment; R&D; Taxation; Stock markets; Venture Capital. [Running Title: Spinoffs in Sweden]
    JEL: E02 G24 G28 N20 O16 O43 O57
    Date: 2013–08–08
  9. By: Bertoni, Fabio; Tykvová, Tereza
    Abstract: We argue that different forms of venture capital contribute differently to the innovation process and, consequently, differ in their impact on portfolio companies' innovation output. Our results suggest that the innovation output of companies financed by independent VCs increases significantly faster than that of both non-VC-backed companies and of companies financed by governmental VCs. However, governmental VCs may be beneficial for innovation by complementing the skills and resources provided by an independent VC in a heterogeneous syndicate. --
    Date: 2013
  10. By: Braunerhjelm, Pontus (Swedish Entrepreneurship Forum); Henrekson, Magnus (Research Institute of Industrial Economics (IFN).)
    Abstract: The purpose of this research endeavor—in the form of eight articles—published in this Special Issue of Industrial and Corporate Change is to further our understanding of the extent, character and orientation of entrepreneurial activity in today’s wealthy countries. This is done by means of detailed studies of particular aspects of the rules of the game deemed to be of particular importance for entrepreneurship, innovation-based firm growth and its ensuing impact on the economy. Particular aspects of entrepreneurship and economic dynamism are covered by pairs (or in one case three) coauthors, who are renowned specialists in the area and with deep knowledge of the pertinent institutions in Sweden and the US. These two countries have been argued to be located at either end of the spectrum of the types of capitalism with respect to the degree coordination and government intervention. This introductory essay sets off by giving a short overview of the institutional differences that distinguish these economies, but also stresses that convergence has occurred in the last decades in several respects. Still, as is obvious from the summary of the eight comparative analyses included in this issue, considerable differences remain. These constitute the basis for the concluding policy discussion.
    Keywords: Entrepreneurship; Innovation; Institutions; Firm growth; Economic dynamism
    JEL: G28 H30 K30 L26 L53 O43 O57
    Date: 2013–11–20
  11. By: Tåg, Joacim (Research Institute of Industrial Economics (IFN)); Åstebro, Thomas (HEC Paris); Tho, Peter (Goizueta Business School)
    Abstract: We explore whether the tendency for smaller firms to have fewer hierarchical layers explains the well-documented inverse correlation between firm size and the rate at which employees become business owners. Our analysis is based on a Swedish matched employer-employee dataset. Conditional on firm size, employees in firms with more layers are less likely to enter entrepreneurship, to become self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for jobswitching and they are stronger for entrepreneurship than for self-employment. However, hierarchies constitute only a partial explanation of the small firm effect. Potential explanations for the effects of layers are examined. Part of the effect appears to be due to preference sorting by employees, and part due to employees in firms with fewer layers having a broader range of skills.
    Keywords: Entrepreneurship; Employee mobility; Hierarchy; Rank; Small firm effect
    JEL: D20 J20 L26 M50
    Date: 2013–02–13
  12. By: Gans , Joshua (Rotman School of Management); Persson, Lars (Institutet för näringslivsforskning)
    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: 2013–08–09
  13. By: Claudia Martínez A.; Esteban Puentes; Jaime Ruiz-Tagle
    Abstract: Using a randomized controlled trial of a large-scale publicly run micro-entrepreneurship program in Chile, we assess the effectiveness of business training and asset transfers on individuals’ employment and income. About half of the participants had not yet started their businesses at intervention, allowing us to study the program effects by baseline economic activity. To analyze the shape of the production function, two levels of asset transfers are allocated. We find that the program does significantly increase individuals’ employment and income by 18% and 32% respectively after one year and significantly improves the business practices of its beneficiaries. The program seems more effective for individuals who are unemployed at the beginning of the program, followed by the selfemployed at the baseline. The effect on wage earners is positive only for low-income individuals. This is consistent with the presence of fixed costs. The additional transfer of assets has a positive and significant effect on employment and self-employment. However, the additional transfer does not have a statistically significant effect on labor and household income, consistent with rapidly decreasing returns in the production function.
