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on Entrepreneurship |
| By: | Petr Sedlacek (Bonn University); Benjamin Pugsley (Federal Reserve Bank of NY); Vincent Sterk (University College London) |
| Abstract: | There are vast differences in the growth patterns of firms: high-growth, young businesses, or “gazelles†, account for the vast majority of employment growth at incumbent firms. Using a large administrative panel data set for the United States, we provide evidence that ex-ante differences in the growth potential of firms account for most of the size heterogeneity across firms of a given age. First, we estimate a reduced-form employment process, allowing for heterogeneity in steady-state levels and deriving parameter identification from the autocovariance function of employment. Next, we estimate a general equilibrium firm dynamics model and explore the implications for firm selection and the macro effects of firm-level distortions. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:196&r=ent |
| By: | Richard N. Langlois (University of Connecticut) |
| Abstract: | Perhaps because we live in the age of the Internet and social networks, everyone seems agreed that innovation is all about recombination. Although not fully dissenting from this consensus, and perhaps in the end affirming it in an important way, I want to draw attention to some apparently different mechanisms of innovation, both suggested by Adam Smith: subdivision (or differentiation) and fine-tuning. On the surface at least, these – especially the second – do not appear to be processes of recombination. I will attempt to elucidate what I mean by these concepts and try to think about how they fit together with recombination in a full Smithian account of innovation. Whether innovation proceeds from the top down or the bottom up depends crucially on the structure of complementary stages in the process of production. Especially if it takes place in a non-modular way, recombination may require unified decision rights, implying the vertical integration of complementary stages of production, in order to overcome the dynamic transaction costs of change. But the processes of subdivision and differentiation may also require changes in decision rights in order to overcome dynamic transaction costs. I illustrate these points with a case study of three generations of an American family of inventor-entrepreneurs in electricity and electronics. |
| Keywords: | Innovation, Decision Rights, Dynamic Transaction Costs, Modularity, Institutions |
| JEL: | B12 B25 D23 L26 L63 L92 M13 N81 N82 O31 O33 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2017-15&r=ent |
| By: | Dora Benedek; Pragyan Deb; Borja Gracia; Sergejs Saksonovs; Anna Shabunina; Nina T Budina |
| Abstract: | Some countries support smaller firms through tax incentives in an effort to stimulate job creation and startups, or alleviate specific distortions, such as financial constraints or high regulatory or tax compliance costs. In addition to fiscal costs, tax incentives that discriminate by firm size without specifically targeting R&D investment can create disincentives for firms to invest and grow, negatively affecting firm productivity and growth. This paper analyzes the relationship between size-related corporate income tax incentives and firm productivity and growth, controlling for other policy and firm-level factors, including product market regulation, financial constraints and innovation. Using firm level data from four European economies over 2001–13, we find evidence that size-related tax incentives that do not specifically target R&D investment can weigh on firm productivity and growth. These results suggest that when designing size-based tax incentives, it is important to address their potential disincentive effects, including by making them temporary and targeting young and innovative firms, and R&D investment explicitly. |
| Keywords: | Productivity;size-based taxation, growth, structural reforms |
| Date: | 2017–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:17/139&r=ent |
| By: | Antonelli, Cristiano (University of Turin) |
| Abstract: | This paper accommodates the new understanding of the limited exhaustibility of knowledge into the Schumpeterian frame of the creative response to articulate a comprehensive model of Schumpeterian growth. The limited exhaustibility of knowledge and its transient appropriability favor the accumulation of a stock of quasi-public knowledge. The increasing stock of quasi-public knowledge together with appropriate knowledge governance conditions account for the secular decline of knowledge costs and the increase of diachronic and pecuniary knowledge externalities. Because of its limited exhaustibility and the consequent cumulability, knowledge is an endogenous endowment that accounts for growth. Unexpected out-of-equilibrium conditions in product and factor markets stir the response of firms. The availability of knowledge externalities accounts for the rate of innovation as they help making the reaction creative so as to enable the introduction of innovations. The search for technological congruence and the secular decline of the cost of technological knowledge accounts for its knowledge intensive direction as it induces the introduction of biased technological changes that augment the output elasticity of knowledge as an input. The limited exhaustibility of knowledge accounts for the secular trend towards the knowledge economy. |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:uto:dipeco:201726&r=ent |
