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on Entrepreneurship |
| By: | Acs, Zoltan J. (London School of Economics); Estrin, Saul (London School of Economics); Mickiewicz, Tomasz (Aston University); Szerb, László (University of Pecs) |
| Abstract: | This paper introduces a new concept in addition to the traditional measures of stocks of capital, labor, human capital and knowledge, to understand the Solow Residual: National Entrepreneurial Ecosystem (NEE). The NEE construct is based on a methodology that combines institutions and human agency into an interdependent system, applying the configuration theory. We argue that NEE affects the efficiency by which inputs are turned into outputs shifting the production function. We use data from a representative global survey and institutional sources to test the model for a cross section of 62 counties over the period 2006-2010 to test this proposition. |
| Keywords: | growth, entrepreneurship, ecosystem, Solow residual, GEM |
| JEL: | L26 J24 P3 O33 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8652&r=ent |
| By: | Coad, Alex (Ratio); Frankish, Julian (Ratio); Roberts, Richard (Ratio); Storey, David (Ratio) |
| Abstract: | This paper links new firm survival with growth, with a focus on the patterns in firms' growth paths. We theorise a Gambler's Ruin framework by arguing that new rm performance is best modelled as a random walk process, but that survival is nonrandom and depends primarily on the stock of accumulated resources. A firm's resources are either there when the business begins or are generated by successful periods `wins'. The empirical section tracks, over six years, the sales and survival/non-survival of 6,247 UK start-ups which all began trading in the same quarter of 2004. We do not find strong evidence in favour of a taxonomy of growth paths, because we observe that every possible growth path seems to occur with roughly equal probability. However, we observe that growth paths influence subsequent survival. Controlling for lagged size, we observe that longer lags of growth, and even start-up size, have signicant eects on survival. |
| Keywords: | Growth paths; firm growth; firm survival; gambler’s ruin; start-up size |
| JEL: | L25 |
| Date: | 2014–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0204&r=ent |
| By: | Rafik Abdesselam (COACTIS, Université Lumière Lyon 2, France); Jean Bonnet (CREM UMR CNRS 6211, Université de Caen Basse-Normandie, UFR SEG (Sciences Economiques et Gestion), Normandie Université, France); Patricia Renou-Maissant (CREM UMR CNRS 6211, Université de Caen Basse-Normandie, UFR SEG (Sciences Economiques et Gestion), Normandie Université, France); Mathilde Aubry (EM Normandie, Métis Research Department, Caen, France) |
| Abstract: | The aim of this paper is to analyze entrepreneurial activity in OECD countries over the period 1999-2012 in order to make a distinction between economies that are more or less entrepreneurial. A combined use of multidimensional and evolutive data analysis methods is used with variables pertaining to entrepreneurial activity and growth. It allows us to distinguish several types of development. Furthermore, three main periods are found, before, during and after the crisis. The pre-crisis period, from 1999 to 2008, was a period of growth favorable to entrepreneurship while the sub-period 2010-2012 is less favorable. The effects of the financial crisis are noticeable after a delay in 2009. We show that in 2009, the agricultural economies have best withstood the financial crisis. Secondly, during the period 2010-2012 after the crisis, economies widely dependent on the financial sector were most impacted by the financial crisis. Because of the financial crisis, the entrepreneurial dynamics vary greatly across countries over the period 1999-2012, however we were able to establish common trajectories for a number of them. |
| Keywords: | Entrepreneurship, Data analysis methods, Entrepreneurial/Administrated economies |
| JEL: | L26 C38 O1 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:201416&r=ent |
| By: | Anyadike-Danes, Michael; Bjuggren, Carl-Magnus; Gottschalk, Sandra; Hölzl, Werner; Johansson, Dan; Maliranta, Mika; Myrann, Anja |
| 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,distributed micro-data analysis |
| JEL: | L25 L26 E24 M13 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14102&r=ent |
| By: | Arvid Raknerud; Mirjam van Praag (Statistics Norway) |
