nep-ent New Economics Papers
on Entrepreneurship
Issue of 2013‒04‒27
ten papers chosen by
Marcus Dejardin
Notre-Dame de la Paix University

  1. Women entrepreneurs in the informal economy: Is formalization the only solution for business sustainability? By Ramani, Shyama V.; Thutupalli, Ajay; Medovarski, Tamas; Chattopadhyay, Sutapa; Ravichandran, Veena
  2. Towards a General Theory of Innovation: Civic Entrepreneurship and the Making of a Cultural Cluster in Ashland, Oregon By Henry Etzkowitz
  3. The Radical Innovation Investment Decision Refined By Bilkic, Natasa; Gries, Thomas; Naudé, Wim
  4. Investment and capital structure decisions under time-inconsistent preferences By Masaaki Kijima; Yuan Tian
  5. Firm-Level Heterogeneity and the Decision to Export: A Real Option Approach By Naudé, Wim; Gries, Thomas; Bilkic, Natasa
  6. Bank-lending constraints and alternative financing during the financial crisis: Evidence from European SMEs By Casey, Eddie; O'Toole, Conor
  7. State intervention and the (micro)credit market in developed countries: loan guarantee and business development services By Renaud Bourlès; Anastasia Cozarenco
  8. Entrepreneurship and property right: de Soto'r right By Kodila-Tedika, Oasis
  9. Micro-prise de participation et entrepreneuriat social du point de vue du capital-risque : By Glòria Estapé-Dubreuil; Arvind Ashta; Jean-Pierre Hédou
  10. Selbständig statt leistungsberechtigt: Eine Implementationsstudie zur Handhabung des Einstiegsgeldes in den Jobcentern By Pongratz, Hans J.; Bernhard, Stefan; Wolff, Joachim; Promberger, Markus

  1. By: Ramani, Shyama V. (Brunel University, UNU-MERIT, and STI4Change); Thutupalli, Ajay (UNU-MERIT); Medovarski, Tamas (STI4Change); Chattopadhyay, Sutapa (UNU-MERIT); Ravichandran, Veena (IDRC)
    Abstract: The existing marketing, strategy and economics literature have little to offer by way of recommendations to promote entrepreneurship in the informal economy, except to advocate that multinationals, local firms, state and public agencies should work together to bring the informal economy into the fold of the formal economy. In contrast, this paper argues that the business sustainability of women entrepreneurs in the informal economy depends upon their engagements or business partnerships with other women (and men) and women-focussed intermediaries. More than formalization, women entrepreneurs need 'spaces' for dialogue with other women (and men) to learn and build business capabilities. Both the State and firms wanting to penetrate the informal economy can create such spaces through partnerships with NGOs and women-focussed organizations. While formalization of entrepreneurial activity is favourable under some circumstances, it can be detrimental under others - necessitating a case by case evaluation rather than a general rule. In order to ensure the business sustainability of women's ventures in the informal economy, any sort of formalization must occur through a gradual process accompanied by intermediaries. These results are formulated through the compilation and analysis of the existing literature and the study of six detailed case studies of women entrepreneurs from developing countries validated by extensive interviews. The results are then used to propose a closed model of linkages between formal and informal economies which has novel organizational implications for firms competing to establish consumer bases and business partnerships in the Base of Pyramid (BoP) markets of developing countries.
    Keywords: Informal economy, entrepreneurship, gender, business sustainability
    JEL: L26 B54 E26
    Date: 2013
  2. By: Henry Etzkowitz (Human Sciences and Technologies Advanced Research Institute (H-STAR), Stanford University)
    Date: 2013–04
  3. By: Bilkic, Natasa (University of Paderborn); Gries, Thomas (University of Paderborn); Naudé, Wim (Maastricht School of Management)
    Abstract: We refine modelling of the radical innovation decision in this paper by extending real option theory to include non-marginal stochastic jump processes. From the model analytics we determine that the average magnitude and frequency of non-marginal stochastic jump processes are the most important parameters in this highly uncertain decision process. We show that these stochastic shocks imply that investment in radical innovation may very often be too time consuming and/or expensive to remain attractive for private entrepreneurs.