| By: | Ganau, Roberto; Rodríguez-Pose, Andrés |
| Abstract: | We examine whether organized crime affects firms' performance (defined using Total Factor Productivity growth) both directly and indirectly, by downsizing the positive externalities arising from the geographic concentration of (intra- and inter-industry) market-related firms. The analysis uses a large sample of Italian small- and medium-sized manufacturing firms over the period 2010-2013. The results highlight the negative direct effects of organized crime on firms' productivity growth. Any positive effect derived from industrial clustering is thoroughly debilitated by a strong presence of organized crime, and the negative moderation effect of organized crime on productivity growth is greater for smaller than for larger firms. |
| Keywords: | Total Factor Productivity; Organized crime; Industrial clustering; Externalities; Italy |
| JEL: | D24 L25 R11 R12 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12140&r=ent |
| By: | Gonzalo Olcina (ERICES and University of Valencia); Elena Mas Tur (Eindhoven University of Technology); Luisa Escriche (ERICES and University of Valencia) |
| Abstract: | This paper contributes to explain the persistence of differences in levels of entrepreneurship within and across countries. We analyse in a dynamic setting the mutual relationship among the distribution of preferences for entrepreneurship in the population, public administration efficiency, and entrepreneurial productivity when preferences and productivity evolve over time. Individuals with entrepreneurial preferences start their own business, while the other individuals join the public and traditional sectors. In each generation, individuals vote on the taxes the entrepreneurs will pay. Under a balanced public budget, the collected taxes are used to pay the civil servants' wages. The effort of civil servants captures the effort made to generate an efficient normative and regulatory environment, and it will affect the probability of success of entrepreneurship. The dynamic of entrepreneurial productivity is determined by the relative proportion of entrepreneurial and non-entrepreneurial individuals among generations. We show that an economy can reach two different long-run equilibria: a traditional equilibrium, with a low proportion of entrepreneurs, low productivity, high taxes and an ineffcient Administration and an entrepreneurial equilibrium with a high proportion of entrepreneurs, a higher productivity and lower taxes but enough to implement an efficient Administration. Our main result is that the equilibrium achieved completely depends on the tax policy followed by the different generations. If decisions are made by majority voting in a myopic way, then the initial conditions of the society become crucial. This result explains persistence: an economy evolves around similar levels of entrepreneurship unless some reforms are implemented. |
| Keywords: | Entrepreneurship, Cultural Transmission, Entrepreneurial Preferences, Tax policy, Public Administration efficiency |
| JEL: | J62 L26 M13 J62 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:dbe:wpaper:0117&r=ent |
| By: | Heidi Leonhardt (University of Natural Resources and Life Sciences Vienna, Institute of Sustainable Economic Development); Juschten Maria (University of Natural Resources and Life Sciences Vienna, Institute for Transport Studies); Clive L. Spash, (Vienna University of Economics and Business) |
| Abstract: | While research on alternatives to growth at the level of the economy as a whole is accumulating, few studies have related the criticism of growth to the business level. This paper starts to address this gap by investigating mechanisms of growth for small and medium sized enterprises (SMEs), presenting a case study that applies Q methodology and interviews with owner-managers of both growing and non-growing SMEs in Austria. Some mechanisms stimulating growth are identified across SMEs including contributing to innovativeness and motivation of employees. Others are only of relevance for some SMEs: competition, financial stability and a desire for market power. The owner-managers of non-growing SMEs hold values and pursue goals that free them from mechanisms of growth or prevent them from being triggered. Moreover, they exhibit a strong identification with their SME, operate in niche markets and strive for financial independence. This illustrates that a growth imperative is neither inevitable nor are growth mechanisms always operative, but depend upon structures and institutions. |
| Keywords: | SME growth, growth mechanisms, post-growth society, social ecological transformation. |
| JEL: | L21 M14 O44 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:sed:wpaper:692017&r=ent |
| By: | Artz, Georgeanne M.; Guo, Zizhen; Orazem, Peter F. |
