nep-ent New Economics Papers
on Entrepreneurship
Issue of 2014‒08‒09
nineteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Entrepreneurship as Experimentation By William R. Kerr; Ramana Nanda; Matthew Rhodes-Kropf
  2. Is there an entrepreneurial culture? A review of empirical research By James Hayton; Gabriella Cacciotti
  3. Why Are Black-Owned Businesses Less Successful than White-Owned Businesses?  The Role of Families, Inheritances, and Business Human Capital By Fairlie, Robert
  4. Behind the GATE Experiment: Evidence on Effects of and Rationales for Subsidized Entrepreneurship Training By Fairlie, Robert
  5. Entrepreneurial families and households By Gry Agnete Alsos; Sara Carter; Elisabet Ljunggren
  6. Accounting for Job Growth: Disentangling Size and Age Effects in an International Cohort Comparison By Michael Anyadike-Danes; Carl-Magnus Bjuggren; Sandra Gottschalk; Werner Hölzl; Dan Johansson; Mika Maliranta; Anja Myrann
  7. The Financing of Diverse Enterprises: Evidence from the SME finance monitor By Sara Carter; Samuel Mwaura
  8. What drives environmental practices of SMEs? By Brigitte Hoogendoorn; Peter van der Zwan; Daniela Guerra
  9. The economic contribution of start-up firms in Germany By Schneck, Stefan; May-Strobl, Eva
  10. Entrepreneurship as ethnic minority liberation By Trevor Jones; Monder Ram
  11. Unpacking open innovation: Absorptive capacity, exploratory and exploitative openness and the growth of entrepreneurial biopharmaceutical firms By Stephen Roper; Helen Xia
  12. Innovation, innovation strategy and survival By Stephen Roper; Helen Xia
  13. Who Takes Advice? Firm Size Threshold, Competence, Concerns and Informality in a Contingency Approach By Kevin Mole; Robert Baldock; David North
  14. The relationship between international networking and firm performance in British SMEs By Rana Tadvji; Azhdar Karami
  15. Financial frictions, occupational choice and economic inequality By Lian Allub; Andres Erosa Etchebehere
  16. Supporting sustained growth among SMEs – policy models and guidelines By Stephen Roper; Mark Hart
  17. Knowledge context, learning and innovation: an integrating framework By Stephen Roper; James H. Love; Ying Zhou
  18. Innovation as Growth Policy: the challenge for Europe By Mariana Mazzucato; Carlota Perez
  19. Size, Age and the Growth of Firms: New Evidence from Quantile Regressions By Roberta Distante; Ivan Petrella; Emiliano Santoro

  1. By: William R. Kerr; Ramana Nanda; Matthew Rhodes-Kropf
    Abstract: Entrepreneurship research is on the rise but many questions about its fundamental nature still exist. We argue that entrepreneurship is about experimentation: the probabilities of success are low, extremely skewed and unknowable until an investment is made. At a macro level experimentation by new firms underlies the Schumpeterian notion of creative destruction. However, at a micro level investment and continuation decisions are not always made in a competitive Darwinian contest. Instead, a few investors make decisions that are impacted by incentive, agency and coordination problems, often before a new idea even has a chance to compete in a market. We contend that costs and constraints on the ability to experiment alter the type of organizational form surrounding innovation and influence when innovation is more likely to occur. These factors not only govern how much experimentation is undertaken in the economy, but also the trajectory of experimentation, with potentially very deep economic consequences.
    JEL: G24 L26 O32
    Date: 2014–07
  2. By: James Hayton (Warwick University Business School); Gabriella Cacciotti (Warwick University Business School)
    Abstract: The literature on the association between cultural values and entrepreneurial beliefs, motives and behaviours has grown significantly over the last decade. Through its influence on beliefs, motives and behaviours, culture can magnify or mitigate the impact of institutional and economic conditions upon entrepreneurial activity. Understanding the impact of national culture, alone and in interaction with other contextual factors, is important for refining our knowledge of how entrepreneurs think and act. We present a review of the literature with the goal of distilling the major findings, points of consensus and points of disagreement, as well as identify major gaps. Research has advanced significantly with respect to examining complex interactions among cultural, economic and institutional factors. As a result, a more complex and nuanced view of culture’s consequences is slowly emerging. However, work that connects culture to individual motives, beliefs and values has not built significantly upon earlier work on entrepreneurial cognition. Evidence for the mediating processes linking culture and behaviour remains sparse and inconsistent, often dogged by methodological challenges. Our review suggests that we can be less confident, rather than more, in the existence of a single entrepreneurial culture. We conclude with suggestions for future research.
