nep-ent New Economics Papers
on Entrepreneurship
Issue of 2017‒07‒16
fourteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Dissolving the entrepreneurship puzzle: Applying Fréchet distributions to Lazear’s occupational choice model By Hårsman, Björn; Mattsson, Lars-Göran
  2. How Do Entrepreneurial Portfolios Respond to Income Taxation? By Frank M. Fossen; Ray Rees; Davud Rostam-Afschar; Viktor Steiner
  3. The Knowledge Spillover Theory of Intrapreneurship, Labour Mobility and Innovation by Firm Size By Braunerhjelm, Pontus; Ding, Ding; Thulin, Per
  4. "It takes three to tango": Brain, cognition and entrepreneurial enhancement By Pérez-Centeno, Víctor
  5. A Note on Schumpeterian Competition in the Creative Class and Innovation Policy By Batabyal, Amitrajeet; Yoo, Seung Jick
  6. Entrepreneurship, Education and the Fourth Industrial Revolution in Africa By Naudé, Wim
  7. The Role of Demand in Fostering Product vs Process Innovation: A Model and an Empirical Test By Dawid, Herbert; Pellegrino, Gabriele; Vivarelli, Marco
  8. Firm dynamics in developing countries: a single policy for all regions? By Calá, Carla Daniela
  9. The influence of the concentration on the performance of firms in retail industry in the Republic of Croatia By Ivan Kristek; Mladen Pancić; Hrvoje Serdarušić
  10. On the Growth of Korean Technoparks By Albert, Link; U Yeong, Yang
  11. Credit Market Development and Firm Innovation: Evidence from the People’s Republic of China By Shang, Hua; Song, Quanyun; Wu, Yu
  12. Network preferences and the growth of the British cotton textile industry, c.1780-1914 By Toms, Steven
  13. Transformative Social Innovation By Novy, Andreas
  14. Spécificités des déterminants des innovations environnementales : une approche appliquée aux PME By Pinget, Amandine

  1. By: Hårsman, Björn (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Mattsson, Lars-Göran (Royal Institute of Technology, Department of Transport Science)
    Abstract: The paper deals with the selection into entrepreneurship and more precisely with Lazear’s model of occupational choice between entrepreneurship and paid employment. The basic aim is to show that lower expected income for entrepreneurs vs. wage-employed is fully compatible with Lazear’s assumption that the selection into entrepreneurship is based upon income maximization – there is no “return to entrepreneurship puzzle”. We will prove this by deriving the theoretical implications that follow from the assumption that skills are Fréchet distributed. Another aim is to shed some empirical light on the resulting theoretical results. This is done by using individual level data from the Swedish employment register for 2004-2008 to compute the parameters of the Fréchet distribution and the corresponding income distributions for self-owners and wage employed. The paper contributes to earlier literature by resolving the so called income paradox and by demonstrating the rich possibilities for empirical studies inherent in the Lazear model.
    Keywords: entrepreneurship; occupational choice; self-owning; skill distribution; Fréchet distribution; entrepreneurship puzzle
    JEL: J24 J30 L26 M13
    Date: 2017–07–07
  2. By: Frank M. Fossen; Ray Rees; Davud Rostam-Afschar; Viktor Steiner
    Abstract: We investigate how personal income taxes affect the portfolio share of personal wealth that entrepreneurs invest in their own business. In a reformulation of the standard portfolio choice model that allows for underreporting of private business income to tax authorities, we show that a fall in the tax rate may increase investment in risky entrepreneurial business equity at the intensive margin, but decrease entrepreneurial investment at the extensive margin. To test these hypotheses, we use household survey panel data for Germany eliciting the personal wealth composition in detail in 2002, 2007, and 2012. We analyze the effects of personal income taxes on the portfolio shares of six asset classes of private households, including private business equity. In a system of simultaneous demand equations in first differences, we identify the tax effects by an instrumental variables approach exploiting tax reforms during our observation period. To account for selectioninto entrepreneurship, we use changes in entry regulation into skilled trades. Estimation results are consistent with the predictions of our theoretical model. An important policy insight is that lower taxes drive out businesses that are viable only due to tax avoidance or evasion, but increase investment in private businesses that are also worthwhile in the absence of taxes.