| Abstract: | Empirical studies show that the pecuniary returns to an individual's decision to switch from wage employment to entrepreneurship are low. We reconsider the pecuniary gains from this transition using a unified and flexible approach based on a mixed model with heterogeneous returns to entrepreneurship. Addressing the issue of self-selection, we analyze to what extent earlier findings are obscured by mixing individuals who become entrepreneurs without interesting wage alternatives with those who do have a realistic alternative opportunity. Our data set covers the whole Norwegian population of individuals matched to the entire population of firms established in the period 2002-- 2011, and includes extensive income and ownership share measures. The results indicate that the average return to entrepreneurship is significantly negative for individuals entering entrepreneurship through self-employment. Entrepreneurs who establish firms by injecting the minimum (or close to minimum) required amount of equity in an incorporated firm at start-up, have a significantly positive, but low return to entrepreneurship on average. Finally, persons who become entrepreneurs by establishing firms that are at least twice as large as the minimum requirement, increase their earnings by 10 percent on average by becoming entrepreneurs. We identify a significant positive selection by absolute advantage with regard to the choice of becoming an incorporated entrepreneur, but not with regard to self-employment. |
| Keywords: | Entrepreneurship; Returns to entrepreneurship; Earnings distribution; Matched personfirm data |
| JEL: | L26 C23 J31 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:789&r=ent |
| By: | Link, Albert (University of North Carolina at Greensboro, Department of Economics) |
| Abstract: | The origin of ideas is an important topic to be addressed by eminent disciplinary scholars, and then debated, and then debated, and then debated yet again. Even addressing the narrower topic of the origin of entrepreneurial or innovative ideas is a bold if not presumptuous undertaking. In this paper, which forms the basis of my keynote address, I set the stage with a brief summary statement about how two historical scholars viewed the source of ideas and then I move to a brief discussion about what academic researchers in the field of entrepreneurship and innovation know about sources that influence innovative behavior. In the final section, I present some inaugural findings from my own research in this area, or more accurately, the research on which I have just begun to embark. I conclude with a question: Why do scholars of entrepreneurship, innovation, and enterprise dynamics need to know about the sources of ideas that lead to new technology and innovation, and I offer a suggestive answer. |
| Keywords: | entrepreneurship; innovation; ideation; technology |
| JEL: | L26 O31 O32 |
| Date: | 2014–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:ris:uncgec:2014_009&r=ent |
| By: | Hardy, Daniel; Rodriguez-Pose, Andres |
| Abstract: | British regions are becoming increasingly culturally diverse, with migration as the main driver. Does this diversity benefit local economies? This research examines the impact of cultural diversity on the entrepreneurial performance of UK regions. We focus on two largely overlooked factors, the measurement of diversity, and the skills composition of diverse populations. First, more that demonstrating the importance of cultural diversity for entrepreneurship, we show that the type of cultural diversity measured is a decisive factor. Second, the skill composition of diverse populations is also key. Diversity amongst the ranks of the highly skilled exerts the strongest impact upon start-up intensities. The empirical investigation employs spatial regression techniques and carriers out several robustness checks, including instrumental variables specifications, to corroborate our findings. |
| Keywords: | cultural diversity; entrepreneurship; high-skilled migration; knowledge spillovers |
| JEL: | F22 J24 L26 M13 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10241&r=ent |
| By: | Oscarina Conceição (DINÂMIA-CET, University Institute of Lisbon, Lisbon, Portugal & Polytechnic Institute of Cavado and Ave); Ana Paula Faria (Universidade do Minho - NIPE) |
| Abstract: | Existing literature has shown that research-based spin-offs firms usually exhibit lower death risks than other start-ups. However, few studies have focused on the survival determinants of these particular firms. From a unique self-collected database of the population of research-based spin-offs created in Portugal from 1995 up to 2007 we analyze if founding conditions, parent organization characteristics and location characteristics play a role on their survival. Our results show that start-up size, firm age, parent reputation and region characteristics are key determinants of research-based spin-offs survival, casting doubts on the role played by the incubation process and the social ties with the parent organization as advanced in previous studies. |
| Keywords: | academic spin-offs; firm survival; duration analysis; group effects models |
| JEL: | L25 D22 O30 C41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:21/2014&r=ent |
| By: | Geurts, Karen; Van Biesebroeck, Johannes |
