nep-ent New Economics Papers
on Entrepreneurship
Issue of 2015‒09‒26
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. Job Creation, Small vs. Large vs. Young, and the SBA By J. David Brown; John S. Earle; Yana Morgulis
  2. Mindful Deviation through Combining Causation and Effectuation: A Design Theory-Based Study of Technology Entrepreneurship By Marine Agogue; Mats Lundqvist; Karen Williams Middleton
  3. Do individuals’ risk and time preferences predict entrepreneurial choice? By Cook, William; Whittle, Richard
  4. Institutions for Getting Out of the Way: A Comment on McCloskey By Richard N. Langlois
  5. Contract Size and Small Firm Competition in Public Procurement By Strömbäck, Elon
  6. Financing social ventures by crowdfunding: The influence of entrepreneurs’ personality traits By Susana Bernardino; J. Freitas Santos
  7. Cost of Crowdfunding as a Source of Capital for the Small Company By Anna Motylska - Kuzma
  8. The Impact of the Magyar Nemzeti Bank's Funding for Growth Scheme on Firm Level Investment By Marianna Endresz; Peter Harasztosi; Robert P. Lieli
  9. Factors influencing SMEs access to finance: A case study of Westland Division,Kenya By KUNG'U, GABRIEL KAMAU
  10. The diversity of carmakers\' behaviors vis-a-vis the Corporate Venture Capital By Vincent FRIGANT; Marina FLAMAND
  11. Le rôle de la syndication des capital-investisseurs dans le financement de l’innovation, The Role of Venture Capitalists Syndication in the Financing of Innovation By Philippe DESBRIERES

  1. By: J. David Brown; John S. Earle; Yana Morgulis
    Abstract: Analyzing a list of all Small Business Administration (SBA) loans in 1991 to 2009 linked with annual information on all U.S. employers from 1976 to 2012, we apply detailed matching and regression methods to estimate the variation in SBA loan effects on job creation and firm survival across firm age and size groups. The estimated number of jobs created per million dollars of loans within the small business sector generally increases with size and decreases in age. The results suggest that the growth of small, mature firms is least financially constrained, and that faster growing firms experience the greatest financial constraints to growth. The estimated association between survival and loan amount is larger for younger and smaller firms facing the “valley of death.”
  2. By: Marine Agogue (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Mats Lundqvist (Department of Computational Biology, School of Computer Science and Communication); Karen Williams Middleton (Chalmers - Chalmers University of Technology - Chalmers University of Technology)
    Abstract: Technology entrepreneurship can be seen as building upon while also deviating from technological paths. Such deviation has primarily been described as singular events where individuals with prior knowledge discover a new opportunity. In this article, we will instead study deviation as a process of collective decision making, seen more as something mindful than singular. The purpose is to explore mindful deviation as decision-making by nascent technology entrepreneurs as they conceptualize an early platform technology. Based on case assignments undertaken by 13 teams in a venture creation program, C-K design theory is used to trace how nascent technology entrepreneurs in action combine causal and effectual decision-making logics. Individually answered questionnaires also offered insights on how the entrepreneurs perceived their decision-making in hindsight. The findings break with our received wisdom around how opportunities are recognized as well as how effectual and causal logics occur. As a result, mindful deviation through combinations of effectual and causal logic is suggested as a means to understand early-stage technology entrepreneurship.
    Keywords: nascent,design theory,entrepreneurship,technology,effectuation
    Date: 2015
  3. By: Cook, William; Whittle, Richard
    Abstract: This study seeks to estimate whether individuals’ risk and time preferences are predictive of self employment status and entry. Prior Work: The low risk aversion of those who are self employed is well established in theory and empirical evidence, there is less evidence however on whether risk seeking in existing employees predicts future self employment entry and virtually no empirical research on the links between time preference and self employment. Approach: This study uses a quantitative approach by estimating a series of statistical models that estimate the relationship between an individuals’ risk and time preferences and whether they are (or subsequently become) self employed using a national longitudinal dataset. Results: We find that the self employed are more likely to have low risk aversion. When restricting our analysis to those who are initially employees we find that , low risk aversion combined with a preference for short term gains are most predictive of a transition into self employment. Implications and Value: This study informs the general question as to whether entrepreneurship is linked to personality traits with new evidence on the link between risk and time preference and self employment entry, in doing so it points towards attitudes toward risk and time preference that need to be encouraged if entrepreneurship is to be developed within countries and firms.