    Keywords: Taxation, entrepreneurship, portfolio choice, investment
    JEL: H24 H25 H26 L26 G11
    Date: 2017
  3. By: Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Ding, Ding (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Thulin, Per (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Presenting The Knowledge Spillover Theory of Intrapreneurship, we examine how labour mobility impacts innovation distributed on firm size. A matched employer-employee dataset, pooled with firm-level patent application data, is implemented in the analysis. We provide new evidence that knowledge workers’ mobility has a positive and strongly significant impact on all firms’ innovation output, measured as patent applications. The patterns and effects differ between large and small firms. More precisely, for small firms, intraregional mobility of knowledge workers that have previously worked in a patenting firm (the learning-by-hiring effect) are shown to be statistically and economically highly significant, whereas only limited impact could be detected for firms losing knowledge workers (the-learning-by-diaspora effect).
    Keywords: Labour mobility; knowledge diffusion; innovation; social networks
    JEL: J24 O31 R23
    Date: 2017–07–13
  4. By: Pérez-Centeno, Víctor
    Abstract: In the global clash for unveiling the 'innermost secrets' of the brain, the field of neuroscience is the most fitting contender. Neuroscience is not quite ready to win the war for now, but it is assuredly equipped to win some battles. Notwithstanding that entrepreneurship is fundamentally a braindriven phenomenon, entrepreneurship research based on neuroscience's tools cannot be counted on the fingers of more than one hand. Grounded on a prior literature review that investigates the state of neuroscience's use in entrepreneurship research, this position paper reflects on the future implications that the utilization of neuroscience brings to entrepreneurship research and cognition. To articulate this exercise, I present the so-called five 'winds of disruption' to signal where to go next in the study of entrepreneurship from a brain-driven perspective. Next I spell out four ways to maximize neuroscience's inputs into entrepreneurship research. Furthermore, I synthesize the value of three neuroscience-based tools to rear and boost 'entrepreneurial enhancement', the ultimate challenge in the orbit of entrepreneurship research.
    Keywords: entrepreneurial neuroscience,neuro-entrepreneurship,entrepreneurial enhancement,cognition,brain-driven entrepreneurship,entrepreneurial enhancement
    JEL: L26 M13 O33
    Date: 2017
  5. By: Batabyal, Amitrajeet; Yoo, Seung Jick
    Abstract: We study innovation policy in a region in which the members of the creative class engage in Schumpeterian competition and thereby extend aspects of the recent analysis in Batabyal and Yoo (2017). Using the language of these researchers, the creative class is broadly composed of existing and candidate entrepreneurs. In contrast to these researchers, we suppose that R&D by candidate entrepreneurs does not generate any negative externalities. In this setting, we analyze the impact that taxes and subsidies on R&D by existing and candidate entrepreneurs have on R&D expenditures and regional economic growth.
    Keywords: Creative Class, Creative Destruction, Economic Growth, Innovation Policy, R&D
    JEL: O31 O38 R11
    Date: 2017–06–30
  6. By: Naudé, Wim (Maastricht University)
    Abstract: The Fourth Industrial Revolution (4IR) is impacting on the industrialization options for Africa inter alia through three interrelated sets of technologies, namely automation, additive manufacturing and the Industrial Internet. In this paper I set out the case for why Africa should industrialize. I then explore the opportunities and threats the 4IR pose for Africa. Threats include job-losses and the re-shoring of manufacturing to advanced economies. Among the opportunities are products-as-services, the sharing (collaborative) economy, and digital services and digital exports. These are markets that are currently underdeveloped in Africa but have substantial potential given Africa's geography, demography and on-going urbanisation. In order for the continent to benefit from the 4IR more needs to be done to improve entrepreneurship and education. A number of policy recommendations for 4IRcompatible entrepreneurship and education policies are made.
    Keywords: industrial policy, entrepreneurship, education, Africa
    JEL: O55 O25 O14 O33 L26 J24
    Date: 2017–06
  7. By: Dawid, Herbert (University of Bielefeld); Pellegrino, Gabriele (EPFL, Lausanne); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: While the extant innovation literature has provided extensive evidence of the so-called "demand-pull" effect, the possible diverse impact of demand evolution on product vs process innovation activities has not been yet investigated. This paper develops a formal model predicting a larger inducing impact of past sales in fostering product rather than process innovation. This prediction is then tested through a dynamic microeconometric model, controlling for R&D persistence, sample selection, observed and unobservable individual firm effects and time and sectoral peculiarities. Results are consistent with the model and suggest that an expansionary economic policy may benefit the diffusion of new products or even the emergence of entire new sectors.