| Abstract: | Firm turnover and growth recorded in administrative data sets differ from underlying firm dynamics. By tracing the employment history of the workforce of new and disappearing administrative firm identifiers, we can accurately identify de novo entrants and true economic exits, even when firms change identifier, merge, or split-up. For a well-defined group of new firms entering the Belgian economy between 2004 and 2011, we find highly regular post-entry employment dynamics in spite of the volatile macroeconomic environment. Exit rates decrease with age and size. Surviving entrants record high employment growth that is monotonically decreasing with age in every size class. Most remarkably, we find that Gibrat’s law is violated for very young firms. Conditional on age, the relationship between employment growth and current size is strongly and robustly positive. This pattern is obscured, or even reversed, when administrative entrants and exits are taken at face value. De novo entrants’ contribution to job creation is relatively small and not very persistent, in particular for (the large majority of) new firms that enter with fewer than five employees. |
| Keywords: | employment growth; firm dynamics; Gibrat's law |
| JEL: | E24 L16 L25 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10118&r=ent |
| By: | Laerkholm Jensen, Thais; Leth-Petersen, Søren; Nanda, Ramana |
| 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. |
| Keywords: | credit constraints; entrepreneurship; household wealth; mortgage finance |
| JEL: | D14 D31 G21 L25 L26 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10260&r=ent |
| By: | Sara Bonesso (Dept. of Management, Università Ca' Foscari Venice); Fabrizio Gerli (Dept. of Management, Università Ca' Foscari Venice); Claudio Pizzi (Dept. of Economics, Università Ca' Foscari Venice); Laura Cortellazzo (Dept. of Management, Università Ca' Foscari Venice) |
| Abstract: | . |
| Keywords: | entrepreneurial intention; higher education; emotional, social and cognitive competencies; competency development |
| JEL: | M13 I23 L26 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:vnm:wpdman:97&r=ent |
| By: | Heike Delfmann |
| Abstract: | People have various motivations for becoming an entrepreneur. A common assumption is that entrepreneurs in deprived or remote regions are more likely to be motivated by necessity, as employment opportunities are limited and people have little to lose in starting their own business. However, demographic changes can also lead to restructuring or motivate people to start a social enterprise. A key step in gaining further insights into entrepreneurship in these areas is developing a better understanding of entrepreneurial motivations. Location decisions taken by firms would rationally include an assessment of regional conditions and developments, which raises the question: what motivates people to start a business in a rural, ageing region? And how do their motivations fit in the opportunity and necessity dimension? Rural Northumberland (UK) and rural Drenthe (NL) are both facing a declining workforce and are strongly ageing. By means of semi structured, face-to-face interviews with entrepreneurs in the two case study regions, the aim is to determine the impact of the regional context on start-up behaviour. In the Netherlands, all rural regions are relatively close to an urban centre in geographical terms and peripheral regions are well connected through infrastructure, providing them a fairly easy link to the urban centres. In England, we find more ?traditional' rural regions, more isolated with weaker links to urbanised areas. By comparing the two regions, which are quite similar on paper but very different on the urban ? rural relation, we assess to what extent the type of rurality affects the decision making process and start-up motivation. |
| Keywords: | ageing; rural; entrepreneurship; in-depth interviews; motivation |
| JEL: | M13 O18 R11 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p1333&r=ent |
| By: | Mehmet Akif Sag; Sami Guven Bilsel |
| Abstract: | The importance of entrepreneurship in a social structure results from the characteristics of entrepreneurs in determining the needs of a society and making investments in that area. Therefore, entrepreneurship is one of the most important factors of the progress for any social structure. On the entrepreneurship, the economics gives increasing importance to the characteristics of social structure. This situation has similar importance on the requirements of entrepreneurship. Two points should be considered in this context while analyzing entrepreneur behaviors. The first one is that entrepreneurship and entrepreneurs works with which social perception. The second one is that whether entrepreneurship and entrepreneurs use social environment they are in with different social groups. Beginning the transitional period from the industrial society to knowledge society in the world, the view of small enterprises can ensure competition efficiency and harmonization in especially social production area has become common. Therefore, ?small and medium enterprises' (SME) are started to be seen as enterprises that can accommodate changing conditions and fill demand gaps in the society quickly because of their dynamic structures. The importance of SMEs that involve great flexibility and productivity together at the international scale increases gradually. Thus, every country creates its own SME. Accordingly, this subject should be considered in terms of social culture since the SME-society relation involves originality