nep-ent New Economics Papers
on Entrepreneurship
Issue of 2017‒11‒12
sixteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Dueling Banjos: Harmony and Discord between ADHD and Entrepreneurship By Daniel A. Lerner; Richard A. Hunt; Ingrid Verheul
  2. Personal Bankruptcy Law and Entrepreneurship By Geraldo Cerqueiro; María Fabiana Penas; Robert Seamans
  3. The income return to entrepreneurship – theoretical model and outcomes for Swedish regions By Hårsman, Björn; Mattsson, Lars-Göran; Hovsepyan, Vardan
  4. Overoptimistic Entrepreneurs: Predicting Wellbeing Consequences of Self-Employment By Odermatt, Reto; Powdthavee, Nattavudh; Stutzer, Alois
  5. Deinstitutionalization through Business Model Evolution: Women Entrepreneurs in the Middle East and North Africa By Richard A. Hunt; Lauren L. Ortiz-Hunt
  6. Performance Heterogeneity Among Service-Sector Entrepreneurial Spinoffs By Richard A. Hunt; Daniel A. Lerner
  7. Asymmetric Information and Imperfect Competition in Lending Markets By Gregory S. Crawford; Nicola Pavanini; Fabiano Schivardi
  8. Patterns of entry and exit in the deregulated German interurban bus industry By Dürr, Niklas S.; Hüschelrath, Kai
  9. What Drives Spatial Clusters of Entrepreneurship in China? Evidence from Economic Census Data By Zheng, Liang; Zhao, Zhong
  10. Measuring the Spillovers of Venture Capital By Monika Schnitzer; Martin Watzinger
  11. Financial Crises, Bank Lending, and Trade Credit:Evidence from Chinese Enterprises By Yajing Liu; Kenya Fujiwara
  12. Financial Frictions, Trade, and Misallocation By Kohn, David; Leibovici, Fernando; Szkup, Michal
  13. Forecasting the Success Rate of Reward Based Crowdfunding Projects By Elenchev, Ivelin; Vasilev, Aleksandar
  14. How Do Accounting and Legal Experts View the Role of Regional Financial Institutions in Supporting SMEs? -Based on a 2016 Questionnaire Study of Accounting and Legal Experts- By Nobuyoshi Yamori; Koji Yoneda
  15. Forecasting the Success Rate of Reward Based Crowdfunding Projects By Ivelin Elenchev; Aleksandar Vasilev
  16. Education, signaling and the allocation of entrepreneurial skills By Arozamena, Leandro; Ruffo, Hernán

  1. By: Daniel A. Lerner (Deusto Business School, Universidad Deusto); Richard A. Hunt (Division of Economics and Business, Colorado School of Mines); Ingrid Verheul (Department of Strategic Management and Entrepreneurship, Rotterdam School of Management, Erasmus University)
    Abstract: The past half century has witnessed a steady and diverse flow of scholarly research to understand the role individual differences play in determining entrepreneurial pursuits and new venture outcomes. Quite recently, the search for micro-level drivers has led scholars to investigate the role of diagnosable conditions such as Attention Deficit/Hyperactivity Disorder (ADHD). The potential influence of ADHD looms large in the field of entrepreneurship as a spate of recent studies reveals the extent to which the condition is associated with creativity, entrepreneurial orientation and new venture initiation. While offering significant progress in de-stigmatizing aberrant conditions, extant scholarship has left unanswered questions regarding when and how ADHD exerts positive or negative influence on entrepreneurial action, execution risk, management acumen, operational excellence and new venture outcomes. Accepting that ADHD should be neither stigmatized nor romanticized in the context of entrepreneurship, we develop a framework offering a more integrated and veridical assessment of ADHD across the complete lifecycle of business venturing. Research propositions and opportunities for future lines of inquiry are elaborated.
    Keywords: ADHD, Entrepreneurial action, Less-reasoned logics, Entrepreneurship, Impulsivity, Opportunity pursuit, Opportunity development, New Ventures, Firm survival
    Date: 2017–10
  2. By: Geraldo Cerqueiro; María Fabiana Penas; Robert Seamans
    Abstract: We study the effect of debtor protection on firm entry and exit dynamics. We find that more lenient personal bankruptcy laws lead to higher firm entry, especially in sectors with low entry barriers. We also find that debtor protection increases firm exit rates and that this effect is independent of firm age. Our results overall indicate that changes in debtor protection affect firm dynamics.
