nep-ent New Economics Papers
on Entrepreneurship
Issue of 2015‒02‒22
fifteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Subsidized Start-Ups out of Unemployment: A Comparison to Regular Business Start-Ups By Caliendo, Marco; Hogenacker, Jens; Künn, Steffen; Wießner, Frank
  2. The role of universities in the location of innovative start-upsa By Giorgio Calacagnini; Ilario Favaretto; Germana Giombini; Francesco Perugini; Rosalba Rombaldoni
  3. Human Capital of Spinouts By Natarajan Balasubramanian; Mariko Sakakibara
  4. On the Failure of R&D Projects By Link, Albert; Wright, Mike
  5. Entrepreneurial Saving Practices and Reinvestment: Theory and Evidence from Tanzanian MSEs By Thorsten Beck; Haki Pamuk; Burak R Uras
  6. Tapping the Financial Wisdom of the Crowd - Crowdfunding as a Tool to Aggregate Vague Information By Schlegel, Friederike; Hakenes, Hendrik
  7. Aspire By Simon Quinn; Marcel Fafchamps
  8. Public health insurance and entry into self-employment By Fossen, Frank M.; König, Johannes
  9. Why Did Self-Employment Increase So Strongly in Germany? By Michael Fritsch; Alexander S. Kritikos; Alina Sorgner
  10. Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets By Emin M. Dinlersoz; Henry R. Hyatt; Hubert P. Janicki
  11. Governance, Firm Size and Innovative Capacity: Regional Empirical Evidence for Germany By Jahn, Vera; Berlemann, Michael
  12. The curse of knowledge increases self-selection into competition: Experimental evidence By Danz, David
  13. Knowledge base combinations and innovation performance in Swedish regions By Grillitsch, Markus; Martin, Roman; Srholec, Martin
  14. Mittelstand zwischen Fakten und Gefühl By Welter, Friederike; May-Strobl, Eva; Holz, Michael; Pahnke, André; Schlepphorst, Susanne; Wolter, Hans-Jürgen; Kranzusch, Peter
  15. Green Entrepreneurship: Einordnung in die Green Economy und Bestandsaufnahme des Themenfeldes By Ludewig, Dirk

  1. By: Caliendo, Marco (University of Potsdam); Hogenacker, Jens (ConVista Consulting AG); Künn, Steffen (IZA); Wießner, Frank (Catholic University of Eichstätt)
    Abstract: Offering unemployed individuals a subsidy to become self-employed is a widespread active labor market policy strategy. Previous studies have illustrated its high effectiveness to help participants escaping unemployment and improving their labor market prospects compared to other unemployed individuals. However, the examination of start-up subsidies from a business perspective has only received little attention to date. Using a new dataset based on a survey allows us to compare subsidized start-ups out of unemployment with regular business founders, with respect to not only personal characteristics but also business outcomes. The results indicate that previously unemployed entrepreneurs face disadvantages in variables correlated with entrepreneurial ability and access to capital. 19 months after start-up, the subsidized businesses experience higher survival, but lag behind regular business founders in terms of income, business growth and innovation. Moreover, we show that expected deadweight losses related to start-up subsidies occur on a (much) lower scale than usually assumed.
    Keywords: innovation, deadweight effects, entrepreneurship, start-up subsidies, evaluation
    JEL: C14 L26 J68
    Date: 2015–01
  2. By: Giorgio Calacagnini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Ilario Favaretto (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Germana Giombini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Francesco Perugini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Rosalba Rombaldoni (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")
    Abstract: Start-ups increasingly find the prospect of university-industry collaborations to be a powerful driver of innovation and entrepreneurship activity. Moreover, at the geographical level, they are attracted by teaching and research institutions, either public or private. This paper focuses on the role played by universities. Our hypothesis is that geographical proximity favors the transfer of knowledge and technology from universities to industries and, consequently, represents a positive factor for regional economic development. Results show that university spillovers are positively correlated with the creation of innovative start-ups. Furthermore, the presence of human capital (graduates) exerts a significant influence on the location decisions of start-ups, being a source for competitiveness for firms close to universities. Research quality, especially in the social sciences area, attracts innovative start-ups, while third-mission activities have a weak impact on locational choice.
