nep-ent New Economics Papers
on Entrepreneurship
Issue of 2014‒12‒13
ten papers chosen by
Marcus Dejardin
Université de Namur

  1. Do Entrepreneurs Really Earn Less? By Alina Sorgner; Michael Fritsch; Alexander Kritikos
  2. Do women earn less even as social entrepreneurs? By ESTRIN, Saul; STEPHAN, Ute; VUJIC, Suncica
  3. Housing Collateral, Credit Constraints and Entrepreneurship - Evidence from a Mortgage Reform By Thais Lærkholm Jensen; Søren Leth-Petersen; Ramana Nanda
  4. By Choice and by Necessity: Entrepreneurship and Self-Employment in the Developing World By David Margolis
  5. Direct and Indirect Effects of Cash Transfers on Entrepreneurship By Ribas, Rafael P.
  7. An Explanation of Economic Change and Development By Fusari, Angelo
  8. PIS AS BOUNDARY SPANNERS, SCIENCE AND MARKET SHAPERS By Vincent Mangematin; Paul O'reilly; James Cunningham
  9. In Search of Labor Demand By Paul Beaudry; David A. Green; Benjamin M. Sand
  10. Emerging industries! By Jeroen de Jong

  1. By: Alina Sorgner; Michael Fritsch; Alexander Kritikos
    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
  2. By: ESTRIN, Saul; STEPHAN, Ute; VUJIC, Suncica
    Abstract: Based upon unique survey data collected using respondent driven sampling methods, we investigate whether there is a gender pay gap among social entrepreneurs in the UK. We find that women as social entrepreneurs earn 29% less than their male colleagues, above the average UK gender pay gap of 19%. We estimate the adjusted pay gap to be about 23% after controlling for a range of demographic, human capital and job characteristics, as well as personal preferences and values. These differences are hard to explain by discrimination since these CEOs set their own pay. Income may not be the only aim in an entrepreneurial career, so we also look at job satisfaction to proxy for non-monetary returns. We find female social entrepreneurs to be more satisfied with their job as a CEO of a social enterprise than their male counterparts. This result holds even when we control for the salary generated through the social enterprise. Our results extend research in labour economics on the gender pay gap as well as entrepreneurship research on women’s entrepreneurship to the novel context of social enterprise. It provides the first evidence for a “contented female social entrepreneur” paradox.
    Keywords: Social entrepreneur, Gender pay gap, Social enterprise, Earnings, Job satisfaction
    JEL: J28 J31 J71 L32
    Date: 2014–11
  3. By: Thais Lærkholm Jensen; Søren Leth-Petersen; Ramana Nanda
    Abstract: We study how a mortgage reform that exogenously increased access to credit had an impact on entrepreneurship, using individual-level micro data from Denmark. The reform allows us to disentangle the role of credit access from wealth effects that typically confound analyses of the collateral channel. We find that a $30,000 increase in credit availability led to a 12 basis point increase in entrepreneurship, equivalent to a 4% increase in the number of entrepreneurs. New entrants were more likely to start businesses in sectors where they had no prior experience, and were more likely to fail than those who did not benefit from the reform. Our results provide evidence that credit constraints do affect entrepreneurship, but that the overall magnitudes are small. Moreover, the marginal individuals selecting into entrepreneurship when constraints are relaxed may well be starting businesses that are of lower quality than the average existing businesses, leading to an increase in churning entry that does not translate into a sustained increase in the overall level of entrepreneurship.
    JEL: D14 D31 G21 G28 L26
    Date: 2014–10
  4. By: David Margolis (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, Paris School of Economics - Université Paris I - Panthéon-Sorbonne, IZA - Institute for the Study of Labor)
    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
    Date: 2014–06
  5. By: Ribas, Rafael P.
    Abstract: This paper exploits a liquidity shock from a large-scale welfare program in Brazil to investigate the importance of credit constraints and informal financial assistance in explaining entrepreneurship. Previous research focuses exclusively on how liquidity shocks change recipients’ behavior through direct effects on reducing financial constraints. However, the shock may also produce spillovers from recipients to others through private transfers and thereby indirectly affect decisions to be an entrepreneur. This paper presents a method for decomposing the liquidity shock into direct effects associated with relieving financial constraints, and indirect effects associated with spillovers to other individuals. Results suggest that the program, which assists 20 percent of Brazilian households, has increased the number of small entrepreneurs by 10 percent. However, this increase is almost entirely driven by the indirect effect, which is related to an increase in private transfers among poor households. Thus the creation of small businesses seems to be more responsive to the opportunity cost of mutual assistance between households than to financial constraints.
