nep-ent New Economics Papers
on Entrepreneurship
Issue of 2014‒07‒13
sixteen papers chosen by
Marcus Dejardin
University of Namur and Universite' Catholique de Louvain

  1. Money or ideas ? a field experiment on constraints to entrepreneurship in rural Pakistan By Gine, Xavier; Mansuri, Ghazala
  2. Parenting with style: altruism and paternalism in intergenerational preference transmission By Matthias Doepke; Fabrizio Zilibotti
  3. Ability Dispersion and Team Performance By Sander Hoogendoorn; Simon C. Parker; Mirjam van Praag
  4. By Choice and by Necessity: Entrepreneurship and Self-Employment in the Developing World By Margolis, David N.
  5. Entrepreneurial Couples By Michael S. Dahl; Mirjam van Praag; Peter Thompson
  6. State Bankruptcy Law and Entrepreneurship : Evidence from a Border Analysis By Shawn M. Rohlin; Amanda Ross
  7. SMEs’ Access to Finance in the Euro Area: What Helps or Hampers? By Bahar Öztürk; Mico Mrkaic
  8. Small and Medium Size Enterprises, Credit Supply Shocks, and Economic Recovery in Europe By Nir Klein
  9. Innovation, financial constraints and relationship lending: firm-level evidence in times of crisis By Emanuele Brancati
  10. Small and Medium-Sized Enterprises in Global Markets: A Differential Approach for Services? By Iza Lejárraga; Humberto López Rizzo; Harald Oberhofer; Susan Stone; Ben Shepherd
  11. Microcredit in Developed Countries: Unexpected Consequences of Loan Ceilings By Anastasia Cozarenco; Ariane Szafarz
  12. Do Capital Tax Incentives Attract New Businesses? Evidence across Industries from the New Markets Tax Credit By Kaitlyn Harger; Amanda Ross
  13. Are organizational innovation practices complements or substitutes for technological innovation performance? By Caroline Mothe; Uyen T. Nguyen-Thi; Phu Nguyen-Van
  14. Toward Competitive and Innovative ASEAN SMEs: Philippine SME Policy Index 2012 By Aldaba, Rafaelita M.; Aldaba, Fernando T.
  15. Die Eignung des Taxpayer-Panels zur Identifizierung von Selbstständigen und Gründungen By Suprinovič, Olga; Kranzusch, Peter
  16. Caractéristiques des entrepreneurs et conception de leurs business plans : le cas des primés au concours du Réseau Entreprendre Paris By Lubica Hikkerova; Jean-Louis Paré; Jean Rédis; Guillaume Marceau

  1. By: Gine, Xavier; Mansuri, Ghazala
    Abstract: This paper identifies the relative importance of human and physical capital for entrepreneurship. A subset of rural microfinance clients were offered eight full time days of business training and the opportunity to participate in a loan lottery of up to Rs. 100,000 (USD 1,700), about seven times the average loan size. The study finds that business training increased business knowledge, reduced business failure, improved business practices and increased household expenditures by about $40 per year. It also improved financial and labor allocation decisions. These effects are concentrated among male clients, however. Women improve business knowledge but show no improvements in other outcomes. A cost-benefit analysis suggests that business training was not cost-effective for the microfinance institution, despite having a positive impact on clients. This may explain why so few microfinance institutions offer training. Access to the larger loan, in contrast, had little effect, indicating that existing loan size limits may already meet the demand for credit for these clients.
    Keywords: Access to Finance,Competitiveness and Competition Policy,Business in Development,Business Environment,E-Business
    Date: 2014–06–01
  2. By: Matthias Doepke; Fabrizio Zilibotti
    Abstract: We develop a theory of intergenerational transmission of preferences that rationalizes the choice between alternative parenting styles (as set out in Baumrind 1967). Parents maximize an objective function that combines Beckerian altruism and paternalism towards children. They can affect their children’s choices via two channels: either by influencing children’s preferences or by imposing direct restrictions on their choice sets. Different parenting styles (authoritarian, authoritative, and permissive) emerge as equilibrium outcomes, and are affected both by parental preferences and by the socioeconomic environment. Parenting style, in turn, feeds back into the children’s welfare and economic success. The theory is consistent with the decline of authoritarian parenting observed in industrialized countries, and with the greater prevalence of more permissive parenting in countries characterized by low inequality.