    Keywords: entrepreneurship, culture, national culture, cultural values, entrepreneurial activity, entrepreneurial cognition
    Date: 2014–02–01
  3. By: Fairlie, Robert
    Abstract: Using confidential microdata from the Characteristics of Business Owners, we examine why African-American owned businesses lag substantially behind white-owned businesses in sales, profits, employment, and survival.  Black business owners are much less likely than white owners to have had a self-employed family member owner prior to starting their business and are less likely to have worked in that family member's business.  Using a nonlinear decomposition technique, we find that the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes.
    Keywords: Business, entrepreneurship, black business, human capital, business human capital, inequality, race
    Date: 2014–08–06
  4. By: Fairlie, Robert
    Abstract: Theories of market failures and targeting motivate the promotion of entrepreneurship training programs and generate testable predictions regarding heterogeneous treatment effects from such programs. Using a large randomized evaluation in the United States, we find no strong or lasting effects on those most likely to face credit or human capital constraints, or labor market discrimination. We do find a short-run effect on business ownership for those unemployed at baseline, but this dissipates at longer horizons. Treatment effects on the full sample are also short-term and limited in scope: we do not find effects on business sales, earnings, or employees.
    Keywords: Business, entrepreneurship, training, random experiment, evaluation, self-employment
    Date: 2014–08–06
  5. By: Gry Agnete Alsos (University of Nordland); Sara Carter (Strathclyde Business School); Elisabet Ljunggren (Nordland Research Institute)
    Abstract: This paper considers the entrepreneur within the context of the family and the household. We explore how families and households interact with and influence business decisions, and give equal prominence to the role of family strategies as well as to business strategies in understanding the development of the family in business. Household and family are distinctive concepts that partly overlap; a focus on the household allows consideration of economic activities, work and residence, while a focus on the family is confined to issues such kinship and marriage relationships that bind together individuals. The paper explores the relationship between the household and the enterprise, drawing attention to the intricate relationship that exists between the two spheres. Although entrepreneurship researchers have rarely discussed the role of the household in business decisions, disciplines such as sociology and anthropology have provided valuable insights into the nature of household dynamics and kinship. These factors are known to have a profound influence on both the tangible and intangible resources available to entrepreneurial ventures. This paper addresses some of the omissions of the entrepreneurship subject domain by focusing attention on household dynamics, kinship relations and the role of the household in recognizing opportunities and providing resources to new and existing ventures.
    Keywords: family entrepreneurship, households, portfolio businesses, rural and farm-based enterprise
    JEL: I31 L25 L26
    Date: 2013–10–01
  6. By: Michael Anyadike-Danes (Aston Business School); Carl-Magnus Bjuggren (Linköping University, Sweden); Sandra Gottschalk (The Centre for European Economic Research (ZEW) in Mannheim); Werner Hölzl (WIFO, Austria); Dan Johansson (Hui Research); Mika Maliranta (The Research Institute of the Finnish Economy (ETLA)); Anja Myrann (Ragnar Frisch Centre for Economic Research, Norway)
    Abstract: The contribution of different-sized businesses to job creation continues to attract policymakers’ attention, however, it has recently been recognized that conclusions about size were confounded with the effect of age. We probe the role of size, controlling for age, by comparing the cohorts of firms born in 1998 over their first decade of life, using variation across half a dozen northern European countries Austria, Finland, Germany, Norway, Sweden, and the UK to pin down size effects. We find that a very small proportion of the smallest firms play a crucial role in accounting for cross-country differences in job growth. A closer analysis reveals that the initial size distribution and survival rates do not seem to explain job growth differences between countries, rather it is a small number of rapidly growing firms that are driving this result.
