nep-ent New Economics Papers
on Entrepreneurship
Issue of 2015‒01‒26
eighteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Invisible Women: Entrepreneurship, Innovation and Family Firms in France during Early Industrialization By B. Zorina Khan
  2. Cyclical Reallocation of Workers Across Large and Small Employers By Henry Hyatt; Erika McEntarfer; John Haltiwanger
  3. An Innovation Policy Framework: Bridging the Gap between Industrial Dynamics and Growth By Braunerhjelm, Pontus; Henrekson, Magnus
  4. Persistence of various types of innovation analysed and explained By Karlsson, Charlie; Tavssoli, Sam
  5. SMEs, financial constraints and growth By Ryan Banerjee
  6. Entrepreneurship and the allocation of government spending under imperfect markets By Islam, Asif
  7. Subsistence Entrepreneurs and Misallocation By Kevin Donovan
  8. Does Broadband Matter for Rural Entrepreneurs or ‘Creative Class’ Employees? By Conley, Kelsey; Whitacre, Brian
  9. Is white-collar crime a form of entrepreneurship? By José Neves Cruz;
  10. Peculiarities of emerging rural entrepreneurship in a post-socialist economy By Möllers, Judith; Traikova, Diana; Buchenrieder, Gertrud
  11. Does agglomeration matter everywhere?: new firm location decisions in rural and urban markets By Artz, Georgeanne M.; Kim, Younjun; Orazem, Peter
  12. Bribing culture and rural start-up plans in transition: evidence from Bulgaria By Traikova, Diana; Manolova, Tatiana; Möllers, Judith; Buchenrieder, Gertrud
  13. Crowdfunding: Determinants of success and funding dynamics By Paolo Crosetto; Tobias Regner
  14. Why Do SMEs Not Borrow More from Banks? Evidence from the People's Republic of China and Southeast Asia By Wignaraja, Ganeshan; Jinjarak, Yothin
  15. The Challenges of Islamic Trade Finance in Promoting SMEs in IDB Member Countries By Elzahi, Abd elrahman; Ali, Saaid
  16. Universities' Role as Knowledge Sources for Product Innovations By Kohei Nishikawa; Daisuke Kanama
  17. Technological parks and the innovation activity of enterprises in the industrial networks – developed regions vs. the intermediate ones By Jadwiga Goraczkowska
  18. The Firm Size Effect On Performance Due To Intangible Resources By Mariia A. Molodchik; Carlos Jardon; Angel Barajas

  1. By: B. Zorina Khan
    Abstract: Family firms are typically associated with negative characteristics, including lower tendencies towards innovation, a higher risk of failure, and inefficiencies deriving from nepotism among family members, criticisms which are even greater when the company is handed over to a female relative. Women in business have generally been presented as petty traders and passive investors, whose entrepreneurial activities were scarce because of such restrictions as limited human capital, culture, market imperfections, and institutional biases. The French economy has similarly been faulted for the prevalence of family firms during the nineteenth century, and for disincentives for the integration of women in the business sector. These issues are explored using an extensive sample of women who obtained patents and prizes at industrial exhibitions during early industrialization. The empirical evidence indicates that middle-class women in France were extensively engaged in entrepreneurship and innovation, and that their commercial efforts were enhanced by association with family firms. Their formerly invisible achievements suggest a more productive role for family-based enterprises, as a means of incorporating relatively disadvantaged groups into the market economy as managers and entrepreneurs.
    JEL: L2 L26 N13 N8 O14 O3
    Date: 2015–01
  2. By: Henry Hyatt (US Census Bureau); Erika McEntarfer (US Census Bureau); John Haltiwanger (University of Maryland)
    Abstract: Search-and-matching models with on-the-job search and firm size yield the prediction that job-to-job flows reallocate workers from smaller to larger firms. Recent papers have extended such models to explain the cyclicality of employment at large vs. small firms. In this paper, we use linked employer-employee data for the U.S. to provide direct evidence on worker reallocation by firm size. We find that job-to-job flows do not generally move workers from smaller to larger employers. Instead, we show that workers moving directly from one job to another more frequently move from large firms to small firms than the reverse. This is despite the fact that large businesses rely more on poaching workers from other firms when hiring and small businesses hire largely from the pool of nonemployed, results that are consistent with the theory. Regarding the cyclical nature of this reallocation, we find that poaching hires are highly procyclical for both large and small firms. Yet despite the cyclical nature of poaching, net reallocation across firm size classes via poaching is relatively stable across the business cycle. The implication is that net poaching by size class is relatively small in magnitude at all phases of the cycle. We find more supportive evidence of the predictions of recent theories regarding net poaching between small and large firms in times of tight labor markets when we focus on mature firms. Even here however the quantitative effects are small.