    Keywords: Intergenerational preference transmission, altruism, paternalism, entrepreneurship, innovation
    JEL: D10 J10 O10 O40
    Date: 2014–06
  3. By: Sander Hoogendoorn (CPB Netherlands Bureau for Economic Policy Analysis, the Netherlands); Simon C. Parker (Ivey Business School, Western University, London, Canada); Mirjam van Praag (Copenhagen Business School, Denmark)
    Abstract: What is the effect of dispersed levels of cognitive ability of members of a (business) team on their team’s performance? This paper reports the results of a field experiment in which 573 students in 49 teams start up and manage real companies under identical circumstances. We ensured exogenous variation in — otherwise random — team composition by assigning students to teams based on their measured cognitive abilities (Raven test). Each team performs a variety of tasks, often involving complex decision making. The key result of the experiment is that the performance of business teams first increases and then decreases with ability dispersion. We seek to understand this finding by developing a model in which team members of different ability levels form sub-teams with other team members with similar ability levels to specialize in different productive tasks. Diversity spreads production over different tasks in order to escape diminishing marginal returns under specialization. The model comes with a boundary condition: our experimental finding is most likely to emerge in settings where different tasks exhibit moderate differences in their productive contributions to total output.
    Keywords: Ability dispersion, team performance, field experiment, entrepreneurship
    JEL: C93 D83 J24 L25 L26 M13 M54
    Date: 2014–05–06
  4. By: Margolis, David N. (Paris School of Economics)
    Abstract: Over half of all workers in the developing world are self-employed. Although some self-employment is chosen by entrepreneurs with well-defined projects and ambitions, roughly two thirds results from individuals having no better alternatives. The importance of self-employment in the overall distribution of jobs is determined by many factors, including social protection systems, labor market frictions, the business environment, and labor market institutions. However, self-employment in the developing world tends to be low productivity employment, and as countries move up the development path, the availability of wage employment grows and the mix of jobs changes.
    Keywords: self-employment, entrepreneurship, development
    JEL: J21 L26 O14 O17
    Date: 2014–06
  5. By: Michael S. Dahl (Aalborg University, Denmark); Mirjam van Praag (Copenhagen Business School, Denmark); Peter Thompson (Emory University, United States)
    Abstract: We study possible motivations for co-entrepenurial couples to start up a joint firm, using a sample of 1,069 Danish couples that established a joint enterprise between 2001 and 2010. We compare their pre-entry characteristics, firm performance and postdissolution private and financial outcomes with a selected set of comparable firms and couples. We find evidence that couples often establish a business together because one spouse – most commonly the female – has limited outside opportunities in the labor market. However, the financial benefits for each of the spouses, and especially the female, are larger in co-entrepreneurial firms, both during the life of the business and post-dissolution. The start-up of co-entrepreneurial firms seems therefore a sound investment in the human capital of both spouses as well as in the reduction of income inequality in the household. We find no evidence of non-pecuniary benefits or costs of coentrepreneurship
    Keywords: Entrepreneurship, motives, performance, couples, co-entrepreneurship.
    JEL: J12 L26
    Date: 2014–05–08
  6. By: Shawn M. Rohlin (Kent State University, Department of Economics); Amanda Ross (West Virginia University, College of Business and Economics)
    Abstract: This paper examines how differences in state bankruptcy laws, specifically the amount of the homestead exemption, affect business location decisions within a few miles of the state boundary. By focusing on these border areas, we are able to more effectively control for unobserved local attributes and isolate the effect of more wealth protection. We find that an increase in the homestead exemption attracts new businesses. We also find that a more generous homestead exemption has a positive impact on existing businesses, suggesting that asset protection through bankruptcy law encourages successful entrepreneurs to incur the risks. Our results indicate that the wealth protection provided by personal bankruptcy law is an important policy tool that state governments can use to attract new, successful businesses owners.
    Keywords: bankruptcy law, entrepreneurship, border methodology
    JEL: K30 K36 R11 R14
    Date: 2014
  7. By: Bahar Öztürk; Mico Mrkaic
    Abstract: The monetary transmission mechanism in the euro area has been adversely affected by the recent crises. Using survey data on thousands of euro area firms, we study factors that affect the access to finance of SMEs. We find that changes in bank funding costs and borrower leverage matter for firms’ access to finance. Increases in bank funding costs and borrowers’ debt-to-asset ratios are significantly and negatively associated with firms’ access to finance. The use of subsidies significantly improve access to finance of SMEs. Finally, access to finance is found to be positively related to firm size and firm age.