    Keywords: CKnowledge transfer, Innovative start-up, University spillovers
    JEL: M13 L20 R30
    Date: 2014
  3. By: Natarajan Balasubramanian; Mariko Sakakibara
    Abstract: This study examines how the human capital of spinout founders and the performance of parent firms affect the success of spinouts by using a matched employer-employee dataset of new ventures covering 7 SIC 1-digit sectors in the United States. Our data cover 29,100 spinouts and 379,800 new ventures formed by lone entrepreneurs in 23 states between 1992 and 2005. We evaluate several components of human capital: outcomes of human capital investments vs. human capital investments, task-related human capital vs. non-task-related human capital, and individual human capital vs. group capital, and examine whether these types of human capital affect spinout performance differently. We find that spinout founder’s earnings (an outcome of human capital investment) and industry experience (task-related human capital) prior to spinout formation have strong positive correlations with spinout performance, as measured by size, wage and growth rate. We also find that group experience of spinout founders prior to spinout formation has a positive correlation with spinout performance, though this effect is slightly weaker and smaller than those of spinout founder’s earnings and industry experience. The effects of these three measures of human capital are mostly present after controlling for parent firm establishment fixed effects. We find some evidence that the size of parent firm establishments has a positive correlation with spinout performance, but this effect does not hold after controlling for parent firm fixed effects. Finally, we find that founder’s earnings, industry experience, group experience and parent firm size are more important during the early stage of spinout formation.
    Date: 2015–01
  4. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics); Wright, Mike (Imperial College and University of Ghent)
    Abstract: There is an extensive literature on the success/failure of firm-funded R&D projects but growing policy interest focuses on publicly-funded R&D projects. Using data from 1,878 Phase II R&D projects funded through the U.S. Small Business Innovation Research (SBIR) program, of which 624 had been discontinued prior to technical completion, we provide for the first time findings on the success/failure of publicly-funded firm-performed R&D projects. We find that prior R&D experience with the technology being funded by SBIR projects, the amount of the SBIR award, and having a female PI, other factors held constant, is negatively related to the probability of project failure. In contrast, firm size is positively associated with project failure. We discuss the implications of these findings for practice, policy, and further research.
    Keywords: R&D; project failure; innovation; SBIR; public sector
    JEL: L26 O31 O32 O33
    Date: 2015–02–16
  5. By: Thorsten Beck; Haki Pamuk; Burak R Uras
    Abstract: What is the relationship between entrepreneurial saving practices and reinvestment?  We develop a model of entrepreneurial finance and show that entrepreneurial reinvestment decisions depend on the efficiency of saving practices.  Utilizing a novel micro & small enterprise survey from Tanzania we test the empirical implications of this theory.  We find (1) saving for business purposes and earnings reinvestment are positively related; (2) the practice of saving in a deposit account of a formal financial institution is more likely to facilitate a reinvestment compared to the practice of keeping savings within the household.  We also show that the negative impact of saving within-the-household on investment is more pronounced for family members with inherently low intra-household bargaining power - such as females and non-head household members.  Our work contributes to the recent debate on the implications of saving instruments in developing countries, and suggests informal saving practices as potential barriers to microenterprise performance.
    Keywords: Micro- and small enterprises, savings, reinvestment, Tanzania
    JEL: D14 G21 O12 O16
    Date: 2014–04–07
  6. By: Schlegel, Friederike; Hakenes, Hendrik
    Abstract: Crowdfunding, a novel form of financing, has seen massive growth over the last few years. Under crowdfunding, a large number of small households offers small loans to a firm. But if some threshold is missed, the firm cannot draw the loans. We construct a model to argue that this mechanism can be used to aggregate vague information by many households (for example, potential future consumers of the firms product). Each household can spend an effort to produce a bit of vague information too vague to justify a straight loan. But if the firm sets the threshold high, a household knows that his money will be drawn only if many other households also get positive information. We describe the equilibrium behavior of households and firms. A welfare analysis reveals that with crowdfunding, firms set the loan rate too low and the threshold too low, inducing households to generate too much information. In comparison to straight finance, crowdfunding is employed too often.
    JEL: G23 L15 G20
    Date: 2014
  7. By: Simon Quinn; Marcel Fafchamps
    Abstract: We gave US$1,000 cash prizes to winners of a business ideas competition in Africa.  The competition, entitled 'Aspire' is intended to attract young individuals aspiring to become entrepreneurs.  Participants were ranked by panels of judges composed of established entrepreneurs.  Each panel selected one winner among twelve candidates; that winner was awarded a prize of US$1,000 to spend at his or her discretion.  Six months after the competition, we compare winners with the two runners-up in each panel: winners are 30 percentage points more likely to be self-employed.  Our findings imply that access to start-up capital constitutes a sizeable barrier to entry into entrepreneurship for the kind of young motivated individual most likely to succeed in business.