    Keywords: technological change, R&D, demand-pull innovation, dynamic two tobit
    JEL: O31
    Date: 2017–06
  8. By: Calá, Carla Daniela
    Abstract: We analyse the determinants of firm dynamics in developing countries using Argentina as an illustrative case. We explain firm entry and exit at the regional level, distinguishing three groups of manufacturing activities: low, medium and high tech. We find that both region- and sector- specific determinants explain firm dynamics, but the impact is not homogeneous across the sectors considered. In particular, for low tech industries, there is a need for explanatory variables that proxy for the specificities of developing economies (e.g., poverty, informal economy and idle capacity). We also find evidence of a core-periphery pattern according to which agglomeration economies and previous entries and exits have different effects in core and peripheral regions. These results are relevant for policy makers in developing countries, who should take into account not only the specificities of such economies, but also the regional heterogeneity both in terms of the level of development and industrial composition within the country .
    Keywords: Dinámica Empresarial; Creación de Empresas; Cese de Actividad; Relación Centro-Periferia; Economía Regional; Argentina;
    Date: 2015–12
  9. By: Ivan Kristek (Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku); Mladen Pancić (Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku); Hrvoje Serdarušić (Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku)
    Abstract: According to SCP paradigm (Structure-Conduct-Performance paradigm) the industry structure affects the behavior of firms in the industry, which affects their performance. The paradigm is consistent with the Neoclassical Theory of the Firm which assumes that there is a direct link between the industry structure, entrepreneurial conduct and performance. The basic principle of this paradigm might be the ability of entrepreneurs to exercise market power in a concentrated industry. High industry concentration is correlated with high profits, especially if the concentration level exceeds a certain critical level under the condition that there are some barriers to entry of new entrepreneurs in the industry. Economic theory supports the view that the industry concentration is in a positive relationship with efficiency, and it can be argued that the growth of industry concentration will increase the efficiency of industry. Current approaches in economic theory and recent empirical studies do not follow the SCP theory, they suggest that the above-average profits, which occur in most concentrated industry’s, are results of economic efficiency and effectiveness, and not a consequence of non-competitive behavior. In this paper we will try to give an answer to the above-mentioned issue present in economic theory. The study will try to demonstrate a statistically significant link between the measure of concentration and measure of efficiency in retail industry in the Republic of Croatia.
    Keywords: SCP, concentration, efficiency, retail industry
    JEL: D22 L11 L25 L81
    Date: 2017–04–05
  10. By: Albert, Link (University of North Carolina at Greensboro, Department of Economics); U Yeong, Yang (University of North Carolina at Greensboro, Department of Economics)
    Abstract: The Republic of Korea undertook a major initiative in the early 1970s to integrate high-technology industry with its regional development strategy. This effort involved three phrases: the development of science towns in the 1970s, the initiation of a technopolis program in the 1980s, and the establishment of science parks or technoparks in the 1990s. We focus on the third phase in this paper, and we identify empirically covariates with the employment growth of Korean technoparks. We find faster employment growth in parks established after the ICT revolution in 2000, in parks with tenants involved in more complex technology development, and in parks with more research-intensive tenants.
    Keywords: science park; technopark; Korea; entrepreneurship; technology; innovation
    JEL: O21 O31 R11
    Date: 2017–06–26
  11. By: Shang, Hua (Asian Development Bank Institute); Song, Quanyun (Asian Development Bank Institute); Wu, Yu (Asian Development Bank Institute)
    Abstract: From the perspective of credit allocation, this paper analyzes the effects of credit market development on the innovative capacities of industrial firms in the People’s Republic of China. Using a large dataset of industrial firms in 31 provinces in the People’s Republic of China, we find that credit market development enhances firms’ product innovation incentives and outcomes. We further show that firms’ credit constraints and firms’ performances are two channels through which credit market development affects innovative capacities of firms. Our results are neither driven by the increase in the quantity of credit, nor by the increase in the number of firms in a province. The results are robust to different samples, different estimation methods, and alternative measures of credit market development.
