nep-ent New Economics Papers
on Entrepreneurship
Issue of 2015‒12‒20
eight papers chosen by
Marcus Dejardin
Université de Namur

  1. Fractionalization and Entrepreneurial Activities By Awaworyi Churchill, Sefa
  2. Endogenous firm entry in an estimated model of the US business cycle. Updated version By Offick, Sven; Winkler, Roland C.
  3. Changing saving and investment behavior: the impact of financial literacy training and reminders on micro-businesses By ABEBE, Girum; TEKLE, Biruk; MANO, Yukichi
  4. Agglomeration and innovation By Carlino, Gerald; Kerr, William R.
  5. R&D partnerships and innovation performance: Can there be too much of a good thing? By Hottenrott, Hanna; Lopes-Bento, Cindy
  6. Reducing Asymmetric Information in Venture Capital Backed IPOs By Escobari, Diego; Serrano, Alejandro
  7. Accounting Information Quality and Government Guaranteed Loans: Evidence from Japanese SMEs By Hyonok KIM; YASUDA Yukihiro
  8. Policies for Productivity Growth By Chang-Tai Hsieh

  1. By: Awaworyi Churchill, Sefa
    Abstract: The vast majority of the literature on ethnicity and entrepreneurship focuses on the construct of ethnic entrepreneurship. However, very little is known about how ethnic heterogeneity affects entrepreneurship. This study attempts to fill the gap, and thus examines the effect of ethnic heterogeneity on entrepreneurial activities in a cross-section of 90 countries. Using indices of ethnic and linguistic fractionalization, we show that ethnic heterogeneity negatively influences entrepreneurship. We argue that potential channels that can explain the negative effect of fractionalization on entrepreneurship include trust, social network, social capital, innovation, and discrimination among others. Results are robust to several checks.
    Keywords: entrepreneurship,ethnic diversity,fractionalization
    Date: 2015–12–07
  2. By: Offick, Sven; Winkler, Roland C.
    Abstract: A recent theoretical literature highlights the role of endogenous firm entry as an internal amplification mechanism of business cycle fluctuations. The amplification mechanism works through the competition and the variety effect. This paper tests the significance of this amplification mechanism, quantifies its importance, and disentangles the competition and the variety effect. To this end, we estimate a medium-scale real business cycle model with firm entry for the U.S. economy. The competition and the variety effect are estimated to be statistically significant. Together, they amplify the volatility of output by 8.5 percent relative to a model in which both effects are switched off. The competition effect accounts for most amplification, whereas the variety effect only plays a minor role.
    Keywords: Bayesian estimation,Business Cycles,Competition Effect,Entry,Mark-ups,Variety Effect
    JEL: E20 E32
    Date: 2015
  3. By: ABEBE, Girum; TEKLE, Biruk; MANO, Yukichi
    Abstract: In developing countries, savings is an important financial tool, particularly for micro-business with limited access to credit. However, micro-entrepreneurs often undersave, even when they have some surplus and the desire to save may be because of a knowledge gap and behavioral biases. We employed an experimental approach relaxing these savings constraints to explore the effects of providing financial literacy training and reminders to micro-entrepreneurs in Ethiopia. While financial literacy training alone seemed ineffective, the reminders significantly increased the savings-to-sales ratio by 54.5%, the percentage of business proceeds reinvested back to business by 91.0 %, and the percentage of savings goal achieved by 116%. Joint treatment significantly increased the percentage of savings goal achieved by 66.5% and deposit in an ordinary bank account by 84%. Our results confirm earlier findings that savings can be limited by attention, whereas how entrepreneurs manage savings depends on their levels of financial literacy [151 words].
    Keywords: savings, reminders, financial training, entrepreneurs
    JEL: D92 E21 L26
    Date: 2015–12–08
  4. By: Carlino, Gerald (Federal Reserve Bank of Philadelphia); Kerr, William R. (Harvard University, Bank of Finland, and NBER)
    Abstract: This paper reviews academic research on the connections between agglomeration and innovation. We first describe the conceptual distinctions between invention and innovation. We then discuss how these factors are frequently measured in the data and note some resulting empirical regularities. Innovative activity tends to be more concentrated than industrial activity, and we discuss important findings from the literature about why this is so. We highlight the traits of cities (e.g., size, industrial diversity) that theoretical and empirical work link to innovation, and we discuss factors that help sustain these features (e.g., the localization of entrepreneurial finance).
    Keywords: agglomeration; clusters; innovation; invention; entrepreneurship
    JEL: J20 J60 L10 L20 L60 O30 R10 R30
    Date: 2015–12–10
  5. By: Hottenrott, Hanna; Lopes-Bento, Cindy
