nep-ent New Economics Papers
on Entrepreneurship
Issue of 2016‒11‒13
twelve papers chosen by
Marcus Dejardin
Université de Namur

  1. High Growth Young Firms: Contribution to Job, Output and Productivity Growth By John Haltiwanger; Ron S Jarmin; Robert Kulick; Javier Miranda*
  2. Taking the Leap: The Determinants of Entrepreneurs Hiring their First Employee By Robert W. Fairlie; Javier Miranda
  3. Entrepreneurship in the Shadows: Wealth Constraints and Government Policy By Semih Tumen
  4. Start-Up Capital and Women's Entrepreneurship: Evidence from Swaziland By Zuzana Brixiová; Thierry Kangoye
  5. Information Asymmetry Reduction in Opaque Contexts: Evidence From Debt and Outside Equity Financing in Early Stage Firms By Mircea Epure; Martí Guasch
  6. Portuguese Startups: a success prediction model By Daniela Santos da Silva; António Cerqueira; Elísio Brandão
  7. Innovation, Competition and Technical Efficiency By Elina Berghäll
  8. Capitalist Spirit and the Markets: Why Income Inequality Matters By Aristotelis Boukouras
  9. Changes in self-employment in the agricultural sector, South Africa: 1994-2012 By Liz Neyens; Martin Wittenberg
  10. Credit constraints and taxes: misallocation in a two-sector economy By Julia Passabom Araujo
  11. Transplanting clean-tech paths from elsewhere: The emergence of the Chinese solar PV industry By Binz, Christian; Diaz Anadon, Laura
  12. "Das 21. Jahrhundert ist weiblich": Unternehmerinnen in der Presse By Ettl, Kerstin; Welter, Friederike; Achtenhagen, Leona

  1. By: John Haltiwanger; Ron S Jarmin; Robert Kulick; Javier Miranda*
    Abstract: Recent research shows that the job creating prowess of small firms in the U.S. is better attributed to startups and young firms that are small. But most startups and young firms either fail or don’t create jobs. A small proportion of young firms grow rapidly and they account for the long lasting contribution of startups to job growth. High growth firms are not well understood in terms of either theory or evidence. Although the evidence of their role in job creation is mounting, little is known about their life cycle dynamics, or their contribution to other key outcomes such as real output growth and productivity. In this paper, we enhance the Longitudinal Business Database with gross output (real revenue) measures. We find that the patterns for high output growth firms largely mimic those for high employment growth firms. High growth output firms are disproportionately young and make disproportionate contributions to output and productivity growth. The share of activity accounted for by high growth output and employment firms varies substantially across industries – in the post 2000 period the share of activity accounted for by high growth firms is significantly higher in the High Tech and Energy related industries. A firm in a small business intensive industry is less likely to be a high output growth firm but small business intensive industries don’t have significantly smaller shares of either employment or output activity accounted for by high growth firms.
    Date: 2016–01
  2. By: Robert W. Fairlie; Javier Miranda
    Abstract: Job creation is one of the most important aspects of entrepreneurship, but we know relatively little about the hiring patterns and decisions of startups. Longitudinal data from the Integrated Longitudinal Business Database (iLBD), Kauffman Firm Survey (KFS), and the Growing America through Entrepreneurship (GATE) experiment are used to provide some of the first evidence in the literature on the determinants of taking the leap from a non-employer to employer firm among startups. Several interesting patterns emerge regarding the dynamics of non-employer startups hiring their first employee. Hiring rates among the universe of non-employer startups are very low, but increase when the population of non-employers is focused on more growth-oriented businesses such as incorporated and EIN businesses. If non-employer startups hire, the bulk of hiring occurs in the first few years of existence. After this point in time relatively few non-employer startups hire an employee. Focusing on more growth- and employment-oriented startups in the KFS, we find that Asian-owned and Hispanic-owned startups have higher rates of hiring their first employee than white-owned startups. Female-owned startups are roughly 10 percentage points less likely to hire their first employee by the first, second and seventh years after startup. The education level of the owner, however, is not found to be associated with the probability of hiring an employee. Among business characteristics, we find evidence that business assets and intellectual property are associated with hiring the first employee. Using data from the largest random experiment providing entrepreneurship training in the United States ever conducted, we do not find evidence that entrepreneurship training increases the likelihood that non-employers hire their first employee.
    Date: 2016–01
  3. By: Semih Tumen
    Abstract: I develop a dynamic model of forward-looking entrepreneurs, who decide whether to operate in the formal economy or informal economy and choose how much to invest in their businesses, taking government policy as given. The government has access to two policy tools: taxes on formal business activity and enforcement (or policing) discouraging informality. The main focus of the paper is on transitional dynamics under different initial wealth levels. Whether an initially small business will be trapped in the informal economy and remain small forever or grow quickly and become a large formal business depends on tax and enforcement policies. High tax rates accompanied by loose enforcement—which is mostly the case in less-developed countries (LDCs)—induce tax avoidance, discourage investment in formal businesses, and drive the entrepreneurial activity toward the informal sector even though the initial wealth level is high. Lowering taxes on formal activity joined with strict enforcement can help reducing the magnitude of poverty traps in LDCs—such as the MENA region, Latin America, and developing Asia.