for every society. Existing SME literature deals with SMEs independently from cultural structures of societies and considers them under the dominant economic theory. Thus, a standard SME and entrepreneur model approaching to all SMEs in all societies of the world with the same point of view occurs. Within the scope of the study, Turkey's process of social change was separated into mainly three terms starting from 1960 when the industrialization and urbanization rate increased. The effects of social structure characteristics of the terms on entrepreneurship are discussed. The discussion analyzes the policies of 9 different national development plans prepared by the governments and tried to be implemented in the terms between the years of 1963-2013 called as planned period and started at the same years in Turkey. This presentation is aimed at described the reflection of these policies, which are tried to be evaluated with social, economic, and spatial dimensions, on the local entrepreneur and local production spaces. |
| Keywords: | Entrepreneurship; SME; development; policy analysis; Turkey |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p1557&r=ent |
| By: | Beck, T.H.L. (Tilburg University, Center For Economic Research); Degryse, H.A. (Tilburg University, Center For Economic Research); de Haas, R. (Tilburg University, Center For Economic Research); van Horen, N. |
| Abstract: | Using a novel way to identify relationship and transaction banks, we study how banks’ lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms’ credit constraints at two contrasting points of the business cycle. We show that relationship lending alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe. |
| Keywords: | relationship banking; credit constraints; business cycle |
| JEL: | F36 G21 L26 O12 O16 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:29d22f6a-3971-4165-8d51-4e6a024793ae&r=ent |
| By: | Cavarretta, Fabrice (ESSEC Business School); Furr , Nathan (BYU (Brigham Young University) Marriott School of Management) |
| Abstract: | Boundedly rational managerial actors struggling to process information often use a limited set of “theories of action,” or simple rules. However, simple rules may have a hierarchical structure, with some simple rules guiding others. Assuming the existence of such “keystone rules,” we establish the complexity of determining an efficient set, and therefore the necessity of using meta-heuristic approaches. We explore the development of “keystone rules” among entrepreneurs as a genetic algorithm, where the computationally hard problem of picking rules is solved by social calculation. We find that the emergent keystone rules among the observed entrepreneurs do not match existing “scientific” theories but have particular epistemic properties. The identification of keystone rules could fill a theoretical gap between the rational decision and the social construction perspectives. |
| Keywords: | entrepreneurship; simple rules; theory; cognition; evolution |
| JEL: | L26 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:essewp:dr-14015&r=ent |
| By: | Toole, Andrew A.; Czarnitzki, Dirk; Rammer, Christian |
| Abstract: | This paper examines how university research alliances and other cooperative links with universities contribute to startup employment growth. We argue that 'scientific absorptive capacity' at the startup is critical for reaping the benefits from university research alliances, but not necessarily for other university connections. We also estimate the aggregate employment contribution from startup firms and attribute those employment gains to university research alliances and other university connections. We find significant contributions to employment growth from university research alliances and other university connections, but scientific absorptive capacity is critical for university research alliances. Only 7% of the startup population maintained a university research alliance, but among these firms, 3.4% of their total jobs created were attributable to their alliances. These results suggest university connections are quite important for job growth and university research alliances contributed substantially to job creation for those firms that had such alliances. |
| Keywords: | Academic Entrepreneurship,Startups,Firm performance,Technology Transfer,University Spinoff Policy,Human Capital |
| JEL: | L25 L26 J24 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14094&r=ent |
| By: | Rui Baptista; Carla Costa |