    Keywords: credit market development; credit allocation; firm innovation; product innovation; innovation incentives; innovation outcomes
    JEL: G15 O31 R11
    Date: 2017–01–27
  12. By: Toms, Steven
    Abstract: The paper considers the dual aspect of social networks in terms of 1) product innovators and developers and 2) the providers of finance. The growth of networks can be explained as a function of incumbents and entrants’ preferences to link with specific nodes defined according to the underlying duality. Such preferences can be used to explain network evolution and growth dynamics in the cotton textile industry, from being the first sector to develop in the industrial revolution through to its maturity. The network preference approach potentially explains several features of the long run industry life cycle: 1. The early combination of innovators with access to extensive credit networks, protected by entry barriers determined by pre-existing network structures, leading to lower capital costs for incumbents and rapid productivity growth, c.1780-1830. 2. The spread of innovation and productivity through value chain linkages during the nineteenth century. 3. The trust movement, joint stock and personal capitalism: the emergence of large firms and a preference for regional financial markets in Lancashire and Scotland. 4. The consolidation of regional instead of national business groups which help explain the decline of the industry. The paper uses case studies of firms, networks, and market institutions based on a mixture of archival evidence, drawn mainly from the financial records of a large sample of cotton firms, and contemporary publications. It stresses human interactions (as opposed to population ecology mechanisms) as determinants of the character, scale and scope of network evolution. Intergenerational features of the networks are identified and classified by these characteristics. Networks were typically bounded in terms of product innovators and less bounded in terms of finance providers. Consequently, finance providers tend to provide the impetus for the rate of network growth in expansion, maturity and contraction phases.
    Keywords: Business networks, British cotton textile industry, innovation, finance, regions, entrepreneurship, mergers.
    JEL: L14 L26 N23 N83 O33
    Date: 2017–07–06
  13. By: Novy, Andreas
    Abstract: This paper presents transformative social innovation as a specific type of social innovation which attempts avoiding the trap of being used by the neoliberal mainstream. Unfortunately, utilizing social innovations to strengthen the "human face of neoliberalism" has become a real threat since the Barroso Commission has embraced social innovation as a panacea to solve the social crisis resulting from the financial breakdown in 2008. In this approach, social innovation has increasingly been reduced to a recipe of fostering social entrepreneurship and creating quasi-markets (Jenson, 2015, p. 101), thereby promoting an "enabling welfare state" which uses the creativity and personal commitment of its citizens (Bureau of European Policy Advisors, 2010: 7). In current social innovation policies, attention focuses on the space of manoeuvre of deliberate agency, often by social entrepreneurs or "change maker", to implement "piecemeal changes" in the short run, like improving language skills of migrants or reintegrating of long-term unemployed into the labour market. Nobody can object to "doing more with less" in the form of cost-and resource efficient responses in times of ecological crisis and fiscal constraints. Nor can one oppose incentives for active citizenship in a "participation society". However, these efforts have become increasingly problematic, as a one-sided concern with measureable social impact, offering quick and visible solutions, has impeded to reflect on the deeper causes of the current multiple crises. But without understanding causes, agency can neither grasp important dimensions of a problem nor identify potentials. It, therefore, tends to remain ineffective. This recalls the "old saying that 'when it comes to practicality, nothing beats a good theory" (Danermark, Ekström, Jakobsen, & Karlsson, 2005, p. 187f) - and a good theory of capitalist modernisation is prerequisite for all types of emancipatory agency. In this paper, I will first quickly present attempts at elaborating a more radical version of social innovation that aims at tackling causes, including unequal power relations and systemic elements of capitalist market economies. Frank Moulaert and his colleagues, the research project TRANSIT and Mangabeira Unger offer different analyses for identifying the transformative potential of social innovations. Based on these contributions, I will present my understanding of transformative social innovations, grounding it in Karl Polanyi's The Great Transformation, critical realism and transdisciplinarity.
    Date: 2017
  14. By: Pinget, Amandine
    Abstract: Understanding how companies innovate for positive environment impact and sustainable development is a crucial issue for business and society today. Yet, little is currently known about this particular kind of innovation. The objective of this thesis is to shed light on the specificities of environmental innovation for small and medium-sized enterprises (SMEs) in terms of determinants and perceived barriers. The theoretical framework is based on the Porter’s Hypothesis in order to examine the effect of regulation. It is enriched by the RBV and KBV approaches to better take into account SMEs’ capabilities and resources in the adoption of environmental innovation. This research is based on three empirical articles and on a quantitative approach which mobilizes several econometric methods. This thesis contributes to three key findings: (1) Environmentally innovative SMEs perceive more barriers, in more intense and numerous ways, compared to others innovative or non-innovative SMEs; (2) Environmentally innovative SMEs utilize more external knowledge sources than other SMEs; (3) SMEs, like large firms, can adopt environmental innovations proactively because they possess certain capacities. These results lead to public policy and managerial recommendations for more widespread and more effective environmental innovation in SMEs.
    Keywords: Environmental innovation, Technological innovation, Determinants, Barriers, Strategic profile, SMEs
    JEL: Q5 Q55
    Date: 2016–12–01

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