nep-ent New Economics Papers
on Entrepreneurship
Issue of 2015‒04‒11
six papers chosen by
Marcus Dejardin
Université de Namur

  1. Dynastic Entrepreneurship, Entry, and Non-Compete Enforcement By James Rauch
  2. What do firms know? What do they produce? A new look at the relationship between patenting profiles and patterns of product diversification By Giovanni Dosi; Marco Grazzi; Daniele Moschella
  3. Persistent Product Innovation and Market-oriented Behaviour: the Impact on Firms' Performance By Primo Autore; Secondo Autore
  4. Firm Survival and Change in Ghana, 2003-2013 By Elwyn Davies; Andrew Kerr
  5. The Impact of Top Management Team Characteristics on Firms Growth. By Colombelli, Alessandra
  6. Business Creation and Transformation Processes in Four Software Companies in Dalian, China: Commonalities and Differences By Zhang Yan; Kawabata Nozomu

  1. By: James Rauch
    Abstract: We investigate entry in a dynastic entrepreneurship (overlapping generations) environment created by employee spinoffs. Without finance constraints, enforcement of non-compete agreements unambiguously improves social welfare outcomes, and even increases the rate of spinoffs from original firms. Indeed, if employers have all the bargaining power vis-à-vis their employees, optimal entry of original firms and all subsequent employee spinoffs is achieved, despite the fact that the original firm can only negotiate with the first spinoff. However, if employees are unable to buy out their non-compete contracts, enforcement of these agreements shuts down socially profitable spinoff firms. Non-enforcement sacrifices entry of original firms that would be marginally profitable in the absence of employee spinoffs, but otherwise clearly improves social welfare outcomes over enforcement in the presence of finance constraints.
    JEL: K12 L26
    Date: 2015–04
  2. By: Giovanni Dosi; Marco Grazzi; Daniele Moschella
    Abstract: In this work we analyze the relationship between the patterns of firm diversification, if any, across product lines and across bodies of innovative knowledge, proxied by the patent classes where the firm is present. Putting it more emphatically we investigate the relationship between "what a firm doe" and "what a firm knows". Using a newly developed dataset matching information on patents and products at the firm level, we provide evidence concerning firms' technological and product scope, their relationships, the size-scaling and coherence properties of diversication itself. Our analysis shows that typically firms are much more diversified in terms of products than in terms of technologies, with their main products more related to the exploitation of their innovative knowledge. The scaling properties show that the number of products and technologies increase log-linearly as firms grow. And the directions of diversification themselves display coherence between neighboring activities also at relatively high degrees of diversification. These findings are well in tune with a capability-based theory of the firm.
    Date: 2015–01–04
  3. By: Primo Autore (ISTAT, Istituto Nazionale di Statistica); Secondo Autore (DISCE, Università Cattolica)
    Abstract: This paper provides an empirical investigation of the impact of innovation on firms' economic performance pinpointing complementarities between product and marketing innovation during the period 1998-2008. Firms' profitability and productivity are simultaneously estimated, thus allowing for consistent and robust estimates of the relationship being tested. The conceptual framework in which we have developed the analysis bridges the gap between the management (organization) approach, from which we grasp the notion of a firm's market orientation to innovation, and the economics of innovation perspective. The results show that being a persistent product-innovating and market-oriented firm significantly affects profitability, although the estimated impact is relatively mild. The gain in productivity determined by investing in R&D is relatively small and in line with the corresponding gain attributable to investing in marketing and organizational innovations. Conversely, capital deepening as measured by the capital-labor ratio-exerts a larger impact on productivity, thus underlining how knowledge capital plays a less relevant role. This result emphasizes a crucial weakness of Italian manufacturing firms, because knowledge investment is the key to future economic growth. The estimates we have presented cover a sufficiently long time interval, thus enabling us to perform different robustness tests.
    Keywords: Product Innovation, Market Orientation, European Community Innovation Survey, Profitability, Productivity
    JEL: L25
    Date: 2015–03
  4. By: Elwyn Davies; Andrew Kerr
    Abstract: How did Ghanaian manufacturing firms change in the period between 2003 and 2013? This paper presents results from a survey of 1000 firms in Ghana, conducted in 2013, which were randomly selected from the 2003 Ghanaian National Industrial Census. This survey allows us to track survival and exit of firms between 2003 and 2013. We find strong regional differences and also differences for small, medium and large firms. The exit rate of firms in Kumasi, the second city, is lower than in Accra, but the growth rate of firms in Kumasi was also lower. Small firms were more likely to exit than large firms. Overall, the picture we paint of manufacturing in Ghana is not a positive one: total employment by firms operating before 2003 decreased from 134 863 in 2003 to 74 319 in 2013. It remains a question to what extent this was compensated by new employment by firms that entered after 2003, who were not surveyed. We also consider the firm size distribution evolution, and show that selection plays some role in explaining the positive correlation between firm size and age, but that this is less strong than in earlier studies.
    Keywords: Firm survival, Firm growth, Ghana, Firm size, Firm size distribution, Selection
    JEL: L25 O11 O14 O55
    Date: 2015
  5. By: Colombelli, Alessandra (University of Turin)
    Abstract: This study attempts to identify the factors affecting the growth of companies listed on the Alternative Investment Market (AIM), the London Stock Exchange’s market dedicated to young and growing companies. We investigate the post IPO growth of a panel consisting of 665 companies listed on the AIM from 1995 to 2006. Our empirical model is estimated using the GMM - System (GMM - SYS) estimator. Our findings confirm that small companies listed on the AIM grow at a faster rate after the IPO. It seems that both human capital and firm characteristics are important determinants of their fast growth. The results of this study carry some policy implications. Policy makers could take into account the relevance of an efficient financial system. Moreover, it is important to look at the process of transformation in the cultural and behavioural attitudes of many countries towards entrepreneurship.
    Date: 2014–10
  6. By: Zhang Yan; Kawabata Nozomu
    Abstract: This study aims to determine the nature of entrepreneur behavior, business creation, and transformation of software companies in Dalian City through case studies. Four companies that were launched in the 2000s were studied. These companies' businesses initially involved labor-intensive processes of offshore software development for the Japanese market. However, they were confronted with the challenge of business transformation after the global financial crisis. Their set agenda included forays into high-grade processes, diversification of products and services, and exploitation of the Chinese market. All four companies tried to transform themselves by creating a unique advantage. The development of such an advantage was a focal point for the software companies to transform their business structure that relied heavily on labor-intensive offshore development. The acquisition of high-grade human resources was an important factor for gaining this advantage. In the field of offshore development for Japanese market, cross-border cooperation across processes was necessary to advance into high-grade processes. The gon /off -siteh hypothesis was valid, while having a Bridge System Engineer (BSE) in the company was not a prerequisite. Differences were observed across the four case studies. In China, Japanese-affiliated companies approached other Japanese-affiliated companies, while Chinese companies approached other Chinese companies. Moreover, the disparity of resource availability for transformation was large between big companies and small-and medium -sized companies. As a result, difference was observed in the strategy employed by the companies for transformation, especially in personnel management in the face of high liquidity in the labor market in China.
    Date: 2015–03

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