nep-ent New Economics Papers
on Entrepreneurship
Issue of 2018‒03‒26
sixteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Varieties of Entrepreneurship: Exploring the Institutional Foundations of Different Entrepreneurship Types through ‘Varieties-of-Capitalism’ Arguments By Dilli, Selin; Elert, Niklas; Herrmann, Andrea M.
  2. Financial and Institutional Reforms for an Entrepreneurial Society By Economidou, Claire; Grillo, Luca; Henrekson, Magnus; Sanders, Mark
  3. Early-Stage Business Formation : An Analysis of Applications for Employer Identification Numbers By Kimberly Bayard; Emin M. Dinlersoz; Timothy Dunne; John Haltiwanger; Javier Miranda; John J. Stevens
  4. Aspirations of Small-Scale Entrepreneurs : Evidence from Urban Retailers in Indonesia By Dalton, Patricio; Rüschenpöhler, Julius; Zia, Bilal
  5. The Labor Market Integration of Refugees to the United States: Do Entrepreneurs in the Network Help? By Dagnelie, Olivier; Mayda, Anna Maria; Maystadt, Jean Francois
  6. Return Migration and Self-Employment: Evidence from Kyrgyzstan By Brück, Tilman; Mahe, Clotilde; Naudé, Wim
  7. Competition in the Venture Capital Market and the Success of Startup Companies: Theory and Evidence By Hong, Suting; Serfes, Konstantinos; Thiele, Veikko
  8. Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation By Robert W. Fairlie; Frank M. Fossen
  9. Do Employee Spinoffs Learn Markets from their Parents? Evidence from International Trade By Marc-Andreas Muendler; James E. Rauch
  10. Entrepreneurship and Sustainability: The Need for Innovative and Institutional Solutions By BEN YOUSSEF, Adel; Boubaker, Sabri; Omri, Anis
  11. Is trade credit a substitute for relationship lending credit? By Jeremie Bertrand; Pierluigi Murro
  12. Japan’s Credit Guarantee System Reform of 2017 and New Functions of Credit Guarantee Associations By Nobuyoshi Yamori
  13. Entrepreneurship Contribution to the Three Pillars of Sustainable Development: What Does the Evidence Really Say? By Dhahri, Sabrine; Omri, Anis
  14. How do small firms respond to tax schedule discontinuities? Evidence from South African tax registers By Boonzaaier, Wian; Harju, Jarkko; Matikka, Tuomas; Pirttilä, Jukka
  15. Entrepreneurial environment at regional level: the case of Polish path towards sustainable socio-economic development By Michał Pietrzak; Adam Balcerzak; Artur Gajdos; Łukasz Arendt
  16. Crowdfunding with overenthusiastic investors : a global game model By Damien Besancenot; Radu Vranceanu

  1. By: Dilli, Selin (Utrecht University); Elert, Niklas (Research Institute of Industrial Economics (IFN)); Herrmann, Andrea M. (Utrecht University)
    Abstract: While entrepreneurship researchers agree that institutions ‘matter’ for entrepreneurship, they also have a rather encompassing understanding of institutions as almost any external factor that influences entrepreneurship. Ultimately, this literature thus comes up with a long list of institutional factors that may explain entrepreneurial differences between countries. But which institutions are most influential? How do these institutions relate to different types of entrepreneurship? And to what extent are institutions complementary to each other in the way they sustain different entrepreneurship types? The literature on ‘Varieties-of-Capitalism’ (VoC) offers a parsimonious theoretical framework to address these questions. Based on the VoC literature, we theoretically derive a consistent set of institutional indicators that can explain differences in entrepreneurship types between countries. Based on principal component and cluster analyses, we illustrate how 21 Western developed economies cluster around four distinct institutional settings. Furthermore, we use simple OLS regressions to show how these institutional constellations are related to different types of entrepreneurship. We conclude that four different ‘Varieties of Entrepreneurship’ can be identified across the Western world. The main implication of our findings is that a ‘perfect’ institutional constellation, equally facilitating different types of entrepreneurship, does not exist. Policy-makers seeking to stimulate entrepreneurship are thus faced with the trade-off of targeting policy reforms to that entrepreneurship type they intend to promote – at the expense of other types of entrepreneurship and the broader societal consequences such reforms will have.