    Keywords: birth cohort, firm age, firm size, firm survival, firm growth
    JEL: L25 E24 M13
    Date: 2013–05–02
  7. By: Sara Carter (Strathclyde Business School); Samuel Mwaura (Strathclyde Business School)
    Abstract: This paper contributes to our understanding of the finance issues currently facing diverse SMEs by presenting a new analysis of the SME Finance Monitor. While prior studies have contributed substantial evidence regarding the effects of either gender or ethnicity on finance outcomes, these analyses have typically focused on either women-owned or ethnic minority owned enterprises. This study considers the experiences and outcomes of both women-owned and ethnic minority-owned enterprises, including the interaction effects of ethnicity and gender. Central to this analysis is the development of a new typology of borrowers that categorises SMEs across six groups: existing borrowers; new/renewed borrowers; declined borrowers; partial borrowers; potential borrowers; and indifferent non-borrowers. Using this typology as the analytical lens enables a more granular view of the SME Finance Monitor dataset, and reveals both a broader set of potential borrowers and a wider set of antecedents of debt-avoidance than have previously been identified. As prior studies have indicated, gender effects that were notable and significant in the initial phases of the analysis were mainly dissipated when other factors, such as legal form and firm age, were considered. Analyses of ethnicity, however, suggest a different experience. While structural factors such as sector, firm size, the presence of a business plan, firm age, and legal form all impact on finance outcomes, after controlling for these structural factors the relative likelihood of borrowing success remains lower among Black and Minority Ethnic (BME) business owners as compared their White British and Irish (WBI) counterparts.
    Keywords: 0018
    JEL: D1 G21 L26
    Date: 2014–05–01
  8. By: Brigitte Hoogendoorn; Peter van der Zwan; Daniela Guerra
    Abstract: The objective of this paper is to develop a better understanding of how and why small and medium-sized enterprises (SMEs) engage in environmental practices. Two types of environmental practices are distinguished: practices related to production processes (greening processes) and practices related to products and services (greening product and service offerings). Despite a growing literature on socially responsible behavior of large firms, the role of SMEs remains underexposed. This neglect of SMEs is not justified because of the substantial impact of SMEs on the economy and the natural environment. By using unique data for almost 9,000 SMEs across 12 sectors in 38 countries, we study the influences of firm, sector and country characteristics on SMEs’ environmental behavior. Our results suggest that different characteristics have dissimilar influences on both types of environmental practices such as the type of customers served and the stringency of environmental legislation at the country level. Moreover, the dominant idea that small firms are reluctant to invest in environmental practices is clearly more nuanced: size indeed matters however only when greening processes are concerned.
    Date: 2014–05–07
  9. By: Schneck, Stefan; May-Strobl, Eva
    Abstract: This paper utilizes German tax data to present evidence about the direct and indirect effects of new firm formation. Cohort analysis is applied to investigate survival, sales, inputs, and value added of start-up firms. Most drop-outs occur in the early years. We show that start-up microenterprises increase economic vitality directly. Turnover and value added are in an approximate proportion of 3:1. With respect to the indirect effects of new firms, we find that one Euro of sales induce considerable indirect effects because 66 Cents are used to buy products and services from incumbents. For this reason, new firms substantially promote economic prosperity of incumbents. Sectoral differences are also indicated, with the manufacturing industry generating highest sales and relying on most inputs in the early periods. -- Dieser Beitrag stellt direkte und indirekte Effekte des Gründungsgeschehens in Deutschland dar. Mit Hilfe des Umsatzsteuerpanels werden Kohortenanalysen angestellt, um die Bestandsfestigkeit, den Umsatz und die Wertschöpfung von Existenzgründungen zu beschreiben. Es wird gezeigt, dass viele Unternehmen in frühen Jahren ausscheiden. Umsatz und Wertschöpfung stehen in einem Verhältnis von etwa 3:1. Neben diesen direkten ökonomischen Effekten gehen auch indirekte Effekte von neuen Unternehmen aus. Der Vorleistungsbezug von Existenzgründungen zeigt, dass rund 66 Cent eines umgesetzten Euros für Waren und Dienstleistungen von Bestandsunternehmen eingesetzt werden. Aus diesem Grund tragen Existenzgründungen auch in beachtlichem Maße zur Prosperität von bereits bestehenden Unternehmen bei.
