nep-ent New Economics Papers
on Entrepreneurship
Issue of 2015‒12‒08
sixteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Learning Entrepreneurship from other Entrepreneurs? By Luigi Guiso; Luigi Pistaferri; Fabiano Schivardi
  2. Where Has All the Skewness Gone? The Decline in High-Growth (Young) Firms in the U.S. By Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
  3. Self‐Employment amongst Migrant Groups in England and Wales: New Evidence from Census Microdata By Clark, Ken; Drinkwater, Stephen; Robinson, Catherine
  4. Breaking the metal ceiling : female entrepreneurs who succeed in male-dominated sectors By Campos,Francisco Moraes Leitao; Goldstein,Markus P.; Mcgorman,Laura; Munoz Boudet,Ana Maria; Pimhidzai,Obert
  5. Psychometrics as a tool to improve screening and access to credit By Arráiz,Irani; Bruhn,Miriam; Stucchi,Rodolfo Mario
  6. Access to finance for innovative SMEs since the financial crisis By Neil Lee; Hiba Sameen; Marc Cowling
  7. The globalisation of angel investments By Josh Lerner; Antoinette Schoar; Stanislav Sokolinski; Karen E. Wilson
  8. Cross-Regional Variations in the Level of Entrepreneurial Activity in Russia by Type of Motivation: Determining Factors By Alexander Chepurenko; Olga Obraztsova; Vladimir Elakhovsky
  9. Reducing Asymmetric Information in Venture Capital Backed IPOs By Escobari, Diego; Serrano, Alejandro
  10. Net employment growth by firm size and age in Italy By Francesco Manaresi
  11. Leadership, communication and innovation By Bel, Roland; Smirnov, Vladimir; Wait, Andrew
  12. Patents Rights and Innovation by Small and Large Firms By Galasso, Alberto; Schankerman, Mark
  13. Subsidies, financial constraints and firm innovative activities in developing economies By Simona Mateut
  14. Social Entrepreneurship in Russia: Key Players and Development Potentiality By Alena I. Nefedova
  15. Creación y destrucción comparada de cooperativas de trabajadores y empresas capitalistas en Uruguay By Andrés Dean
  16. Impact du développement financier sur la dynamique de création des entreprises : évidence en données de panel sur les pays du MENA By GHANEM, Yasmina; ACHOUCHE, Mohamed

  1. By: Luigi Guiso (EIEF); Luigi Pistaferri (Stanford University); Fabiano Schivardi (Bocconi University and EIEF)
    Abstract: We document that individuals who grew up in areas with high density of firms are more likely, as adults, to become entrepreneurs, controlling for the density of firms in their current location. Conditional on becoming entrepreneurs, the same individuals are also more likely to be successful entrepreneurs, as measured by business income or firm productivity. Strikingly, firm density at entrepreneur’s young age is more important than current firm density for business performance. These results are not driven by better access to external finance or intergenerational occupation choices. They are instead consistent with entrepreneurial capabilities being at least partly learnable through social contacts. In keeping with this interpretation, we find that entrepreneurs who at the age of 18 lived in areas with a higher firm density tend to adopt better managerial practices (enhancing productivity) later in life.
    Date: 2015
  2. By: Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
    Abstract: The pace of business dynamism and entrepreneurship in the U.S. has declined over recent decades. We show that the character of that decline changed around 2000. Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms. Prior research has shown that the sustained contribution of business startups to job creation stems from a relatively small fraction of high-growth young firms. The presence of these high-growth young firms contributes to a highly (positively) skewed firm growth rate distribution. In 1999, a firm at the 90th percentile of the employment growth rate distribution grew about 31 percent faster than the median firm. Moreover, the 90-50 differential was 16 percent larger than the 50-10 differential reflecting the positive skewness of the employment growth rate distribution. We show that the shape of the firm employment growth distribution changes substantially in the post-2000 period. By 2007, the 90-50 differential was only 4 percent larger than the 50-10, and it continued to exhibit a trend decline through 2011. The reflects a sharp drop in the 90th percentile of the growth rate distribution accounted for by the declining share of young firms and the declining propensity for young firms to be high-growth firms.