    Keywords: Entrepreneurship; Entrepreneurial ecosystems; Varieties-of-Capitalism; Institutional complementarities
    JEL: L50 M13 O31 P14
    Date: 2018–03–13
  2. By: Economidou, Claire (University of Piraeus); Grillo, Luca (Politecnico di Milano); Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Sanders, Mark (Utrecht University School of Economics)
    Abstract: In this paper, we introduce a special issue of Small Business Economics on Financial and Institutional Reforms for an Entrepreneurial Society in Europe. There are many reasons for Europe to want to make the transition to a more entrepreneurial society. And for decades now, policy makers are trying to bring that transition about with variations on the “educate, deregulate and finance”- approach to entrepreneurship. We argue that more fundamental reforms are required to improve the entrepreneurial ecosystem and bring about this transition. We then discuss the twelve contributions that pertain to five different facets of the entrepreneurial ecosystem. The first two papers address the most fundamental institutional foundations of the ecosystem. The next three papers discuss the (lack of) access to knowledge and incentives to start innovative entrepreneurial ventures. That is followed by three papers that focus on the institutions that (fail to) channel financial resources to such ventures and two papers that analyze the relevance of labor market institutions. The special issue concludes with two papers investigating how the interplay of institutions and productive entrepreneurship results in economic growth.
    Keywords: Entrepreneurship; Institutions; Reform; European Union; Innovation
    JEL: D02 L26 O38 O43 P11
    Date: 2018–03–16
  3. By: Kimberly Bayard; Emin M. Dinlersoz; Timothy Dunne; John Haltiwanger; Javier Miranda; John J. Stevens
    Abstract: This paper reports on the development and analysis of a newly constructed dataset on the early stages of business formation. The data are based on applications for Employer Identification Numbers (EINs) submitted in the United States, known as IRS Form SS-4 filings. The goal of the research is to develop high-frequency indicators of business formation at the national, state, and local levels. The analysis indicates that EIN applications provide forward-looking and very timely information on business formation. The signal of business formation provided by counts of applications is improved by using the characteristics of the applications to model the likelihood that applicants become employer businesses. The results also suggest that EIN applications are related to economic activity at the local level. For example, application activity is higher in counties that experienced higher employment growth since the end of the Great Recession, and application counts grew more rapidly in counties engaged in shale oil and gas extraction. Finally, the paper provides a description of new public use dataset, the “Business Formation Statistics (BFS),” that contains new data series on business applications and formation. The initial release of the BFS shows that the number of business applications in the 3rd quarter of 2017 that have relatively high likelihood of becoming job creators is still far below pre-Great Recession levels.
    Keywords: Business fluctuations and cycles ; Urban rural and regional economics
    JEL: L26 R11
    Date: 2018–03–05
  4. By: Dalton, Patricio (Tilburg University, Center For Economic Research); Rüschenpöhler, Julius (Tilburg University, Center For Economic Research); Zia, Bilal
    Abstract: Small-scale entrepreneurs are ubiquitous in developing countries, yet very few graduate to become larger businesses. We ask whether such entrepreneurs even aspire to grow, and if so on which dimensions of the business? Among a representative sample of retail shop owners in Jakarta, we find that the average business has strong short- and long-term aspirations for growth in shop size, number of employees, number of customers, and sales. Yet, there is pronounced heterogeneity with more than half the businesses reporting no aspirations for growth in the next 12 months, and 16 percent failing to imagine an ideal business over the long-term. We find that entrepreneurs with low profits, business skills, and agency beliefs, as well as those who are older, female, and less educated have significantly lower aspirations. We also show that aspirations predict future-oriented behaviors such as savings, credit use, business expansion, and innovation, even after controlling for business practices. These results have important implications for the design and targeting of business growth programs and policies.
