nep-ent New Economics Papers
on Entrepreneurship
Issue of 2014‒12‒03
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. Do entrepreneurs really earn less? By Alina Sorgner; Michael Fritsch; Alexander Kritikos
  2. Demographics and Entrepreneurship By James Liang; Hui Wang; Edward P. Lazear
  3. County Fiscal Policy and Entrepreneurship: The Impact of Occupational License Taxes on Business Startups By Burney, Shaheer; Allen, James E. IV; Davis, Alison F.
  4. Entrepreneurship and Business Groups: An Evolutionary Perspective on the Growth of the Koç Group in Turkey By Asli M. Colpan; Geoffrey G. Jones
  5. On the misery of losing self-employment By Hetschko, Clemens
  6. Financing Innovation By William R. Kerr; Ramana Nanda
  7. An Analysis of the Macroeconomic Conditions Required for SME Lending: The Case of Turkey By Hatice Jenkins; Monir Hussain
  8. How do business practices affect micro and small firms’ performance in a low-income economy? An analysis using dynamic panel data By Trinh, Long; Sonobe, Tetsushi
  9. Entrepreneurship, knowledge, and the industrial revolution By Attar, M. Aykut
  11. Das Zukunftspanel Mittelstand: Eine Expertenbefragung zu den Herausforderungen des Mittelstands By Welter, Friederike; May-Strobl, Eva; Schlömer-Laufen, Nadine; Kranzusch, Peter; Ettl, Kerstin

  1. By: Alina Sorgner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Alexander Kritikos (DIW, Berlin)
    Abstract: Based on representative micro data for Germany, we compare the incomes of self-employed with those of wage workers. Our results show that the median self-employed entrepreneur with employees earns significantly more than the median salaried employee, while the median solo entrepreneur earns less. However, solo entrepreneurship pays for those with a university entrance degree but no further professional qualification as well as for those who were in the upper percentiles of the income distribution in their previous salaried job. Surprisingly, the variation in hourly incomes of solo entrepreneurs is higher than that of entrepreneurs with employees.
    Keywords: Income, Entrepreneurship, Self-Employment, Start-ups, Germany
    JEL: L26 D22
    Date: 2014–11–11
  2. By: James Liang; Hui Wang; Edward P. Lazear
    Abstract: Entrepreneurship requires creativity and business acumen. Creativity may decline with age, but business skills increase with experience in high level positions. Having too many older workers in society slows entrepreneurship. Not only are older workers less innovative, but more significant is that when older workers occupy key positions they block younger workers from acquiring business skills. A formal theoretical structure is presented and tested using the Global Entrepreneurship Monitor data. The results imply that a one-standard deviation decrease in the median age of a country increases the rate of new business formation by 2.5 percentage points, which is about forty percent of the mean rate. Furthermore, older societies have lower rates of entrepreneurship at every age.
    JEL: J11 L26 M51
    Date: 2014–09
  3. By: Burney, Shaheer; Allen, James E. IV; Davis, Alison F.
    Abstract: In this paper, we create a model of business startup decisions by utility maximizing individuals to determine the impact of county occupational license taxes on business startups. We utilize a unique dataset generated by the Kentucky Entrepreneurship Survey which allows us to observe personal traits of entrepreneurs, each year a startup was established, and the entrepreneurs’ perception of the entrepreneurial culture of each county. Controlling for relevant factors, we find that county-level occupational license taxes do not significantly impact the decision of entrepreneurs to start a business. We do, however, find strong evidence that other factors such as community culture influence startup decisions.
    Keywords: occupational license tax, entrepreneurship, startup, business, fiscal policy, county, local government, Kentucky, Community/Rural/Urban Development, Public Economics,
    Date: 2014
  4. By: Asli M. Colpan (Kyoto University, Graduate School of Management); Geoffrey G. Jones (Harvard Business School, General Management Unit)
    Abstract: This working paper examines the origins and development of the Koç Group, which grew to be the largest business group in Turkey. This enterprise was an important actor in the emergence of modern business enterprise in the new state of the Republic of Turkey from the 1920s. After World War II it diversified rapidly, forming part of a cluster of business groups which dominated the Turkish economy alongside state-owned firms. This study shows how the founder of the Group, Vehbi Koç, formulated his business model, and analyzes how his firm evolved into a diversified business group. The research supports prevailing explanations of business groups which identify the role of institutional voids, government policies and contact capabilities, but it also builds on and extends earlier suggestions in both the management and business history literatures that entrepreneurship needs incorporating more strongly as an explanatory factor. This working paper argues that Koç acted as both a Kirznerian and Schumpeterian entrepreneur to build his business group, both in its formative stages and later in its subsequent growth into a diversified group.
