nep-ent New Economics Papers
on Entrepreneurship
Issue of 2016‒03‒06
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. Two Sides to the Evasion: The Pirate Bay and the Interdependencies of Evasive Entrepreneurship By Elert, Niklas; Henrekson, Magnus; Lundblad, Joakim
  2. Optimal Crowdfunding Design By Matthew Ellman; Sjaak Hurkens
  3. How Did Young Firms Fare During the Great Recession? Evidence from the Kauffman Firm Survey By Zarutskie, Rebecca; Yang, Tiantian
  4. The Link between R&D, Innovation and Productivity: Are Micro Firms Different? By Julian Baumann; Alexander S. Kritikos
  5. Industrial Dynamics: A Review of the Literature 1990-2009 By Carlsson , Bo
  6. The effect of house prices on business start-ups: A review and analysis using Swedish regional data By Berggren, Björn; Fili, Andreas; Wilhelmsson, Mats
  7. Business Model Implementation: The Antecedents of Multi-Sidedness By Ryan Rumble; Vincent Mangematin
  8. The Role of Banks in SME Finance By Norden, L.
  9. Innovation in professional services in a context of disruption By Bailey, Andrew
  10. Contrasting Models of Incubation for Enterprise Creation: Exploring Lessons for Efficacy and Sustainability from Higher Education Institutions in India and the United Kingdom By Basant, Rakesh; Sarah Cooper

  1. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Lundblad, Joakim (Centre for Innovation, Research and Competence in the Learning Economy (CIRCLE))
    Abstract: Evasive entrepreneurs innovate by circumventing or disrupting existing formal institutional frameworks by evading them. Since such evasions rarely go unnoticed, they usually lead to responses from lawmakers and regulators. We introduce a conceptual model to illustrate and map the interdependence between evasive entrepreneurship and the regulatory response it provokes. We apply this framework to the case of the file sharing platform The Pirate Bay, a venture with a number of clearly innovative and evasive features. The platform was a radical, widely applied innovation that transformed the Internet landscape, yet its founders became convicted criminals because of it. Applying the evasive entrepreneurship framework to this case improves our understanding of the relationship between policymaking and entrepreneurship in the digital age, and is a first step towards exploring best responses for regulators facing evasive entrepreneurship.
    Keywords: Entrepreneurship; Innovation; Institutions; Regulation; Self-employment
    JEL: L50 M13 O31 P14
    Date: 2016–01–06
  2. By: Matthew Ellman; Sjaak Hurkens
    Abstract: We characterize optimal reward-based crowdfunding where production is contingent on an aggregate funding threshold. Crowdfunding adapts project-implementation to demand (market-testing) and its multiple prices enhance rent-extraction via pivotality, even for large crowds, indeed for arbitrarily large if tastes are correlated. Adaptation raises welfare and rent-extraction can enhance adaptation, but sometimes distorts production and lowers welfare. Threshold commitment, central to All-Or-Nothing platforms, raises profits but can lower consumer welfare. When new buyers arrive ex-post, crowdfunding’s market-test complements traditional finance and informs subsequent pricing. We prove that crowdfunding is a general optimal mechanism in our baseline.
    Keywords: crowdfunding, Mechanism Design, entrepreneurial finance, market-testing, adaptation, rent-extraction
    JEL: C72 D42 L12
    Date: 2016–01
  3. By: Zarutskie, Rebecca (Board of Governors of the Federal Reserve System (U.S.)); Yang, Tiantian (Duke University)
    Abstract: We examine the evolution of several key firm economic and financial variables in the years surrounding and during the Great Recession using the Kauffman Firm Survey, a large panel of young firms founded in 2004 and surveyed for eight consecutive years. We find that these young firms experienced slower growth in revenues, employment, and assets and faced tighter financing conditions during the recessionary years. While we find some evidence that firm growth picked up following the recession, it is not clear that it returned to the levels it would have been absent the recessionary shock. We find little evidence that financing conditions for young firms loosened following the recession and show that financing constraints, in addition to diminished demand, may have contributed to these firms' slower growth. We discuss the strengths and the limitations of the Kauffman Firm Survey in measuring the impact of the Great Recession on young firms and their founders and consider features of future data collection and measurement efforts that would be useful in studying entrepreneurial activity over the business cycle.
