nep-ent New Economics Papers
on Entrepreneurship
Issue of 2016‒09‒18
twelve papers chosen by
Marcus Dejardin
Université de Namur

  1. Self-Employment, Wealth and Start-up Costs: Evidence from a Financial Crisis By Koffi Elitcha; Raquel Fonseca Benito
  2. The effect of entry on R&D networks By Emmanuel Petrakis; Nikolas Tsakas
  3. Multilevel Transmission of Cultural Attitudes and Entrepreneurial Intention: Evidence from High-School Students By A. Tubadji; E. Santarelli; R. Patuelli
  4. Entrepreneurial heterogeneity and the design of entrepreneurship policies for economic growth and inclusive development By Calza, Elisa; Goedhuys, Micheline
  5. Can microcredit impact the activity of small and medium enterprises? New evidence from a Regression Discontinuity Design in Panama By Nènè Oumou; Jonathan Goyette
  6. Small Firms, Human Capital, and Productivity in Asia By Vandenberg, Paul; Trinh, Long Q.
  7. Commercial Bank Innovations in Small and Medium-Sized Enterprise Finance: Global Models and Implications for Thailand By Subhanij, Tientip
  8. The Impact of Consumer Credit Access on Employment, Earnings and Entrepreneurship By Kyle Herkenhoff
  9. Tax evasion, firm dynamics and growth By Emmanuele Bobbio
  10. The creation function of a junior listing venue: An empirical test on the Alternative Investment Market By Valerie Revest; Alessandro Sapio
  11. Do Stronger Patents Stimulate or Stifle Innovation? The Crucial Role of Financial Development By Chu, Angus C.; Cozzi, Guido; Pan, Shiyuan; Zhang, Mengbo
  12. A Dialogical Approach to increase " Matching " Efficiency before Collaborative Business Model Processes By Jérémie Faham; Maxime Daniel; Benjamin Tyl; Iban Lizarralde; Iñaki Garagorri; Jérémy Legardeur

  1. By: Koffi Elitcha; Raquel Fonseca Benito
    Abstract: Financial constraints affect in important ways the decision of individuals to become entrepreneur (self-employed). This implicitly suggests a positive relation between the propensity of individuals to become entrepreneur and their personal wealth. Recent theoretical work and empirical evidence confirm this hypothesis. More interestingly, it has been shown that the slope of the entrepreneurship-wealth relationship increases with the extent of liquidity constraints and flattens with the magnitude of start-up costs. Using individual level data from 3 surveys (SHARE, ELSA and HRS) in Europe and the United States, as well as the World Bank’s Doing Business data, this paper empirically zeroes in on the impact of start-up costs on the self-employment-wealth relationship. The dynamic nature of the data enables us to investigate potential effects of the last global financial crisis. Results confirm the strong positive relationship between the entrepreneurial choice and wealth, as well as the negative effect stemming from the increase in start-up costs. Interestingly, although there is no strong evidence that wealth in itself played a bigger role during the crisis, we find that the negative impact of start-up costs on wealth proved to be significantly pronounced during the last crisis.
    Keywords: Self-Employment, Occupational Choice, Wealth, Liquidity Constraints, Start-up Costs, Financial Crisis,
    JEL: E02 E21 J21 J24
    Date: 2016–09–09
  2. By: Emmanuel Petrakis; Nikolas Tsakas
    Abstract: We investigate the effect of potential entry on the formation and stability of R&D networks considering farsighted firms. We show that the presence of a potential entrant often alters the incentives of incumbent firms to establish an R&D link. In particular, incumbent firms may choose to form an otherwise undesirable R&D collaboration in order to deter the entry of a new firm. Moreover, an incumbent firm may refrain from establishing an otherwise desirable R&D collaboration, expecting to form a more profitable R&D link with the entrant. Finally, potential entry may lead an inefficient incumbent to exit the market. We also perform a welfare analysisand show that market and societal incentives are often misaligned.
