nep-ent New Economics Papers
on Entrepreneurship
Issue of 2016‒09‒04
seven papers chosen by
Marcus Dejardin
Université de Namur

  1. Smithian Growth through Creative Organization By Patrick Legros; Andrew F. Newman; Eugenio Proto
  2. Historicizing Entrepreneurial Imprinting: Sensitive Periods, Cognitive Frames and Resistance By Giovanni Favero; Vladi Finotto; Anna Moretti
  3. The Role of Start-Ups in StructuralTransformation By Robert C. Dent; Fatih Karahan; Benjamin Pugsley; Aysegul Sahin
  4. Firm Innovation and Financial Analysis: How Do They Interact? By Joel Peress; jim goldman
  5. Involuntary Entrepreneurship - Evidence from Thai Urban Data By Tenzin Yindok; Alexander Karaivanov
  6. External determinants of small business survival – The overwhelming impact of GDP and other environmental factors and a new proposed framework By GUIMARÃES BARBOSA, EVALDO
  7. Firm Entry and Exit and Aggregate Growth By Timothy Kehoe; Sewon Hur; Kim Ruhl; Jose Asturias

  1. By: Patrick Legros; Andrew F. Newman; Eugenio Proto
    Abstract: We model technological progress as an external effect of organizational design, fo- cusing on how factories, based on labor division, could spawn the industrial revolution. Dividing labor, as Adam Smith argued, facilitates invention by observers of production processes. However, entrepreneurs cannot internalize this benefit and choose labor di- vision to facilitate monitoring. Equilibrium with few entrepreneurs features low wage shares, high specialization, but a limited market for innovations. Conversely, with many entrepreneurs there is a large market for innovation, but little specialization be- cause of high wage shares. Technological progress therefore occurs with a moderate scarcity of entrepreneurs. Institutional improvements affect growth ambiguously.
    Keywords: factory system, industrial revolution, technological change, contracts
  2. By: Giovanni Favero (Dept. of Management, Università Ca' Foscari Venice); Vladi Finotto (Dept. of Management, Università Ca' Foscari Venice); Anna Moretti (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: Literature in strategy and entrepreneurship resorted to the concept of imprinting to explain the resilience of firmsÕ traits. Nonetheless, it assumed such a process is at work rather than aiming at its explanation. This article advances a conceptual framework based on three main building blocks - cognitive frame, resource mobilization, and resisting entrepreneurs - combined in a historical perspective, overcoming the existing generalized confusion about "what to study" and "how to study" in the investigation of entrepreneurial imprinting. We offer an original definition of the imprints and a dynamic view based on resistance investigating the replication, substitution, and re-negotiation of imprints in time. The contribution of the present work is twofold: on the one side, it contributes to the ongoing debate on entrepreneurial imprinting by closing some of the gaps that characterized previous literature on the subject, and offering an innovative bridging between imprinting and resistance; on the other side, it answers to the recent call for a deeper integration between historical approaches and entrepreneurship literature.
    Keywords: Entrepreneurial imprinting, Cognitive frames, Resistance, Historical approach, Interpretive process
    JEL: L26 N01 M14
    Date: 2016–08
  3. By: Robert C. Dent; Fatih Karahan; Benjamin Pugsley; Aysegul Sahin
    Abstract: The U.S. economy has been going through a striking structural transformation—the secular reallocation of employment across sectors—over the past several decades. We propose a decomposition framework to assess the contributions of various margins of firm dynamics to this shift. Using firm-level data, we find that at least 50 percent of the adjustment has been taking place along the entry margin, owing to sectors receiving shares of start-up employment that differ from their overall employment shares. The rest is mostly the result of life cycle differences across sectors. Declining overall entry has a small but growing effect of dampening structural transformation.
    Keywords: structural transformation, employment dynamics, sectoral reallocation
    Date: 2016–01
  4. By: Joel Peress (INSEAD); jim goldman (insead)
    Abstract: Entrepreneurs innovate more when financiers are better informed about their projects because they expect to receive more funding should their projects be successful. Conversely, financiers collect more information about projects when entrepreneurs innovate more because the opportunity cost of misinvesting, i.e. of missing out on successful projects, is higher. Thus, technological knowledge and knowledge about technologies are mutually reinforcing. We report evidence consistent with this interaction using two quasi-natural experiments that changed, respectively, the innovation incentives and the information environment for U.S. listed firms. A calibration suggests that its contribution to income growth represents more than one third of the total contributions of information collection and innovation. We also estimate that a policy designed to stimulate innovation has an indirect effect through investors’ learning incentives that accounts for a third of the total effect of the policy on firms’ innovation incentives.