    Keywords: Entrepreneurship, Informal economy, Government policy, Investment, Wealth constraints
    JEL: E21 E26 L26 O17
    Date: 2016
  4. By: Zuzana Brixiová (SALDRU, University of Cape Town); Thierry Kangoye (African Development Bank)
    Abstract: This paper examines gender differences in entrepreneurial performance and their links with start-up capital utilizing a search model and empirical analysis of survey of entrepreneurs from Swaziland. The results show that entrepreneurs of both genders with higher start-up capital record better sales performance than those with smaller amounts of capital. For women entrepreneurs, formal finance sources of start-up capital are also associated with higher sales. However, as in other developing countries, women entrepreneurs in Swaziland have smaller start-up capital and are less likely to fund it from formal sources than men. Among women entrepreneurs, those with college education and confident in their skills tend to start their firms with higher amounts of capital. Professional support also matters, as women with such support are more likely to fund their start-up capital from the formal financial sector.
    Keywords: women's entrepreneurship, start-up capital, search model, multivariate analysis
    JEL: L53 O12 C61
    Date: 2016
  5. By: Mircea Epure; Martí Guasch
    Abstract: This study analyzes the relationship between debt and outside equity investments in early stage firms. The existing evidence on this relationship is scarce and inconclusive, mostly due to the pervasive opaqueness of early stage firms. We argue that outside investors who face the severe information asymmetries that exist in entrepreneurial firms may use the level of debt as a signal. In addition, personal and business debt could signal different information to outside investors. We use the Kauffman Firm Survey and develop an empirical strategy based on a Heckman selection model and a propensity score matching analysis. Our results consistently show that debt, and particularly business debt, is positively related to outside equity investments, especially in times of economic distress. We posit that start-ups with higher levels of business debt can send more credible signals to capital markets, and identify cash holdings and the firm-bank relationship as possible information channels for outside investors.
    Keywords: financing; debt; equity; entrepreneurship; information asymmetry; capital structure
    JEL: G32 M13 M40
    Date: 2016–11
  6. By: Daniela Santos da Silva (FEP-UP, School of Economics and Management, University of Porto); António Cerqueira (FEP-UP, School of Economics and Management, University of Porto); Elísio Brandão (FEP-UP, School of Economics and Management, University of Porto)
    Abstract: This study analyses the factors that influence the success of Portuguese startups. It aims to develop a success versus failure prediction model regarding the Portuguese entrepreneurship ecosystem. Our empirical study considers four categories that influence the success: characteristics of founders, characteristics of startups, capital and external factors. The sample includes 50 startups established over the period from 2003 to 2015 in Portugal. The explanatory variables that we use are management experience, industry experience, marketing skills, age, education, parents that have their own business (characteristics of founders), capital (capital), record keeping and financial controls, planning, professional advisors, staff, partners, product or service timing (characteristics of startups) and economic timing (external factors). The empirical results show that only the founder’s characteristics and external factors have a significant influence in Portuguese startups success. Portuguese startups with young founders, less than 25 years old, and founders with less education, high school education or less, are more likely to be unsuccessful cases. However, and contrarily to the previous literature, marketing expertise is negatively correlated with the success of startups Overall, the success and failure prediction model presents an ability to accurately predict a specific Portuguese startup as success or failure of 82%.
    Keywords: startup, entrepreneurship, logit model, success, failure, prediction model
    JEL: L25 L26 M13
    Date: 2016–11
  7. By: Elina Berghäll
    Abstract: Contradictory empirical and theoretical evidence on the relationship between innovation and competition has been reconciled in a model that yields an inverted U-shaped curve. I test whether the predictions of the model are supported by the data with an unbalanced panel of firms for 1990-2003 in a high productivity growth, high-tech industry, Finnish ICT manufacturing. In particular, I investigate how well alternative, yet rigorous measures of innovation and the technology gap, such as R&D intensity, R&D elasticity, technical change, technical efficiency and total factor productivity fare with respect to competition measured by the Lerner index. The results prove sensitive to the choice of variable. Overall, the model is not supported by the empirical evidence of the industry.
    Keywords: competition, innovation, technical efficiency, technology frontier, R&D intensity
    JEL: O25 L50 L60 D20 O30
    Date: 2016–10–12
  8. By: Aristotelis Boukouras
    Abstract: I develop a simple static general equilibrium model with capitalist-spirit preferences and prices set by firm owners (entrepreneurs). The model’s pure symmetric Nash equilibria differ markedly from the canonical model: (i) A positive output gap and unemployment may emerge in equilibrium, despite the absence of price rigidities or information asymmetries. (ii) Income and wealth inequality affect equilibrium prices and employment. (iii) The model generates ambiguous comparative statics. Specifically, an increase in inequality of either type may reduce employment and increase the output gap of the economy, while productivity reductions may have the opposite effect. As a result, minimum wage policies may increase employment. These results provide some justification for a number of arguments used in public debates.
