nep-ent New Economics Papers
on Entrepreneurship
Issue of 2017‒12‒03
nine papers chosen by
Marcus Dejardin
Université de Namur

  1. The Nature of Firm Growth By Benjamin W. Pugsley; Petr Sedlacek; Vincent Sterk
  2. Startups and Stanford University By Herv\'e Lebret
  3. Uncertainty shocks and firm dynamics : Search and monitoring in the credit market By Brand, Thomas; Isoré, Marlène; Tripier, Fabien
  4. Firm Survival in New EU Member States By Baumöhl, Eduard; Iwasaki, Ichiro; Kočenda, Evžen
  5. Financing Ventures By Greenwood, Jeremy; Han, Pengfei; Sanchez, Juan M.
  6. Policy Implications on Company Growth – A Review By Ali-Yrkkö, Jyrki; Kotiranta, Annu; Ylhäinen, Ilkka
  7. Bankruptcy Technology, Finance, and Entrepreneurship By Nelson Sobrinho
  8. Investment Distortion by Collateral Requirement: Evidence from Japanese SMEs By Ogura, Yoshiaki
  9. How Costly Are Labor Gender Gaps? Estimates by Age Group for the Balkans and Turkey By David Cuberes; Marc Teignier

  1. By: Benjamin W. Pugsley (University of Notre Dame); Petr Sedlacek (Centre for Macroeconomics (CFM); University of Oxford); Vincent Sterk (Centre for Macroeconomics (CFM); University College London (UCL))
    Abstract: Only half of all startups survive past the age of ve and surviving businesses grow at vastly dierent speeds. Using micro data on employment in the population of U.S. businesses, we estimate that the lion's share of these differences is driven by ex-ante heterogeneity across firms, rather than by ex-post shocks. We embed such heterogeneity in a firm dynamics model and study how ex-ante differences shape the distribution of firm size, "up-or-out" dynamics, and the associated gains in aggregate output. "Gazelles" - a small subset of startups with particularly high growth potential - emerge as key drivers of these outcomes. Analyzing changes in the distribution of ex-ante firm heterogeneity over time reveals that gazelles are driven towards extinction, creating substantial aggregate losses.
    Keywords: Firm dynamics, Startups, Macroeconomics, Big data
    JEL: D22 E23 E24
    Date: 2017–11
  2. By: Herv\'e Lebret
    Abstract: Startups have become in less than 50 years a major component of innovation and economic growth. Silicon Valley has been the place where the startup phenomenon was the most obvious and Stanford University was a major component of that success. Companies such as Google, Yahoo, Sun Microsystems, Cisco, Hewlett Packard had very strong links with Stanford but even these vary famous success stories cannot fully describe the richness and diversity of the Stanford entrepreneurial activity. This report explores the dynamics of more than 5000 companies founded by Stanford University alumni and staff, through their value creation, their field of activities, their growth patterns and more. The report also explores some features of the founders of these companies such as their academic background or the number of years between their Stanford experience and their company creation.
    Date: 2017–11
  3. By: Brand, Thomas; Isoré, Marlène; Tripier, Fabien
    Abstract: We develop a business cycle model with gross flows of firm creation and destruction.The credit market is characterized by two frictions. First,entrepreneurs undergo a costly search for intermediate funding to create a firm. Second, upon a match, a costlystate-verification contract is set up. When defaults occurs, banks monitor firms, seize their assets, and a fraction of financial relationships are severed. The model is estimated using Bayesian methods for the U.S. economy. Among other shocks, uncertainty in productivity turns out to be a major contributor to both macro-financial aggregates and firm dynamics.
    JEL: D8 E3 E4 E5
    Date: 2017–11–23
  4. By: Baumöhl, Eduard; Iwasaki, Ichiro; Kočenda, Evžen
    Abstract: We analyze firm survival determinants in four new European Union member states (Czech Republic, Hungary, Poland, and Slovakia). We employ the Cox proportional hazards model on firm-level data over the period of 2006–2015. We show that less concentrated control of large shareholders, higher solvency, and more board directors are linked with increased probability of firm survival in all four countries. However, an excessive number of board directors shows a detrimental effect. Firms with foreign owners and higher returns on their assets exhibit better survival chances. On the other hand, larger firms and those hiring international auditors show lower probabilities of survival. A number of determinants specifically influence firm survival in different ways across countries. This fact emphasizes that differences in business conditions are important when studying firm survival.
    Keywords: firm survival, new EU member states, survival and exit determinants, hazards model, panel data
    JEL: D22 G01 G33 G34 P34
    Date: 2017–10
  5. By: Greenwood, Jeremy (University of Pennsylvania); Han, Pengfei; Sanchez, Juan M. (Federal Reserve Bank of St. Louis)
