nep-ent New Economics Papers
on Entrepreneurship
Issue of 2016‒01‒03
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. Growth in first- and second-generation immigrant firms in Sweden By Efendic, Nedim; Andersson, Fredrik W.; Wennberg, Karl
  2. High-growth firms: Not so vital after all? By Daunfeldt, Sven-Olov; Halvarsson, Daniel; Mihaescu, Oana
  3. Bursting into life: Firm growth and growth persistence by age By Coad, Alex; Daunfeldt, Sven-Olov; Halvarsson, Daniel
  4. The enduring importance of family wealth: Evidence from the Forbes 400, 1982 to 2013 By Korom, Philipp; Lutter, Mark; Beckert, Jens
  5. Mobility and Entrepreneurship: Evaluating the scope of knowledge-based theories of entrepreneurship By Fredriksen, Lars; Wennberg, Karl; Balachandran, Chanchal
  6. Learning Entrepreneurship From Other Entrepreneurs? By Guiso, Luigi; Pistaferri, Luigi; Schivardi, Fabiano
  7. User Entrepreneurship: Defining and Identifying Explicit Type of Innovation By Freshwater, David; Wojan, Timothy J.
  8. Do Micro-Entrepreneurship Programs Increase Wage-Work? Evidence from Chile By Claudia Martínez A.; Esteban Puentes; Jaime Ruiz-Tagle
  9. R&D as an Investment in Knowledge Based Capital By Link, Albert; Swann, Christopher
  10. Impact of Incubation on Innovative Firms By José Ignacio Rivero
  11. What Matters More for Economic Development, the Amount of Funding or the Number of Projects Funded? Evidence from the Community Development Financial Investment Fund By Kaitlyn R. Harger; Amanda Ross; Heather M. Stephens

  1. By: Efendic, Nedim (Stockholm School of Economics); Andersson, Fredrik W. (Statistics Sweden); Wennberg, Karl (Institute for Analytical Sociology (IAS) & Department of Management and Engineering Linköping University, Sweden and Ratio Institute)
    Abstract: Despite the burgeoning literature on immigrant entrepreneurship, there is a dearth of research on the social and economic factors shaping the performance of immigrant-run firms. Drawing upon human and social capital theory and assimilation theory, we investigate differences in performance measured as revenue growth in a comparative study of native and immigrant CEOs. Following 50,002 small firms in Sweden over four years, we find distinct patterns in both firm size and revenue growth between firms managed by immigrants and by natives. While firms run by second-generation immigrants from OECD countries exhibit higher growth rates than natives, the reverse is true for second generation immigrants from non-OECD countries, suggesting that economic integration in terms of immigrants’ small business growth in Sweden is characterized by segmented rather than universal assimilation.
    Keywords: Immigrant entrepreneurship; intergenerational differences; firm growth; Sweden
    JEL: J61 M13 O18
    Date: 2015–12–23
  2. By: Daunfeldt, Sven-Olov (HUI Research and Dalarna University); Halvarsson, Daniel (The Ratio Institute); Mihaescu, Oana (HUI Research and Dalarna University)
    Abstract: High-growth firms have received considerable interest recently since they create most of the new jobs in the economy. The purpose of our paper is to investigate the characteristics of high-growth firms prior to their growth period, and whether these characteristics differ across industries. Using data on a large sample of limited liability firms in Sweden for the period 2007-2010, we find that high-growth firms do not have the characteristics that we typically associate with successful firms. On the contrary, our results indicate that high-growth firms have low profits and a weak financial position. This might explain why studies have found that high-growth firms are seldom capable of sustaining their high growth rates in subsequent periods, and thus question policies that are targeted towards these companies.
    Keywords: Entrepreneurship; Firm growth; Gazelles; High-growth firms; High-impact firms; Innovation
    JEL: L11 L25
    Date: 2015–12–23
  3. By: Coad, Alex (University of Sussex); Daunfeldt, Sven-Olov (HUI Research and Dalarna University); Halvarsson, Daniel (The Ratio institute)
    Abstract: Is firm growth more persistent for young or old firms? Theory gives us no clear answer, and previous empirical investigations have been hampered by a lack of detailed data on firm age, as well as a non-representative coverage of young firms. We overcome these shortcomings using a rich dataset on all limited liability firms in Sweden during 1997-2010, covering firms of all ages and information on registered start year. We find that sales growth for new ventures is characterized by positive persistence, whereas it quickly turns negative and remains negative as firms get older. It thus seems that the growth paths of older firms are buffeted around by environmental turbulence, and that older firms may have challenges in adapting their strategies to changing market conditions, whereas new firms experience an early burst of sustained growth.