| Abstract: | The success of ?entrepreneurial clusters' has led policymakers towards extensive efforts to seed local entrepreneurship. A particularly important determinant of the ?supply of entrepreneurs' are industry linkages within cities or regions. Indeed, studies consistently find that the most powerful predictor of future entrepreneurship for a city or region is the presence and strength of incumbent firms in the same or in related industries. This study examines how co-agglomeration (or collocation) of entrepreneurial firms in related industries influences cluster growth. Two types of effects are considered that may drive collocation: the inheritance of capabilities from local incumbents by spinout founders; and agglomeration benefits stemming from local access to supply-side spillovers. These effects are examined for the Portuguese molds and plastics industries. If agglomeration economies explain industry collocation, one would expect firms from related industries to collocate in the agglomerated region. Firms locating in the agglomerated region should perform better than firms located elsewhere, independently of their background. If heritage is the main force behind collocation, then spinouts will locate close to parent firms regardless of their region of origin. Spinouts from parent firms in the same or a related industry perform better than other startups. Our methodology is twofold. We first present a historical account of the evolution of the Portuguese molds and plastics industries, focusing on the location and genealogy of firms. Second, we conduct an econometric analysis of detailed data on firms, founders, and workers in the Portuguese molds and plastics industries covering the period 1986-2009. In order to test the predictions derived from agglomeration and organizational heritage theories, two main types of models are estimated, regarding: I. the probability of firms in molds and plastics industries cross-spawning entrants in those industries; II. the determinants of the performance of entrants, according to their geographical origin and founder background (i.e. spinouts vs. independent startups), using survival and sales growth models. Results suggest that the transmission of capabilities from parent firms to spinouts locating in the same region is the foremost driver of collocation and performance for the molds and plastic injection industries. The presence of the plastics industry has a positive impact on the molds industry but not the inverse, implying that while collocation with molds is not a requirement for the plastics industry to flourish, collocation with plastics is important for the molds industry. |
| Keywords: | Clusters; Spinouts; Regional development; Agglomeration Economies; Organizational Heritage |
| JEL: | L26 M13 R30 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p475&r=ent |
| By: | Jan de Kok; Tommy Span |
| Abstract: | In this study we examine whether the ageing of the Dutch labour force has had an effect on entrepreneurship rates in the recent past, and if it is likely to have an effect in the future. Because we only have data on a relatively short period of time (2001 – 2009), we focus on variation between regions instead of variation across time. The first two research questions of this study are therefore: to which extent are regional differences in business ownership rates and in start-up rates related to regional differences in the age composition of the workforce? To answer these questions, we have applied a shift-share analysis on available data on the age composition of the labour force and entrepreneurship rates for 12 Dutch provinces for the years 2001 - 2009. We find that there is indeed an age composition effect: regional deviations from the national age structure of the labour force can partly account for regional deviations from the national entrepreneurship rates. This applies for business ownership rates as well as start-up rates. The size of this age composition effect is however not very large. By combining these identified age composition effects with expected changes of the age structure of the Dutch workforce (between 2010 and 2060), we have been able to answer the third and final research question of this study, to which extent the ageing of the workforce would affect entrepreneurship rates at national level. Our results show that there is hardly any effect to be expected. This lack of impact may be due to the combination of different factors. First of all, the identified age composition effects are not very large. Secondly, the expected changes in the shares of the different age groups may not be large enough to cause large changes in the entrepreneurship rates. Finally, the changes that do occur for different age groups may counteract each other. |
| Date: | 2014–11–27 |
| URL: | http://d.repec.org/n?u=RePEc:eim:papers:h201409&r=ent |
| By: | Artur Raimundo Dias (Faculdade de Economia do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC TEC; OBEGEF) |
| Abstract: | The aim of the present study is to contribute to the empirical literature on the consequences of Business Failure (BF), resorting to qualitative methods in order to better understand the aftermath of BF. Semi-structured interviews were used in order to collect data, which were later transcribed and analyzed using Interpretative Phenomenological Analysis. Evidence gathered based on the experience of six entrepreneurs (three from the north of Europe and three from the south) showed that previous failure impacted individuals strongly. Such an impact appears to be shaped by the individual’s experience and age, and their perception of blame for the failure. However, for these particular individuals, it does not seem to be affected by the size of the project or the amount of financial loss. An array of moderator costs was identified, ranging from antecedents to institutions that were present in the individual’s lives. The outcomes are directly relatable to the failed experience by the individual. It was also found that the failure had a significant effect on the individual’s career path. |
