nep-ent New Economics Papers
on Entrepreneurship
Issue of 2016‒06‒25
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. New Firms and Post-Entry Performance: The Role of Innovation. By Colombelli, Alessandra; Krafft, Jackie; Vivarelli, Marco
  2. What are the biggest obstacles to growth of SMEs in developing countries? - A picture emerging from an enterprise survey By Flora Wang
  3. Long-term effects of subsidies on firm growth: introducing the concept of outcome additionality By Goerke, Björn; Albers, Sönke
  4. Small, young, and exporters: New evidence on the determinants of firm growth By M. Grazzi; D. Moschella
  5. Innovation and Entrepreneurship for the growth and diversification of the GCC Economies By Miniaoui, Hela; Schilirò, Daniele
  6. Job Creation and the Role of Dependencies By Fornaro, Paolo; Luomaranta, Henri
  7. Which updates during an equity crowdfunding campaign increase crowd participation? By Jörn Block; Lars Hornuf; Alexandra Moritz
  8. The interface of networking and 'wasta' in an Arabic context By Sefiani, Yassine; Davies, Barry; Bown, Robin; Kite, Neilson
  9. Changing saving and investment behavior: the impact of financial literacy training and reminders on micro-businesses By Girum Abebe; Biruk Tekle; Yukichi Mano
  10. The relationships between, on the hand, size, growth and age of the firm and, on the other hand, small business survival – a constructive critique and a proposal of a new framework By Guimarães Barbosa, Evaldo
  11. A Model of Occupational Choice, Offshoring and Immigration By Bulent Unel

  1. By: Colombelli, Alessandra; Krafft, Jackie; Vivarelli, Marco (University of Turin)
    Abstract: This paper investigates the reasons why entry per se is not necessarily good and the evidence showing that innovative startups survive longer than their non-innovative counterparts. In this framework, our own empirical analysis shows that greater survival is achieved when startups engage successfully in both product innovation and process innovation, with a key role of the latter. Moreover, this study goes beyond a purely microeconomic perspective and discusses the key role of the environment within which innovative entries occur. What shown and discussed in this contribution strongly supports the proposal that the creation and survival of innovative start-ups should become one qualifying point of the economic policy agenda.
    Date: 2016–03
  2. By: Flora Wang (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: SMEs are drivers of economic growth and job creation in developing countries. It is paramount to determine the factors that hinder their growth. This paper uses the Enterprise Survey from the World Bank which covers data from 119 developing countries to investigate the biggest obstacles SMEs are confronting and the determinants that influence the obstacles as perceived by enterprise managers. The results show that SMEs perceive access to finance as the most significant obstacle which hinders their growth. The key determinants among firms’ characteristics are size, age and growth rate of firms as well as the ownership of the firm. The latter – the role of the state in financing SME - is particularly intriguing. External reasons for the financing dilemma are also examined. It is shown that the main barriers to external financing are high costs of borrowing and a lack of consultant support.
    Keywords: SMEs, Obstacles to Growth, Financing Dilemma, Developing Countries, firm characteristics, internal and external barriers
    Date: 2016–05
  3. By: Goerke, Björn; Albers, Sönke
    Abstract: Public agencies provide subsidies for small and medium sized businesses (SMEs) to foster their development in terms of employment and sales. Although input and output additionality have been researched intensively little is known about the actual long-term effects of subsidies on SME growth. Relying on a unique dataset of actual SMEs we provide a means of evaluating whether subsidies lead to the expected positive long-term effects. We apply a specifically designed 3-stage-effects-model (3SEM) from the input of resources to the final outcome. The results imply that the effects of subsidies differ across types: While R&D grants unfold enduring positive effects other subsidies like corporate matchmaking might even harm companies.