    Date: 2013–03
  14. By: Pere Arqué-Castells (Universitat Autònoma de Barcelona & IEB); Elisabet Viladecans-Marsal (Universitat de Barcelona & IEB)
    Abstract: During the period 1965-1987 Spain was an emerging market in full transition from developing to developed status. During the same period the Spanish banking system underwent an unprecedented episode of expansion growing from 5,000 to over 30,000 bank branches. We examine whether the latter process partly caused the former by focusing on the relationship between branch expansion and entrepreneurship in the wholesale and retail trade industries. To address the non-random allocation of bank branches we exploit changes in branching policies that induced a plausibly exogenous time-varying pattern in the relationship between a municipality’s initial financial development and branch expansion. Our estimates, based on a panel data-set of over 2,000 Spanish municipalities, reveal that branch expansion had a strong positive impact on entrepreneurship. This effect was essentially driven by the savings banks, which have stronger regional development objectives than those held by the commercial banks, and which expanded more intensely into municipalities with more precarious financial services.
    Keywords: Banks, entrepreneurship, economic development
    JEL: G21 O43 L26
    Date: 2013
  15. By: Agustí Segarra (Research Group of Industry and Territory, Department of Economics and CREIP, Universitat Rovira i Virgili, Av. Universitat, 1; 43204 – Reus (Spain)); José García-Quevedo (Department of Public Economics and Barcelona Institute of Economics (IEB), University of Barcelona, Av. Diagonal 690; 08034 – Barcelona (Spain)); Mercedes Teruel (Research Group of Industry and Territory, Department of Economics and CREIP, Universitat Rovira i Virgili, Av. Universitat, 1; 43204 – Reus (Spain))
    Abstract: Theoretical and empirical approaches have stressed the existence of financial constraints in innovative activities of firms. This paper analyses the role of financial obstacles on the likelihood of abandoning an innovation project. Although a large number of innovation projects are abandoned before their completion, the empirical evidence has focused on the determinants of innovation while failed projects have received little attention. Our analysis differentiates between internal and external barriers on the probability of abandoning a project and we examine whether the effects are different depending on the stage of the innovation process. In the empirical analysis carried out for a panel data of potential innovative Spanish firms for the period 2004-2010, we use a bivariate probit model to take into account the simultaneity of financial constraints and the decision to abandon an innovation project. Our results show that financial constraints most affect the probability of abandoning an innovation project during the concept stage and that low-technological manufacturing and non-KIS service sectors are more sensitive to financial constraints.
    Keywords: barriers to innovation, failure of innovation projects, financial constraints
    JEL: O31 D21
    Date: 2013–03
  16. By: Sánchez, Rosario/R; Diaz, M. Angeles
    Abstract: One of the characteristics of the Spanish economy is the high percentage of small and medium-sized firms. Size is one of the factors that condition the managerial organization of the firms and their efficiency and productivity. Moreover size has been found a highly significant variable in explaining differences in firm’s innovative activities and the returns of R&D expenditures, and it is a well-established connection between productivity and innovative activities. This paper analyses the relationship between innovative activities and size and their effect over firms’ technical efficiency and then over their productivity. We also take into account other variables that could affect the relationship between productivity and innovative activities: industrial sector, market structure, or firms’ financial conditions. The analysis could help to design political economic measures to encourage small firms’ innovation and then contribute to improve their competitiveness. We use a micro panel data set of Spanish manufacturing firms, during the period 2004–2009, to simultaneously estimate a stochastic frontier production function and the inefficiency determinants. The data source is published in the Spanish Industrial Survey on Business Strategies (Encuesta sobre Estrategias Empresariales, ESEE), collected by the Fundación SEPI. Our preliminary results show that innovative firms are more efficient than non-innovative firms; and that small and medium-sized firms’ tent to be more efficient than large firms are.
    Keywords: small firms, technical efficiency, innovative activities.
    JEL: C23 J21 L60
    Date: 2013–02–25
  17. By: Zawadzki, Krystian; Wasilczuk, Julita
    Abstract: In the course of preparations to the 2012 European Football Championship (Euro 2012) many doubts have arisen as to the actual cost-benefit balance affecting the hosting country. The event is accompanied by intense promotion of the agglomeration and the region, especially abroad. In effect, one can anticipate the competitive position of both the region and the businesses operating there to improve. The investigation whether the Euro 2012 will have an impact on the Pomeranian Region was conducted threefold. First, a modified Preuss (2007a) model was used to analyse the regional environment factors, which would contribute to improve competitiveness of the region and its Small and Medium Enterprises (SMEs). In the second area, the short run increase in business activities were investigated using the field research among the entrepreneurs. The last part of research was focused on the growth willingness of entrepreneurs.
    Keywords: Mega Sport Event, Competitiveness, Entrepreneurship
    JEL: D81 R11
    Date: 2013–02–18

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