nep-ent New Economics Papers
on Entrepreneurship
Issue of 2015‒08‒13
twelve papers chosen by
Marcus Dejardin
Université de Namur

  1. House Money and Entrepreneurship By Sari Pekkala Kerr; William R. Kerr; Ramana Nanda
  2. The Power of (Non) Positive Thinking: Self-Employed Pessimists Earn More than Optimists By Dawson, Christopher; de Meza, David Emmanuel; Henley, Andrew; Arabsheibani, Reza
  3. Are “Better” Ideas More Likely to Succeed? An Empirical Analysis of Startup Evaluation By Erin L. Scott; Pian Shu; Roman M. Lubynsky
  4. When culture does (not) matter: role models and self-efficacy as drivers of entrepreneurial behavior By Schmutzler, Jana; Andonova, Veneta; Díaz Serrano, Lluís
  5. Gender diversity and innovation in manufacturing and service firms By Teruel, Mercedes; Parra, Maria Dolores; Segarra Blasco, Agustí, 1958-
  6. Business Dynamics of Innovating Firms: Linking U.S. Patents with Administrative Data on Workers and Firms By Stuart Graham; Cheryl Grim; Tariqul Islam; Alan Marco; Javier Miranda
  7. The Determinants of Entrepreneurship at the Country Level: A Panel Data Approach By Gonçalo Brás; Elias Soukiazis
  8. Patents and the Success of Venture-Capital Backed Startups: Using Examiner Assignment to Estimate Causal Effects By Patrick Gaule
  9. Value of E-Banking to Small and Medium-Sized Enterprises By Parveneh Shahnoori; Glenn P. Jenkins
  10. Export quality upgrading under credit constraints By Ciani, Andrea; Bartoli, Francesca
  11. Crowdfunding, demand uncertainty, and moral hazard - a mechanism design approach By Roland Strausz; ; ;
  12. More Haste, Less Speed? Signaling through Investment Timing By Bobtcheff, Catherine; Levy, Raphaël

  1. By: Sari Pekkala Kerr (Wellesley College); William R. Kerr (Harvard Business School, Entrepreneurial Management Unit); Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit)
    Abstract: We examine the relationship between house prices and entrepreneurship using micro data from the US Census Bureau. Increases in house prices are often thought to drive entrepreneurship through unlocking the collateral channel for bank loans, but this interpretation is challenged by worries regarding omitted variable biases (e.g., rising local demand) or wealth effects (i.e., that people with more valuable homes are more likely to enter entrepreneurship for reasons other than access to collateral). We construct an empirical environment that utilizes very localized price changes, exploits variations in initial home values across residents in the same zip code, and embeds multiple comparisons (e.g., owners vs. renters, homestead exemption laws by state). For the United States during the 2000-2004 period, the link of home prices to the rate of entrepreneurship through home equity channels is modest in economic magnitude. This is despite a focus on a time period that experienced the largest concentration of US home price growth over the last two decades. Even when we do connect home equity to entrepreneurship, part of the effect is linked to an increased demand for entrepreneurship. While housing collateral plays a role in the entry that we observe, it does not seem to be a major barrier to entrepreneurship in our context.
    Keywords: house prices, mortgages, collateral channel, entrepreneurship, entry
    JEL: E44 G21 L26 M13 R12 R31 R32
    Date: 2015–02
  2. By: Dawson, Christopher (University of Bath); de Meza, David Emmanuel (London School of Economics); Henley, Andrew (Aberystwyth University); Arabsheibani, Reza (Swansea University)
    Abstract: Developing further the accumulating evidence that self-employment attracts optimists, this paper investigates the relationship between earnings and prior optimism. It finds that self-employed optimists earn less than self-employed realists. Amongst employees, optimists earn more. These results are consistent with biased expectations leading to entry errors. As a test of validity, we find that amongst the married, future divorcees have higher financial expectations but their realisations are no worse, suggesting our optimism measure captures an intrinsic psychological trait associated with rash decisions.
    Keywords: financial optimism, expectations, self-employment
    JEL: D84 M13
    Date: 2015–07
  3. By: Erin L. Scott (National University of Singapore Business School); Pian Shu (Harvard Business School, Technology and Operations Management Unit); Roman M. Lubynsky (Massachusetts Institute of Technology)
    Abstract: Entrepreneurs face high uncertainty, and often make costly investments in new business ideas without knowing the expected payoff. This paper empirically examines whether ex-ante assessment of early-stage startup ideas can predict their subsequent commercialization. We leverage an entrepreneurship program at the Massachusetts Institute of Technology in which early-stage venture ideas, presented in the form of succinct standardized summaries, elicit subjective evaluations from a large set of experienced entrepreneurs and executives. Using data on 652 ventures in multiple industry sectors, evaluated over an 8-year period, we find that ideas that elicit more positive evaluations are significantly more likely to ultimately reach commercialization. We further show that these results are driven by venture ideas with documented intellectual capital in research-and-development-intensive sectors, such as life sciences and medical devices. We find no evidence, by contrast, that experts can effectively assess the commercial potential of venture ideas in non-R&D-intensive sectors such as consumer web and enterprise software. Finally, we find that industry-specific and scientific expertise is not critical to experts' collective ability to predict ventures' commercial viability.