    Keywords: Access to capital markets;Euro Area;Monetary transmission mechanism;Private sector;Credit;Borrowing;Banking sector;Monetary policy;access to finance; micro, small and medium sized enterprises; monetary policy
    Date: 2014–05–09
  8. By: Nir Klein
    Abstract: The limited access to bank credit in recent years has increased the pressure on small and medium size enterprises (SMEs), forcing them to scale down investment plans and production. This paper, which explores the macroeconomic implications of this channel, finds evidence that countries with high prevalence of SMEs tended to recover more slowly from the global financial crisis than their peers, implying that the interaction of the economic structure and access to bank financing plays a critical role in episodes of economic recovery. This conclusion is reinforced by a VAR estimation, which demonstrates that a negative credit supply shock applied to SMEs has an adverse effect on economic activity, and this impact is amplified in countries that have a high share of SMEs.
    Keywords: Economic recovery;Europe;Business enterprises;Credit;Supply;External shocks;Panel analysis;SMEs, Credit Supply Shocks, Economic Recovery, Panel VAR.
    Date: 2014–06–10
  9. By: Emanuele Brancati (LUISS University of Rome)
    Abstract: Financial frictions represent a severe obstacle to firmsÕ innovativeness. This paper shows the existence and quantifies the effects of financial barriers to the innovation propensity of Italian SMEs. Employing direct measures of financial constraints and a credit-score estimated ad hoc, I find financially-constrained firms have a probability of innovating that is significantly lower than sound companies (-30%). Results document the existence of a feedback-effect of innovation on firmsÕ financial position, resulting into an additional reduction in firmsÕ propensity to innovate. The paper also highlights the role of soft information in mitigating financial obstacles to innovation by improving the financial condition of more opaque (small) borrowers.
    Keywords: Innovation, financial constraints, relationship lending, SMEs.
    JEL: O31 L25 G21
    Date: 2014
  10. By: Iza Lejárraga; Humberto López Rizzo; Harald Oberhofer; Susan Stone; Ben Shepherd
    Abstract: This study empirically investigates key restrictions to the internationalisation of small and medium-sized enterprises (SMEs) in manufacturing and across different types of services. The study explores the extent to which binding constraints faced by SMEs producing goods may differ from small firms operating in services sectors and takes stock of how existing policy initiatives address some of these differences. Our results suggest that while firm size clearly influences the trade performance of SMEs in manufacturing, it is an ambiguous predictor of export performance in the case of small-sized services firms. The findings show that firm size influences the choice of export channel and that small firms rely more on indirect and agglomeration networks. Finally, the results point to a strong degree of firm-level heterogeneity across services activities and enterprise size. It would seem that incorporating sectoral and size heterogeneity into existing policies might be desirable to address key constraints for SMEs.
    Keywords: trade, services, small and medium-sized enterprises, internationalisation, SMEs, trade in services
    JEL: F14 L8
    Date: 2014–07–03
  11. By: Anastasia Cozarenco; Ariane Szafarz
    Abstract: In most developed countries, regulators have imposed loan ceilings to subsidized microfinance institutions (MFIs). Micro-entrepreneurs in need of above-ceiling loans are left with the co-financing option, which means securing the aboveceiling share of the loan with a regular bank, and getting a ceiling-high loan from the MFI. Co-financing is attractive to MFIs because it allows them to free-ride on the regular banks' screening process. Therefore, loan ceilings can have the perverse effect of facilitating the co-financing of large projects at the expense of micro-entrepreneurs who need below-ceiling loans only. This is the gist of our theoretical model. We test the predictions of this model by exploiting the natural experiment of a French MFI that became subject to the French EUR 10,000 loan ceiling in April 2009. Difference-in-differences probit estimations confirm that imposing loan ceilings to MFIs can have unexpected and socially harmful consequences.
    Keywords: Microcredit; regulation; developed countries; loan size; natural experiment
    JEL: G21 L51 G28 O52 L31 I38 C25 M13
    Date: 2014–07–03
  12. By: Kaitlyn Harger (West Virginia University, College of Business and Economics); Amanda Ross (West Virginia University, College of Business and Economics)
    Abstract: All levels of government pursue policies to attract new businesses with the hope that these enterprises will create local economic growth. In this paper, we use the New Markets Tax Credit (NMTC) to determine the effect of a capital tax credit on where firms in different types of industries locate. When estimating the impact of the NMTC on business location, there are likely to be unobservable local characteristics that are correlated with where businesses choose to open that would cause OLS estimates to be biased. To control for the endogenous selection, we use a plausibly exogenous eligibility cutoff and compare census tracts that are just eligible for the tax credit to those that are just ineligible. Using data from the Dun and Bradstreet MarketPlace Files, we find that in Metropolitan Statistical Areas, the NMTC incentivized new businesses to locate in tracts that were eligible for the tax credit in 2002 and 2004. However, we find that in 2006 the tax credit deterred new establishments. When we stratify the 2006 sample by industry, we find that this capital tax credit attracted more capital intensive industries, such as manufacturing, while deterring more labor intensive industries, such as services. Our results are important to policy makers, as we find that the type of tax credit offered causes a sorting of different industries across locations.