    Keywords: R&D Networks; Entry; Farsighted stability
    JEL: D85 L24 O33
    Date: 2016–09
  3. By: A. Tubadji; E. Santarelli; R. Patuelli
    Abstract: Intention toward any occupational choice can be widely categorized as a rational choice process combined with a subjective attitude function. There is extensive literature dealing with the formation of intention toward entrepreneurship in adolescents, in particular as a result of either parental (vertical) transmission of social capital or network effects from peers or neighbours (the latter two being two different levels of horizontal transmission varying in proximity in terms of bonding and bridging). We contribute to this literature by considering the joint effect of all these three levels simultaneously, in order to avoid an underspecification of the model due to omission of important cultural factors. We hypothesize that such three levels identify a mechanism where the individual perception of their importance interacts with their objective characteristics. With data for second-year high-school students, and employing empirical triangulation through Logit and 3SLS methods, we find evidence for a strong parental effect and of secondary peer effects on student intention. We also detect clear endogenous effects from the neighbourhood and the overall cultural context. Moreover, entrepreneurship is confirmed to be perceived, even by students, as a buffer for unemployment and social mobility.
    JEL: R32 R38 Z10 J60
    Date: 2016–08
  4. By: Calza, Elisa (UNU-MERIT); Goedhuys, Micheline (UNU-MERIT)
    Abstract: Entrepreneurship is the object of renewed and increasing attention, not only by academics, but also by policy makers worldwide. This interest partly results from a positive perception of entrepreneurship as a driver of economic growth, and the urgency for policy makers to find ways to stimulate and sustain economic growth, in developed as well as in developing countries. This trend raises the need to have a clear understanding of the role of entrepreneurship in the economy and society. This paper acknowledges that there is a large heterogeneity across entrepreneurs in their ability to contribute to economic growth. We present insights from macro-economic studies supporting this statement. We next take a micro perspective and discuss the evidence based literature to identify the critical factors and entrepreneur characteristics that can lead to entrepreneurial success and contribute to growth. This discussion serves as a framework against which we reflect on the rationales and effectiveness of entrepreneurial policies in developing countries.
    Keywords: entrepreneurship, firm growth, development policy
    JEL: O12 O20 L26
    Date: 2016–08–29
  5. By: Nènè Oumou (Département d'économique, Université de Sherbrooke); Jonathan Goyette (Département d'économique, Université de Sherbrooke)
    Abstract: In this paper, we conduct an impact analysis of microcredit on entrepreneurial activity using a new data-set collected among 740 entrepreneurs located in Panama. Our focus is on a new type of microfinance institution which grants loans to enterprises falling in what we call the financial missing middle, i.e., enterprises which are too big for traditional microcredit but not big enough for commercial banks. We collected an unbalanced panel of data on enterprise's business and credit history. Using our partner's rules of credit attribution, we build a regression discontinuity design to evaluate the effect of loan's obtainment on the activity of financed enterprises. Our results show a limited impact of access to credit on firm's revenues despite a significant impact on investment in equipment and immobilization. The magnitude of the positive effect is higher on micro-enterprises while auto-enterprises are negatively impacted by microcredit as is usually documented in the literature. We emphasize that the cost of credit is one of the major determinants of the limited impact of microcredit on entrepreneurial activity.
    Keywords: Microfinance Institutions, firm’s performance, Regression Discontinuity, Panama
    JEL: D22 G21 L26 O12 O16
    Date: 2016–08
  6. By: Vandenberg, Paul (Asian Development Bank Institute); Trinh, Long Q. (Asian Development Bank Institute)
    Abstract: The paper analyzes the link between human capital and firm-level productivity in five Asian countries. It draws on a dataset of over 4,000 enterprises and considers both the prior educational attainment of workers and in-service training programs of enterprises. Differences between small, medium-sized, and large enterprises and between countries are also presented. The key finding is that both preservice education and in-service training are positively correlated with labor productivity. The productivity of small and medium-sized enterprises (SMEs) is enhanced by a higher level of skills and education of the workforce, just as it is with large firms. However, there are country differences. The policy implications are that competitiveness is enhanced both by raising the general level of education in the workforce and by encouraging enterprise-based training programs.