    Keywords: Debtor Protection, Personal Bankruptcy, Entrepreneurship
    Date: 2017–01
  3. By: Hårsman, Björn (KTH Royal Institute of Technology and Centre of Excellence for Science and Innovation Studies); Mattsson, Lars-Göran (KTH Royal Institute of Technology, Department of Transport Science); Hovsepyan, Vardan (KTH Royal Institute of Technology, Department of Industrial Economics and Management)
    Abstract: This paper investigates the income return to entrepreneurship and wage employment by means of Lazear’s model of occupational choice. The income return of an actor is defined as the income resulting from the preferred occupational choice divided by the hypothetical income he or she would earn, if for some reason forced to make the opposite choice. We analyze this by deriving theoretical implications of assuming that the skill strengths in Lazear’s model are Fréchet distributed. In the empirical part of the paper, data from the Swedish employment register for individuals having a university exam in electrical engineering is used to compute the return to self-employment and wage employment. The results are reported by a division of Sweden into three regions and for different subgroups by sex, age and earlier experience of self-employment. Our computations show that the average return to entrepreneurship is less than 5 percent for most subgroups of self-employed and the average return to wage employment over 50 percent for more than half of the subgroups. The return to the self-employed hiring at least one person is higher in the Stockholm than the other regions. Self-employed have higher returns if they are males, 45 years or older, or if they have earlier experience of self-employment. The ratio between average income of self-employed and wage employed is less than 1 for almost all subgroups in all regions consistent with our theoretical model. Together with the similarities between computed and observed income distributions for self-employed and wage employed, this supports the Fréchet assumption in our application of Lazear’s model.
    Keywords: entrepreneurship; self-employment; wage employment; regional occupational choice; income return; skill distribution; Fréchet distribution
    JEL: J24 J30 L26 M13
    Date: 2017–10–27
  4. By: Odermatt, Reto (University of Basel); Powdthavee, Nattavudh (University of Warwick); Stutzer, Alois (University of Basel)
    Abstract: The formation of expectations is a fundamental part of the process when people decide about engaging in an entrepreneurial venture. We evaluate the accuracy of newly self-employed people's predictions of their overall future wellbeing. Based on individual panel data for Germany, we find that they are overly optimistic when we compare their predicted life satisfaction with their actual life satisfaction five years later on. This overoptimism also holds for those entrepreneurs who successfully remain in business for at least five years. A possible reason might be that they underestimate the heavy workload reflected in higher working hours than desired and the drop in leisure satisfaction.
    Keywords: adaptation, overoptimism, life satisfaction, projection bias, wellbeing, self-employed
    JEL: D83 D91 J20 I31
    Date: 2017–10
  5. By: Richard A. Hunt (Division of Economics and Business, Colorado School of Mines); Lauren L. Ortiz-Hunt (Dyson School of Applied Economics, Cornell University)
    Abstract: This paper is among the first to examine the interplay between deinstitutionalization and the rollout of novel business models by women entrepreneurs in developing countries. Much of the existing literature has examined the ways in which policy directives by formal institutions are the key drivers of entrepreneurial activity among women. Implicitly, this orientation suggests that the fate of women entrepreneurs is tied to, and cascades from, macro-level deinstitutionalization efforts, arising through changes in policies, laws and regulations championed at the highest levels. While this top-down view may intuitively be attractive, there are empirical reasons to doubt that the ``institutional cascading'' model accurately captures the underlying mechanisms of entrepreneurial activity among women. Taking a radically different tack, we develop and test an alternative, market-based perspective in which novel business models developed by women drive deinstitutionalization in bottom-up fashion. The context for our study involves detailed case histories of 95 women who started new businesses in the Middle East and North Africa (MENA), 1960 - 2012. Using a question-driven research design, our findings indicate that deinstitutionalization is strongly associated with the timing and substance of entrepreneurial action taken by MENA women.
    Keywords: Women Entrepreneurs, Business Models, Deinstitutionalization, Institutional Theory, Innovation, Middle East and North Africa
    Date: 2017–10
  6. By: Richard A. Hunt (Division of Economics and Business, Colorado School of Mines); Daniel A. Lerner (Deusto Business School, Universidad Deusto)
    Abstract: In recent years, beliefs about entrepreneurial spinoffs have coalesced around several ``stylized facts,'' including the perspective that knowledge is transferred from parent-firms to progeny in hereditary fashion, such that spinoffs emanating from high-quality parent-firms outperform the spinoffs from low-quality parent-firms. This emerging orthodoxy has found some support in fast- changing and technologically complex sectors, but it is less clear whether parental endowments are a key determinant of operational success in the context of service-oriented sectors, which comprise more 80\% of many developed economies. Through the discovery and analysis of a complete industry population, the results of this study suggest that extant perspectives may not fully account for the extreme heterogeneity of performance that is often exhibited by entrepreneurial spinoffs, especially differences among firms spawned by the same parent. These findings contribute to the ongoing discussion of intra-industry entrepreneurial spinoffs by establishing much-needed boundary conditions and by revealing underlying logics that govern the hereditary transfer of knowledge and capabilities among service sector spinoffs.