    Abstract: R&D collaboration facilitates pooling of complementary skills, learning from the partner as well as sharing risks and costs. Research therefore repeatedly stressed the positive relationship between collaborative R&D and innovation performance. Fewer studies addressed potential drawbacks of collaborative R&D. Collaborative R&D comes at the costs of coordination and monitoring, requires knowledge disclosure and involves the risk of opportunistic behaviour by the partners. Thus, while the net gains from collaboration can be high initially, cost may start to outweigh those benefits if firms engage in multiple collaborative projects simultaneously. This study explicitly considers a firm's collaboration intensity, that is, the share of collaborative R&D projects in the firms' total R&D project portfolio. For a sample of 2,891 firms located in Germany, active in abroad range of manufacturing and service sectors and of which 86% are SMEs, we indeed find that increasing the share of collaborative R&D projects in total R&D projects is associated with a higher probability of product innovation and with a higher market success of new products. While we can confirm previous findings in terms of gains for innovation performance, we also find that collaboration has decreasing and even negative returns on product innovation if its intensity increases above a certain threshold. Consequently, the relationship between collaboration intensity and innovation has an inverted-U shape. In particular, costs start outweighing benefits if a firm pursues more than about two thirds of its R&D projects in collaboration. This result is robust to conditioning market success to the introduction of new products and to accounting for the selection into collaborating.
    Keywords: innovation performance,product innovation,R&D partnerships,collaboration intensity,financing constraints,collaboration complexity,transaction costs,selection model,endogenous switching
    JEL: O31 O32 O33 O34
    Date: 2015
  6. 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,Asymmetric Information
    JEL: C31 D82 G24 G32
    Date: 2015–11–20
  7. By: Hyonok KIM; YASUDA Yukihiro
    Abstract: We empirically investigate the effects of accounting information quality, as measured by accruals quality, on the use of government guaranteed loans, which we regard as a form of transaction lending. We find that higher accruals quality is associated with higher use rates of government guaranteed loans, but not associated with use rates of nonguaranteed (i.e., regular) loans, which we consider to constitute relationship lending within the Japanese context. We also find that higher accruals quality is not related to the interest rate for guaranteed loans, but is associated with a lower interest rate for nonguaranteed loans. These results indicate that the relevant accounting information is effectively used in the screening processes for small and medium-sized enterprises (SMEs), but that the effectiveness varies depending on the particular lending technology employed.
    Date: 2015–12
  8. By: Chang-Tai Hsieh
    Abstract: Growth, investment and trade are the outcomes of the processes by which people with ideas start firms. But where does the productive capacity of firms come from? What are the barriers that prevent resources to flow to the firms with the greatest potential? Why is it that not all people that possess entrepreneurial talent choose to start firms? This paper reviews the micro forces that matter for aggregate productivity growth focusing on six issues: costs to reallocating labour and capital, the influence of firm ownership and political connections, informality, the allocation of talent across the economy, barriers to internal trade and the working of housing markets. It concludes that the forces are complex but matter tremendously for macro productivity and addressing them requires a wide combination of policies.<P>Le rôle des politiques publiques pour la croissance de la productivité<BR>La croissance, l’investissement et le commerce découlent de processus par lesquels les personnes qui ont des idées créent des entreprises. Mais d’où vient la capacité productive des entreprises? Quels sont les obstacles qui empêchent la circulation des ressources vers les entreprises ayant le plus grand potentiel? Comment se fait-il que toutes les personnes qui ont un talent d’entrepreneur ne choisissent pas de créer des entreprises? Ce document examine les facteurs microéconomiques qui influencent la croissance de la productivité agrégée en se concentrant principalement sur six d’entre eux : les coûts de la réaffectation du travail et du capital, l’influence de la propriété de l’entreprise et des relations politiques, l’informalité, la répartition des talents à travers l’économie, les obstacles au commerce intérieur et le fonctionnement des marchés du logement. La conclusion est que ces facteurs sont complexes mais ont un effet considérable sur la productivité au niveau macroéconomique et leur traitement exige l’application d’un large éventail de politiques publiques.
    Keywords: productivity, institutions, growth, institutions, productivité, croissance
    JEL: O4 O43 O47
    Date: 2015–12–14

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