    Keywords: Entrepreneurship; Financing constraints; Firm performance; Great Recession; Young firms
    Date: 2015–09–23
  4. By: Julian Baumann; Alexander S. Kritikos
    Abstract: We analyze the link between R&D, innovation, and productivity in MSMEs with a special focus on micro firms with fewer than 10 employees; usually constituting the majority of firms in industrialized economies. Using the German KfW SME panel, we examine to what extent micro firms are different from other firms in terms of innovativeness. We find that while firms engage in innovative activities with smaller probability, the smaller they are, for those firms that do make such investment, R&D intensity is larger the smaller firms are. For all MSMEs, the predicted R&D intensity is positively correlated with the probability of reporting innovation, with a larger effect size for product than for process innovations. Moreover, micro firms benefit in a comparable way from innovation processes as larger firms, as they are similarly able to increase their labor productivity. Overall, the link between R&D, innovation, and productivity in micro firms does not largely differ from their larger counterparts.
    Keywords: MSMEs, R&D, Innovation, Productivity
    JEL: L25 L60 O31 O33
    Date: 2016
  5. By: Carlsson , Bo (Case Western Reserve University, Weatherhead School of Management, Department of Economics, Cleveland and CIRCLE, Lund University)
    Abstract: This paper reviews the literature in the field of Industrial Dynamics as it has emerged since I first introduced the term in 1985. Nearly 8,000 articles in 12 major journals have been reviewed and classified under five broad themes that constitute the basic questions in industrial dynamics: 1. The causes of industrial development and economic growth, including the dynamics and evolution of industries and the role of entrepreneurship 2. The nature of economic activity in the firm and the dynamics of supply, particularly the role of knowledge. 3. How the boundaries and interdependence of firms change over time and contribute to economic transformation. 4. Technological change and its institutional framework, especially systems of innovation. 5. The role of public policy in facilitating adjustment of the economy to changing circumstances at both micro and macro levels. Under each theme, the main findings and their implications for theory and policy are summarized.
    Keywords: industrial dynamics; literature review; knowledge; technological change; institutions; growth
    JEL: D00 D20 L00 O30
    Date: 2016–01–18
  6. By: Berggren, Björn (Department of Real Estate and Construction Management, Royal Institute of Technology); Fili, Andreas (Department of Real Estate and Construction Management, Royal Institute of Technology); Wilhelmsson, Mats (Department of Real Estate and Construction Management, Royal Institute of Technology)
    Abstract: Entrepreneurs are at the core of economic development in that they start new businesses or make existing firms grow. To fulfill this important role, entrepreneurs need access to finance. Owing to information asymmetry and the relatively high risk associated with business start-ups, many financiers shy away from engaging in relationships with firms during the early stages of their development. Based on the existing body of knowledge on the financing of entrepreneurship, we know that insider finance is of paramount importance in the early stages of firms’ development. We expand this knowledge base by analyzing the influence of house prices on business start-ups across municipalities in Sweden. In our analysis, we include data from all municipalities in Sweden. Our data on house prices and control variables are collected in period one, and our data on the frequency of start-ups are collected in period two. We find that rising house prices in a municipality lead to a higher frequency of start-ups. In our regression analysis, we find that a 1% increase in house prices leads to a 0.14% increase in start-ups. Our findings are in line with the limited international research that has been previously conducted, and for this reason, they could be seen as a vital addition to the existing body of knowledge within the area of entrepreneurship and regional development.
    Keywords: Business start-ups; entrepreneurship; financing; house prices; mortgages
    JEL: M13 R11 R31
    Date: 2015–10–06
  7. By: Ryan Rumble (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Vincent Mangematin (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM))
    Abstract: Business model research has long focused on external triggers, drivers, and enablers of business model adoption. What is less well known is how business models are adopted in practice. Using a conceptual framework developed by Baden-Fuller & Mangematin, we propose 16 ideal types of business models. Based on a qualitative comparative analysis of 77 businesses, we explore the antecedents of these business model types, paying particular attention to multi-sided models, which are growing in prominence, and require businesses to manage complexity and interdependencies. Surprisingly, our analyses reveal that tools developed to support business design, creativity or visualization were systematically absent from the operationalization of complex, multi-sided business models. The paper contributes to our understanding in three ways: (1) it reveals how businesses with complex, multi-sided models are crafted using heuristics rather than rational business model design tools, (2) it highlights consistent relationships between the practices employed during business creation/reconfiguration and the business models that are adopted, and (3) it opens fruitful research avenues to develop tools to support heuristics in business design and implementation.