    Date: 2015–11
  3. By: Clark, Ken (University of Manchester); Drinkwater, Stephen (University of Roehampton); Robinson, Catherine (University of Kent)
    Abstract: Self‐employment constitutes a vital part of the economy since entrepreneurs can provide not only employment for themselves but also for others. The link between self‐employment and immigration is, however, complex since self‐employment can be viewed as both a haven from the paid labour market or as a source of economic growth. Moreover, the nature of self-employment has changed considerably in recent decades, especially with regards to providing a flexible form of employment for many demographic groups. We investigate the evolving relationship between self‐employment and immigration in the UK using recently released microdata from the 2011 Census for England and Wales. Our findings indicate large variations, with high self‐employment rates observed for some groups with a long established history of migration to the UK (especially men born in Pakistan) and also for some groups who have arrived more recently (such as from the EU's new member states). We further explore the differences, analyse variations by gender and identify key determining factors. In addition to certain socio‐economic characteristics, it is found that migration‐related influences, such as English language proficiency and period of arrival in the UK, play an important role for some groups.
    Keywords: self‐employment, immigrants, United Kingdom
    JEL: J61 F22 J21
    Date: 2015–11
  4. By: Campos,Francisco Moraes Leitao; Goldstein,Markus P.; Mcgorman,Laura; Munoz Boudet,Ana Maria; Pimhidzai,Obert
    Abstract: A range of reasons is cited to explain gender differences in business performance in Africa. Within those, the sector of operations is consistently identified as a major issue. This paper uses a mixed methods approach to assess how women entrepreneurs in Uganda start (and strive) operating firms in male-dominated sectors, and what hinders other women from doing so. The study finds that women who cross over into male-dominated sectors make as much as men, and three times more than women who stay in female-dominated sectors. The paper examines a set of factors to explain the differences in sector choices, and finds that there is a problem of information about opportunities in male-dominated industries. The analysis also concludes that psychosocial factors, particularly the influence of male role models and exposure to the sector from family and friends, are critical in helping women circumvent or overcome the norms that undergird occupational segregation.
    Keywords: E-Business,Gender and Health,Gender and Law,Access to Finance,Gender and Development
    Date: 2015–12–02
  5. By: Arráiz,Irani; Bruhn,Miriam; Stucchi,Rodolfo Mario
    Abstract: This paper studies the use of psychometric tests, which were designed by the Entrepreneurial Finance Lab as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. The analysis uses administrative data covering the period from June 2011 to April 2014 to compare debt accrual and repayment behavior patterns across entrepreneurs who were offered a loan based on the traditional credit-scoring method versus the Entrepreneurial Finance Lab tool. The paper finds that the psychometric test can lower the risk of the loan portfolio when used as a secondary screening mechanism for already banked entrepreneurs?that is, those with a credit history. For unbanked entrepreneurs?those without a credit history?using the Entrepreneurial Finance Lab tool can increase access to credit without increasing portfolio risk.
    Keywords: Access to Finance,Bankruptcy and Resolution of Financial Distress,Debt Markets,Banks&Banking Reform,Microfinance
    Date: 2015–12–03
  6. By: Neil Lee; Hiba Sameen; Marc Cowling
    Abstract: In the wake of the 2008 financial crisis, there has been increased focus on access to finance for small and medium sized firms. Some evidence from before the crisis suggested that it was harder for innovative firms to access finance. Yet no research has considered the differential effect of the crisis on innovative firms. This paper addresses this gap using a dataset of over 10,000 UK SME employers. We find that innovative firms are more likely to be turned down for finance than other firms, and this worsened significantly in the crisis. However, regressions controlling for a host of firm characteristics show that the worsening in general credit conditions has been more pronounced for non-innovative firms with the exception of absolute credit rationing which still remains more severe for innovative firms. The results suggest that there are two issues in the financial system. First, we find evidence of a structural problem which restricts access to finance for innovative firms. Second, we show a cyclical problem has been caused by the financial crisis and impacted relatively more severely on non-innovative firms.
    Keywords: Finance; SME; Entrepreneurship; Recession; Innovation
    JEL: G21 G32 L2 O31
    Date: 2015–03
  7. By: Josh Lerner; Antoinette Schoar; Stanislav Sokolinski; Karen E. Wilson
    Abstract: Highlights The last decade has seen a rapid expansion and deepening of the types of vehicles that fund start-up firms in the U.S. and worldwide. In particular, we have seen a growing role of angel groups and other more “individualistic” funding options for start-ups, such as super angels or crowd sourcing platforms. Authors seek to understand the nature and consequences of angel investments across a variety of geographies with varying levels of venture capital markets and other forms of risk capital. They ask whether angel investors improve the outcomes and performance of the start-ups they invest in. Furthermore we want to understand whether and how the types of firms that seek angel funding vary with the overall entrepreneurial ecosystem in a country. Authors examine the records of 13 angel investment groups based in 12 nations and with applicants for financing transactions from 21 nations, examining both the applicants that were considered and rejected and those that were funded. Key findings from the analysis are two-fold. First, angel investors have a positive impact on the growth of the firms they fund, their performance, and survival. Second, they find that the selection of firms that apply for angel funding is different across countries.