    Keywords: radical innovation, innovation, entrepreneurship, investment, R&D, risk, real option theory, technology
    JEL: D92 D81 L26
    Date: 2013–04
  4. By: Masaaki Kijima (Graduate School of Social Sciences, Tokyo Metropolitan University); Yuan Tian (Faculty of Economics, Ryukoku University)
    Abstract: Based on a continuous-time model of quasi-hyperbolic discounting, this paper provides an analytically tractable framework of entrepreneurial firms’ investment and capital structure decisions with time-inconsistent preferences. We show that the impact of time-inconsistent preferences depends not only on the financing structures (all-equity financing or debt-equity financing), but also on the entrepreneurs’ belief regarding their future timeinconsistent behavior (sophisticated or naive). Time-inconsistent preferences delay investment under both all-equity financing and debt-equity financing. However, the impact is weakened under debt-equity financing, because debt financing increases the payoff value upon investment and accelerates investment. Naive entrepreneurs invest later and default earlier than sophisticated entrepreneurs, leading to a shorter operating period. Moreover, we find that naive entrepreneurs may choose higher leverage, while sophisticated entrepreneurs always choose lower leverage, compared to the time-consistent benchmark. These results support the empirical findings in entrepreneurial finance.
    Keywords: Investment; Capital structure; Quasi-hyperbolic discounting; Entrepreneurial finance
    JEL: D92 G11 G32
    Date: 2013–04
  5. By: Naudé, Wim (Maastricht School of Management); Gries, Thomas (University of Paderborn); Bilkic, Natasa (University of Paderborn)
    Abstract: In "new" new international trade theory, whether firms export or not are determined by their productivity. These models assume that firms enter a market to find their productivity levels revealed to them as in a lottery. In this paper we propose an alternative way to model whether firms export or not, namely as a firm-level decision akin to an investment decision with a real option value. We show that endogenizing the export decision is consistent with patterns of productivity and exporting reported in the empirical literature.
    Keywords: international new ventures, firm-level heterogeneity, start-ups, stochastic dynamic programming, trade, exports, productivity, real option theory, investment, firms, international entrepreneurship
    JEL: D92 D81 L26 M13
    Date: 2013–04
  6. By: Casey, Eddie; O'Toole, Conor
    Abstract: The financial crisis has brought to the fore concerns regarding small- and medium-sized enterprises' (SMEs) capacity to access traditional bank lending. Using European firm-level data on SME access to finance since the onset of the financial crisis, we find that bank-lending constrained SMEs are significantly more likely to avail of alternative forms of external finance, controlling for firm-level and country-level characteristics. We then determine the implications that usage of alternative forms of finance can have for certain economically desirable business activities. In particular, we find that using alternative finance substantially reduces the likelihood of business fixed investment. This effect is not evident for business innovation.
    Keywords: data/investment
    Date: 2013–03
  7. By: Renaud Bourlès; Anastasia Cozarenco
    Abstract: We analyze in this paper how various forms of State intervention can impact the microcredit market in developed countries. Using a simple model where entrepreneurs borrow without collateral, we study the effect of different policies on microfinance institutions' lending behavior. We first introduce state intervention through the loan guarantee and show that, not surprisingly, it increases the number of entrepreneurs receiving a loan. However, after modeling business development services provided by the microfinance institution, we show that the government loan guarantee can have a counterproductive effect by reducing the number of entrepreneurs benefiting from such services. We therefore analyze an alternative policy: the subsidization of business development services by the State. We then provide a condition under which - for fixed government expenditures - such subsidies are more effective (in terms of outreach) than loan guarantees.
    Keywords: microcredit; loan guarantee; business development services; microfinance institution
    JEL: G14 G21 G38 D45 D82
    Date: 2013–04–25
  8. By: Kodila-Tedika, Oasis
    Abstract: Using cross-sectional analysis with new data on entrepreneurship and entrepreneurship, we test the hypothesis of de Soto (1994, 2005) that the right of property is required for hatching entrepreneurship. Given our econometric estimates and our sensitivity tests, the right to property is essential to entrepreneurship. Countries with a higher entrepreneurship are those who respect property rights..
