nep-ent New Economics Papers
on Entrepreneurship
Issue of 2013‒08‒31
eighteen papers chosen by
Marcus Dejardin
University of Namur and Universite' Catholique de Louvain

  1. In the name of my parents: Entrepreneurship and the intergenerational transmission of values By Michael Wyrwich
  2. Practice Makes Perfect: Entrepreneurial-Experience Curves and Venture Performance By Toft-Kehler, Rasmus; Wennberg, Karl; Kim, Phillip
  3. "Romanticizing Penniless Entrepreneurs?" The Relationship between Start-Ups and Human Wellbeing across Countries By Naudé, Wim; Amorós, José Ernesto; Cristi, Oscar
  4. Smart and Illicit: Who Becomes an Entrepreneur and Does it Pay? By Ross Levine; Yona Rubinstein
  5. Regional Influences on the Prevalence of Family Versus Non-Family Start-Ups By Bird, Miriam; Wennberg, Karl
  6. Explaining entrepreneurial orientation among university students: evidence from Italy By A. Arrighetti; F. Landini; L. Caricati; N. Monacelli
  7. Self-employment and the local business cycle By Svaleryd, Helena
  8. Do SBA Loans Create Jobs? By Brown, J. David; Earle, John S.
  9. Small business exit: Review of past research, theoretical considerations and suggestions for future research By DeTienne, Dawn; Wennberg, Karl
  10. Credit crunches and credit allocation in a model of entrepreneurship By Marco Bassetto; Marco Cagetti; Mariacristina De Nardi
  11. Team heterogeneity in startups and its development over time By Kaiser, Ulrich; Müller, Bettina
  12. Survival of Spinoffs and Other Startups: First Evidence for the Private Sector in Germany, 1976-2008 By Fackler, Daniel; Schnabel, Claus
  13. Entrepreneurship and the Business Environment in Africa: An Application to Ethiopia By Brixiova, Zuzana; Ncube, Mthuli
  15. Business Angels' practices in the screening stage: A study of knowledge transfer to the entrepreneur By Gilles Certhoux; Alexandre Perrin
  16. Human capital, social capital and organizational performance: A structural modeling approach By J. Augusto Felicio; Eduardo Couto; Jorge Caiado
  17. Access to finance of independent SMEs in Luxembourg. The consequences of the crisis. By Allegrezza , Serge; Ben Aoun-Peltier, Leila; Dubrocard, Anne; Larue, Solène
  18. Industry Differences in the Firm Size Distribution By Halvarsson, Daniel

  1. By: Michael Wyrwich (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: Mounting empirical evidence shows that kids of self-employed parents are very likely to become entrepreneurs themselves. These findings are often attributed to the intergenerational transmission of parental norms and values. However, many papers in the field are not that explicit about parental values. Furthermore, nearly all studies neglect potential heterogeneity of entrepreneurial parents and their values. I argue that values of entrepreneurial parents can be quite different due to context factors like their motivation for being self-employed (e.g., necessity- vs. opportunity driven). I also think that direct information on values should be exploited to understand their intergenerational transmission. To this end, I fill research gaps and contribute to the literature by making use of a natural experiment. This allows identify- ing a group of entrepreneurial parents with a distinct value orientation and detecting a trans- mission of these parental values.
    Keywords: Entrepreneurship, Intergenerational transmission, Values
    JEL: L26 J13 J62 P37 Z13
    Date: 2013–08–20
  2. By: Toft-Kehler, Rasmus (Copenhagen Business School, Symbion Entrepreneurial Learning Lab); Wennberg, Karl (Ratio and Stockholm School of Economics); Kim, Phillip (Wisconsin School of Business)
    Abstract: This study tackles the puzzle of why increasing entrepreneurial experience does not always lead to improved financial performance of new ventures. We propose an alternate framework demonstrating how experience translates into expertise by arguing that the positive experience-performance relationship only appears to expert entrepreneurs, while novice entrepreneurs may actually perform increasingly worse because of their inability to generalize their experiential knowledge accurately into new ventures. These negative performance implications can be alleviated if the level of contextual similarity between prior and current ventures is high. Using matched employee-employer data of an entire population of Swedish founder-managers between 1990 and 2007, we find a non-linear relationship between entrepreneurial experience and financial performance consistent with our framework. Moreover, the level of industry, geographic, and temporal similarities between prior and current ventures positively moderates this relationship. Our work provides both theoretical and practical implications for entrepreneurial experience—people can learn entrepreneurship and pursue it with greater success as long as they have multiple opportunities to gain experience, overcome barriers to learning, and build an entrepreneurial-experience curve.