    Keywords: subsidies,additionality,innovation
    JEL: L2 H2 O3
    Date: 2016
  4. By: M. Grazzi; D. Moschella
    Abstract: This work investigates how the export status of the firm influences the patterns of growth at different age classes. We address this research question resorting to a novel set of data that links together the universe of Italian firms and detailed data on export transactions. We find that the positive relationship between export status and growth declines with firm age. Further, we also find that, even when accounting for the role of age, the negative size-growth relationship does not disappear, contrary to some recent evidence. These results, which are robust to a series of controls, suggest for a positive signaling role of the export status which is stronger for young exporters or born globals. Exploiting the product-country level dimension of the customs data we also provide, for the first time, evidence on differences in exchange rates pass through between young and experienced exporters. In particular, we find that early exporters appear to be well equipped to face exchange rates variations as their exports decrease less following a currency appreciation.
    JEL: D22 F14 L11 L21 L25
    Date: 2016–06
  5. By: Miniaoui, Hela; Schilirò, Daniele
    Abstract: The region of Gulf Arab states has vast reserves of petroleum that make it a vital source of the global economy. The reduction in oil prices and, in general, their high volatility pose strong challenges to the GCC economies. In the present contribution we argue that innovation and entrepreneurship can be the main drivers to diversify and develop the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE). In fact, in the long-run, diversified economies perform better than mono-sector economies. Moreover, innovation and entrepreneurship are key factors that trigger economic development and contribute to the degree of competitiveness, playing also an important stakeholder role in boosting the overall economic growth rates. Therefore, having an entrepreneurial and innovative capacity is very important in order to facilitate competitiveness and growth in a region such as that of GCC countries. More specifically, in this article we analyze the innovation environment in the GCC countries and their innovation performance. Also we consider the innovation policies, underlining the important role of institutions for innovation. To support our analysis, we take into account of several data and information sources, and surveys. In addition, we provide an overview on entrepreneurship in the GCC countries and grasp the current state of entrepreneurship in these countries. We also aim to identify the conditions to stimulate entrepreneurship and qualify the human capital in order to diversify and develop the non-oil private sector and improve the competitiveness of the GCC economies.
    Keywords: Innovation; Entrepreneurship; Diversification; Competitiveness; Growth; GCC countries
    JEL: L10 L26 M13 O31 O38
    Date: 2016–06
  6. By: Fornaro, Paolo; Luomaranta, Henri
    Abstract: We contribute to the large literature on the relation between firm size and job creation by examining the effects of dependences between enterprises. Using Finnish monthly data encompassing the population of Finnish private businesses, we calculate gross job creation and destruction, together with net job creation, for different size classes and industries. Importantly, we divide firms into a dependent (i.e. owned, at least partially, by a large company) and independent category. The analysis is based on both a dataset including entry and exit and a sample considering only continuous companies, to control for the effects of firm's age. Due to the quality of the data, we are able to isolate the 'organic' growth of firms, disregarding the effects of mergers and split-offs together with other legal restructurings. We find that independent companies have shown considerably higher net job creation, even after taking age into account. However, dependent firms do not show particularly different behavior with respect to the sensitivity to aggregate conditions, compared to their independent counterparts.
    Keywords: Dependencies, Job Creation, Firm-level Data, Large datasets, Employment statistics
    JEL: E24 E32 J63 L25 L26
    Date: 2016–05–01
  7. By: Jörn Block; Lars Hornuf; Alexandra Moritz
    Abstract: Start-ups often post updates during equity crowdfunding campaigns. Yet, little is known about the effects of such updates on funding success. We investigate this question by using handcollected data from 71 funding campaigns on two German equity crowdfunding portals. Using a combination of qualitative and quantitative empirical research techniques, we find that posting an update has a significant positive effect on the number of investments by the crowd and the investment amount collected by the start-up. This effect does not occur immediately in its entirety; rather, it is lagged by a few days. The positive effect increases with the number of words of the update. Distinguishing by the content of the update, we find that the positive effect can be attributed to updates on new funding and business developments and updates on promotional campaigns run by the start-up. Updates on the start-up team, business model, cooperation projects, and product developments do not have meaningful effects. Our paper contributes to the literature on the effects of information disclosure on equity crowdfunding success and offers potential guidance for startups in designing effective and successful equity crowdfunding campaigns.