    Keywords: business groups, Turkey, Entrepreneurship in emerging markets.
    Date: 2014–11
  5. By: Hetschko, Clemens
    Abstract: German panel data is used to show that the decrease in life satisfaction caused by an increase in the probability of losing work is higher when self-employed than when paid employed. Further estimations reveal that becoming unemployed reduces self-employed workers´ satisfaction considerably more than salaried workers´ satisfaction. These results indicate that losing self-employment is an even more harmful life event than losing dependent employment. Monetary and non-monetary reasons seem to account for the difference between the two types of work. Moreover, it originates from the process of losing self-employment and the consequences of unemployment rather than from advantages of self-employment.
    Keywords: life satisfaction,self-employment,probability of losing work,unemployment
    JEL: I31 J24 J65 L26
    Date: 2014
  6. By: William R. Kerr; Ramana Nanda
    Abstract: We review the recent literature on the financing of innovation, inclusive of large companies and new startups. This research strand has been very active over the past five years, generating important new findings, questioning some long-held beliefs, and creating its own puzzles. Our review outlines the growing body of work that documents a role for debt financing related to innovation. We highlight the new literature on learning and experimentation across multi-stage innovation projects and how this impacts optimal financing design. We further highlight the strong interaction between financing choices for innovation and changing external conditions, especially reduced experimentation costs.
    JEL: G21 G24 L26 M13 O31 O32
    Date: 2014–11
  7. By: Hatice Jenkins (Department of Banking and Finance, Eastern Mediterranean University, North Cyprus); Monir Hussain (Department of Banking and Finance, Eastern Mediterranean University, North Cyprus)
    Abstract: Providing SMEs with access to external finance has been a major concern for many governments and international organizations for three decades. In recent years the experiences of emerging market countries suggest that a paradigm shift is taking place in SME finance. Particularly in fast-growing emerging market countries, banks are increasingly targeting SMEs as a new line of banking business. This research analyzes how the macroeconomic factors have contributed to the increased commercial bank lending to SMEs in Turkey, a fast-growing emerging market country. Based on an econometric analysis it is found that a high GDP growth rate and increasing competition in the Turkish banking sector have contributed to the growing banking sector credit to SMEs. The findings also reveal that curbing the high inflation rate and reducing government domestic borrowings have significantly helped to encourage bank lending to the SME segment. This research contributes to the literature by providing empirical evidence to much-discussed theoretical arguments on the characteristics of an enabling macroeconomic environment for SME finance.
    Keywords: SME lending, macroeconomics, banking sector, emerging markets, access to credit
    JEL: G21 G28 O12
    Date: 2014–06
  8. By: Trinh, Long; Sonobe, Tetsushi
    Abstract: There has been an increasing interest among economists in the impact of management practices on firm’s productivity. This paper explores how business practices affect firm productivity by using Vietnam’s bi-annual surveys of small firms conducted from 2006 to 2011. We constructed a simple weighted business practice index from 8 indicators. This index is simple but rather suitable for small and medium firms in developing countries. To examine the role of business practices in determining firm performance, production function and determinants of business practice adoption are estimated using the GMM-system method, which allows us to control for the endogeneity of production input, business practices index, and other factors. The results indicate that business practice index has a positive and statistically significant impact on firm productivity, employment and sales growth. As business practice index increases by 1 standard deviation (e.g. by 0.194 points over 1 and 0.173 points), the firm's value added increases by 19.1% to 24.0%. There is no evidence that the education level of the business owners/managers, percentage of employees with college degree on firm productivity. The results suggest that education may have indirect effects on productivity through business practice index. The effect of business practice on firm performance is found to vary across different sub-samples.. Both direct and indirect effects of competition lose their significance when we separately estimate production functions for each group of firms. We also find that for whole sample and for sole proprietorship businesses, the adoption of business practice in last period have a positive and statistically significant effects on the adoption of business practice in this period. However, total factor productivity (estimated from production function without business practice index) in the previous period does not have a strong impact on a firm’s adoption of business practice in this period while previous revenue and value added have a statistically significant impact.