    Date: 2014–12–08
  8. By: Fossen, Frank M.; König, Johannes
    Abstract: We estimate the impact of a differential treatment of paid employees versus self-employed workers in a public health insurance system on the entry rate into entrepreneurship. In Germany, the public health insurance system is mandatory for most paid employees, but not for the selfemployed, who usually buy private health insurance. Private health insurance contributions are relatively low for the young and healthy, and until 2013 also for males, but less attractive at the other ends of these dimensions and if membership in the public health insurance allows other family members to be covered by contribution-free family insurance. Therefore, the health insurance system can create incentives or disincentives to starting up a business depending on the family situation and health. We estimate a discrete time hazard rate model of entrepreneurial entry based on representative household panel data for Germany, which include personal health information, and we account for non-random sample selection. We estimate that an increase in the health insurance cost differential between self-employed workers and paid employees by 100 euro per month decreases the annual probability of entry into selfemployment by 0.38 percentage points, i.e. about a third of the average annual entry rate. The results show that the phenomenon of entrepreneurship lock, which an emerging literature describes for the system of employer provided health insurance in the USA, can also occur in a public health insurance system. Therefore, entrepreneurial activity should be taken into account when discussing potential health care reforms, not only in the USA and in Germany.
    Keywords: health insurance,entrepreneurship lock,self-employment
    JEL: L26 I13 J2
    Date: 2015
  9. By: Michael Fritsch; Alexander S. Kritikos; Alina Sorgner
    Abstract: Germany experienced a unique rise in the level of self-employment in the first two decades following unification. Applying the non-linear Blinder-Oaxaca decomposition technique, we find that the main factors driving these changes in the overall level of self-employment are demographic developments, the shift towards service sector employment, and a larger share of population holding a tertiary degree. While these factors explain most of the development in self-employment with employees and the overall level of self-employment in West Germany, their explanatory power is much lower for the stronger increase of solo self-employment and of self-employment in former socialist East Germany.
    Keywords: Self-employment, non-linear Blinder-Oaxaca decomposition technique, entrepreneurship, Germany
    JEL: L26 D22
    Date: 2015
  10. By: Emin M. Dinlersoz; Henry R. Hyatt; Hubert P. Janicki
    Abstract: Compared with mature firms, young firms, most of which represent entrepreneurial activity, disproportionately hire younger, nonemployed individuals, and provide them with lower earnings. Furthermore, in recent years the number of young firms has been declining, along with their employment share, employee size, and worker earnings. To account for these facts, this paper introduces heterogeneous labor markets with search frictions to a dynamic model of entrepreneurship. Individuals differ in productivity and wealth. They can choose not to work, become entrepreneurs, or work in one of two sectors: a corporate versus an entrepreneurial sector. The sectoral differences in production technology and labor market frictions lead to sector-specific wages and worker sorting. Individuals with lower assets tend to take lower-paying jobs in the entrepreneurial sector. Empirical analysis indicates that this type of sorting is consistent with the average net worth of workers in young versus mature firms in the data. The model is used to explore potential mechanisms behind the recent decline in entrepreneurship in the U.S.
    Date: 2015–02
  11. By: Jahn, Vera; Berlemann, Michael
    Abstract: Successful innovation is a precondition for economic prosperity. While various potential determinants of innovative activity have been considered, little empirical evidence is yet available for the influence of firm governance issues. This paper aims at filling this gap in the literature by studying whether the relative importance of owner-managed small and medium sized enterprises has an effect on regional innovative capacity. We therefore combine patent data with data from the firm database of Creditreform, containing information on the governance structure of regional operating enterprises. Using a cross section of German NUTS-3-regions, we identify a significantly positive relation between the relative importance of owner-managed SMEs and innovative capacity. This finding is highly robust when controlling for various sorts of spatial correlation.
    JEL: O31 C21 D23
    Date: 2014
  12. By: Danz, David
    Abstract: The psychology literature provides ample evidence that people have difficulties taking the perspective of less informed others. This paper presents a controlled experiment showing that this "curse of knowledge" can cause comparative overconfidence and overentry into competition. In a broader context, the results provide an explanation for the overconfidence of nascent entrepreneurs and the substantial rate of failure among new businesses.
