nep-ent New Economics Papers
on Entrepreneurship
Issue of 2016‒07‒23
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. Creditor Rights and Entrepreneurship: Evidence from Fraudulent Transfer Law* By Nuri Ersahin; Rustom M. Irani; Katherine Waldock
  2. Firm Reputation and Employee Startups By Jan Zabojnik
  3. What Role Did Management Practices Play in SME Growth Post-Recession? By Bryson, Alex; Forth, John
  4. Financial Literacy and Self-employment By Ćumurović, Aida; Hyll, Walter
  5. Support for Public Research Spin-offs by the Parent Organizations and the Speed of Commercialization By Slavtchev, Viktor; Göktepe-Hultén, Devrim
  6. Payment Instruments, Enforceability and Development: Evidence from Mobile Money Technology By Thorsten Beck; Ravindra Ramrattan; Haki Pamuk; Burak R. Uras
  7. Friend or Foe? Crowdfunding Versus Credit when Banks are Stressed By Blaseg, Daniel; Koetter, Michael
  8. Technology and Innovation Policies for Small and Medium-Sized Enterprises in East Asia By Intarakumnerd, Patarapong; Goto, Akira
  9. The Impact of Directed Lending Programs on the Credit Access of Small Businesses in India: A Firm-level Study By Kale, Deeksha
  10. Firm Entry and Regional Growth Disparities: the Effect of SOEs in China By Kjetil Storesletten; Gueorgui Kambourov; Loren Brandt
  11. Why does he get award? Comparison of innovative thinking points By Jen Chia Chang; Hsi Chi Hsiao; Su Chang Chen; Tien Li Chen; Pei Jou Chiu

  1. By: Nuri Ersahin; Rustom M. Irani; Katherine Waldock
    Abstract: We examine entrepreneurial activity following the adoption of fraudulent transfer laws in the U.S. These laws strengthen creditor rights by removing the burden of proof from creditors attempting to claw back funds that were transferred out of failing businesses. These laws are particularly important for entrepreneurs whose personal assets are often commingled with those of the venture. Using establishment-level data from the U.S. Census Bureau, we find significant declines in start-up entry, churning among new entrants, and closures of existing ventures after the passage of these laws. Our findings suggest that strengthening creditor rights can, in some circumstances, impede entrepreneurial activity and slow down the process of creative destruction.
    Keywords: Creditor Rights; Bankruptcy; Entrepreneurship; Creative Destruction; Law and Finance Ersahin
    JEL: G21 G33 K22 L26 M13
    Date: 2016–07
  2. By: Jan Zabojnik (Queen's University)
    Abstract: This paper studies a repeated-game model in which firms can build a reputation for rewarding innovative employees. In any Pareto efficient equilibrium, low-value innovations get developed in established firms, while high-value innovations get developed in startups. The threshold level can be discontinuous, so otherwise similar firms may exhibit very different levels of innovation. The paper also shows that the optimal incentive contract for innovative employees has an option-like form, and that a firm may want to worsen the distribution of possible innovations. The model's predictions are consistent with a broad set of observed regularities regarding the creation of employee startups.
    Keywords: Startups, innovation, reputation, venture capital
    JEL: L14 L26 O31 O34 M13
    Date: 2016–07
  3. By: Bryson, Alex (University College London); Forth, John (National Institute of Economic and Social Research (NIESR))
    Abstract: Small and medium-sized enterprises (SMEs) are known to contribute significantly to aggregate economic growth. However, little is known about the role played by management practices in SME growth since recession. We contribute to the literature on SME growth by analysing longitudinal administrative data on firms' employment and turnover, taken from the UK's Business Structure Database (BSD), with data on management practices collected in face-to-face interviews from the HR Managers and employees who were surveyed as part of the 2011 British Workplace Employment Relations Survey (WERS). We find off-the-job training is the only management practice that is robustly and significantly associated with higher employment growth, increased turnover, and a decline in closure probabilities, over the period 2011-2014. The findings suggest SME investment in off-the-job training is sub-optimal in Britain such that firms could benefit economically from increasing the amount of off-the-job training they offer to their non-managerial employees.