| Keywords: | business failure, consequences; interpretative phenomenological analysis; learning from failure |
| JEL: | G33 L26 M21 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:550&r=ent |
| By: | Andrea Bellucci; Luca Pennacchio |
| Abstract: | In recent decades firms have intensified the exploration of external sources of knowledge to enhance their innovation capabilities. This paper presents an empirical analysis of the factors that affect the importance of academic knowledge for firms’ innovative activities. An integrated approach that simultaneously considers country-level and firm-level factors is adopted. Regarding the former factors, the analysis shows that the entrepreneurial orientation of university and the quality of academic research increase the importance of knowledge transfers from universities to firms. This suggests that the environmental and institutional context contribute to explain cross-national disparities in university-industry interactions and in the effectiveness of knowledge transfer. In regard to the latter factors, the results indicate that firms oriented toward open search strategies and radical innovations are more likely to draw knowledge from universities. Furthermore, firms belonging to high technology sectors and firms with high absorptive capacity place greater value on the various links with universities. With respect to firm size the estimates show an inverted U-shaped relation with the importance of universities as a source of knowledge. However, the greatest benefits from interacting with universities are achieved by small and young research-active firms. |
| Keywords: | Innovation, industry-university links, knowledge transfer, university entrepreneurial orientation |
| JEL: | O32 O33 L20 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iaw:iawdip:113&r=ent |
| By: | Dmitry Pokrovsky; Kristian Behrens |
| Abstract: | We develop a model of a city populated by heterogeneous agents. Agents self-select into entrepreneurship, and entrepreneurs set up firms which hire workers. We characterize the equilibrium matching between firms and workers, as well as the within-city assignment of agents to locations. We then explore the implications of city size and the characteristics of the underlying skill distribution for selection into entrepreneurship, rent gradients, and city-wide inequality in disposable incomes. Agents self-select into occupations based on their earnings, we assume that highly productive agents have a comparative advantage in entrepreneurship, so that there exists some endogenously determined unique cutoff that separates workers from entrepreneurs. Workers are hired by entrepreneurs and are paid a match-specific wage, whereas entrepreneurs are the residual claimants to their firms' profits. All agents live in a linear city that stretches out on the finite interval. Both workers and entrepreneurs commute to the central business district (CBD) for work. Commuting entails costs, which we model parimoniously using an `iceberg' specification. In our model, agents differ by income. A commuting costs are paid as a fraction of income, it follows that richer agents will want to locate closer to the CBD to minimize their costs. We thus have to find the spatial distribution of agents in the city- the mapping of agent's talent to city locations, such that every agent picks his preferred location. We look at the case with a fixed lot size assumption: maximizing utility is equivalent to maximizing disposable income - income net of land rent and commuting costs. First, we will derive the comparative statics of the equilibrium variables with respect to exogenous parameters of the model like total population, commuting costs, and various moments of the talent distribution of the population. We expect that reducing commuting costs will lead to an increase in the density in a city, and that it will increase the share of entrepreneurs in the city. A larger share of entrepreneurs leads to tougher selection, which should magnify income inequality in the city. We have no a'priori intuition for the direction of change in "real" income inequality. Furthermore, a distribution of talent that is more skewed towards highly talented workers should increase the steepness of the rent gradient towards the city center. The reason is that more productive agents live closer to the center and compete for land there, and that a larger mass of highly talented agents will increase competition for land towards the center. Depending on how fast land prices go up for the rich compared to land prices for the poor, "real" income inequality may a'priori rise or fall as the distribution of talent gets more unequal within the city. |
| JEL: | D31 D43 L11 L13 L26 R14 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p997&r=ent |