    Keywords: de Soto, entrepreneuriat, droit de propriété, institutions
    JEL: D73 D2 I2 L26 P48
    Date: 2012–12–29
  9. By: Glòria Estapé-Dubreuil (CEREN - Centre de Recherche sur l'Entreprise - Start entering a institution, university, grande ecole); Arvind Ashta (CEREN - Centre de Recherche sur l'Entreprise - Start entering a institution, university, grande ecole, Chaire Banque Populaire en Microfinance du Groupe ESC Dijon Bourgogne - Commencez à saisir le nom d'un établissement); Jean-Pierre Hédou (CEREN - Centre de Recherche sur l'Entreprise - Start entering a institution, university, grande ecole)
    Abstract: Microequity may be the key to overcoming stress of micro entrepreneurs who are over-exposed to micro-credit. French microangels are willing to invest small amounts to help people start their own business and move out of poverty. The French microangels invest through syndication in microenterprise projects. Each angel provides only a few hundred Euros, but together they are able to provide as much as three thousand Euros to firms. They look for social and environmental returns rather than financial returns. These include geographical proximity and solidarity.
    Keywords: Social entrepreneurship; micro-angels; micro-enterprise; micro equity; business angels; venture capital; social investors
    Date: 2012–12
  10. By: Pongratz, Hans J.; Bernhard, Stefan (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Wolff, Joachim (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Promberger, Markus (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "This report presents results from a qualitative study on the implementation of a startup subsidy for unemployed welfare recipients (the so-called 'Einstiegsgeld'). Our central findings are: - After the introduction of Einstiegsgeld in 2005 the inflow into the start-up subsidy reached an early peak in the years 2006 and 2007 at more than 32 thousand programme starts annually. In relation to an annual stock of 2.5 to 2.8 million unemployed welfare recipients in these years, the inflow was rather small. Since 2007, there has been a continuous decline of the inflow into the start-up subsidy. This does not only reflect a reduction in the stock of eligible welfare recipients. Based on results of this study we can assume that this development is partly caused by changes of the jobcenters' selection processes, which became stricter after their initial experience with the Einstiegsgeld programme. - Within these jobcenters there are three main mechanisms of selecting participants into the programme: (1) The jobcenters' decisions depend on the approval of the welfare recipients' business plan by external experts. (2) Jobcenters have implemented stepwise selection procedures for granting Einstiegsgeld to welfare recipients. This leads to a relatively high number of 'voluntary' drop-outs and thus reduces the number of applications for the subsidy. (3) Finally, often some case-workers in the jobcenters have gained specialized knowledge on entrepreneurship issues that helps them to guide the process of selecting welfare recipients for the start-up subsidy. - Jobcenters and their employees confront three main problems when they take decisions about granting the subsidy: (1) Assisting the potential entrepreneurs and selecting them for the subsidy is much more complicated and less common than job placements are. Employees face new and challenging tasks, e.g. when it comes to assessing the prospects for success of an envisaged business formation. (2) Due to the fact that the nascent entrepreneurs are welfare recipients and that the start-up subsidy takes place in an institutional context, the relation between jobcenter and potential entrepreneurs is restricted in certain ways. For example, welfare recipients are likely to withhold information that may be relevant for their entrepreneurial undertaking simply because it might threaten their entitlements to benefits. (3) The cooperation of jobcenters with local experts on entrepreneurship is central to the administration of the Einstiegsgeld. However, experts and jobcenters tend to focus strictly on their respective areas of discretion. Thus, each of them misses out part of the story: Jobcenters do not take responsibility for the economic assessment of the experts and the experts do not take into account the fact that their clientele are not only potential entrepreneurs but at the same time welfare recipients. - Since the administration of the Einstiegsgeld is complex and challenging an internal division of labour seems to be an adequate strategy for jobcenters. While all jobcenters have thought about such a specialization at some point in time not all of them made a decision for specializing some of their staff for the handling of Einstiegsgeld. When making their decisions jobcenters have to balance pros and cons: Advantages of specialization are the greater experience and relevant knowledge that specialists possess and that can help to implement Einstiegsgeld effectively. However, specialization may not be appropriate, because of a relatively low number of cases and thus the danger to overinvest organizational resources in a relatively small scheme." (Author's abstract, IAB-Doku) ((en))
    Keywords: Arbeitslosengeld II-Empfänger, Einstiegsgeld, berufliche Selbständigkeit - Förderung, Arbeitsmarktpolitik, arbeitsmarktpolitische Maßnahme, Politikumsetzung, Job-Center
    Date: 2013–03–28

This nep-ent issue is ©2013 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.