    Keywords: Entrepreneurship, Financial Constraints, Informal Financing, Risk-Sharing, Cash Transfer, Indirect Effect, Consumer/Household Economics, Financial Economics, Labor and Human Capital, Public Economics, Research Methods/ Statistical Methods, C21, H31, I38, J24, L26,
    Date: 2014
  6. By: Christophe Bonnet (GDF - Gestion, Droit et Finance - Grenoble École de Management (GEM)); Peter Wirtz (Centre de Recherche Magellan - Institut d'Administration des Entreprises (IAE) - Lyon - Université Jean Moulin - Lyon III : EA3713); Martine Séville (COACTIS - Université Lumière - Lyon II : EA4161 - Université Jean Monnet - Saint-Etienne)
    Abstract: This research is an attempt to make progress in the understanding of the process of board formation and its impact on the functions performed by the board in young entrepreneurial ventures. We study the link between board members' characteristics and the effective accomplishment of monitoring and resource provision functions. Expanding earlier research we argue that the identity of external financiers matters in configuring the board and designing its working mode and roles. This is because different investors (1) may be endowed with different skills and knowledge, and (2) their social identities influence the motivation to accomplish different roles. We present a conceptual framework of the process of board formation in entrepreneurial firms and confront it with an in-depth longitudinal case study of a young venture that has received funding from business angels and venture capitalists. We show that board composition and routines are co-constructed by different (but not all) salient stakeholders who were involved in the first input of external capital. The intended and actual role of the board members depends on their specific capabilities and financial stakes and on processes of social identification. The observation of evolving board routines shows that certain members participate in two parallel processes of interaction with the entrepreneurs. Formal board meetings essentially serve the purpose of regular monitoring, whereas certain board members contribute to resource provision in parallel informal interactions, when they strongly identify themselves with entrepreneurs.
    Keywords: Nascent governance; board of directors; entrepreneurial finance; social identification
    Date: 2013–06–05
  7. By: Fusari, Angelo
    Abstract: The contribution to the explanation of economic change that this paper sets out is centered on a core of interconnected endogenous variables, mainly innovation, radical uncertainty and entrepreneurship, which current economic analyses consider only in part and separately, sometimes as endogenous but for the most as exogenous. The article (and the formalized model) suppose that the functioning of the economy is not disturbed by the operation of pathological factors mainly concerning public sector, as largely happens in current time, for instance: excessive public debt and public deficit; great inefficiencies and wastes in public sector and administration, and hence high taxation; inefficiencies, slowness and arbitrariness of judicial power; diffused organized criminality; financial capital operating, mainly at the international level, as master instead of servant of production, that is, largely devoted to speculation. A proper and efficient operation of the economy needs that those anomalies are absent. We attempt to explain economic change and development with regard to modern dynamic economies where the above pathologies have been removed. This supposition would be strengthened by the reduction of the model to only ‘necessary’ variables, as devised in sub-section 3.1.2 The theoretical frame of the proposed explanation is a dynamic competitive process: that is, a competition based not merely on prices but also put into action by entrepreneurs’ search for opportunities of profit attached to successful innovations, which generate profits through temporary monopolies and also engender disequilibria and radical uncertainty that will provide additional opportunities of profit. This dynamic competitive process is a great agent of economic change and evolutionary motion. As a first stage approximation, it can be thought of as a combination of Schumpeterian innovative entrepreneurship and action with the neo-Austrian market process and entrepreneurship: a combination describing the advent of innovations and the subsequent adaptive push enacted by the imitative diffusion of innovations and the search for other opportunities of profit allowed by rising disequilibria and uncertainty; a push that leads towards the reduction of the inconsistencies and radical uncertainty caused by innovation and (hence) towards a reorganization and re-equilibration of the economy on new structural bases. The understanding of the process of change and development is greatly obscured by the current separation of the two theoretical perspectives above. But it must be added that the explanation of such processes requires more than the simple combination of the two perspectives. In particular, it is essential that the notion of radical uncertainty – of which the Schumpeterian theory of economic development gives no explicit importance – is deepened. For its part, the neo-Austrian analysis of the market process, while attributing a great importance to radical uncertainty, thinks of it simply as a fog, an exogenous variable. We shall see that the explanation and measurement of radical uncertainty is a crucial – albeit very controversial and delicate – element of the understanding of the process of economic change and development. Moreover, we shall underline that the two theoretical perspectives (Schumpeterian and neo-Austrian) lack an adequate explanatory analysis of both the main agent of the whole process, that is, entrepreneurship (mainly its availability) and innovations. 