    Keywords: entrepreneurship,direct effects,indirect effects,sales
    JEL: L26 L29
    Date: 2014
  10. By: Trevor Jones (CREME, University of Birmingham); Monder Ram (CREME, University of Birmingham)
    Abstract: To what extent does ethnic minority entrepreneurship promote socio-economic advancement? An implicit narrative of ethnic minority enterprise as a catalyst for social mobility has held sway in academic and policy discourse. It is fuelled by a largely-US inspired literature that emphasises ‘ethnic resources’. We evaluate this question by drawing on recent theoretical developments that seek to embed ethnic minority entrepreneurship more clearly in the various contexts in which they are embedded. These contexts, rather than resources that may or may not exist amongst ethnic minority groups, are found to be more persuasive in accounting the nature of minority enterprise.
    Keywords: ethnic minority enterprise, discrimination, social mobility
    JEL: Z13
    Date: 2013–10–02
  11. By: Stephen Roper (Warwick University Business School); Helen Xia (Loughborough University)
    Abstract: In this paper we explore the relationship between two key aspects of open innovation in small firms – absorptive capacity and external relationships – and their effects on growth in the US and European biopharmaceutical sectors. Results from an international sample of 349 biopharmaceutical firms surveyed in the US, UK, France and Germany suggest that realized absorptive capacity plays an important role in determining firms’ growth. In terms of the interaction between firms’ absorptive capacity and external relationships, we find that engagement with exploratory relationships depends strongly on the continuity of R&D, while participation in exploitative relationships is more conditional on firms’ realized absorptive capacity.
    Keywords: alliances, absorptive capacity, bio-technology, US, Europe
    JEL: O31 L25 L65
    Date: 2014–05–02
  12. By: Stephen Roper (Warwick University Business School); Helen Xia (Loughborough University)
    Abstract: Innovation has a recognised effect on survival. Undertaking more risky innovation, for example, may increase the risk of business failure, while more incremental innovation may reduce failure risk. Here, we investigate how firms’ innovation strategy choices – which may reduce the riskiness or costs of innovation and/or increase the innovation rewards – moderate the innovation-survival relationship. Our analysis is based on UK Community Innovation Survey data matched with survival data from firms’ published accounts. We are able to match nearly 80 per cent of UK CIS respondents. Contrary to expectations we find that innovation partnering and intellectual property protection have little or no moderating effect on the innovation-survival relationship. However, receiving public support for innovation has significant positive moderating effects. This suggests the notion of “survival additionality”, i.e. firms receiving public support derive more persistent benefits from innovation than firms which did not receive public support. Specifically, firms which receive public support for innovation are 2.7 per cent more likely to survive for eight years than firms which innovate but without public support. This result is strongest for product and service rather than process change, with implications for innovation policy design and evaluation.
    Keywords: Innovation, survival, strategy, public support, additionality, UK
    JEL: O32 L1 O38 Q34 L26
    Date: 2014–02–02
  13. By: Kevin Mole (Warwick University Business School); Robert Baldock (Middlesex University Business School); David North (Middlesex University Business School)
    Abstract: Although they are not the only conduit for knowledge, advisers can diffuse new methods, knowledge and best practice to SMEs Existing work suggests advice as a resource available for the small firm manager. Whether the manager takes that advice depends on the trust between owner-manager and adviser, the degree to which the owner-manager perceives themselves to need advice, the ‘knowledge gap hypothesis’ and the degree to which they feel able to interact with advisers and implement advice. In this paper, we model whether a small firm manager takes advice from formal sources, including public and private suppliers.
    Keywords: business advice, small business, SME policy, SME management, small firms
    JEL: M10 L53
    Date: 2013–09–01
  14. By: Rana Tadvji (Bangor University, UK); Azhdar Karami (Bangor University, UK)
    Abstract: The main objective of this paper is to investigate the effecto of international networking on the performance of British small and medium sized enterprises (SME). The international networking capabilities have been recognized as a vital element of growth and survival. In tnis research data has been collected using online questionnaries and mail survey for a sample of 118 SMEs operating in manufacturing, service providing and R&D sectors in the UK. The research hypotheses have been tested by applying the Structural Equation Model (SEM) methodology. The Lisrel software was used to test and analyse the relationship among variables. The collected data has been analysed using SEM. The data analysis illustates a positive and significant relationship between international networking activities of the SMEs and their performance. Learning, synergy of combined resources and knowledge sharing all were positively associated with profitability and to a lesser extent on sales growth.