    Keywords: aspirations; micro-enterprises; innovation; small business growth; firm performance; technology adoption; self-efficacy; locus of control
    JEL: O12 L26 M20 O17 M50
    Date: 2018
  5. By: Dagnelie, Olivier (University of Rennes); Mayda, Anna Maria (Georgetown University); Maystadt, Jean Francois (Lancaster University)
    Abstract: We investigate whether entrepreneurs in the network of refugees - from the same country of origin - help refugees' labor-market integration by hiring them in their businesses. We analyze the universe of refugee cases without U.S. ties who were resettled in the United States between 2005 and 2010. We address threats to identification due to sorting of refugees into specific labor markets and to strategic placement by resettlement agencies. We find that the probability that refugees are employed 90 days after arrival is positively affected by the number of business owners in their network, but negatively affected by the number of those who are employees. This suggests that network members who are entrepreneurs hire refugees in their business, while network members working as employees compete with them, consistent with refugees complementing the former and substituting for the latter.
    Keywords: refugees, labor market integration, entrepreneurship
    JEL: F22 J61
    Date: 2018–02
  6. By: Brück, Tilman (ISDC - International Security and Development Center); Mahe, Clotilde (Maastricht University); Naudé, Wim (Maastricht University)
    Abstract: A common finding of the migration literature is that migrants are more likely to choose self-employment upon return to their origin countries than non-migrants. This has led to the belief that return migration stimulates entrepreneurship in source countries and hence supports economic development. In this paper, we test these assertions, drawing on the Life in Kyrgyzstan Study, a rich longitudinal data set from a transition economy with high levels of international temporary migration. We find that for return migrants, self-employment is often a temporary occupational choice, suggesting that self-employment serves as a 'parking lot'. In addition, we find evidence that return migrants who were self-employed before migrating are less likely to opt for self-employment on their return, implying that migration disrupts self-employment trajectories. Both findings cast doubt on the common narrative of return migration stimulating entrepreneurship and therefore economic development.
    Keywords: occupational choice, entrepreneurship, migration, transition economies, Central Asia, Kyrgyzstan
    JEL: F22 J24 L26 P20
    Date: 2018–02
  7. By: Hong, Suting (Shanghai Tech University); Serfes, Konstantinos (Drexel University); Thiele, Veikko (Queen's University)
    Abstract: We examine the effect of a competitive supply of venture capital (VC) on the success rates of VC-backed startup companies (e.g. IPOs). We first develop a matching model of the VC market with heterogeneous entrepreneurs and VC firms, and double-sided moral hazard. Our model identifies a non-monotone relationship between VC competition and successful exits: a more competitive VC market increases the likelihood of a successful exit for startups with low quality projects (backed by less experienced VC firms in the matching equilibrium), but it decreases the likelihood for startups with high quality projects (backed by more experienced VC firms). Despite this non-monotone effect on success rates, we find that VC competition leads to higher valuations of all VC-backed startups. We then test these predictions using VC data from Thomson One, and find robust empirical support. The differential effect of VC competition has a profound impact on entrepreneurship policies that promote VC investments.