    JEL: L26 M13 O31 J24 G32
    Date: 2015–07
  4. By: Schmutzler, Jana; Andonova, Veneta; Díaz Serrano, Lluís
    Abstract: The correlation between facets of national culture and startup activities has received confirmation in empirical research while many mechanisms behind the correlation remain unclear. We study the interplay between the individualism-collectivism orientation of national culture, the incidence of entrepreneurial role models and selfefficacy understood as the perception of possessing relevant skills and knowledge to become a successful entrepreneur. We find that exposure to entrepreneurial role models offsets self-efficacy as a driver of entrepreneurial intentions. The effect is magnified by the individualistic character of the national culture. Key words: entrepreneurial intentions, role models, self-efficacy, individualism, multilevel regressions
    Keywords: Emprenedoria, Autopercepció, Cultura, 33 - Economia,
    Date: 2015
  5. By: Teruel, Mercedes; Parra, Maria Dolores; Segarra Blasco, Agustí, 1958-
    Abstract: Traditionally, researchers have considered the innovation process as being gender neutral. However, recently some studies have begun to take gender diversity into account as a determinant of firms’ innovation. This paper aims to analyse how the effect of gender diversity on innovation output at firm level is sensitive to team size. Using the Spanish PITEC (Panel de Innovación Tecnológica) from 2007 to 2012 for innovative manufacturing and service firms, we estimate a multivariate probit model to analyse how gender diversity both in R&D teams and in the total workforce affect product, process, marketing and organizational innovations. Our results show that gender-diverse teams increase the probability of innovating, and this capacity is positively related team size. Gender diversity, in both the R&D department and the total workforce, has a larger positive impact on the probability of carrying out product and organizational innovations in larger teams than it does in smaller teams. This effect is less clear-cut in the case of marketing and process innovation, where the impact is only significant for micro and small firms. Finally, size effects are of greater importance when we distinguish between the manufacturing and service sectors. JEL Code: O30, O31, J16
    Keywords: Innovacions tecnològiques, Treball en equip, Personal Administració, Rol sexual en el medi laboral, 33 - Economia,
    Date: 2015
  6. By: Stuart Graham; Cheryl Grim; Tariqul Islam; Alan Marco; Javier Miranda
    Abstract: This paper discusses the construction of a new longitudinal database tracking inventors and patent-owning firms over time. We match granted patents between 2000 and 2011 to administrative databases of firms and workers housed at the U.S. Census Bureau. We use inventor information in addition to the patent assignee firm name to and improve on previous efforts linking patents to firms. The triangulated database allows us to maximize match rates and provide validation for a large fraction of matches. In this paper, we describe the construction of the database and explore basic features of the data. We find patenting firms, particularly young patenting firms, disproportionally contribute jobs to the U.S. economy. We find patenting is a relatively rare event among small firms but that most patenting firms are nevertheless small, and that patenting is not as rare an event for the youngest firms compared to the oldest firms. While manufacturing firms are more likely to patent than firms in other sectors, we find most patenting firms are in the services and wholesale sectors. These new data are a product of collaboration within the U.S. Department of Commerce, between the U.S. Census Bureau and the U.S. Patent and Trademark Office.
    Date: 2015–07
  7. By: Gonçalo Brás (Faculty of Economics, University of Coimbra, Portugal); Elias Soukiazis
    Abstract: The objective of this study is to analyse the impact of a variety of factors (economic, institutional, competitiveness, formal and informal) on the entrepreneurial activity of nations, given by the Total Entrepreneurial Activity rate (TEA). A panel data approach of 26 developed countries is used to evaluate the simultaneous influence of the referred factors on TEA over the period 2004-2011. Aiming to include a wide range of variables imposed by the multidisciplinary entrepreneurship concept, the stepwise regression approach is applied with backward elimination of insignificant variables. Our findings show an inverse relationship between TEA and the initial capital effort; a direct relation between TEA, monetary freedom, investment freedom, financial market development and education; and a non-linear concave relationship between TEA and the GDP per capita. However, the most significant impacts on TEA come from factors related to education level and the financial market conditions. The dynamic estimation approach shows a quite high speed of adjustment between the actual and desired rate of entrepreneurship.
    Keywords: Total Entrepreneurial Activity (TEA), Opportunity or necessity driven Entrepreneurship, Determinants of Entrepreneurship, Panel data.