    Keywords: SMEs, small and medium-sized enterprises, employment growth, sales, workplace closure, HRM, training, recession
    JEL: L25 M12 M50 M53
    Date: 2016–07
  4. By: Ćumurović, Aida; Hyll, Walter
    Abstract: In this paper, we study the relationship between financial literacy and self-employment. We use established financial knowledge-based questions to measure financial literacy levels. The analysis shows a highly significant correlation between self-employment and financial literacy scores. To investigate the impact of financial literacy on being self-employed, we apply instrumental variable techniques based on information on economic education before entering the labour market and education of parents. Our results reveal that financial literacy positively affects the probability of being self-employed. As financial literacy is acquirable, findings suggest that entrepreneurial activities may be raised via enhancing financial knowledge.
    Keywords: financial literacy,financial sophistication,self-employment
    JEL: A20 D03 J23 J24
    Date: 2016
  5. By: Slavtchev, Viktor; Göktepe-Hultén, Devrim
    Abstract: We empirically analyze whether support by the parent organization in the early (nascent and seed) stage speeds up the process of commercialization and helps spin-offs from public research organizations generate first revenues sooner. To identify the impact of support by the parent organization, we apply multivariate regression techniques as well as an instrumental variable approach. Our results show that support in the early stage by the parent organization can speed up commercialization. Moreover, we identify two distinct channels - the help in developing a business plan and in acquiring external capital - through which support by the parent organization can enable spin-offs to generate first revenues sooner.
    Keywords: academic entrepreneurship,support,TTO,commercialization,time to market
    JEL: L26 M13 O31 O32 O33
    Date: 2015
  6. By: Thorsten Beck; Ravindra Ramrattan (Innovations for Poverty Action); Haki Pamuk (Development Economics Group, Wageningen University); Burak R. Uras (Tilburg University)
    Abstract: The relationship between efficient payment instruments and enforcement constraints is studied in the context of economic development. Using a novel enterprise survey from Kenya, we document a strong positive association between the use of mobile money as a method to pay suppliers and access to trade credit. We propose a dynamic general equilibrium model with heterogeneous entrepreneurs, limited financial commitment and the risk of theft to account for this empirical pattern. Mobile money dominates fiat money as a medium of exchange in its capacity to avoid theft, but it comes with electronic transaction costs. The interaction between risk of theft and limited enforcement of trade credit contracts generates demand for mobile money as a payment method with suppliers. The use of mobile money in turn reinforces valuation of trade credit contracts and relaxes enforcement constraints. Calibrating the stationary equilibrium of the model to match a set of moments in Kenyan enterprise data, the importance of the endogenous interactions between mobile money and trade credit on entrepreneurial performance and macroeconomic development is investigated.
    Date: 2016
  7. By: Blaseg, Daniel; Koetter, Michael
    Abstract: Does bank instability push borrowers to use crowdfunding as a source of external finance? We identify stressed banks and link them to a unique, manually constructed sample of 157 new ventures seeking equity crowdfunding. The sample comprises projects from all German equity crowdfunding platforms since 2011, which we compare with 200 ventures that do not use crowdfunding. Crowdfunding is significantly more likely for new ventures that interact with stressed banks. Innovative funding is thus particularly relevant when conventional financiers are facing crises. But crowdfunded ventures are generally also more opaque and risky than new ventures that do not use crowdfunding.
    Keywords: equity crowdfunding,credit crunch,bank stress
    JEL: G01 G21 G30
    Date: 2015
  8. By: Intarakumnerd, Patarapong (Asian Development Bank Institute); Goto, Akira (Asian Development Bank Institute)
    Abstract: Policies for stimulating technological development and innovation in small and medium-sized enterprises can be divided into three groups. Supply-side policies aim at increasing firms’ incentives to invest in innovation by reducing costs. Demand-side policies are public actions to induce innovation and/or speed up the diffusion of innovation. Systemic policies focus on strengthening interactive learning between actors in innovation systems. Policies can be implemented through various instruments comprising tax incentives, grants or direct subsidies, low-interest loans, and the government’s direct equity participation. These instruments have pros and cons. The experiences of four late-industrializing East Asian economies—Taipei,China; Singapore; Malaysia; and Thailand—provide key lessons. Firms at different levels of technological and innovative capability need different policy instruments. The more successful economies have a higher level of flexibility and policy coordination and learning. The amount, duration, and continuity of government supporting schemes are crucial. Policy makers must have a deep understanding of what constitutes innovations and innovation systems, and how they evolve over time. Innovation financing policies require other corresponding policy initiatives to make them successful. Lastly, institutional factors do shape the choices and effective implementation of these policies.