    Keywords: Risk Preference, Time Preference, Decision Making, Economics, Entrepreneurship
    JEL: C0 J0 M0
    Date: 2015
  4. By: Richard N. Langlois (University of Connecticut)
    Abstract: In “Max U versus Humanomics: a Critique of Neoinstitutionalism,” Deirdre McCloskey tells us that culture matters – maybe more than do institutions – in explaining the Great Enrichment that some parts of the world have enjoyed over the past 200 years. But it is entrepreneurship, not culture or institutions, that is the proximate cause of economic growth. Entrepreneurship is not a hothouse flower that blooms only in a culture supportive of commercial activity; it is more like kudzu, which grows invasively unless it is cut back by culture and institutions. McCloskey needs to tell us more about the structure of the relationship among culture, institutions, and entrepreneurship, and thus to continue the grand project begun by Schumpeter.
    Date: 2015–09
  5. By: Strömbäck, Elon (Department of Economics, Umeå School of Business and Economics)
    Abstract: The European Commission encourages public authorities to split procurement contracts into multiple contracts in order to increase the competiveness of small and medium sized enterprises (SMEs). In this paper, I use data from Swedish public procurement auctions for internal regular cleaning service contracts to study the effect of contract size and number of contracts on SME participation and the probability of submitting the winning bid. I found that SME participation is negatively related to both contract size and the number of contracts in the procurement. A possible interpretation is that reduced contract size in order to stimulate SME participation is counteracted by reduced incentives for them to enter into procurements with multiple contracts. Medium-sized firms are also more successful when bidding for smaller contracts relative to large firms. Nevertheless, the results indicate that the SMEs’ award rate is positively correlated with the number of contracts in the procurement.
    Keywords: Procurement design; Split-award; Endogenous entry; Small and medium sized enterprises
    JEL: D44 H11 H57 L23
    Date: 2015–09–15
  6. By: Susana Bernardino (Politécnico do Porto/ISCAP/CECEJ, Porto); J. Freitas Santos (Politécnico do Porto/ISCAP/CECEJ e Universidade do Minho/NIPE)
    Abstract: Purpose – This research aims to understand the role played by social entrepreneurs’ personality traits on the choice between the traditional donation model and social crowdfunding (CF) to finance social projects. Design/methodology/approach – Social CF is examined as an instrument to capture funds for social projects, and the particular case of the Portuguese Social Stock Exchange (PSSE) is presented. The approach is quantitative in nature and the data were collected through a questionnaire that was emailed to non-governmental organizations in Portugal and founders of the projects listed on PSSE. Logistic regression was employed to predict the probability that a social entrepreneur would use PSSE rather than traditional financing. The predictor variables were based on the big five personality traits. Findings – Our investigation reveals that the agreeableness and neuroticism factors were not even considered in the results of the factorial analysis, which indicates the minor importance of these personality traits in the funding decisions of the Portuguese social entrepreneurs. The same applies to the factors of openness to new experiences and extraversion, which, although considered in the logistic analysis, showed no statistical significance. Finally, the conscientiousness personality trait seems to be the only factor that might explain the use of the PSSE platform. Originality/value – Studies on the profile of the social entrepreneurs that use CF for financing social projects are relatively rare, specifically in the context of Social Stock Exchange platforms. Additionally, there is a need to carry out more empirical evidence about the effect of social entrepreneurs’ personality traits on the decision to finance social projects through social CF platforms vis-a-vis the traditional donation model.
    Keywords: Social Entrepreneurship, Social Crowdfunding, Social Entrepreneur’s Personality traits, Social Ventures, Portuguese Social Stock Exchange.
    Date: 2015
  7. By: Anna Motylska - Kuzma (Wroclaw School of Banking)
    Abstract: The main object of this paper is to analyse advantages and disadvantages of capital deriving from crowdfunding compared to other sources of capital used in a company, especially in the SMEs. As the main factor used for comparison I take the cost of capital, because it is crucial in the decision process of choosing the source of financing. The explored data is mainly obtained from the Polish economy, but I use the European and World context, too. To contrast the capital from crowdfunding I have chosen debt funds (i.e. bank loans, commercial papers and leasing or hire-purchase) and equity funds (i.e. issue of shares, venture capital or private equity funds, business angels) as the more traditional sources used to finance innovative projects in the company. Although the conventional sources of capital could be cheaper or easier to raise, they have many limitation to use, especially for SMEs and earlystage enterprises. Additionally, they are not able to ensure and provide demand for the new ideas offered by firms. This fact definitely changes the cost of used capital, especially when it should finance an innovative project
    Keywords: crowdfunding, cost of capital, innovative project, SME, financial strategy
    JEL: G24 G30 G32
  8. By: Marianna Endresz (Magyar Nemzeti Bank (the Central Bank of Hungary)); Peter Harasztosi (Magyar Nemzeti Bank (the Central Bank of Hungary)); Robert P. Lieli (Magyar Nemzeti Bank (the Central Bank of Hungary))
    Abstract: The Magyar Nemzeti Bank (the Central Bank of Hungary) introduced a “funding for lending” type loan program aimed at small and medium sized enterprises (SMEs) in mid-2013. We combine firms’ balance sheet data with two loan data sets to study the program’s impact on firm level investment in 2013. We start from a simple difference-in-differences (DID) estimator, but argue that the parallel trend assumption that underlies the method is likely violated. Therefore, we propose a correction based on the idea that the selection process involved in securing a market loan in a pre-program year is similar to the selection process into the program. Our results indicate that the program succeeded in generating extra investment in the SME sector that would not have taken place otherwise; specifically, we attribute to the program about 30% of the total investment undertaken by participating firms. Nevertheless, the effect is markedly heterogeneous with respect to firm size, being proportionally larger for smaller firms.