    JEL: L26 M13 C31
    Date: 2015–07
  8. By: Patrick Gaule
    Abstract: I study how patents affect firm success (initial public offering or acquisition at a high price) in a sample of 2,191 U.S. startups applying for patent protection in the 24 months following their first round of venture capital funding. I observe both successful and unsuccessful patent applications and use a measure of patent exam- iner leniency as an instrument for getting patents. I find a positive effect of patents on firm success for life science firms but not for information technology firms.
    Keywords: patents; entrepreneurship; venture capital; patent examiners; acquisition; initial public offering;
    JEL: O34 G24 L26
    Date: 2015–07
  9. By: Parveneh Shahnoori (Eastern Mediterranean University, North Cyprus); Glenn P. Jenkins (Queen’s University, Canada and Eastern Mediterranean University, North Cyprus)
    Abstract: Policy makers in many countries encourage small and medium-sized enterprises (SMEs) to become more engaged in international trade activities. A complementary element to international trade is access to low-cost banking services. For policy makers and bank regulatory agencies it is important to know the value that SMEs place on alternative types of online banking services (e-banking). Using a choice experiment and a mixed logit model, we evaluate the value to these businesses of attributes of online banking, namely travel time saved, waiting time saved, unlimited 24/7 accessibility, and a high level of security. From this analysis an estimate is made of the willingness to pay for alternative packages of such services used by the SMEs in the United Arab Emirates free-trade zones. The results of this research show that 24/7 accessibility to banking services and a high level of security are statistically highly significant and valuable to these enterprises.
    Keywords: willingness to pay, online banking, SME, free-trade zone, mixed logit model
    JEL: G21 D61
    Date: 2015–09
  10. By: Ciani, Andrea; Bartoli, Francesca
    Abstract: This paper studies whether credit constraints affect the decision of small and medium size enterprises (SMEs) to upgrade the quality of their exported output with respect to the one sold domestically. We use a detailed firm-level data-set on Italian SMEs reporting information on output characteristics, credit rationing and international activities. Employing .rm credit scores used by banks for their lending decisions, we assess how credit constraints affect export quality upgrading. First, we find that exporting firms are less likely to upgrade output quality, when their credit score worsens. A one standard deviation worsening in the credit score lowers the probability of quality upgrading by more than 35 percent. Second, firms exporting to distant markets cut quality upgrading more sharply when their score worsens. The negative impact of credit constraints is confirmed when taking into account firm heterogeneity in size and other relevant .rm attributes. The main result is robust to endogeneity considerations of the credit score. Overall, our findings suggest that, by impacting export quality upgrading, credit constraints may affect the intensive margin of trade.
    Keywords: Credit Constraints,Product Quality,Distance,International Trade
    JEL: F10 F14 L15 G20 G32
    Date: 2015
  11. By: Roland Strausz; ; ;
    Abstract: Crowdfunding challenges the traditional separation between nance and marketing. It creates economic value by reducing demand uncertainty, which enables a better screening of positive NPV projects. Entrepreneurial moral hazard threatens this eect. Using mechanism design, mechanisms are characterized that induce ecient screening, while preventing moral hazard. \All-ornothing" reward-crowdfunding platforms re ect salient features of these mechanisms. Eciency is sustainable only if expected gross returns exceed twice expected investment costs. Constrained ecient mechanisms exhibit underinvestment. With limited consumer reach, crowdfunders become actual investors. Crowdfunding complements rather than substitutes traditional entrepreneurial nancing, because each nancing mode displays a dierent strength.
    Keywords: Crowdfunding, nance, marketing, demand uncertainty, moral hazard
    JEL: D82 G32 L11 M31
    Date: 2015–07
  12. By: Bobtcheff, Catherine; Levy, Raphaël
    Abstract: We consider a real option model in which a cash-constrained entrepreneur learns prior to investing, but at a speed which is private information. The entrepreneur seeks outside funding, and uses the timing of his investment to signal his confidence in the venture, and accordingly obtain cheaper credit. In the benchmark case with no informational friction, we show that the optimal investment date may be nonmonotonic or decreasing in the learning speed, depending on the prior NPV of the project: better learning increases the value of the option to wait, but also increases the speed of updating. In the presence of asymmetric information, the cash constraint may result in distortions in investment timing, and the inefficiency is higher the more stringent the cash shortage. Inefficient investment policy may take both the form of hurried investment (as compared to the benchmark), when both entrepreneur types learn suficiently fast, and of delayed investment, when the slow-learning type does not learn fast enough. Therefore, the severity of the cash constraint affects the magnitude of the timing distortion, but not its direction.
    Keywords: Signaling, investment timing, financing of innovation, real options.
    Date: 2015–04–24

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