| Abstract: | Firm profitability is affected by location-specific factors such as agglomeration economies, infrastructure, or proximity to consumers or key producers. Location-specific profits are also influenced by the idiosyncratic match between the entrepreneur and the community. Using data on the universe of all new firm entrants in North Carolina and Iowa between 1992–2011, this study shows how observed location-specific factors affect the probability of new firm entry. We then show that the unobserved factors that influence new firm entry increase the probability of firm survival, demonstrating that these unobserved idiosyncratic factors influence firm profitability and are not just unproductive entrepreneurial preferences for the location.These unobserved factors are interpretable as match capital between the entrepreneur and the location. Shift-share analysis demonstrates that the match capital varies systematically across urban locations, meaning that the match capital can be incorporated into property values in densely populated markets. However, the match capital varies disproportionately within and not between rural markets, meaning that match capital in thin markets is primarily due to a unique match between the entrepreneur and the rural location. These results suggest that it will be easier to transfer firm profitability in the case of a firm sale in dense urban markets than in thin rural markets. |
| Date: | 2017–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genstf:201707070700001025&r=ent |
| By: | ShiXue He; Marcel Ausloos |
| Abstract: | Changes in the capital structure before and after the global financial crisis for SMEs are studied, emphasizing their financing problems, distinguishing between internal financing and external financing determinants. The empirical research bears upon 158 small and medium-sized firms listed on Shenzhen and Shanghai Stock Exchanges in China over the period of 2004-2014. A regression analysis, along the lines of the Trade-Off Theory, shows that the leverage decreases with profitability, non-debt tax shields and the liquidity, and increases with firm size and tangibility. A positive relationship is found between firm growth and debt ratio, though not highly significantly. It is shown that the SMEs with high growth rates are those which will more easily obtain external financing after a financial crisis. It is recognized that the China government should reconsider SMEs taxation laws. |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1707.06635&r=ent |
| By: | Russell Wong (Federal Reserve Bank of Richmond); Cathy Zhang (Purdue University); Guillaume Rocheteau (University of California, Irvine) |
| Abstract: | This paper develops a dynamic model of lending relationships and monetary policy. Entrepreneurs can finance idiosyncratic investment opportunities through external finance -- by forming lending relationships with banks -- or internal finance -- by accumulating partially liquid assets. We study the dynamic response of lending rates, inflation, and investment to a banking crisis that severs lending relationships. We characterize optimal monetary policy in the aftermath of a crisis and show it involves a positive nominal interest rate that trades off the need to reduce the cost of self insurance by unbanked entrepreneurs and the need to promote the creation of lending relationships with banks. We calibrate the model to the U.S. economy and study quantitatively the optimal policy problem in and out of steady state, with and without commitment by the policymaker. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:152&r=ent |
| By: | DOMBOU T., Dany R. |
| Abstract: | This study investigates the influence of institutional pressures on the level of entrepreneurship in Sub-Saharan Africa (SSA). It assumes that in sub-Saharan Africa, countries with the highest levels of entrepreneurship rates tend to have the highest levels of economic freedom. Data are on 37 SSA countries and come from The Heritage Foundation and the World Data Indicator. Equations are estimated using the ordinary least squares method. The main results show that a less restrictive institutional environment tends to encourage entrepreneurship. Low levels of fiscal pressure significantly encourage entrepreneurship up to 114% of the levels of tax freedom. The results also show that women entrepreneurs are much more sensitive to tax pressure than their male counterparts. Finally, the results show that entrepreneurs tend to evolve in the informal sector, or to submit false accounting balances to the tax authorities in order to avoid tax burden (Women entrepreneurs in this case being either more entrepreneurial than their male counterparts or more Honest), which has a negative impact on their ability to benefit from external funding. The main recommendation goes to governments, they must reduce the tax pressures linked to small activities. And to do this, they must order microeconomic studies to determine which taxes to reduce and at which level. |
| Keywords: | Entrepreneurship; Economic freedom; Tax burden; Financial inclusion; gender; |
| JEL: | E02 L26 O43 O55 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:80242&r=ent |