    Keywords: Firm age; growth rate autocorrelation; sales growth; learning-bydoing; minimum efficient scale
    JEL: D22 L25 L26
    Date: 2015–12–23
  4. By: Korom, Philipp; Lutter, Mark; Beckert, Jens
    Abstract: The social science literature proposes two competing explanatory frameworks for the existence and longevity of super-fortunes: superstar or winner-take-all mechanisms, suggesting an increased dominance of new self-made billionaires; and mechanisms focusing on inherited advantages, suggesting an enduring importance of old family fortunes. Using panel data from the USA's annual Forbes 400 ranking (1982-2013), this study analyzes factors that increase or decrease the likelihood of remaining listed among the American super-rich. We find initially that the percentages of self-made entrepreneurs among the highest wealth echelons of US society have increased significantly since 1982. Sectors that improved the most are finance (including hedge funds and private equity), new technology and mass retail. The decline of inheritance as a source of wealth and the rise of new tech and finance fortunes suggest low reproduction rates among super-rich property owners. Family wealth, however, plays an important role if the longevity of fortunes is considered. While the literature predicts family fortunes to be taxed away, divided among a large number of heirs, or lost through incompetence, we find that scions of inherited great wealth (mostly up to the third generation) are more likely to remain listed in the Forbes 400 roster than self-made entrepreneurs. We conclude that even though entrepreneurship increasingly matters for becoming super-rich, it is first and foremost the ability of rich family dynasties to retain control over corporations and to access sophisticated financial advice that makes fortunes last.
    Abstract: Die sozialwissenschaftliche Literatur zur Existenz und Langlebigkeit von Superreichtum bietet zwei konkurrierende Erklärungsansätze: zum einen Superstar- oder Winner-take-all-Mechanismen, die zu einer Zunahme von Selfmade-Milliardären führen; zum anderen aus ererbten Vorteilen entstehende Mechanismen, aus denen sich eine fortlaufende Konzentration alter Familienvermögen ergibt. Mithilfe eines Längsschnittdatensatzes aus den Forbes-400-Listen von 1982 bis 2013 untersucht das Papier, von welchen dieser Faktoren die Verweildauer im Forbes-Ranking abhängig ist. Dabei zeigt sich zunächst, dass der Anteil des Selfmade-Unternehmertums in den Rankings seit 1982 deutlich ansteigt. Die Branchen mit dem höchsten Wachstum sind die Finanzwirtschaft, insbesondere Hedge-Fonds und Private-Equity-Firmen, sowie neue Technologien und Handel. Auch wenn dies auf eine abnehmende Bedeutung ererbten Familienvermögens hinweist, zeigt sich bei der Analyse der Verweildauer, dass Erben großer Vermögen (meist in dritter Generation) deutlich länger in den Rankings verbleiben als Selfmade-Unternehmer. Wir schließen daraus, dass es trotz der Zunahme von Selfmade-Superstars in erster Linie Familiendynastien sind, denen es gelingt, durch Firmenbesitz und professionelle Vermögensberatung die Kontrolle über ihren Reichtum aufrechtzuerhalten.
    Date: 2015
  5. By: Fredriksen, Lars (Aarhus university); Wennberg, Karl (Institute for Analytical Sociology (IAS) & Department of Management and Engineering Linköping University, Sweden and Ratio Institute); Balachandran, Chanchal (Linköping unievrsity)
    Abstract: Knowledge-based theories of entrepreneurship infer transfer of knowledge from the effect of labor mobility on entrepreneurial entry. Yet, simple selection or situational mechanisms that do not imply knowledge transfer may influence entrepreneurial entry in similar ways. We argue that the extent to which such alternative mechanisms operate, labor mobility predicts entry but not subsequent performance for entrepreneurs. Analyses of matched employee-employer data from Sweden suggest that high rates of geographical and industry mobility increase individuals’ likelihood of entrepreneurial entry but have no effects on their entrepreneurial performance, indicating that the relationship between labor mobility and entrepreneurial entry not necessarily implies knowledge transfer.
    Keywords: Entrepreneurship; Mobility; Knowledge
    JEL: J61 M13 O18
    Date: 2015–12–23
  6. By: Guiso, Luigi; Pistaferri, Luigi; Schivardi, Fabiano
    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.
    Keywords: entrepreneurship; learning; spillovers
    JEL: J24 M13 R11
    Date: 2015–12
  7. By: Freshwater, David; Wojan, Timothy J.
    Abstract: Innovation is widely recognized as a key driver of economic growth, but innovation is now mainly measured by patent statistics and seen as reflecting earlier investments in formal innovation systems that produce new products an new technologies. A consequence of this approach to describing the innovation process is that there is little role for entrepreneurs and in particular little chance of innovation taking place in rural regions. Yet prior to the 20th century most innovation came from individual entrepreneurs and many innovations originated in rural regions. In particular one form of innovation - user-innovation, where individuals or single firms when confronted with a significant problem that has no acceptable existing solution create their own innovation, is particularly relevant to rural regions. While most rural innovations serve local or niche markets there are examples of major rural innovations that have had disruptive national or global impacts. Preliminary results from the new USDA Rural Establishment Innovation Survey confirm that user innovation is an important aspect of many rural entrepreneurs and an important aspect of firm competiveness.