    Date: 2014
  3. By: Braunerhjelm, Pontus (Swedish Entrepreneurship Forum); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: This paper examines policy measures that foster the creation of innovations with high inherent potential and that simultaneously provide the right incentives for individuals to create and expand firms that disseminate such innovations in the form of highly valued products. In so doing, we suggest an innovation policy framework based on two pillars: (i) the accumulation, investment, and upgrading of knowledge and (ii) the implementation of mechanisms that enable knowledge to be exploited such that growth and societal prosperity are encouraged. Knowledge is a necessary but far from sufficient condition for growth. To secure industrial dynamics and growth in the long term, institutions must be designed both to encourage sophisticated knowledge investments and to stimulate the creation, diffusion and productive use of knowledge in all sectors of the economy. We argue that the latter area has been overlooked in the policy discussion and that a coherent innovation policy framework must include tax policy, labor market regulation, savings channeling, competition policy, housing market regulation, and infrastructure to foster growth and future prosperity.
    Keywords: Entrepreneurship; Innovation; Institutions; Innovation policy; R&D; Technology transfer; University-industry relations
    JEL: J24 O31 O32 O57
    Date: 2015–01–12
  4. By: Karlsson, Charlie (Jönköping International Business School (JIBS), Blekinge Institute of Technology & Centre of Excellence for Science and Innovation Studies (CESIS)); Tavssoli, Sam (Blekinge Institute of Technology)
    Abstract: This paper analyses the persistency in innovation behaviour of firms. Using five waves of the Community Innovation Survey in Sweden, we have traced the innovative behaviour of firms over a ten-year period, i.e. between 2002 and 2012. We distinguish between four types of innovations: process, product, marketing, and organizational innovations. First, using Transition Probability Matrix, we found evidence of (unconditional) state dependence in all types of innovation, with product innovators having the strongest persistent behaviour. Second, using a dynamic probit model, we found evidence of “true” state dependency among all types of innovations, except marketing innovators. Once again, the strongest persistency was found for product innovators.
    Keywords: persistence; innovation; product innovations; process innovations; market innovations; organizational innovations; state dependence; heterogeneity; firms; Community Innovation Survey
    JEL: D22 L20 O31 O32
    Date: 2015–01–16
  5. By: Ryan Banerjee
    Abstract: The SME sector is often hailed as an important engine of economic growth. But recent research suggests that young rather than small firms are the main contributors to employment growth. This paper shows that young firms are also key contributors to profit growth across advanced economies. It them examines the impact of financial constraints on profitability across the age distribution of SMEs. We find that start-ups which report finance as their greatest constraint receive smaller new loans and evidence that financing constraints reduce start-up profitability. We do not find a similar relationship for older SMEs in pre-crisis data. Therefore, policy initiatives which ease financing constraints for start-ups could play an important role in boosting economic growth. However, following the protracted financial crisis in Europe, we also find that financial constraints reduced profitability in the cohort of more mature firms that were start-ups just before the financial crisis.
    Keywords: firm age, firm size, SMEs, financial constraints, economic growth
    Date: 2014–12
  6. By: Islam, Asif
    Abstract: Previous studies have established a negative relationship between total government spending and entrepreneurship activity. However, the relationship between the composition of government spending and entrepreneurial activity has been woefully under-researched. This paper fills this gap in the literature by empirically exploring the relationship between government spending on social and public goods and entrepreneurial activity under the assumption of credit market imperfections. By combining macroeconomic government spending data with individual-level entrepreneurship data, the analysis finds a positive relationship between increasing the share of social and public goods at the cost of private subsidies and entrepreneurship while confirming a negative relationship between total government consumption and entrepreneurial activity. The implication may be that expansion of total government spending includes huge increases in private subsidies, at the cost of social and public goods, and is detrimental for entrepreneurship.