    Keywords: International networking, performance, SME, UK
    Date: 2014–07
  15. By: Lian Allub; Andres Erosa Etchebehere
    Abstract: We develop a quantitative theory of entrepreneurship, income inequality, and financial frictions disciplined with household data from Brazil. The theory extends Lucas (1978) by modeling heterogeneity in two skills: -working and managerial skills. Consistently with the evidence, the theory implies three occupational categories: workers, employers, and self-employed entrepreneurs. We find that the removal of financial frictions decreases self-employment rates from 24% to 11% (with small effects on the number of employers), increases aggregate output by 48%, and has non- trivial effects on the distribution of income. We also find that while most households benefit from a reform that eliminates enforcement problems, the majority of employers (about two thirds) lose from the reform. By depressing the demand for labor, limited enforcement depresses the equilibrium wage rate, increasing the profits of employers. Our theory thus suggests that employers in Brazil may have a vested interested in maintaining a status quo with low enforcement.
    Date: 2014–07
  16. By: Stephen Roper (Warwick University Business School); Mark Hart (Aston University Business School)
    Abstract: Among SMEs high growth is often episodic and not sustained. How can we best support SMEs to achieve sustained growth? In this paper we review a number of international support measures designed to give SMEs the capabilities and resources to sustain fast growth. Policy guidelines emerge suggesting the need for partnership, for regionalised delivery and the potential value of holistic supports for sustained growth. Support measures are of three main types: Systemic measures which focus on informational or strategic market failures; Holistic approaches – which combine business development and leadership development; Functional or thematic approaches – which focus more narrowly on financial support, on management and leadership development or technology adoption or use. Reviewing these schemes suggests seven design or implementation guidelines for measures aiming to support sustained growth. These relate both to the effective targeting of growth support measures as well as ensuring that schemes are both effective and efficient.
    Keywords: SME, small business, sustained growth, policy
    JEL: L53 L78
    Date: 2013–09–01
  17. By: Stephen Roper (Warwick University Business School); James H. Love (Aston University Business School); Ying Zhou (Aston University Business School)
    Abstract: In this paper we develop a framework to identify those elements of firms’ knowledge context which are important for innovation, and the mechanisms through which that knowledge impacts on firms’ innovation performance. We make four main contributions to the existing literature. First, our characterisation of knowledge context provides the basis for a more specific identification of which elements of firms’ knowledge environment are important for innovation, discriminating between spatial, industrial and network influences. Second, we reflect the role of innovation ambition in shaping firms’ knowledge search strategies. Third, we differentiate between firms’ interactive and non-interactive knowledge search activities and recognise that these may be complemented by unanticipated and serendipitous knowledge spillovers. Finally, we introduce the notion of encoding capacity to reflect firms’ internal ability to assimilate and apply external knowledge. Our framework provides an integrating mechanism for existing empirical studies, suggests a number of new research directions related to the determinants of innovation performance and the heterogeneity of innovation outcomes.
    Keywords: Knowledge, innovation, spatial, industry, learning
    Date: 2014–06–01
  18. By: Mariana Mazzucato (SPRU, University of Sussex, UK); Carlota Perez (SPRU, University of Sussex, UK; London School of Economics, UK; Nurkse Institute, Estonia)
    Keywords: Growth policy, innovation, green growth, inclusive growth, technological revolutions, role of government, mission-oriented investments, value creation, definancialisation, respecialisation
    Date: 2014–07
  19. By: Roberta Distante (Fondazione Eni Enrico Mattei, Milan, Italy); Ivan Petrella (University of London, UK); Emiliano Santoro (Catholic University of Milan, Italy and University of Copenhagen, Denmark)
    Abstract: The nexus between firm growth, size and age in U.S. manufacturing is examined through the lens of quantile regression models. A number of interesting features are unveiled that linear frameworks could not detect. Size pushes both low and high performing firms towards the median rate of growth, while age is never advantageous, and more so as firms grow faster.
    Keywords: Firm Growth, Size, Age, Conditional Quantile
    JEL: C14 L1
    Date: 2014–07

This nep-ent issue is ©2014 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.