    Keywords: antecedent,heuristics,QCA,business model,multi-sided,implementation,configuration
    Date: 2015
  8. By: Norden, L.
    Abstract: __Abstract__ Banks play a crucial role for the financing of small and medium-sized enterprises (SMEs). SMEs represent a large fraction of all firms in many economies and contribute significantly to employment and growth. But, SMEs are more informationally opaque, more risky, more financially constrained, and more bank-dependent than large firms, which creates serious challenges in SME finance. In this inaugural address, I focus on lending technologies to cope with key challenges in SME finance. I present evidence from two recent empirical studies. The first conclusion is that relationship lending works. Applying meta-analysis in a cross-country context, we show that, on average, borrowers benefit from relationship lending. SMEs obtain more credit and/or lower loan rates under relationship lending. Furthermore, bank competition makes benefits for borrowers more likely. The second conclusion is that trade credit has limited scope to replace bank debt when the latter is subject to a shock. SMEs in Europe have countered a shock to their bank debt to some extent with trade credit. However, substitution has become increasingly difficult during the financial crisis and was only possible for a subset of firms: the ones with better credit quality and intermediate financial constraints. Overall, a comprehensive understanding of lending technologies such as relationship lending and trade credit is critical for lenders, borrowers, and policymakers to ensure the proper functioning of SME finance.
    Keywords: Banks, SME Finance, Bank Lending, Banking, Finance, Credit, Lending Technology, Relationship Lending, Trade Credit
    JEL: G21 G24 O16 E22 L11 L25
    Date: 2015–02–20
  9. By: Bailey, Andrew
    Abstract: This research is focussed on how large professional services firms in New Zealand innovate in the context of and as a response to potential disruption. The theory of disruptive innovation describes how incumbents can be overwhelmed by innovative new entrants. Typically these new entrants begin in markets which are unattractive to incumbents because they can’t make money there with their existing business models. Therefore, some have claimed that new businesses must be set up, or various dual approaches adopted, to survive against disruptive new entrants. Semi-structured interviews were held with senior members of large professional services firms to understand their perspective on how innovation is managed in their organisation in the context of potential disruption and the capabilities which support them in doing this. From these interviews, a number of themes emerged which were compared with some of the approaches advocated by the literature in terms of responding to potential disruption. The research found that large professional services firms in New Zealand are focussed on how they can enable innovation from within the firm – typically built off the back of client demand and concentrating on how they work differently with clients, using new methodologies and resourcing models – particularly partnering with third parties to play a service aggregator role – to deliver better outcomes for clients and maintain the professional services firms’ incumbency. At the same time, there are some tentative steps to think about how incubation and/or ‘dual organisations’ might be able to test more disruptive, alternative business models.
    Keywords: Disruptive, Innovation, Professional services,
    Date: 2015
  10. By: Basant, Rakesh; Sarah Cooper
    Abstract: Encouraging the establishment and growth of technology-based ventures continues to be the focus of attention from policy-makers globally, linked to enhanced levels of innovation, economic activity and wealth/employment creation. Higher education institutions (HEIs) are prominent among the public, private and not-for-profit organisations supporting the commercialisation of scientific outputs. Modes and vehicles adopted include spin-outs, science parks, intellectual property exploitation and different forms of incubation activity. Some HEIs in the United Kingdom have significant experience of commercialisation and technology transfer activities and have developed markedly different approaches. Meanwhile, HEIs in India are broadening their attention from their teaching-research focus to wider engagement in supporting venture creation. While approaches differ between HEIs all face issues of efficacy and sustainability. Set within the wider context of the HEI commercialisation agenda this paper focuses on incubation models, with particular attention to efficacy and sustainability dimensions. Using six case studies (three each from UK and India), we identify contrasting ways in which incubation was undertaken. Findings raise questions regarding whether and if so how HEIs should be involved in the business of incubation to enhance efficacy and provide a more broadly-based and robust platform for underpinning sustainability.
  11. By: Stefania Cosci (LUMSA University); Valentina Meliciani (University of Teramo); Valentina Sabato (LUMSA University)
    Abstract: This paper investigates the impact of relationship lending on innovation (the probability to innovate and the intensity of innovation). Using a unique dataset providing detailed information on bank-firm relationships across European firms, we relate different proxies of relationship lending (soft information, long-lasting relationships, number of banks, share of the main bank) to innovation. We find a very strong and robust positive effect of ‘soft-information intensive’ relationships, a less robust positive effect of long-lasting relationships and a negative effect of credit concentration as measured by the number of banking relationships. We also find that ‘soft-information intensive’ relationships reduce credit rationing for innovative firms, while long-lasting relationships seem to favour innovation via other relational channels. These results raise some concern on the impact of screening processes based on automatic procedures, as those suggested by the Basel rules, on firms’ capability to finance innovative activities in Europe.
    Keywords: relationship lending; innovation; R&D; credit constraints; soft information
    JEL: G10 G21 G30 O30 O31
    Date: 2015–03

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