    Keywords: curse of knowledge,hindsight bias,information projection,overconfidence,sorting,incentive schemes,competition,beliefs,experiments
    JEL: C91 D80 D82 D83 D84
    Date: 2014
  13. By: Grillitsch, Markus (CIRCLE, Lund University); Martin, Roman (CIRCLE, Lund University); Srholec, Martin (CIRCLE, Lund University & CERGE-EI, Charles University and Economics Institute of the Academy of Sciences of the Czech Republic)
    Abstract: The literature on geography of innovation suggests that innovation outcomes depend on the type of knowledge base employed by firms. While knowledge bases are distinct categories with regards to the nature and the rational of knowledge creation, existing studies also stress that innovation usually involves more than one knowledge base. In fact, new ideas often occur when analytical, synthetic and symbolic knowledge intertwines. It remains unclear, though, which combinations of knowledge bases are most conducive to innovation at the level of the firm, and how this is influenced by the knowledge bases available in the regional milieu. Therefore the contribution of this paper is threefold: i) to measure knowledge bases of firms and their regional heterogeneity in a more comprehensive way than the existing empirical literature has been able to do so far, ii) to quantitatively assess the impact of combinations of knowledge bases on innovation output, iii) to analyze the interplay between firm- and region-level knowledge bases (and combinations thereof) in generating innovations. Empirically, the paper applies econometric analysis on firm- and region-level data from Sweden. The knowledge base of firms is captured using detailed occupational data derived from linked employer-employee datasets that is merged at the firm-level with information from Community Innovation Surveys. The empirical analysis reveals in a quantitative way the extent to which the knowledge base combinations affect innovativeness of firms.
    Keywords: Knowledge bases; knowledge combination; regions; innovation performance; microdata; cross-level interaction; Sweden
    JEL: O30 O31 R10
    Date: 2015–02–08
  14. By: Welter, Friederike; May-Strobl, Eva; Holz, Michael; Pahnke, André; Schlepphorst, Susanne; Wolter, Hans-Jürgen; Kranzusch, Peter
    Abstract: Die in der jüngsten Vergangenheit zu beobachtenden strukturellen Veränderungen der Unternehmenslandschaft berühren auch und gerade den Mittelstand. Wir unter-suchen Mittelstand im Spannungsfeld unserer definitorischen Merkmale, nämlich der Identität von Eigentum und Leitung einerseits und der Einschätzung der Unternehmerschaft zu ihrer Zugehörigkeit zum Mittelstand und ihrer Bewertung der Wesensmerkmale mittelständischer Unternehmen andererseits. Die Befunde unserer empiri-schen Untersuchung machen deutlich, dass definitorischer Mittelstand und selbst definierter Mittelstand nicht deckungsgleich sind. Um die unterschiedlichen Aspekte des Mittelstands besser (be)greifen zu können, bedienen wir uns des Konstrukts Mittelstandsuniversum. Mit dessen Hilfe ist es uns möglich, die unterschiedlichen Teilpopulationen des Mittelstands zu charakterisieren. Hierdurch erhält die Mittelstandspolitik Hinweise, wie der Mittelstand mit seiner zunehmenden Ausdifferenzierung besser adressiert werden kann.
    Abstract: In recent years, the entrepreneurial landscape has been subject to structural change which also impacts on the German Mittelstand. This study explores key characteris-tics of the Mittelstand, drawing on a business survey. We analyse potential discrepancies between our definition that classifies the Mittelstand based on the unity of ownership and leadership and the entrepreneur's sense of belonging to the Mittelstand as well as their assessment of typical Mittelstand values and norms. In order to better distinguish between these various segments of the Mittelstand, we introduce the construct "universe of the Mittelstand" (Mittelstandsuniversum). This construct allows policy makers to better address the Mittelstand, taking into account its growing differentiation and heterogeneity.
    Keywords: Mittelstand,KMU,Strukturwandel,Mittelstandsuniversum,German Mittelstand,SME,structural change,universe of the Mittelstand
    JEL: L20 L26
    Date: 2015
  15. By: Ludewig, Dirk
    Abstract: [Ziele der Publikation] Entgegen der schon heute großen und wachsenden Bedeutung der Green Economy und des Green Entrepreneurship in der realen Wirtschaftspraxis, werden diese Bereiche noch immer als eher neu, von der Größe her unbedeutend und exotisch wahrgenommen. Dies gilt in vielen Kreisen der Wirtschaft, in der Politik, in der breiten Öffentlichkeit und nicht zuletzt auch in der Wissenschaft und an den Hochschulen. Hauptziel dieser Publikation ist es, eine umfassende Bestandsaufnahme des Themenfeldes Green Entrepreneurship vorrangig in Deutschland vorzunehmen. Dafür ist es nicht zuletzt für das Verständnis notwendig, den Bereich Green Entrepreneurship in die Green Economy einzuordnen und damit auch dieses Themenfeld darzustellen. Dies ist Nebenziel dieser Publikation.
    Date: 2015

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