nep-ent New Economics Papers
on Entrepreneurship
Issue of 2014‒11‒12
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. The Stature of the Self-employed and its Premium By Cornelius A. Rietveld; Jolanda Hessels; Peter van der Zwan
  2. Drivers of entrepreneurship and post-entry performance of newborn firms in developing countries By Quatraro, Francesco; Vivarelli, Marco
  3. Ability Dispersion and Team Performance By Sander Hoogendoorn; Simon C. Parker; Mirjam van Praag
  4. Entrepreneurial Couples By Michael S. Dahl; Mirjam van Praag; Peter Thompson
  5. Exploring regional differences in the regional capacity to absorb displacements By Nyström, Kristina; Viklund Ros, Ingrid
  6. Ownership Change, Multinationals, and Growth of New Technology-Based Firms By Xiao , Jing
  7. Bank ownership structure, SME lending and local credit markets By Hasan, Iftekhar; Jackowicz , Krzysztof; Kowalewski, Oskar; Kozlowski , Lukasz
  8. Equilibrium Labor Turnover, Firm Growth and Unemployment By Dale Mortensen; Melvyn Coles
  9. Persistence of cooperation on innovation: Econometric evidence from panel micro data By Srholec , Martin
  10. Exploring and yet failing less: Learning from exploration, exploitation and human capital in R&D By Pablo D’Este; Alberto Marzucchi; Francesco Rentocchini
  11. Effects of Lending Relationships with Government Banks on Firm Performance: Evidence from a Japanese government bank for small businesses (Japanese) By UESUGI Iichiro; UCHIDA Hirofumi; MIZUSUGI Yuta

  1. By: Cornelius A. Rietveld; Jolanda Hessels; Peter van der Zwan (Erasmus University Rotterdam)
    Abstract: Taller individuals typically have occupations with higher social status and higher earnings than shorter individuals. Further, entrepreneurship is associated with high social status in numerous countries; hence, entrepreneurs might be taller than wage workers. Using data from the German Socio-Economic Panel (2002-2010), we find that a 1 cm increase in an individual’s height raises the probability of being self-employed (the most common proxy for entrepreneurship) versus paid employed by 0.16 percentage-points. Within self-employment the probability of being an employer is increased by 0.11 percentage-points as a result of a 1 cm increase in height whereas this increase is 0.05 percentage-points for an own-account worker. Furthermore, we confirm that a height premium in earnings exists for not only paid employees, as indicated by prior studies, but also for self-emp loyed individuals. An additional 1 cm in height is associated with a 0.44% increase in hourly earnings for paid employees, and a 0.87% increase for self-employed individuals. The predicted earnings differences between short and tall individuals are substantial. Short paid employees—first quartile of height—earn 15.5 Euros per hour whereas tall paid employees—third quartile of height—earn 16.5 Euros per hour; in self-employment the earnings are 12.8 and 14.4 Euros per hour, respectively. Another novel finding is that we establish the existence of a height premium for work and life satisfaction, but only for paid employees. Finally, our analysis reveals that 44% of the height premium in earnings is explained by differences in educational attainment whereas the height premium in work and life satisfaction is only marginally explained by education.
    Keywords: Self-employment, Stature, Height premium, Education, Life satisfaction
    JEL: J24 J31
    Date: 2014–08–19
  2. By: Quatraro, Francesco; Vivarelli, Marco
    Abstract: The aim of this paper is to provide an updated survey of the"state of the art"in entrepreneurial studies with a particular focus on developing countries (DCs). In particular, the concept of"entrepreneurship"is critically discussed, followed by a discussion of the institutional, macroeconomic, and microeconomic conditions that affect the entry of new firms and the post-entry performance of newborn firms. The reviewed literature bears some policy implications for the support of the creation new firms, such as the targeting of policy measures to prospective entrepreneurs who possess high education levels, long previous job experience, and innovative skills. Specifically, for DCs, tailored subsidies and support should be coupled with framework and infrastructural policies that are able to improve the business environment such that new ventures can start and grow.
    Keywords: Microfinance,Environmental Economics&Policies,Access to Finance,Small Scale Enterprise,Banks&Banking Reform
    Date: 2014–10–01
  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: 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
  5. By: Nyström, Kristina (The Ratio Institute and The Royal Institute of Technology); Viklund Ros, Ingrid (The Royal Institute of Technology)
    Abstract: Every year there is a substantial turbulence in an economy with respect to new firm formation and business closures. Each year, according to Tillväxtanalys (2009), about 100 000 Swedish employees lose their job due to a business closure. However, the share of firm closures vary substantially across Swedish regions (Nyström, 2007; 2009) and consequently the number of workers affected by the firm closure can be expected to vary across regions. In this paper we explore the patterns of regional displacements and to what extent there are differences in the regional capacity to re-employ displaced workers within one year. We use individual-firm level data to identify all establishment closures and re-employments in Sweden during the period 2001-2009. On average the share of displaced workers is 1.22 percent, but the regional variation is substantial. We find that the regional share of re-employments within the region where the displaced worker was employed varies between 15 and 85 percent. We do not find any correlation between the share of displacements and the capacity to absorb displaced workers.