    Keywords: rural innovation, rural development, entrepreneurship, innovation models, regional growth, Community/Rural/Urban Development, O31, R58, D21, N10,
    Date: 2014–12–08
  8. By: Claudia Martínez A.; Esteban Puentes; Jaime Ruiz-Tagle
    Abstract: Using a randomized controlled trial of a large-scale, publicly run micro-entrepreneurship program in Chile, we assess the effectiveness of business training and asset transfers to the poor. Using survey and monthly administrative data we study the effects of the program over a period of 46 months. We find that the program significantly increases employment by 15.3 and 6.8 percentages points 9 and 33 months after implementation, respectively. There is also a significant increase in labor income. The employment increase in the short run is through self-employment, while in the long run wage work also increases. In the long run, total labor increases mostly due to an increase in wage income. This is consistent with the hypothesis that skills taught during the training lessons are also useful for wage work. We also find that the quality of the intervention matter, especially in the long run. Finally, comparing two levels of asset transfers, different employment paths emerge: those who receive a low level of transfers mostly end up with salaried work whereas those who receive a high level of transfers tend to be self-employed.
    JEL: J14 O12 L26 M53
    Date: 2015
  9. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics); Swann, Christopher (University of North Carolina at Greensboro, Department of Economics)
    Abstract: It is well documented that knowledge based capital (KBC) is a driver of economic growth and development and that knowledge acquired through scientific research and development (R&D) is one important component of KBC. In this paper we examine the importance of R&D to a firm for exploring new business opportunities using information from the AEGIS database. We find that, among other things, human capital measured in terms of the educational background of the firm’s founders is a positive and statistically significant covariate with the importance of R&D. We conclude the paper with public policy recommendations for enhancing the educational component of the human capital resource base of firms.
    Keywords: entrepreneurship; R&D; knowledge based capital; human capital; technology; innovation; AEGIS
    JEL: L25 L26 O31 O33
    Date: 2015–12–22
  10. By: José Ignacio Rivero (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: This paper measures the impact of incubation on new and innovative Uruguayan firms’performance. Technological innovation has a fundamental role in explaining economic growth and broader economic development. With this in mind, the fact that new and innovative firms face larger difficulties when trying to validate their innovations becomes a policy concern. One of the answers given to this problem is incubation, which attempts to place this particular sort of companies in a “secure” environment until they are able to survive on their own. The evaluation was restricted to firms housed at a particular incubator called Ingenio, which is one of the largest and oldest operating in Uruguay. It was carried out using a unique panel of data gathered from the incubator and through a survey of current and former incubatees and of rejected candidates. In order to control for potential correlation between the outcome and firms’ observed and unobserved traits a sharp regression discontinuity design was employed, exploiting the incubator’s selection process. Evidence showed timid support for the hypothesis that incubation has a positive impact on firms’ sales and employment, while no impact was detected on their exports. One of the possible explanations for the small impacts detected is that small sample size may have biased the estimates downwards. Therefore it can be affirmed that, at the very least, incubation did not hamper these companies’ performance.
    Keywords: incubation, sharp regression discontinuity, impact evaluation.
    JEL: M13 O2 O31 O32 O38
    Date: 2015–04
  11. By: Kaitlyn R. Harger (Florida Gulf Coast University, Department of Economics); Amanda Ross (West Virginia University, Department of Economics); Heather M. Stephens (West Virginia University, Agricultural and Resource Economics)
    Abstract: Governments try to attract entrepreneurs to specific areas by providing incentives to new businesses that locate within their jurisdiction. However, there is a debate over how best to allocate these funds. Using establishment-level data from the National Establishment Time Series (NETS) database for California, and data on the location of disbursements from the Community Development Financial Institutions (CDFI) and New Market Tax Credit (NMTC) programs, we consider the effectiveness of these two programs in attracting new businesses to disadvantaged areas. Investors are eligible to receive funding through these programs if the census tract where they are located has a median family income less than or equal to 80% of the state’s median family income. Using this plausibly exogenous eligibility threshold, we find that higher levels of funding per project through the NMTC program result in an increase in the number of new establishments in that area. However, we find that the number of NMTC projects funded has no effect on attracting new firms to eligible tracts, and there is little evidence of a consistent effect of the CDFI program. The amounts of funding through the CDFI program are relatively small, though more projects were funded through this program than the NMTC. Thus, our findings suggest that the amount of funding allocated to these areas matters more for economic development than does the number of projects funded. In addition, we find that there are heterogenous effects with regard to the impact of these programs, specifically across different firm sizes and industries, suggesting that these policies may cause firms to reallocate and sort across census tracts.
    Keywords: economic development, funding, projects, community development, financial investment fund
    Date: 2015–12

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