    Date: 2015–09
  8. By: Alexander Chepurenko (National Research University Higher School of Economics); Olga Obraztsova (Russian State Social University); Vladimir Elakhovsky (National Research University Higher School of Economics)
    Abstract: The paper deals with the difference in the share of opportunity-based early entrepreneurs among regions in Russia, which is an important indicator of the ‘quality’ of the entrepreneurial activity. We invent an index called the share of opportunity-based early entrepreneurs (SOBE) which is defined as the number of nascent entrepreneurs and new business owners who are driven by the search for new opportunities and towards the realization of their own values when starting-up and developing their businesses. It is shown that the differences in SOBE levels among Russian regions are statistically significant; cross-regional differences in the SOBE level reflect a certain set of regional social and economic factors right away or with an one-year or two-year lag; they may depend on the tempo of changes in a certain set of factors related to social and economic development in given regions. Among the confirmed hypotheses are the following: a successive growth of private investment in the regional economy as well as a stable increase of real wages of employed population are factors that decrease a region’s SOBE level; moreover, the higher the population’s access to PC and Internet at home, the higher is the related region’s SOBE level. The empirical part is based on the survey designed by the Higher School of Economics which was conducted in 2011 in 79 regions of Russia with a sample of 56 900 respondents. The survey is representative for the structure of the adult population in each of the surveyed regions
    Keywords: entrepreneurial activity, entrepreneurial motivation, regional economy, entrepreneurship in Russia
    JEL: L26 R11
    Date: 2015
  9. By: Escobari, Diego; Serrano, Alejandro
    Abstract: Purpose – The purpose of this paper is to model asymmetric information and study the profitability of venture capital (VC) backed initial public offerings (IPOs). Our mixtures approach endogenously separates IPOs into differentiated groups based on their returns’ determinants. We also analyze the factors that affect the probability that IPOs belong to a specific group. Design/methodology/approach – We propose a new method to model asymmetric information between investors and firms in VC backed IPOs. Our approach allows us to identify differentiated companies under incomplete information. We use a sample of 2,404 U.S. firms from 1980 through 2012 to estimate our mixture model via maximum likelihood. Findings – We find strong evidence that companies can be separated into two groups based on how IPO returns are determined. For companies in the first group the results are similar to previous studies. For companies in the second group we find that profitability is mainly affected by the reputation of the seed VC and capital expenditures. Tangible assets and age help explain group affiliation. We also motivate our findings for a continuum of heterogeneous IPO groups. Practical implications – The proposed mixture approach helps decrease asymmetric information for investors, regulators, and companies. Originality/value – Our mixture methods help decrease asymmetric information between investors and firms improving the probability of making profitable investments. Separating between groups of IPOs is crucial because different determinants of an IPO operating performance can potentially have opposite effects for different groups.
    Keywords: Venture Capital, Mixture Model, Initial Public Offerings
    JEL: C31 D82 G24 G32
    Date: 2015–11–20
  10. By: Francesco Manaresi (Bank of Italy)
    Abstract: We study how net employment growth rates differ by firm age and size. For this purpose, we exploit a long panel dataset collecting information for all Italian private firms with at least one employee. We find that firm size is not a crucial determinant of firm growth, once age is controlled for. Firms in their early years of life (up to 3 years) display higher growth rates and slightly higher exit rates than older firms. This up-or-out dynamic of Italian firms seem subdued if compared with the US, the other country for which a similar analysis is available. We also exploit the long time series to identify which types of firms are hit the most during economic downturns. Results show that older firms reduce net employment growth the most. The impact on younger firms seem partially cushioned by stronger selection at entry. Conditional on age, size turns out not to be significantly correlated with the drop in net employment growth rates during downturns.
    Keywords: employment growth, firm size, firm age
    JEL: D22 L25
    Date: 2015–11
  11. By: Bel, Roland; Smirnov, Vladimir; Wait, Andrew
    Abstract: We study the interplay between communication, leadership attributes and the probability of successful innovation. Although a firm requires both strong leadership and sufficient communication to overcome inertia, we posit that frequent communication – particularly amongst strong managers and in larger firms – can cause leaders to pull the firm in different directions, resulting in disagreement and a failure to successfully innovate. Using a uniquely detailed establishment-level data set we find that, on their own, firm size, regular communication and result-oriented leadership are all positively associated with innovation. However, as predicted by our model, the use of frequent communication in successfully innovating firms is moderated: (i) when leaders tend to be strongly focussed on results; and (ii) in larger firms.