    Keywords: capitalist spirit, general equilibrium, income distribution, income inequality, minimum wage, output gap, unemployment, wealth distribution, wealth inequality
    JEL: D31 D63 E24 E25
  9. By: Liz Neyens (Analysis Group Inc., Boston); Martin Wittenberg (DataFirst, University of Cape Town)
    Abstract: While South Africa enjoys a wealth of household and firm data that speaks to the evolution of the labour market since the end of apartheid in 1994, the interpretation of these data is complicated by a variety of measurement and fieldwork changes that have occurred over this time period. These changes have been well documented by Wittenberg (2004, 2014), Casale, Muller, and Posel (2004), and Yu (2007). One of the most dramatic changes that must be considered when examining employment trends over this period is the apparent increase in self-employment that took place with the switch from the October Household Surveys (OHS) to the Labour Force Surveys (LFS). With this change in survey instrument, there was a seeming increase in the number of self-employed agricultural workers from roughly 150 000 in the last wave of the OHS (October 1999) to more than 1.4 million in the first wave of the LFS (February 2000). The number of self-employed agricultural workers (SEAWs) drops somewhat after September 2000 but remains elevated throughout all waves of the LFS compared to previous OHS waves and later Quarterly Labour Force Survey (QLFS) waves. This series, calculated using the Post-Apartheid Labour Market Series (PALMS) which combines all three survey instruments—OHS, LFS, and QLFS.
    Date: 2016
  10. By: Julia Passabom Araujo
    Abstract: Effects of misallocation in a two sector economy with different capital intensity technologies can be particularly large. This article proposes a model of occupational choice based on wealth and entrepreneurial talent in which individuals are subject to credit constraints and different tax-rates. Agents must choose between opening a business in a more, or less, capital intensive sector or being a wage worker. The model is calibrated to the Brazilian economy between 2000-2013. Regarding the effects of financial frictions, limiting credit availability to a less capital intensive sector can be worse in terms of efficiency, but less distortive in terms of income inequality. Taxation over a more capital intensive sector worsens aggregate productivity, although it can improve income distribution. Taxing wage workers have a lower impact on efficiency, but will be severely worse on equality.
    Keywords: Capital intensity; credit frictions; taxation; entrepreneurship; misallocation
    JEL: L26 O11 O14 O41
    Date: 2016–10–14
  11. By: Binz, Christian (CIRCLE, Lund University); Diaz Anadon, Laura (Harvard University)
    Abstract: New clean-tech industries emerge in increasingly complex spatial patterns that challenge existing explanations on industrial path creation. In particular, the case of latecomer regions quickly building up industries in fields that are unrelated to their previous industrial capabilities is not well understood in the literature. This paper aims to address this gap with an analytical framework that draws on technological innovation system and catching-up literatures to specify the place-specific and extra-regional system resources that firms in latecomer regions draw on in the industry formation process. An in-depth case study of the Chinese solar photovoltaics (PV) sector reveals an industry formation process that differs from existing models. Rather than depending on linkages with multinational companies, extensive policy support, or gradual recombination of pre-existing domestic capabilities, early industry formation in the Chinese solar PV sector emerged from path transplantation in a highly internationalized entrepreneurial project. Pioneering actors mobilized knowledge, markets, investment and technology legitimacy developing outside China and re-combined them with the country’s generic capabilities in export-oriented mass manufacturing. This implies that in some industries, globalization may enable a new model of industrial path creation based on bridging domestic resource gaps by directly mobilizing system resources emerging in the international networks of a global innovation system.
    Keywords: cleantech; path creation; technological innovation system; solar photovoltaics; China; transnational entrepreneurship
    JEL: F64 O33 Q55
    Date: 2016–11–05
  12. By: Ettl, Kerstin; Welter, Friederike; Achtenhagen, Leona
    Abstract: Die vorliegende Studie untersucht die Presseberichterstattung über Unternehmerinnen insbesondere mit Blick darauf, welches Bild von Unternehmerinnentum in den Presseberichten vermittelt wird. Zu diesem Zweck wurden Artikel in sechs ausgewählten überregionalen deutschen Tageszeitungen im Zeitraum 2004-2013, sowie ausgewählte Artikel aus schwedischen Printmedien ausgewertet. Die Ergebnisse zeigen, dass die Berichterstattung zunehmend vielfältiger wird und die Sichtbarkeit von Unternehmerinnen zunimmt. Allerdings werden auch heute noch klassische Stereotype und traditionelle Rollenbilder durch die Berichterstattung transportiert.
    Abstract: The present study examines how the daily press in Germany contributes to presenting and spreading role models for women entrepreneurs. Therefore we analyzed six of the biggest nationwide newspapers in the space of time 2004-2013. For comparison we furthermore included selected Swedish print media. Our results show that women entrepreneurs get more and more visible in the press discourse, but traditional stereotypes and role models are still presented in several of the articles.
    Keywords: Gender,Gründungen/Selbstständigkeit,Start-up/Self-Employment,Enterprise Management
    JEL: M13 L26 J16
    Date: 2016

This nep-ent issue is ©2016 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.