    Keywords: funding for lending, program evaluation, difference-in-differences estimation, unconventional monetary policy.
    JEL: D04 G38 E58
    Date: 2015
    Abstract: SMEs have been recognized as being great contributors to the Kenyan economy offering both employment and platform for innovative ideas. They form a larger percentage of the businesses that operate in Kenya as compared to their counterpart, the large companies. They are however faced by many constraints that hinder their performance and consequently their growth. One of the main constraints that have been highlighted over the years is the financial constraint. The need for finance is of paramount importance for the success of any firm, be it big or small. The purpose of this research was to investigate the factors that influence SMEs’ access to funding. The literature explored in this research highlight three main factors, namely firm’s, financial and entrepreneurial characteristics. These form the independent variables in the theoretical framework that influence the dependent variable, that is, access to external funding. The analysis involves primary data obtained through questionnaire and interviews and secondary data from journals, books and internet. This report contributes as a wake up call to the financial system to be more and more SMEs’ sensitive and offer financial services that are all inclusive. The financing gap, in the credit market, that exists between large and small companies need to be abridged. This can be achieved by creating an enabling environment for SME, formulating regulatory framework that is SMEs’ friendly, segmenting NSE for SMEs’ listing. SMEs are also called up to keep good financial report and to form linkages or associations to ease the burden of accessing funds.
    Keywords: SMEs, Financial inclusion, credit rating, MFIs, enabling environment
    JEL: G20
    Date: 2011
  10. By: Vincent FRIGANT; Marina FLAMAND
    Abstract: This paper wishes to contribute to the literature about the industrial firms\' motivations to invest in Corporate Venture Capital programs. In a first part, we build a typology on CVC objectives based on a literature review. Then we apply this typology to carmakers’ CVC programs. We study 13 worldwide car manufacturers. Results show a poor interest of car makers vis-à-vis CVC programs. However, the existing programs show that strategic objectives are the most common objectives even if some others objectives are also pursued, like the “relational objective”. Summarizing the results, we identify four typical behaviors of carmakers vis-à-vis CVC programs. We conclude by a discussion about the automotive industry specificity, and we call upon other sectoral studies based on a qualitative method.The diversity of carmakers\' behaviors vis-a-vis the Corporate Venture Capital
    Keywords: Corporate Venture Capital, CVC, Innovation, Automotive, Investment strategy, Entrepreneurial Finance
    JEL: G3 G34 L62 M13
    Date: 2015
  11. By: Philippe DESBRIERES (IAE DIJON - Université de Bourgogne (CREGO))
    Abstract: (VF) La pratique de la syndication est notablement développée dans le métier du capital-investissement, quel que soit le stade de développement, le secteur d’activité et la nationalité de l’entreprise financée. La syndication s’explique autant par des arguments financiers (partage des risques entre capital-investisseurs ; gouvernance du management de l’entreprise financée...) que par la nécessité d’une part, d’accéder à des ressources (informations, compétences) en matière de sélection et de surveillance des investissements et, d’autre part, de partager, voire créer, des connaissances. L’objectif de cette synthèse de la littérature est d’étudier dans quelle mesure cette pratique favorise ou contraint l’innovation et son financement dans les firmes entrepreneuriales. (VA) Syndication is a highly developed practice in the venture capital industry, whatever are the stage of development, the industry sector and the nationality of the financed company. It can be explained by financial arguments (sharing of risks between venture capitalists; governance of managemers of the financed firm) as well as by the necessity, on the one hand, to reach resources (information, skills) regarding selection and control of the investments and, on the other hand, to share or create knowledge. The objective of this survey is to study to what extent this practice favor or limit innovation and its financing within entrepreneurial firms.
    Keywords: capital-investissement, syndication, innovation, financement;Venture Capital, Syndication, Innovation, Financing
    JEL: G24 L26 O31
    Date: 2015–05

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