    Keywords: Public Sector Economics,Debt Markets,Economic Theory&Research,Economic Stabilization,Access to Finance
    Date: 2015–01–01
  7. By: Kevin Donovan (University of Notre Dame)
    Abstract: Empirical evidence suggests that many individuals in developing countries operate businesses not due to some superior skill or idea, but because they lack the opportunity to become salaried employees. In a model with incomplete markets, occupational choice, and frictional job search, I argue that this is due to the interaction of low unemployment benefits and financial market underdevelopment. The resulting misallocation along the extensive margin between salaried positions and business ownership generates a larger left tail of firm size and a significantly smaller quantitative impact of targeted lending to poor entrepreneurs. Model predictions are then tested with individual-level surveys of both Chilean and Mexican microenterprise owners. Evidence shows that misallocated owners have lower profit conditional on observable inputs and are more likely to have left their last salaried position involuntarily. Both are consistent with the model.
    Date: 2014
  8. By: Conley, Kelsey; Whitacre, Brian
    Abstract: Broadband, or high-speed Internet access, has changed the way our society operates; yet there are still parts of rural American where the connection is lagging behind. Closing the ‘digital divide’ is a priority on rural America’s agenda, with government programs focusing on providing broadband infrastructure to unserved (or underserved) areas. An unanswered question, however, is whether a relationship exists between broadband availability and the existence of entrepreneurs or ‘creative class’ workers in rural communities. These types of workers have been shown to be particularly important for economic growth in rural areas. One relevant hypothesis is that some threshold related to broadband exists (a specific download speed, or number of providers) that is positively related to the existence of rural entrepreneurs; such a finding would have meaningful implications for future U.S. broadband policy. This research explores this relationship using county-level data from the 2012 National Broadband Map and measures of entrepreneurship and creative class employees from the Census and ERS. Spatial econometric tools are used to assess the cross-section relationship as of 2012. First-differenced regressions are also used to determine whether increasing levels of broadband have influenced changes in entrepreneurship or creative class employees in rural areas over time.
    Keywords: rural America, rural entrepreneurs, broadband adoption, broadband availability, creative class, spatial econometric, first-differenced, Community/Rural/Urban Development,
    Date: 2015–01–15
  9. By: José Neves Cruz (CIJE – Centre for Legal and Economic Research and School of Criminology of the Faculty of Law of the University of Porto);
    Abstract: According to Baumol (1990), entrepreneurship does not always create social value but, depending on contextual factors (rules of the game), entrepreneurial talent may be directed towards unproductive and destructive activities, including white-collar crime. Following Baumol’s hypothesis we propose a theoretical framework for the integration of the empirical study of entrepreneurship and white-collar crime designed with intelligence and innovation, based on the combination of two competing approaches hitherto used separately for both issues: the personality traits model and the theory of planned behaviour.
    Keywords: white-collar crime; entrepreneurship; personality traits; intentions; theory of planned behaviour
    Date: 2013–02
  10. By: Möllers, Judith; Traikova, Diana; Buchenrieder, Gertrud
    Abstract: We take a qualitative snapshot of rural entrepreneurs in Bulgaria aiming to shed light opportunities and barriers they face in post communist rural communities. Utilising ethnographical methodology, we capture the complex interplay with the institutional environment. Rural entrepreneurship may be seen as one anchor to address the uneven distribution of economic activity across territorial space, one of the complex rural livelihood pathways. We find that the rural business climate is dominated by distrust in formal institutions: a culture of informality is accompanied by widely-accepted corruption.