    Keywords: Serial Entrepreneurship; Learning Curves; Experience; Similarity; Performance
    JEL: L26 M13
    Date: 2013–07–17
  3. By: Naudé, Wim (Maastricht School of Management); Amorós, José Ernesto (Universidad del Desarrollo); Cristi, Oscar (Universidad del Desarrollo)
    Abstract: We study the effect of entrepreneurship and its allocation between necessity and opportunity entrepreneurship on three indicators of countries' wellbeing: monetary wellbeing, non-monetary wellbeing and our own indicator of a country's ability to translate economic growth into non-monetary wellbeing. We take into consideration that there is a feedback effect from monetary and non-monetary wellbeing to entrepreneurial allocation. Using data from the Global Entrepreneurship Monitor we establish that opportunity entrepreneurship may contribute towards national wellbeing and that better wellbeing in turn may stimulate opportunity entrepreneurship. Hence, entrepreneurship may contribute towards countries' wellbeing in a broad sense, and countries with higher levels of wellbeing may contribute towards opportunity entrepreneurship.
    Keywords: entrepreneurship, wellbeing, development, Global Entrepreneurship Monitor
    JEL: I31 M13 O50
    Date: 2013–08
  4. By: Ross Levine; Yona Rubinstein
    Abstract: We disaggregate the self-employed into incorporated and unincorporated to distinguish between "entrepreneurs" and other business owners. The incorporated self-employed have a distinct combination of cognitive, noncognitive, and family traits. Besides coming from higher-income families with better-educated mothers, the incorporated - as teenagers - scored higher on learning aptitude tests, had greater self-esteem, and engaged in more aggressive, illicit, risk-taking activities. The combination of "smarts" and "aggressive/illicit/risk-taking" tendencies as a youth accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. In contrast to a large literature, we also find that entrepreneurs earn much more per hour than their salaried counterparts.
    Keywords: Self-employment, Occupational choice, Compensation, Firm organization, Corporate finance, Cognitive and Noncognitive traits
    JEL: L26 J24 J3 G32
    Date: 2013–08
  5. By: Bird, Miriam (Stockholm School of Economics); Wennberg, Karl (Ratio and Stockholm School of Economics)
    Abstract: We integrate insights from family business and organizational ecology into the entrepreneurship field by constructing a theoretical framework that explains how the regional context impacts family and non-family start-ups in differing ways. Regional count data models based on a rich longitudinal dataset reveal that while economic factors such as population size and growth in regions are primarily associated with the number of non-family start-ups, factors related to regional embeddedness, such as pre-existing small family businesses as well as favorable community attitudes toward small businesses, are more strongly associated with the number of family start-ups. Our research provides support for the notion that ‘the regional context’ is an important yet under-theorized area for research on venture creation and family business.