    Abstract: The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, VCs provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., the average cash-on-cash multiple and statistics by funding round concerning the success rate, failure rate, investment rate, equity shares, and the value of an IPO. Raising capital gains taxation reduces growth and welfare.
    Date: 2017–08–01
  6. By: Ali-Yrkkö, Jyrki; Kotiranta, Annu; Ylhäinen, Ilkka
    Abstract: This report is a synthesis of the previous literature analyzing the role of different types of companies on economic growth and employment, and an overlook on the impacts of different policy measures on companies. The role of large companies in the economy is still significant, although diminishing. However, the size of a company is nearly always determined at the company level, rather than at the group level, which brings some uncertainty to the interpretation of the results. Majority of the research on public corporate funding concerning Finland focuses on R&D subsidies; there are fewer studies covering other business subsidies and public venture capital investments. R&D subsidies have mostly positive impacts on employment, especially among young and small companies. Impacts on the productivity are, however, uncertain. Cooperation of public and private investors maximizes the impact of public venture capital investments. The other business subsidies may help firms to grow larger but do not improve their productivity.
    Keywords: Growth, company, employment, firm size, small, SME, value added, productivity
    JEL: L25 O14 O47 J21 J23
    Date: 2017–11–20
  7. By: Nelson Sobrinho
    Abstract: Using an overlapping-generations growth model featuring financial intermediation, I find that inefficiencies in technology to deal with private debt distress (bankruptcy technology), and obstacles to entrepreneurship (high costs of doing business) have significant negative effects on the income per capita and welfare of developing countries. These inefficiencies may also interact in perverse ways, futher amplifying the negagtive effects in the long run. The results provide strong rationale for structural reforms that simultaneously speed up the resolution of private sector insolvency, improve creditor protection, and eliminate obstacles to entrepreneurship.
    Date: 2017–08–10
  8. By: Ogura, Yoshiaki
    Abstract: We examine the significance of the distortionary effect of the collateral requirement to investments in assets pledgeable for collateral by small and medium-sized enterprises (SMEs). The theory predicts that the binding collateral constraint causes over-investment if the price of pledgeable assets is expected to go up steeply while it causes under-investment otherwise. Our structural estimation of the Euler equation under a collateral constraint using the dataset on Japanese SMEs in the 1980s and 1990s shows that the collateral constraint is binding when the price of a pledgeable asset is declining, whereas it is not when the price is increasing. This finding indicates that the binding collateral constraint causes mainly the problem of under-investment for many SMEs in a recession and casts doubt on the welfare effect of the loan-to-value (LTV) ratio cap as a macroprudence policy.
    Keywords: collateral constraint, investment, small and medium-sized enterprises, real estate price, loan-to-value ratio
    JEL: E22 G31 R30
    Date: 2017–11
  9. By: David Cuberes (Clark University); Marc Teignier (Universitat de Barcelona)
    Abstract: In this paper, survey data are used to document the presence of gender gaps in selfemployment, employership, and labor force participation in seven Balkan countries and Turkey. The paper examines the quantitative effects of the gender gaps on aggregate productivity and income per capita in these countries. In the model used to carry out this calculation, agents choose between being workers, self-employed, or employers, and women face several restrictions in the labor market. The data display very large gaps in labor force participation and in the percentage of employers and self-employed in the labor force. In almost all cases, these gaps reveal a clear underrepresentation of women. The calculations show that, on average, the loss associated with these gaps is about 17 percent of income per capita. One-third of this loss is due to distortions in the choice of occupations between men andwomen. The remaining two-thirds corresponds to the costs associated with gaps in labor force participation. The dimensions of these gender gaps and their associated costs vary considerably across ages groups, with the age bracket 36–50 years being responsible for most of the losses.
    Keywords: gender inequality, entrepreneurship talent, factor allocation, aggregate productivity, span of control, Balkans, Turkey
    JEL: E2 J21 J24 O40
    Date: 2017–11

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