    Keywords: rural Bulgaria, entrepreneurial intentions, on-farm diversification, transition, inefficient institutions, Industrial Organization,
    Date: 2014–08
  11. By: Artz, Georgeanne M.; Kim, Younjun; Orazem, Peter
    Abstract: We test whether commonly used measures of agglomeration economies encourage new firm entry in both urban and rural markets.  Using new firm location decisions in Iowa and North Carolina, we find that measured agglomeration economies increase the probability of new firm entry in both urban and rural areas.  Firms are more likely to locate in markets with an existing cluster of firms in the same industry, with greater concentrations of upstream suppliers or downstream customers, and with a larger proportion of college-educated workers in the local labor supply.  Firms are less likely to enter markets with no incumbent firms in the sector or where production is concentrated in relatively few sectors.  The same factors encourage both stand-alone start-ups and establishments built by multi-plant firms.  Commuting decisions exhibit the same pattern as new firm entry with workers commuting from low to high agglomeration markets.  Because agglomeration economies are important for rural firm entry also, policies encouraging new firm entry should focus on relatively few job centers rather than encouraging new firm entry in every small town.
    Keywords: firm entry; education; specialization; local monopoly; industrial diversity; upstream and downstream firms; stand-alone versus expansion start-ups
    JEL: L26 M13 R11
    Date: 2014–07–05
  12. By: Traikova, Diana; Manolova, Tatiana; Möllers, Judith; Buchenrieder, Gertrud
    Abstract: We investigate how the perception for wide-spread bribing culture affects rural non-farm startup plans in transition. The study contributes to the literature on rural entrepreneurship and the role of institutional factors as drivers of entrepreneurial decisions. Using primary farm household data from Bulgaria and relying on Ajzen's Theory of Planned Behavior, we tested the mediation effects of corruption perceptions over attitudes, norms and perceived control. Evidence for partial mediation through attitudes was found. Stronger corruption perception is correlated with both stronger start-up intentions and positive attitudes towards it.
    Keywords: Rural entrepreneurship, corruption perception, transition, mediation analysis, Ajzen, Community/Rural/Urban Development,
    Date: 2014–08
  13. By: Paolo Crosetto (INRA, University of Grenoble); Tobias Regner (Max Planck Institute of Economics, Jena)
    Abstract: Over the past years crowdfunding emerged as an alternative funding channel for entrepreneurs. In contrast to traditional financiers (banks, venture capital firms or angel investors), crowdfunding allows individuals to fund entrepreneurs directly even with small amounts. We received individual- level data from Startnext, the biggest crowdfunding platform in Germany, enabling us to investigate funding dynamics, explore pledgers' motivations and analyze projects' success determinants. We find substantial heterogeneity of how success (about half of the 2,252 projects in our dataset get funded) is reached. When two thirds of the funding duration has passed, the majority of projects (59%) that eventually get funded are not on a successful track. However, pledges in the final phase can only partially be explained by a rush to get still unfunded projects succeed. Overall, 18.7% of pledges are made to projects that already reached their funding target and our analysis shows that the increased funding towards the deadline is due to pledges to projects that already made it, particularly pre-selling pledges.
    Keywords: crowdfunding, entrepreneurial finance, donations, pre-selling
    JEL: D03 G32
    Date: 2014–12–21
  14. By: Wignaraja, Ganeshan (Asian Development Bank Institute); Jinjarak, Yothin (Asian Development Bank Institute)
    Abstract: This study examines the relationship between firm characteristics and borrowing from commercial banks by small and medium-sized enterprises (SMEs) in the People's Republic of China (PRC) and five Southeast Asian economies (Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam). Analysis of microdata from enterprise surveys highlights key aspects of SME finance since the global financial crisis, including sources of credit, lender types, and collateral types. First, SMEs typically resort to internal sources rather than external finance (including borrowing from banks) and trade credit. Second, when it comes to external finance, SMEs typically use informal non-bank credit sources more than banks. Third, there is a positive and significant association between bank borrowing and certain characteristics of SMEs, notably financial audits, firm age, and export participation. Fourth, personal assets of SME owners tend to matter more as collateral for SME borrowing from banks than other collateral types. Improving credit guarantee systems, enhancing monitoring and credit scoring by banks, and widening the scope of collateral are possible ways to facilitate increased bank borrowing by SMEs.