    Keywords: SME; human capital; firms; enterprises; services; productivity; skills; education; in-service training; labor; workforce; competitiveness; enterprise-based training; People’s Republic of China; Indonesia; Malaysia; Thailand; Viet Nam
    JEL: D22 D24 J24
    Date: 2016–09–12
  7. By: Subhanij, Tientip (Asian Development Bank Institute)
    Abstract: In Thailand, the government has long recognized the importance of small and medium-sized enterprises (SMEs) to the economy and has given a large amount of financial support to this sector. Still, SMEs are not able to catch up with larger enterprises and the constraints to SME financing remain the main topic of policy discussion today. Against this background, the important issue for Thailand may not be about the lack of financial assistance per se but about how to design an appropriate market-friendly business model and supporting scheme to help SMEs gain access to credit on a sustainable basis. Given the success of microfinance around the world, a large number of commercial banks have made a profitable business out of this sector. This paper explores various business models by commercial banks in microfinance and provides policy implications for Thailand. By making use of commercial banks' competitive advantage, Thailand can create a more market-friendly environment for SME financing. This will also ensure that lending to small-business clients is not a burden to the government and is self-sustaining in the long run.
    Keywords: SME; Thailand; bank; financing; microfinance; loans; credit; MFI; SFI; financial institution; commercial banking; financial access
    JEL: E50 G21
    Date: 2016–09–12
  8. By: Kyle Herkenhoff (University of Minnesota)
    Abstract: How does consumer credit access impact employment prospects, earnings, and entrepreneurship? We answer this question by merging individual employment records from the Census Bureau with individual TransUnion credit reports, and exploiting the discrete increase in individual credit following exogenous bankruptcy flag removal. We find that flows into self-employment increase, flows out of self-employment increase, flows into formal employment increase. Earnings levels and growth rates rise for individuals who make the transition into formal employment. There are two competing economic forces underlying these results: (i) credit constraints loosen after exogenous bankruptcy flag removal allowing households to start self-employed businesses (ii) households who were self-employed because credit checks precluded them from finding formal sector jobs subsequently return to the formal sector after bankruptcy flag removal.
    Date: 2016
  9. By: Emmanuele Bobbio (Banca d'Italia)
    Abstract: Italy's growth performance has been lacklustre in the last two decades. The economy has a low R&D intensity; firms are smaller and less likely to grow or exit than firms in other advanced countries; the shadow economy is large. I show how these features arise simultaneously in a Schumpeterian growth model with heterogeneous firms where the tax auditing probability increases with firm size. Tax evasion confers a cost advantage over competitors. In equilibrium, small firms invest less in innovation because growing entails a (shadow) cost of fiscal regularization. Unfair competition forces other firms to lower the mark-up they charge for their new products, reducing the incentive to innovate. Market selection is hampered, further lowering the aggregate growth rate along the extensive margin. I calibrate the model on Italian firm-level data for the period 1995-2006 and find that enforcing taxes would have increased the long-run growth rate from 0.9% to 1.1%. The market share of high type firms would have been 6 percentage points higher and average firm size 20% higher. Also, I find that lowering the tax burden can have a significant impact on growth when the shadow economy is large, while the effect is negligible when taxes are enforced.