    Keywords: Family Business; Start-up; Population Ecology; Regional Science
    JEL: L21 M13 R12
    Date: 2013–08–19
  6. By: A. Arrighetti; F. Landini; L. Caricati; N. Monacelli
    Abstract: This paper presents one of the first studies on the entrepreneurial orientation of Italian university students. For a large sample of students from the University of Parma (Italy), we estimate the sources of entrepreneurial intent, distinguishing between the propensity to start a new business and the perceived likelihood of becoming an entrepreneur. In line with previous research in other countries, entrepreneurial intent is explained by a wide set of variables, including psychological, social and contextual factors. For Italian university students, the current economic crisis and the consequent increase in uncertainty do not seem to significantly weaken the importance of psychological variables as factors shaping entrepreneurial intent, confirming that these variables maintain primary relevance regardless of the context and the economic situation. While the perception of a lack of economic opportunities does not significantly affect the propensity to start a new venture, it does have a negative impact on the perceived likelihood of becoming an entrepreneur. This, in turn, suggests that the ongoing economic recession may indeed have a negative impact on the future entrepreneurial supply through a discouragement effect. Finally, the impact of family and business associations on stimulating entrepreneurial intent turns out not to be statistically significant. The combination of these results significantly contributes to our general understanding of entrepreneurial intent among Italian university students.
    Keywords: entrepreneurial intent, university students, Italy, economic crisis
    Date: 2013
  7. By: Svaleryd, Helena (Department of Economics, Uppsala University)
    Abstract: The business cycle is likely to be of importance for self-employment rates. When the economy is growing, business opportunities open up and encourage the set-up of new firms. In downturns, self-employment may be a way to avoid unemployment. The strength of these pull and push factors may depend on the amount of human capital a person has. The findings in this paper show that although the local business cycle is of minor importance for total self-employment rates in Sweden, there are heterogeneous effects across groups. People with higher human capital endowments are more likely to be pulled into self-employment, while those with lower human capital endowments are to a larger extent pushed into self-employment. This pattern is particularly strong for women.
    Keywords: Self-employment; local business cycle; panel data
    JEL: J21 J24
    Date: 2013–08–08
  8. By: Brown, J. David (U.S. Census Bureau); Earle, John S. (George Mason University)
    Abstract: Small Business Administration (SBA) loans have long been one of the most significant policy interventions in the U.S. affecting firm behavior, but little is known about their outcomes. This paper estimates the effects on employment using a list of all SBA loans linked to annual data on all U.S. employers from 1976 to 2010. Our methods combine firm fixed-effect regressions with matching on exact firm age, industry, year, and pre-loan size, and on propensity scores as a function of four years of employment history and other variables. The results imply positive average effects on loan recipient employment of about 25 percent, or 3 jobs at the mean. Including loan amount, we find little or no impact of loan receipt per se, but an increase of about 5.4 jobs for each million dollars of loans. Similar results for high-growth counties and industries suggest the estimates are not driven by differential demand conditions across firms. Exploiting variation in the distance of controls from recipient firms, we find only very small displacement effects. In all these cases, the results pass "placebo" and "pre-program" specification tests. Other specifications using only matching or only regression imply somewhat higher effects, but they fail these tests. The estimates facilitate calculations of total job creation by the SBA and of the cost per job created.
    Keywords: small business finance, entrepreneurship, employment, program evaluation
    JEL: D04 G21 G28 H32 H81 J23 L52
    Date: 2013–08
  9. By: DeTienne, Dawn (Colorado State University); Wennberg, Karl (Ratio and Stockholm School of Economics)
    Abstract: In this chapter we look at exit as a multidimensional and multidisciplinary phenomenon that may involve processes and outcomes operating at multiple levels of analysis. We do so because entrepreneurship research is often considered a phenomenondriven academic field (Shane, 2003; Sorenson and Stuart, 2008) and entrepreneurship is in itself a multidimensional concept: its definition depends on the focus of the research undertaken (Davidsson, Low, & Wright, 2001). In this field, it is surprising that exit has received much less attention than the phenomenon of entry, growth, or innovation among new firms; however, there has been renewed interest in this topic and this research crosses many disciplines and multiple theoretical perspectives. In this chapter, we provide an indepth review of that research which is applicable to small business. We review disciplinary approaches to research on exit, and then present a literature review of 28 empirical studies of entrepreneurial exit during the last 29 years. We summarize these studies under a number of topical areas and discuss the potential for further development in these areas. In doing so, we provide a framework and opportunities for future research.