    Keywords: technological development; East Asia SMEs; diffusion of innovation; demand-side policies
    JEL: D22 L25 O31
    Date: 2016–07–20
  9. By: Kale, Deeksha
    Abstract: This paper studies the impact of a policy package aimed at increasing access to bank credit of small firms at the national level in India. In 2006, the Government of India expanded the pool of small firms eligible for directed credit under a nation-wide credit program, by changing the criterion that determined the small business status of firms across all industries. Exploiting the expansion in the pool of small firms eligible for directed lending, I analyze the crowding out of previously eligible firms by recently eligible firms. I also study the growth in credit experienced by small firms from sources other than bank credit. I find that recently eligible firms not only disproportionately increased their bank credit stock relative to previously eligible firms, but also increased borrowings from other sources of credit. In other words, I find no evidence of substitution of other forms of credit with bank loans for recently eligible firms.
    Keywords: Banking; Government Policy; Credit Access
    JEL: G1 G18 G2
    Date: 2016–07–12
  10. By: Kjetil Storesletten (University of Oslo); Gueorgui Kambourov (University of Toronto); Loren Brandt (University of Toronto)
    Abstract: We study the effect of a large SOE (State-Owned Enterprises) sector on economic growth and document that localities (prefectures) in China with a large SOE sector in 1995 experienced a smaller economic growth than those with a small SOE sector in 1995. We show that one important mechanism through which the size of the SOE sector affects economic growth is the effect on firm entry in the non-SOE sector. In prefectures with a high SOE output share, non-SOE firm entry is small and the entrants have low TFP, labor productivity, and level of capital. We also infer the capital and output wedges that firms in the non-SOE and the SOE sector are facing in 1995 and 2004. We conclude that these wedges alone cannot account for the documented facts on non-SOE firm entry and that the analysis needs to incorporate a feature that would operate as a start-up cost (or an entry wedge). We build a heterogeneous firm model with endogenous entry to help understand the non-SOE entry patterns in the cross section in 1995. Then, we use the model to analyze the effect of a number of changes in the economic environment in China between 1995 and 2004.
    Date: 2016
  11. By: Jen Chia Chang (Graduate Institute of Technological & Vocational Education, National Taipei University of Technology); Hsi Chi Hsiao (Department of Business Administration, Cheng Shiu University); Su Chang Chen (Institute of service management, National Penghu University of Science and Technology); Tien Li Chen (Department of Industrial Design, National Taipei University of Technology); Pei Jou Chiu (Graduate Institute of Technological & Vocational Education, National Taipei University of Technology)
    Abstract: Innovation is an important basis for successfully gaining global market shares in the era of technological changes. In order to maintain national competitiveness, the government attaches great importance to innovative thinking ability. To this end, throughout various stages of education in Taiwan, creativity competitions are held. Among them, at universities and colleges, annual innovation and entrepreneurship competitions are held; at vocational high schools, national creativity project work competitions are held. In this study, award-winning students from the two competitions were selected. The creative concept design capability scale was adopted to compare the award winners and non-winners in terms of differences in innovative thinking points. The creative concept design capability scale was used to assess the gap among students who received training, college project instructors, and student innovative thinking points. Findings show that the overall innovative thinking points are mostly concentrated in the appearance. University/college of technology or vocational high school competition award winners alike have a significantly higher total score compared to the total innovative thinking points score of regular university/college of technological teachers and students. However, as to the innovative thinking points for different categories, university and college award winners of innovation entrepreneurship competitions tend to put the chemical change of innovative thinking points to better uses; vocational high school award winners of creativity project work competitions tend to put the external size and external texture layout of innovative thinking points to better uses. The university and college students on the project team are better able to use the physical changes, structural complexity, operability, shape changes, functional enhancement, and usage enhancement of the innovative thinking points. This study recommends that students select more related professional practical courses to “learn by doing†. Students are encouraged to participate in off-campus learning activities or creativity competitions so that they can broaden their horizons. As for teaching, teachers may lead students in site visits to learn about innovative products in the industry. The course design combines theory and practice, case discussions are examples of which.
    Keywords: Innovative thinking points, Competition award winner, Creativity
    JEL: I20 I23 I29

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