    Keywords: growth, innovation, selection, firm dynamics, tax evasion, size dependent policies
    JEL: O30 O43 H26
    Date: 2016–09
  10. By: Valerie Revest; Alessandro Sapio
    Abstract: Stock markets perform a creation function if the inflow of financial cap- ital in the birth of new privately-held firms is stimulated by the promise of stock market liquidity at a later point in time. Junior stock market segments, characterized by lighter listing procedures and costs, may be suited to perform a creation function, but their liquidity promise may not be reliable due information opacity. We test the creation function of the Alternative Investment Market (AIM), the junior segment of the London Stock Exchange (LSE), by means of dynamic panel data models, where entry at the sectoral level is regressed on capital raised at IPO on AIM and on the LSE main market, venture capital investments, and control variables. Our sample includes UK manufacturing sectors over the 2004-2012 time span. We find that sectors that raised more capital at IPO on AIM housed more new entrants in the subsequent years, whereas the results on main market IPOs and venture capital financing are mixed. The magnitude of this effect increases as the amounts of raised capital are aggregated over longer time horizons. Results are confirmed after endogeneity tests (pseudo diff-in-diff and 2-stage residual inclusion estimators).
    Keywords: Entry, Firm creation, Stock exchange, Junior stock market
    Date: 2016–09–15
  11. By: Chu, Angus C.; Cozzi, Guido; Pan, Shiyuan; Zhang, Mengbo
    Abstract: This study explores the effects of patent protection in a distance-to-frontier R&D-based growth model with financial frictions. We find that whether stronger patent protection stimulates or stifles innovation depends on credit constraints faced by R&D entrepreneurs. When credit constraints are non-binding (binding), strengthening patent protection stimulates (stifles) R&D. The overall effect of patent protection on innovation follows an inverted-U pattern. An excessively high level of patent protection prevents a country from converging to the world technology frontier. A higher level of financial development influences credit constraints through two channels: decreasing the interest-rate spread and increasing the default cost. Via the interest-spread (default-cost) channel, patent protection is more likely to have a negative (positive) effect on innovation under a higher level of financial development. We test these results using cross-country regressions and find supportive evidence for the interest-spread channel.
    Keywords: Patent protection, credit constraints, economic growth, convergence
    JEL: E44 O31 O34
    Date: 2016–09
  12. By: Jérémie Faham (ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA), IMS - Laboratoire de l'intégration, du matériau au système - Université Sciences et Technologies - Bordeaux 1 - Institut Polytechnique de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Maxime Daniel (ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA), LaBRI - Laboratoire Bordelais de Recherche en Informatique - Université Bordeaux Segalen - Bordeaux 2 - Université Sciences et Technologies - Bordeaux 1 - École Nationale Supérieure d'Électronique, Informatique et Radiocommunications de Bordeaux (ENSEIRB) - CNRS - Centre National de la Recherche Scientifique); Benjamin Tyl (APESA Innovation - APESA Innovation - APESA); Iban Lizarralde (ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA)); Iñaki Garagorri (Universidad de Deusto); Jérémy Legardeur (ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA), IMS - Laboratoire de l'intégration, du matériau au système - Université Sciences et Technologies - Bordeaux 1 - Institut Polytechnique de Bordeaux - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The 2014-2020 European Union cohesion policy settled the obligation to establish “Research and Innovation Strategies for the Smart Specialization” (RIS3) to build competitive advantages for each region. The originality of RIS3 is the “bottom-up” identification of regional priorities through the “Entrepreneurial Discovery” (ED) process which stresses the need to involve all the regional “entrepreneurs” (RE) - companies, research, consulting, public authorities etc. - into the design of territorial orientations. However there is a lack of recommendations to implement it into heterogeneous regions. The Collaborative Business Models (CBM) approach has probably a role to play within this process as a suitable strategic tool to set up regional “value networks”. However, the preparatory stage of CBM and especially the identification and the matching processes among potential RE partners is often not addressed. This work is a proposition to answer this issue of matching in order to improve the CBM efficacy within RIS3.
    Keywords: Matching,Collaborative Business Models,Profile Comprehension,Regional Entrepreneurs,Dialogical questionnaire,Entrepreneurial Discovery,RIS3,Innovation,Collaborative Platform,Smart Interface,Networking
    Date: 2016–06–19

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