    Keywords: Entrepreneurship; Exit
    JEL: L26 M13
    Date: 2013–08–22
  10. By: Marco Bassetto; Marco Cagetti; Mariacristina De Nardi
    Abstract: We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business in this set-up, we show that, by reducing entrepreneurial firm size and earnings, negative shocks have a very persistent effect on real activity. In determining the speed of recovery from an adverse economic shock, the most important factor is the extent to which the shock erodes entrepreneurial wealth.
    Date: 2013
  11. By: Kaiser, Ulrich; Müller, Bettina
    Abstract: We investigate the workforce heterogeneity of startups with respect to education, age and wages. Our explorative study uses data on the population of 1,614 Danish firms founded in 1998. We track these firms until 2001 which enables us to analyze changes in workforce composition over time. Such a dynamic analysis constitutes a hitherto neglected area of entrepreneurship research. To assess relative workforce heterogeneity, we construct a simulated benchmark to which we compare observed workforce heterogeneity. We find that the initial workforce is relatively homogeneous compared to our benchmark. Our result holds both for non-knowledge-based and, to a lesser extent, knowledge-based startups. This seems surprising since a vast management literature advocates heterogeneous teams. The difficulites associated with workforce heterogeneity (like affective condlict or coordination cost) as well as \homophily (peoples inclination to bound with others with similar characteristics) hence appear to generally overweigh the benefits of heterogeneity (like greater variety in perspectives or more creativity). We also document that workforces become more heterogeneous over time - startups add workers with skills different from the workforce at startup. The initial supposedly poor mix of workforce characteristics is hence adjusted as the startup matures. This increase in workforce heterogeneity is, however, smaller compared to our benchmark but substantially larger than is team additions had the same characteristics as the initial team members. --
    Keywords: Entrepreneurship,Startups,Skill Heterogeneity,Team Dynamics
    JEL: C10 L26 M13
    Date: 2013
  12. By: Fackler, Daniel (University of Erlangen-Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg)
    Abstract: Using a 50 percent sample of all establishments in the German private sector, we report that spinoffs are larger and initially employ more skilled and more experienced workers than other startups. Controlling for these and other differences, we find that spinoffs are less likely to exit than other startups. We show that in West and East Germany and in all sectors investigated pulled spinoffs (where the parent company continues after they are founded) generally have the lowest exit hazards, followed by pushed spinoffs (where the parent company stops operations). The difference between both types of spinoffs is particularly pronounced in the first three years. Contrary to expectations, intra-industry spinoffs are not found to have lower exit hazards in our sample.
    Keywords: spinoffs, startups, firm exits, Germany
    JEL: L2 D22 M13 C41
    Date: 2013–08
  13. By: Brixiova, Zuzana (African Development Bank); Ncube, Mthuli (African Development Bank)
    Abstract: Since mid-2000s, Ethiopia has been one of the fastest growing countries in the world. However, productive entrepreneurship in high-value added activities has made limited contributions to this growth, in part because of a weak business environment. Moreover, the low-productive firms in the informal sector still account for a large share of employment. Reflecting these facts, this paper presents a model of costly entrepreneurial start-ups in an economy with a large informal sector and rigid business environment where an equilibrium outcome can be a low-skill, low-productivity trap. By fostering productive start-ups and skilled employment, creation of an enabling business environment could help move the Ethiopian economy into high-productivity equilibrium.
    Keywords: entrepreneurship, SME start-ups, low productivity trap, multiple equilibria, Africa
    JEL: L26 J24 J48 O17
    Date: 2013–08
  14. By: Linda Hamdi-Kidar (IAE Toulouse - Institut d'Administration des Entreprises - Toulouse - PRES Université de Toulouse); Cyrielle Vellera (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre-Mendès-France - Grenoble II)
    Abstract: Regardless the type of industry, it has been shown that users, and more specifically lead users, are among the prime developers of truly novel solutions. Most stop before market launch of their innovation, but others go further and start their own firms. While an encouraging body of literature has proven the crucial role and the commercial interest of integrating lead users in the innovation process, little research has been done concerning motivations that drive these individuals to become firm-founders. In this article, we identify the intrinsic and extrinsic motivations that drive some lead users to switch from an innovator role to an entrepreneur role.