1 It must be underlined that the notion of profit relevant with regard to the envisaged dynamic competition process does not include interest on the employed capital; it concerns only true profits, the so-called extra-profits resulting from entrepreneurial gains from successful innovations and the profit opportunities attached to the consequent disequilibria and uncertain perspectives. The ratio between those profits and the capital employed, expressed as the profit rate, is relevant mainly in that it is the only reliable indicator of the degree of success of an entrepreneur’s decision making, primarily in introducing innovations and meeting disequilibria and uncertainty. However, here we are not interested in the distribution of profits, that is, whether profit takes on a capitalist nature or is yielded by public or self-managed firms, etc. Such distributive characteristics express simply a choice of civilization, which is incidental to the mere question of economic change and development. Our model is not limited to the explanation of the core variables (that is, various kinds of innovation, such as radical and incremental process innovations and innovations of product, the demand and supply of entrepreneurship, and radical uncertainty) crucial in the representation of the whole process of change and the inherent disequilibrating and re-equilibrating evolutionary motion. The specified model also includes (and explains) other important variables such as output, employment, investment, prices, and wages. It refers to the maximum level of sectoral disaggregation, a sector for each specific good, and describes long waves. A specification with a restricted number of sectors is used for simulations. The structure of the paper is as follows: Section 1 concerns the introduction, while a second section is dedicated to a literary presentation of the theoretical construction, concerned mainly with the main variables enacting dynamic competition (entrepreneurship, radical uncertainty, innovation, profit) and long waves. A third section presents the formal specification of the model. This section is divided into five blocks. Block 1 concerns the explanation of radical process innovations and the advent of new products (that occur as soon as their explanatory functions reach some specified trigger values) and incremental innovations, while some Gamma distributions describe the diffusion of the radical process innovations across the economy, that is, the adaptive process following the innovative breakthroughs. Block 2 includes the equations explaining uncertainty, the availability of entrepreneurship, its demand and hence the excess of entrepreneurial skills. Block 3, which includes the equations of prices, wages and profits, has a conventional content, with the exception of some explanations of mark up and the definition of the rate of true profit, which excludes interests on capital. Block 4 concerns consumption and, in particular, the diffusion of new goods. Block 5 concerns capital and investment. A fourth section presents three simulations of the model that suppose different degrees of intensity of dynamic competition. A final section exposes some reference to a previous micro-specification of the model at the level of the firm. 2.
    Keywords: Development and growth,technological change, Innovations and their diffusion, economic evolution
    JEL: O1 O11 O30 O33
    Date: 2014
  8. By: Vincent Mangematin (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Paul O'reilly (College of Business - Dublin Institute of Technology); James Cunningham (Whitaker Institute for Innovation and Societal Change - J.E. Cairnes School of Business and Economic)
    Abstract: The research program organization has been generalized to implement research policies in OECD countries. Principal investigators are the linchpin of the program based organization as they are developing research project to fit within programs. However, principal investigators are not only project managers but they also enact their environment, shape organization, heterogenous networks, research avenues, research communities and transepistemic arenas. Principal investigators are not only researchers they are also boundary spanners amongst academic and private sectors and amongst subfields and disciplines. Principal investigators, especially serial Principal investigators act as scientific entrepreneurs who enact their environment. It questions the relationship between Principal investigators and their organization. It also questions the efficiency and effectiveness of program based research policy.
    Keywords: Scientific entrepreneurs. Principal investigators. enactment. research avenues
    Date: 2014
  9. By: Paul Beaudry; David A. Green; Benjamin M. Sand
    Abstract: We propose and estimate a novel specification of the labor demand curve incorporating search frictions and the role of entrepreneurs in new firm creation. Using city-industry variation over four decades, we estimate the employment - wage elasticity to be -1 at the industry-city level and -0.3 at the city level. We show that the difference between these estimates likely reflects the congestion externalities predicted by the search literature. Also, holding wages constant, an increase in the local population is associated with a proportional increase in employment. These results provide indirect information about the elasticity of job creation to changes in profits.
    JEL: J23
    Date: 2014–10
  10. By: Jeroen de Jong
    Abstract: To-the-point industry information is generally hard to get,  especially when it concerns new and emerging industries which are not covered by existing statistics - while simultaneously these industries are important for employment growth and general welfare. To fill this void, Panteia joined forces with RSM Erasmus University. In a collaborative effort with 62 master students of the 2014-2015 cohort in Strategic Entrepreneurship a challenge was launched in which teams of students mapped a range of emerging industries. Each team conducted a desk-research, literature review and a range of in-depth interviews with incumbent entrepreneurs. Their best reports can be found here. 
    Date: 2014–11–11

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