    Date: 2016
  5. By: Tenzin Yindok (Simon Fraser University); Alexander Karaivanov (Simon Fraser University)
    Abstract: We build and structurally estimate an occupational choice model between entrepreneurial and non-entrepreneurial alternatives. Unlike much of the literature, we explicitly model and distinguish between "involuntary" entrepreneurship, i.e., running own business out of necessity vs. running business because this is income-maximizing. Involuntary entrepreneurship arises for those who prefer the non-business occupation (e.g., wage-work) but cannot obtain it (with some probability that we estimate), due to lack of education, qualifications, or other labor market frictions. We also allow for credit constraints and analyze their interaction with the labor constraint. We estimate the model via GMM using the 2005 Townsend Thai urban survey. We find that 16% of all business households are classified as involuntary entrepreneurs. We use the structural estimates to evaluate the effect of relaxing the credit and labor constraints, and the impact of microcredit on the rate of entrepreneurship (voluntary and involuntary) and income, on average and stratified by wealth and schooling. Our results suggest that there are large potential income gains for poor households from relaxing both the labor and credit constraints or from providing access to microcredit, but the fraction of involuntary entrepreneurs can only be significantly reduced by addressing the labor constraint.
    Date: 2016
    Abstract: This article claims that the basic relationships between, on the one side, the small firms’ hazard of exit, and, on the other side, the GDP growth rate and the industry growth rate are U-shaped. This means that there are more births and deaths for this segment of manufacturing enterprises during both cyclical downturns and booms in the economy. Higher competition in the economy in the first case comes from necessity entrepreneurs and in the second case from opportunity ones. The article also claims that the quadratic specification would rarely be the most adequate, since other combinations of different pairs of exponents would certainly better capture nuances of the relationships being regressed, in view of the fact that the actual U-shaped relationship is rarely symmetric. This is exactly why the artificial exclusive monotonic fitting normally produces parameter estimates that signalize the existence of a decreasing relationship. So, what may wonder many people, the invariably detected inverse relationship is not caused by the second half segment (where the economic upturns occur) of the continuous of the GDP growth rate, but rather by the first (where the economic downturns occur), whose impact on the hazard of exit is normally stronger. Also, even a direct relationship may occur because of this asymmetry and findings of lack of statistical significance result from a misguided attempt to fit a linear specification to a perfect, or almost perfect, symmetrical actual U-shaped relationship. The article conclusively claims that these realizations, and the fact that authors overfit by specifying contemporaneously the GDP growth rate, the industry growth rate and the industry entry rate, explain findings in the extant literature that are awkward, unexpected and embarrassing and interpretations that are many times completely inapplicable.
    Keywords: Small business; Survival determinants; GDP growth; Cox regression
    JEL: M21
    Date: 2016–08–15
  7. By: Timothy Kehoe (University of Minnesota); Sewon Hur (University of Pittsburgh); Kim Ruhl (New York University Stern School of Busi); Jose Asturias (Georgetown University)
    Abstract: Using plant-level data from Chile and Korea, we find that, during episodes of rapid growth, most of the aggregate productivity growth is due to the entry and exit of firms while, during episodes of slower growth, it is mostly due to growth within and across existing firms. Studies for other countries suggest that this is an empirical regularity. We develop a dynamic general equilibrium model based on Hopenhayn (1992) which incorporates the theory of economic growth proposed by Parente and Prescott (1994) and Kehoe and Prescott (2002). In this model, new firms enter every period with productivities drawn from a distribution whose mean grows over time. After entering, a firm’s productivity grows, but not as rapidly as new firms’ productivity distribution. In a version of the model calibrated to U.S. plant-level data, we simulate two sets of reforms: a decrease in new firms’ costs of entry and a reduction in the barriers to technology adoption for new firms. The model reproduces the regularity that we observe in the data, and confirm that entry and exit of firms is crucial for reforms to generate rapid growth.
    Date: 2016

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