    Keywords: Lead users ; User entrepreneurs ; User Innovation
    Date: 2012
  15. By: Gilles Certhoux (Audencia Recherche - Audencia); Alexandre Perrin (EDHEC Business School - Edhec Business School)
    Abstract: Are Business Angels likely to influence the entrepreneur before any investment decisions have been taken? If such is the case, what are the reasons for doing so and in what way do they influence the entrepreneur? In this article we examine knowledge transfer from angel to entrepreneur at the pre-investment phase which is seldom treated in depth in literature. Through the use of an original theoretical framework (the activity system model), we describe the activities which are at the heart of the interactions between Business Angels and entrepreneurs. Our methodology is therefore qualitative and founded on an inductive reasoning. The analysis and comparison of four French cases show that, in spite of the absence of a relationship bound by contracts, business angels can modify a venture's content and the entrepreneur can accept these changes due to the former's expertise in terms of explicit and tacit knowledge.
    Keywords: Business Angels ; Knowledge transfer ; Activity system
    Date: 2013–06–26
  16. By: J. Augusto Felicio (School of Economics and Management (ISEG), Technical University of Lisbon); Eduardo Couto (School of Economics and Management (ISEG), Technical University of Lisbon); Jorge Caiado (CEMAPRE, School of Economics and Management (ISEG), Technical University of Lisbon)
    Abstract: This research evaluates the human capital and social capital of managers and its influence on the performance of small and medium-sized Portuguese companies. We resorted to the structural modeling methodology approach applied to a sample of 192 small and medium companies aged between four and fifteen years from five different activity sectors. It was concluded that human capital affects social capital and the experience and cognitive ability influence personal relations and complicity. The organizational performance is strongly influenced by human capital through the cognitive ability of the manager. It's an important contribution to the management literature.
    Keywords: Human capital, Social capital, Organizational performance, Cognitive ability, Small and medium enterprises
    Date: 2013–08
  17. By: Allegrezza , Serge; Ben Aoun-Peltier, Leila; Dubrocard, Anne; Larue, Solène
    Abstract: This paper analyses the availability of external funding for Luxembourgish independent small and medium-sized enterprises (SMEs) before and during the crisis. SMEs represent a large part of the private sector in Luxembourg. External finance is essential to enable firms to invest in order to increase their productivity, innovate and create employment. Data used come from the Access to Finance (ATF) survey conducted by STATEC in 2010 and coordinated by Eurostat. This paper provides some stylized facts on access to finance in Luxembourg. It presents results from a regression analysis on how the individual characteristics, the past behavior and the business environment perception affect the decision about whether or not to seek external finance. The results of estimations show that past behavior is the most important determinant of seeking finance. Particular emphasis is placed on assessing the consequences of the 2007-2010 recession by introducing variables related to changes in perception between 2007 and 2010 and growth constraints.
    Keywords: SMEs, Access to finance, Luxembourg, survey data
    JEL: D04 D22 M2
    Date: 2013–07–18
  18. By: Halvarsson, Daniel (Ratio)
    Abstract: This paper empirically examines industry determinants of the shape of Swedish firm size distributions at the 3-digit (NACE) industry level between 1999-2004 for surviving firms. Recent theoretical studies have begun to develop a better understanding of the causal mechanisms behind the shape of firm size distributions. At the same time there is a growing need for more systematic empirical research. This paper therefore presents a two-stage empirical model, in which the shape parameters of the size distribution are estimated in a first stage, with firm size measured as number of employees. In a second stage regression analysis, a number of hypotheses regarding economic variables that may determine the distributional shape are tested. The result from the first step are largely consistent with previous statistical findings confirming a power law. The main finding, however, is that increases in industry capital and financial constraint exert a considerable influence on the size distribution, shaping it over time towards thinner tails, and hence fewer large firms.
    Keywords: Firm size distribution; Zipf's law; Gibrat's law
    JEL: D22 L11 L25
    Date: 2013–08–21

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