    Keywords: Entrepreneurial spinoffs, Spinouts, Knowledge transfer, Spillovers, Hereditary endowments, Entrepreneurship, Market entry, New ventures
    Date: 2017–10
  7. By: Gregory S. Crawford (University of Zürich, CEPR and CAGE); Nicola Pavanini (Tilburg University and CEPR); Fabiano Schivardi (LUISS University, EIEF and CEPR)
    Abstract: We study the effects of asymmetric information and imperfect competition in the market for small business lines of credit. We estimate a structural model of credit demand, loan use, pricing, and firm default using matched firm-bank data from Italy. We find evidence of adverse selection in the form of a positive correlation between the unobserved determinants of demand for credit and default. Our counterfactual experiments show that while increases in adverse selection increase prices and defaults on average, reducing credit supply, banks’ market power can mitigate these negative effects.
    Date: 2017
  8. By: Dürr, Niklas S.; Hüschelrath, Kai
    Abstract: We study patterns of entry and exit in the German interurban bus industry in the first three years after its deregulation in January 2013. Using a comprehensive data set of all firm and route entries and exits, we find that the industry grew much quicker than originally expected - with particularly a few new entrants being most successful in quickly extending their route networks from regional to national coverage. Although the clear majority of routes is operated on a monopoly basis, competition does play a key role on routes with a sufficiently large base of (potential) customers. From a spatial perspective, three years after deregulation, the entire interurban bus network connects 60 percent of all 644 larger German cities - with the intensity of entry being dependent on the number of inhabitants, average income, the share of under 24 years old and the presence of intermodal competition by intercity railway services.
    Keywords: deregulation,interurban bus services,entry,exit,competition
    JEL: L11 L41 L43 L92 K21 K23
    Date: 2017
  9. By: Zheng, Liang (Central University of Finance and Economics); Zhao, Zhong (Renmin University of China)
    Abstract: Since Chinese government initiated economic reform in the late 1970s, entrepreneurship and private sectors have emerged gradually and played an increasingly important role in promoting economic growth. However, entrepreneurship is distributed unevenly in China. Using micro data from 2008 economic census and 2005 population census, this paper explains spatial clusters of entrepreneurship for both manufacturing and services. For both sectors, entrepreneurship (measured by new private firms) tends to emerge in places with more relevant upstream and downstream firms. Moreover, Chinitz's (1961) theories are also supported for manufacturing: small upstream and downstream firms seem to be more important for manufacturing entrepreneurship. For both sectors, entrepreneurship is positively related to city size, the share of young adults and the elderly population, and foreign direct investment. More migrants are also found to promote service entrepreneurship. Our paper is the first to consider both manufacturing and service entrepreneurship in China and should be of interest to both local and national policymakers who plan to encourage entrepreneurship.
    Keywords: new firm formation, entrepreneurship, Marshallian effect, Chinitz effect, China
    JEL: L26 L60 L80 R10 R12
    Date: 2017–10
  10. By: Monika Schnitzer; Martin Watzinger
    Abstract: We provide the first measurement of knowledge spillovers from venture capital-financed companies onto the patenting activities of other companies. On average, these spillovers are nine times larger than those generated by the R&D investment of established companies. Spillover effects are larger in complex product industries than in discrete product industries. Start-ups with experienced inventors holding a patent at the time of receiving the first round of investment produce the largest spillovers, indicating that venture capital fosters the commercialization of technologies. Methodologically, we contribute by developing a novel definition of the spillover pool, combining citation-based and technological proximity-based approaches.
    Keywords: venture capital, spillovers, innovation
    JEL: G24 O30 O31 O32
    Date: 2017
  11. By: Yajing Liu (Graduate School of Economics, Kobe University); Kenya Fujiwara (Graduate School of Business Administration, Kobe University)
    Abstract: Using Chinese firm-level data from 2006~2014?which includes the period of the recent financial crisis?we test whether firms, particularly small and medium enterprises (SMEs) that are financially constrained, are more likely to use or depend on trade credit. We also compare enterprises by ownership structure to determine which type of enterprises use trade credit more than bank loans. We then study the effect of the financial crisis of 2008 to observe whether firms increased their use of trade credit right after the crisis. We expect SMEs that are financially constrained to depend more on trade credit during the financial crisis. This may suggest the existence of a substitution relationship between bank loans and trade credit in conditions where enterprises are highly constrained financially or during periods of financial crisis.