    Date: 2014–06
  13. By: Caroline Mothe; Uyen T. Nguyen-Thi; Phu Nguyen-Van
    Abstract: We empirically investigate the pattern of complementarity between four organizational practices. Firm-level data were drawn from the Community Innovation Survey (CIS) carried out in 2008 in Luxembourg. Supermodularity tests confirm the crucial role of organizational innovation in raising firms’ technological innovation. The pattern of complementarity between organizational practices differs according to the type of innovation, i.e. product or process innovation, but also according to whether the firm is in the first stage of the innovation process (i.e. being innovative or not) or in a later stage (i.e. innovation performance in terms of sales of new products).
    Keywords: Complementarity, Organizational innovation, Substitution, Supermodularity, Technological innovation.
    JEL: D22 O32
    Date: 2014
  14. By: Aldaba, Rafaelita M.; Aldaba, Fernando T.
    Abstract: The ASEAN SME Policy Index is an analytical tool to review, track, and identify gaps in small and medium enterprise (SME) policy development and implementation. The index covers the following eight policy areas: institutional framework; cheaper and faster start-up and better legislation and regulation for SMEs; access to information and supporting services; access to finance; technology and technology transfer; market access and getting more output of the single market; promotion of entrepreneurial education; and developing stronger, more effective representation for SMEs` interests. Applying the above framework, the paper assesses whether the policies, programs, and institutions in the Philippines are supportive of the development of SMEs in the region. On the average, the overall score for the country is quite modest and to move forward, it is important to simplify and streamline the overall registration process. Existing government programs must be evaluated in terms of scope and delivery with a view to improve and broaden support services for start-ups to include business incubators as well as vouchers, grants and loans on favorable terms especially for the most dynamic enterprises. There is also a need to institutionalize the framework for conducting regulatory impact assessment in the country.
    Keywords: Philippines, ASEAN SME Policy Index
    Date: 2014
  15. By: Suprinovič, Olga; Kranzusch, Peter
    Abstract: Auf der Basis der Einkommensteuerdaten lassen sich Angaben zu Selbstständigen sowie zu Gründungen nach Tätigkeitsarten ermitteln. Bis zum Jahr 2007 ist die Anzahl der Personen mit selbstständigen Tätigkeiten auf 6,8 Millionen gestiegen. Davon entfallen rund eine Million auf Rentner/Pensionäre (Zuerwerb) und 2 Millionen auf Nebenerwerbsselbstständige. 1,6 Millionen Selbstständige üben Freie Berufe aus, davon 57 % im Haupterwerb. Das Panel kann zur Erstellung einer aktuellen Gründungsstatistik beitragen, da es Hinweise zur Struktur der Gründungen z. B. mit Informationen zum Erwerbsstatus und zur Einkunftslage der Per-sonen sowie zur Beständigkeit der Gründung gibt. -- Based on income tax data, statistical information can be compiled on self-employed and business start-ups by field of activity. Until 2007 the number of individuals with self-employed economic activities has increased to 6.8 million. Thereof, approx. one million are old age pensioners (with additional income from self-employment) and two million part-time self-employed (i.e. with secondary income). 1.6 million self-employed operate in the liberal pro-fessions, thereof 57 % as main economic activity. The panel can contribute to the creation of an up-to-date statistics on business start-ups since it provides information on the structure of start-ups, e.g. with regard to the employment status and income situation of a person as well as to the stability/continuity of a business start-up.
    Keywords: Gründungen,Selbstständige,Deutschland,Gewerbe,Freie Berufe,Land- und Forstwirtschaft,Einkommen,Business start-up,Self-employed,Germany,Commercial business,Liberal pro-fessions,Agriculture and Forestry,Income
    JEL: C80 J44 L84 M13 O15
    Date: 2014
  16. By: Lubica Hikkerova; Jean-Louis Paré; Jean Rédis; Guillaume Marceau
    Abstract: In this article, we propose a method to evaluate enterprise creation projects based on the study of profiles of entrepreneurs and project teams, as well as external factors. This method is based on the theories of human capital and social capital, notabl
    Keywords: human capital, social capital, entrepreneur, entrepreneurship, start-up, performance,
    Date: 2014–06–23

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