    Keywords: Displacements; exit. Labor mobility; regional development
    JEL: J00 R10
    Date: 2014–10–07
  6. By: Xiao , Jing (CIRCLE and Department of Economic History, Lund University)
    Abstract: New technology-based firms (NTBFs) are usually restricted by limited ownership and management structures. This paper explores whether acquisition, particularly that by multinational enterprises (MNEs), promotes the growth of NTBFs. Based on micro-level longitudinal data, we construct a large sample of Swedish NTBFs entering from 1997 to 2002 and follow them until 2009. This paper uses fixed effects models combined with inverse-probability-of-treatment weights (IPTW) to account for endogeneity of acquisition arising from both time-invariant and time-variant heterogeneity across firms. The findings show that acquisition by Swedish MNEs significantly improves the growth of NTBFs, but only when it comes to the growth in employees. In contrast, acquisition by both foreign MNEs and Swedish domestic enterprises are not found to have any significant effects on the growth in either employees or sales of NTBFs.
    Keywords: acquisition; firm growth; new technology-based firms; multinational enterprises; longitudinal data; fixed effects models; inverse-probability-of-treatment weights; Sweden
    JEL: F23 G34 L22 O33
    Date: 2014–11–05
  7. By: Hasan, Iftekhar (Fordham University and Bank of Finland); Jackowicz , Krzysztof (Kozminski University); Kowalewski, Oskar (Institute of Economics of the Polish Academy of Sciences (INE PAN)); Kozlowski , Lukasz (BGZ SA)
    Abstract: In this paper, by employing a novel approach, we study the relationship between bank type and small-business lending in a post-transition country. Using a unique dataset on bank branches and firm-level data, we find that local cooperative banks lend more to small businesses than do large domestic banks and foreign-owned banks, even when controlling for the financial situation of the cooperative banks. Additionally, our results suggest that cooperative banks provide loans to small businesses at lower costs than foreign-owned banks or large domestic banks. Finally, we show that small and medium-sized firms perform better in counties with a large number of cooperative banks than in counties dominated by foreign-owned banks or large domestic banks. Our results are important from a policy perspective, as they show that foreign bank entry and industry consolidation may raise valid concerns for small firms in developing countries.
    Keywords: small-business lending; cooperative banks; foreign banks; post-transition countries
    JEL: G21 G28
    Date: 2014–07–30
  8. By: Dale Mortensen (Northwestern University); Melvyn Coles
    Abstract: This paper considers a labor market employers differ in productivity, which is private information, and face hiring costs. Each employer sets its current wage but does not commit to future wages. Workers search on the job for better paid employment. A signalling equilibrium is show to exist and characterized in which more productive firms pay higher wages in every state of the market and workers transit from less to more productive employers. There is firm turnover: new small start-up firms are created while some existing firms die. Consistent with Gibrat's law, firm growth rates are size independent but increase with firm productivity (which evolves stochastically). With endogenous aggregate job creation rates and job-to-job transitions, the model provides a rich, coherent, non-steady state framework of equilibrium wage formation and worker flows. Existence of a steady state equilibrium for any finite number of firm productivity types is established. Steady state is unique when firm productivity is permanent and there are many firm types. A unique non-steady state equilibrium exists in the case of one type. In the general case, a unique equilibrium can be established when the elasticity of the hire rate with respect to productivity is sufficiently small.
    Date: 2014
  9. By: Srholec , Martin (CERGE-EI, Prague and CIRCLE, Lund University)
    Abstract: Arrangements to cooperate on innovation facilitate access to external sources of knowledge. Using panel data derived from five waves of Community Innovation Survey in the Czech Republic, we examine whether firms engage in these arrangements persistently or rather revert to other behaviour. Econometric estimates of dynamic random effects and multivariate probit models provide strong support to the thesis of persistence, particularly of linkages with the university sector and suppliers. The results are robust to the initial conditions problem and serial correlation in idiosyncratic errors. Government programs initiating cooperation on innovation therefore have the potential to induce durable changes in the innovative behaviour of firms.
    Keywords: Innovation; cooperation; persistence; panel data; Community Innovation Survey; Czech Republic
    JEL: C23 C25 L20 O31 O32
    Date: 2014–09–28
  10. By: Pablo D’Este (INGENIO [CSIC-UPV], Universidad Politécnica de Valencia, Spain); Alberto Marzucchi (Dept. of International Economics, Institutions and Development (DISEIS), Catholic University of Milan, Italy; INGENIO [CSIC-UPV], Universidad Politécnica de Valencia, Spain); Francesco Rentocchini (Southampton Business School, University of Southampton, United Kingdom)
    Keywords: innovation failure, exploration, exploitation, human capital, learning
    JEL: O32 D83 D22 J24
    Date: 2014–10
  11. By: UESUGI Iichiro; UCHIDA Hirofumi; MIZUSUGI Yuta
    Abstract: Employing massive contract- and firm-level data provided by the Small and Medium Enterprise (SME) Unit of the Japan Finance Corporation (JFC), one of the largest government lending institutions for SMEs, and linking the data with other firm-level data from a business credit information company, we empirically examine (1) the lending behavior of JFC to SMEs, (2) the effects of JFC's lending on the credit availability and the ex-post performance of its borrowers, and (3) the role of JFC's information production. As for (1), JFC's lending behavior, we find (1-a) a statistically significant association between JFC's lending decision and a variety of variables including those from borrowers' financial statements, (1-b) JFC's counter-cyclical lending behavior to SMEs, and (1-c) a reduced emphasis on loans collateralized by real estate properties in recent years. As for (2), effects of JFC's lending, we find (2-a) its significant positive impact on borrowers' credit availability, capital investment, and employment, (2-b) occasional complementarities between JFC loans and loans provided by other financial institutions, and (2-c) no definitive evidence for its positive impact on the borrowers' ex-post performance including their profitability and the probabilities of having financial distress. As for (3), JFC's information production, we find evidence suggesting that JFC's internal credit ratings have sufficient power in identifying firms that are likely to survive and that the ratings are more informative than financial statement information.
    Date: 2014–09

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