    Keywords: Financial Crises, trade credit, bank loans, Chinese industrial enterprises, SMEs
    Date: 2017–10
  12. By: Kohn, David; Leibovici, Fernando; Szkup, Michal
    Abstract: We investigate the extent to which financial frictions shape the aggregate effects of a trade liberalization through their impact on aggregate total factor productivity (TFP) and capital misallocation. We study a small open economy populated with heterogeneous entrepreneurs who differ in their productivity and are subject to financing constraints. Individuals choose whether to be workers or entrepreneurs, and entrepreneurs choose whether to export or not. We show how financial frictions distort these decisions and aggregate TFP. We calibrate the model to match key features of Chilean plant-level data and use it to quantify the TFP losses due to misallocation. We then investigate how the presence of financial constraints affects the output and TFP gains from trade liberalization. We find that lowering trade barriers has a stronger positive effect in less financially developed economies. The higher profits that result from trade liberalizations allow firms to accumulate assets and relax their credit constraint, which is particularly valuable in economies where firms are severely constrained.
    Keywords: Economía, Emprendimiento, Investigación socioeconómica, Productividad, Sector productivo, Comercio, Finanzas,
    Date: 2017
  13. By: Elenchev, Ivelin; Vasilev, Aleksandar
    Abstract: The present paper develops three models that help predict the success rate and attainable investment levels of online crowdfunding ventures. This is done by applying standard economic theory and machine learning techniques from computer science to the novel sector of on-line crowd-based micro- financing. In contrast with previous research in the area, this paper analyzes transaction-level data in addition to information about completed crowdfunding projects. This provides an unique perspective in the ways crowd finance ventures develop. The models reach an average of 83% accuracy in predicting the outcome of a crowdfunding campaign at any point throughout its duration. These ndings prove that a number of product and project specifi c parameters are indicative of the success of the venture. Subsequently, the paper provides guidance to capital seekers and investors on the basis of these criteria, and allows participants in the crowdfunding marketplace to make more rational decisions.
    Keywords: microfinance,entrepreneurial finance,crowdfunding
    JEL: C0
    Date: 2017
  14. By: Nobuyoshi Yamori (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Koji Yoneda (Faculty of Economics, Kumamoto Gakuen University, Japan)
    Abstract: In February 2016 we administered a questionnaire to 700 tax accountants, certified accountants and lawyers, and conducted a study of the actual state of regional revitalization efforts by experts and the issues they faced. In this paper, we use some of the results of this study to analyze the actual state of collaborations between regional financial institutions and accounting/legal experts, and the issues they face, with respect to providing support to regional SMEs (small and medium-sized enterprises). Efforts by regional financial institutions are not always fully visible to experts, and collaboration between experts and regional financial institutions is still developing. In the future, deepened mutual understanding through greater regular contact between them will be important for increasing support capabilities for regional SMEs.
    Keywords: SME support, Region-based relationship banking, Regional finance, Experts, Questionnaire
    Date: 2017–10
  15. By: Ivelin Elenchev; Aleksandar Vasilev (Centre for Economic Theories and Policies, Sofia University St. Kliment Ohridski)
    Abstract: The present paper develops three models that help predict the success rate and attainable investment levels of online crowdfunding ventures. This is done by applying standard economic theory and machine learning techniques from computer science to the novel sector of online crowd-based micro-financing. In contrast with previous research in the area, this paper analyzes transaction-level data in addition to information about completed crowdfunding projects. This provides an unique perspective in the ways crowdfinance ventures develop. The models reach an average of 83% accuracy in predicting the outcome of a crowdfunding campaign at any point throughout its duration. These fundings prove that a number of product and project specific parameters are indicative of the success of the venture. Subsequently, the paper provides guidance to capital seekers and investors on the basis of these criteria, and allows participants in the crowdfunding marketplace to make more rational decisions.
    Keywords: microfinance, entrepreneur finance, crowdfunding
    JEL: M20 G24
    Date: 2017–11
  16. By: Arozamena, Leandro; Ruffo, Hernán
    Abstract: We assess the allocative importance of education when workers can choose to self-employ. To do so, we build a model combining educational choices with the labor market and selfemployment. Education can increase workers' human capital and may signal their ability as well. Both roles can be more important for working in a firm than for self-employment. We show that when education performs worse its signaling role, firms cannot distinguish high and low productivity workers, and there is a higher proportion of workers that allocate in less productive activities as self-employed. This option further reduces incentives to educate, given that education is less valuable for a worker if self-employed. Lowering the cost of education increases the number of educated workers, but does not solve the signaling problem, and could generate stronger misallocation.
    Keywords: Educación, Economía, Emprendimiento, Investigación socioeconómica, Productividad, Sector privado, Sector productivo, Trabajo y protección social, Habilidades y destrezas,
    Date: 2017

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