    Keywords: Innovation; Communication; Leadership: Inertia
    Date: 2015–12
  12. By: Galasso, Alberto; Schankerman, Mark
    Abstract: This paper studies the causal impact of patents on subsequent innovation by the patent holder. The analysis is based on court invalidation of patents by the U.S. Court of Appeals for the Federal Circuit, and exploits the random allocation of judges to control for the endogeneity of the judicial decision. Patent invalidation leads to a 50 percent decrease in patenting by the patent holder, on average, but the impact depends critically on characteristics of the patentee and the competitive environment. The effect is entirely driven by small innovative firms in technology fields where they face many large incumbents. Invalidation of patents held by large firms does not change the intensity of their innovation but shifts the technological direction of their subsequent patenting.
    Keywords: courts; innovation; patents
    JEL: K41 L24 O31 O32 O34
    Date: 2015–11
  13. By: Simona Mateut
    Abstract: This paper extends the investigation on the relationship between public subsidies and innovation to firms in developing economies. The analysis merges the innovation subsidy literature with the stream focusing on financial constraints for innovation. Innovation is defined broadly to include the introduction of new products or services and the upgrade of existing ones, which is relevant for developing economies. The results obtained using a range of econometric techniques and alternative measures of financial constraints suggest a positive correlation between public subsidies and the innovative activities of 11,998 firms across thirty Eastern Europe and Central Asia countries.
    Keywords: innovation, subsidies, financial constraints
    Date: 2015
  14. By: Alena I. Nefedova (National Research University Higher School of Economics)
    Abstract: This article presents an overview of different approaches to the definition of social entrepreneurship and contains the findings of a survey on the process of its development in Russia. Whereas this type of business is institutionalized in the economy of the U.S. and certain European nations, where special laws are developed for it and significant tax benefits are afforded in certain cases, it is in its initial state in Russian society. Its development in the Russian economy will largely depend on the actions taken by the key players in the emerging organizational field and not solely on socio-economic and historical conditions. A series of expert interviews at the first study stage resulted in identification of the key players, in particular, ‘Our Future’ – the foundation for regional social programs that served as the monopolistic source of financial support for social entrepreneurship during the study. To find out what social entrepreneurship model is taking shape in Russia, 186 applications completed by different organizations seeking social entrepreneurship financing support were reviewed. The applications were made during a three year period of the Foundation’s business. The review suggested that the Foundation mostly backs up those social programs capable of becoming independent from external financial sources
    Keywords: social entrepreneurship, organizational field, non-profit entities, new institutionalism
    JEL: L26
    Date: 2015
  15. By: Andrés Dean (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This paper revisits the question of why there are so few labor-managed firms in capitalist economies. We analyze the processes of creation (entries) and destruction (exits) of labor-managed firms, compare to capitalist firms. We focus on macroeconomic conditions changes that affect firms, favoring its creation or dissolution. And particularly if these changes affect labor-managed firms and capitalist firms differently. We use a panel data including the universe of worker cooperatives and a sample of 20% of Uruguayan capitalist firms, during the period 1996-2013. While part of the theoretical and empirical literature suggests that entries and exits of labor-managed firms follow a countercyclical pattern, we find evidence partially supporting this hypothesis. Furthermore our evidence suggests that creation and dissolution flows of this kind of firms are also driven by institutional factors.
    Keywords: Entries, Exits, Business cycle, Labor-managed Firms
    JEL: D21 J54
    Date: 2015–10
  16. By: GHANEM, Yasmina; ACHOUCHE, Mohamed
    Abstract: Résumé: Sur un panel de 14 pays de la région Moyen Orient, Afrique du Nord (MENA), le présent papier examine si le développement financier entraîne un effet considérable sur le développement de l’entrepreneuriat en facilitant l’émergence de nouvelles entreprises. Les résultats estimés par les doubles moindres carrés généralisés en variables instrumentales accentuent l’importance des systèmes financiers développés pour la dynamique de création des entreprises. Globalement, le développement financier et sa composante expliquée par la qualité institutionnelle affectent positivement et significativement la densité d’entrée dans les pays pétroliers comparativement aux pays non pétroliers.
    Abstract: Using a panel of 14 Middle East, North Africa (MENA) countries, this paper investigates and examines whether financial development trains a substantial effect on entrepreneurship development by facilitating the rise of new firms. Generalized Two-Stage Least Squares estimate results with instrumental variables highlight the relevance of developed financial systems for the creation of new firms. In Overall, financial development and its component explained by the institutional quality exert a positive and significant effect on new entry density in oil MENA countries compared to non-oil ones.
    Keywords: développement financier, création des entreprises, densité d’entrée, MENA, panel.
    JEL: C23 E69 G21 L26
    Date: 2015–11–30

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