    Keywords: business practice, dynamic panel data, productivity growth, small medium enterprises, microenterprise, Vietnam, Industrial Organization, Production Economics, Productivity Analysis,
    Date: 2014–05
  9. By: Attar, M. Aykut
    Abstract: This paper constructs a two-sector unified growth model that explains the timing and the inevitability of an industrial revolution through entrepreneurs' role for the accumulation of useful knowledge. While learning-by-doing in agriculture eventually allows the preindustrial economy to leave its Malthusian trap, an industrial revolution is delayed as entrepreneurs of the manufacturing sector do not attempt invention if not much is known about natural phenomena. On the other hand, these entrepreneurs, as managers, serendipitously identify new useful discoveries in all times, and an industrial revolution inevitably starts at some time. The industrial revolution leads the economy to modern growth, the share of the agricultural sector declines, and the demographic transition is completed with a stabilizing level of population in the very long run. Several factors affect the timing of the industrial revolution in expected directions, but some factors that affect the optimal choice of fertility have ambiguous effects. The analysis almost completely characterizes the equilibrium path from ancient times to the infinite future, and the model economy successfully captures the qualitative aspects of the unified growth experience of England.
    Keywords: unified growth theory,useful knowledge,industrial enlightenment,demographic transition,endogenous technological change
    JEL: O31 O33 O41 J13 N33
    Date: 2014
  10. By: Hohler, Julia; Kuhl, Rainer
    Abstract: The Agribusiness is in flux: a shrinking number of up- and downstream corporations questions traditional equilibrium concepts. How will the population of firms develop and which consequences will arise for competition? In 1931, Gibrat stated the firm size and a firm’s growth rate to be independent. Testing the validity of Gibrat’s law for the German Agribusiness allows drawing conclusions on future developments of concentration. By investigating 551 manufacturing downstream enterprises, we reject Gibrat’s law and find small firms to grow stronger than bigger firms in relation to their initial size. Consequently, the sector could reach a steady state in concentration.
    Keywords: Agribusiness, structural change, empirical growth., Agribusiness,
    Date: 2014–09
  11. By: Welter, Friederike; May-Strobl, Eva; Schlömer-Laufen, Nadine; Kranzusch, Peter; Ettl, Kerstin
    Abstract: Demografischer Wandel, Globalisierung, Rohstoffknappheit, Klimawandel sowie eine sich beschleunigende technologische Entwicklung stellen die mittelständische Wirtschaft vor (neue) Herausforderungen. Eine Identifikation und Bewertung aktuell anstehender und zukünftiger Herausforderungen wurde mithilfe des neu aufgelegten Zukunftspanels Mittelstand, einer internetbasierten Expertenbefragung aus Mittelstandspolitik, Wirtschaft und Mittelstandsforschung, vorgenommen. In dieser ersten Runde des Zukunftspanels Mittelstand wurden 58 Themen identifiziert, die sich 8 Handlungsfeldern zuordnen lassen. Die Ergebnis-se helfen bei der Erarbeitung zukünftiger Schwerpunktthemen für die Mittelstandspolitik und Mittelstandsforschung.
    Abstract: Changing demographics, globalization, scarcity of resources, climate change and dynamic technology and innovation will affect small and medium sized enterprises in Germany (Mittelstand companies). In order to identify and evaluate actual challenges and upcoming topics an internet-based survey of experts which comprised representatives of politics, business and academia - the so called IfM Bonn Future Panel on SMEs - was conducted. In this first round of survey we found 58 topics which were attributed to 8 action fields. The findings will help to elaborate future key topics for SME policy makers and SME research.
    Keywords: Mittelstand,Mittelstandsforschung,Mittelstandspolitische Herausforderungen und Trends,SMEs,research on SMEs,challenges and upcoming topics for SMEs and SME politics in Germany
    JEL: L20 L26
    Date: 2014

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