    Keywords: credit access; firm-level survey; collateral; credit guarantees; smes
    JEL: D22 E44 F14 L16 O14
    Date: 2015–01–13
  15. By: Elzahi, Abd elrahman (The Islamic Research and Teaching Institute (IRTI)); Ali, Saaid (The Islamic Research and Teaching Institute (IRTI))
    Abstract: Accessing financing is one of the most formidable challenges facing Small and Medium Enterprises (SMEs); particularly in the least developing member countries (LDMC) of IDB. Given their low capital base, the availability of financial resources is essential for the SMEs growth. This research attempts to investigate the challenges and limitations facing the use of Islamic finance to promote Small and Medium Enterprises (SMEs) in IDB member countries. Secondary data from member Countries were collected and analyzed to identify the binding constraints in using Islamic finance in promoting SMEs. The findings of this study show- that despite of the recent growth of the Islamic institutions and the development of new Islamic financing products, still there is no favorable environment for Islamic finance to play vital role in the development of SMEs in the IDB member countries. The main reasons might be due to the weakness in the development of trade and the Islamic financing infrastructures. Given the uprising unemployment in many member countries, this study makes specific recommendations to the governments, Islamic banks management as well as IDBG to contribute in removing the challenges associated with accessing the sources of financing to encourage Islamic finance to further promote SMEs.
    Keywords: Islamic Financing; Smes’ In IDB Member Countries
    Date: 2015–01–19
  16. By: Kohei Nishikawa; Daisuke Kanama
    Abstract: This study verified innovation objectives for Japanese SMEs' access to university knowledge the effects of university knowledge on innovation outcomes. The analysis found the following three points. First, Japanese SMEs do not access university knowledge strategically according to innovation objectives but decide whether to use university knowledge in consideration of such factors as proactive R&D spending, financial constraints on innovations and the effectiveness of legal means to secure profit from innovations. Next, product innovations for "improving product or service quality," "expanding product or service lineups," "replacing existing products or services" and "exploring new markets" can lead to financial successes without university knowledge, rather than with such knowledge. Finally, the utilization of university knowledge does not necessarily lead to greater technological capabilities. In Japan, science, technology and innovation policy has strongly encouraged university-industry collaboration from later 1990¡¯s aiming to support innovation activities for SMEs. The results of this study do not confirm the total effects of the policy. Length: 38 pages
  17. By: Jadwiga Goraczkowska (Uniwersytet Zielonogorski, Poland)
    Abstract: Currently, technological parks constitute the most organisational and conceptually developed type of innovation centres and entrepreneurship. This results in the fact that they can be encountered in all highly developed countries in the world. They are also formed in the catching-up countries. However, one should consider whether the stimulation of innovation in the countries, which are not based on knowledge through institutional solutions used in the developed countries will turn out to be effective. Because between these countries there is a technological gap. The aim of the article was therefore to determine, using the probit modelling, the direction and strength of technological parks on the innovation activity. The study covered two provinces: Silesian, which is one of the most developed regions in Poland and Pomeranian with the intermediate industrial system. The influence of technological parks on innovation was determined based on the survey conducted in 1453 industrial enterprises. The main conclusions are brought down to the following theses: (1) using the technological parks increases the chance for the implementation of new solutions by enterprises, (2) parks to a greater extent stimulate the innovation activity in the developed province, (3) enterprises entering in the cross-regional network relations favours the selection of the technological park as the catalyst for innovation processes.
    Keywords: innovation, industry, technological parks, network
    JEL: L60 O31 O32
    Date: 2014–12
  18. By: Mariia A. Molodchik (National Research University Higher School of Economics); Carlos Jardon (National Research University Higher School of Economics); Angel Barajas (National Research University Higher School of Economics)
    Abstract: The paper explores the effect of firm size on the relation between intangible resources and companies’ performance (ROA). The authors identify six types of intangibles: human resources and management capabilities, innovation and internal process capabilities and customer loyalty and networking capabilities. The study provides econometric justification using a database of more than 1400 European public companies. The time period for the investigated data covers ten years from 2004 to 2013. A dummy regression analysis was applied for empirical testing. The findings revealed that the size of a company matters with regard to the employment of intangible resources and for a performance based on intangibles
    Keywords: intangibles, performance, SME, large companies, European companies, ROA, dummy regression.
    JEL: O30 F L L60 L63
    Date: 2014

This nep-ent issue is ©2015 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.