    Date: 2016
  8. By: Sefiani, Yassine; Davies, Barry; Bown, Robin; Kite, Neilson
    Abstract: ABSTRACT Purpose - The aim of this study is to uncover particular and significant methods of pursuing business connections, in the small manufacturing businesses of Tangier. Prior Work - The significance of networking and its impact on the performance of SMEs was revealed in a number of studies. There have been significant studies on the structural, relational, and cognitive dimensions of social capital in value creation. It can be noted that there are potentially significant differences in the concept of networking particularly those that are influenced by Arabic culture. Approach - A two-stage design, which incorporated both quantitative and qualitative approaches, was employed in this study. Approaches were employed in succession with the findings from the quantitative phase informing the qualitative phase. Initially, a paper and online survey questionnaire was administered to a population of 365 industrial SMEs to gain some insights on the perceptions of owner-managers of the impact of networking on business performance. Following the quantitative phase, fifteen in-depth face-to-face semi-structured interviews were conducted with selected owner-managers of SMEs, forming a judgmental selection, to explore their experiences, beliefs, and attitudes with respect to networking factor. Results - Both quantitative and qualitative phases of the study found that networking was a significant factor in influencing the success of SMEs. The concept of wasta, the Arabic word for connections, emerged from the qualitative phase. Findings show that using wasta, through politico-business networks is important since it enables access to current information that is crucial for the success of SMEs. The concept of wasta was also mentioned in relation to financial resources and suppliers. Findings revealed that strong relationships with suppliers enable firms to get financial resources in the form of trade credits. Furthermore, the relationship between wasta and human resources was also revealed. Findings showed that owner-managers use their network relations through wasta in order to recruit their staff. Implications - The findings of this study add to the understanding of networking in Arabic countries with the importance of wasta in an economy that functions on relationships. The findings of this study could therefore be useful to international managers to assist their intercultural effectiveness by adjusting to culture-specific networking in Tangier. Value - This study supports previous findings of Hutchings & Weir (2006) and contributes additional evidence that suggests the significance of wasta and its impact on SME success.
    Keywords: Networking, Wasta, Performance, SMEs, Arabic, Tangier
    JEL: M19
    Date: 2016–06–09
  9. By: Girum Abebe; Biruk Tekle; Yukichi Mano
    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 maybe because of knowledge gap and behavioral biases. To test the importance of these saving constraints, we offered four-hour financial literacy training and periodic SMS reminders for three months to randomly selected group of micro-entrepreneurs in Addis Ababa, Ethiopia.. While financial literacy training alone seemed ineffective, we find that reminders and joint treatment encouraged better saving behavior. Our results confirm earlier findings that savings can be limited by attention, whereas how entrepreneurs manage savings depends on their levels of financial literacy.
    Keywords: savings; reminders; financial training; entrepreneurs
    JEL: D92 E21 L26
    Date: 2016
  10. By: Guimarães Barbosa, Evaldo
    Abstract: This article claims that the basic relationships between, on the one side, size, growth and age of the small firm and, on the other side, the small firm’s hazard of exit is, apart from the “honeymoon” and the “liability of senescence” effects, non-linear, either U-shaped or inverted U-shaped. Variations from these patterns are dependent upon choices of different specifications and the presence or absence from the multivariate analysis of the real determinants for which size, growth and age of the firm proxy. The article also claims that the quadratic specification that has traditionally been fitted is rarely the most adequate, since other combinations of different pairs of exponents would certainly better capture nuances of the relationships being regressed. The article conclusively claims that these realizations explain findings in the extant literature that are awkward, unexpected, embarrassing and unacceptable and interpretations that are many times even more inapplicable.
    Keywords: Small firms; Survival determinants; Size, growth and age; Cox regression
    JEL: M21
    Date: 2016–06–19
  11. By: Bulent Unel
    Abstract: This paper develops a North-South model of offshoring and immigration with occupational choice and endogenous firm productivity. Individuals in North choose to become entrepreneurs or workers, whereas those in South can only be employed as workers in either country. The model is used to investigate the impact of offshoring and immigration policies on occupational choice, task allocation, productivity, income inequality, and welfare. The model yields several interesting findings, but most notably it predicts that lowering offshoring costs generates job polarization, and pro-offshoring and pro-immigration policies may not be welfare improving in North.

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