    Keywords: entrepreneurship; venture capital; matching; double-sided moral hazard; exit; IPO
    JEL: C78 D86 G24 L26 M13
    Date: 2018–02–01
  8. By: Robert W. Fairlie; Frank M. Fossen
    Abstract: A common finding in the entrepreneurship literature is that business creation increases in recessions. This counter-cyclical pattern is examined by separating business creation into two components: “opportunity” and “necessity” entrepreneurship. Although there is general agreement in the previous literature on the conceptual distinction between these two factors driving entrepreneurship, there are many challenges to creating a definition that is both objective and empirically feasible. We propose an operational definition of opportunity versus necessity entrepreneurship using readily available nationally representative data. We create a distinction between the two types of entrepreneurship based on the entrepreneur’s prior work status that is consistent with the standard theoretical economic model of entrepreneurship. Using this definition we document that “opportunity” entrepreneurship is pro-cyclical and “necessity” entrepreneurship is counter-cyclical. We also find that “opportunity” vs. “necessity” entrepreneurship is associated with the creation of more growth-oriented businesses. The operational distinction proposed here may be useful for future research in entrepreneurship.
    Date: 2017
  9. By: Marc-Andreas Muendler; James E. Rauch
    Abstract: It is well established that employee spinoffs learn their parents’ technologies, but little is known about their demand-side learning. We exploit the identification in international trade data of parent markets (countries) to investigate whether exporting employee spinoffs of exporting parents have an advantage in accessing their parents’ markets over exporting comparison firms well positioned to learn those markets at arm’s length. We find that, controlling for the greater overlap of spinoffs with their parents’ export products, at entry spinoffs access 51 percent more parent markets than exporting firms in the same 4-digit industries and municipalities as the parents. This advantage shrinks monotonically with time, becoming statistically insignificant four years after entry, indicating that intrafirm learning provides spinoffs with a four-year head start over learning at arm’s length. Spinoffs do not overlap more than comparison firms with parent markets that the parents did not serve at spinoff entry, providing evidence against the alternative hypothesis that product overlap inadequately controls for greater technological similarity of spinoffs to parents. Firm entry into parent markets predicted by spinoff status does not lead to entry into “adjacent” markets the following year.
    Keywords: employee spinoffs, intrafirm learning, export spillovers, firm performance
    JEL: F14 L25 L26
    Date: 2018
  10. By: BEN YOUSSEF, Adel; Boubaker, Sabri; Omri, Anis
    Abstract: The role of innovation and institutional quality for achieving sustainability are important issues tackled by current sustainable development debates, particularly in developing countries. Using a modified environmental Kuznets curve model, the present study improves our understanding of the critical roles of innovation, institutional quality, and entrepreneurship in structural change toward a sustainable future for Africa. Our empirical results show that formal and informal entrepreneurship are conducive to reduced environmental quality and sustainability in 17 African countries however informal entrepreneurship contributes more than formal entrepreneurship to this environmental degradation. The relationship between entrepreneurship and sustainable development turns strongly positive in the presence of high levels of innovation and institutional quality. This study contributes to this emerging research strand by clarifying the conditions that allow African countries to move toward more sustainable economies. Our results highlight the important roles played by innovation and institutions for achieving sustainability in Africa.
    Keywords: Entrepreneurship; Sustainability; Innovation; Institutional quality.
    JEL: M21 O31 Q56
    Date: 2017–12–01
  11. By: Jeremie Bertrand (ISA Lille); Pierluigi Murro (LUMSA University)
    Abstract: Despite its importance to the funding of small enterprises (SMEs), the question of how trade credit is used has not been fully answered. Recently, Uchida et al. (2013) showed that trade creditors can act as relationship lenders. To advance this result, we study the use of trade credit as a substitute for relationship lending credit when firms cannot otherwise obtain such credit. Using a sample of SMEs from the Survey of Italian Manufacturing Firms, we show that when opaque firms seeking relationship credit encounter transactional banks, they retain a greater portion of trade credit in their loans. These firms thus substitute trade credit for their missing relationship credit, because trade creditors are better evaluators of firms than are transactional lenders. The results depend on the size and age of the firm, the nature of the bank, and the size of the firm’s banking pool.
    Keywords: Banks, Lending Technologies, Small Business, Trade Credit
    JEL: G21 L14 L22
    Date: 2018–03
  12. By: Nobuyoshi Yamori (Research Institute for Economics and Business Administration (RIEB), Kobe University, Japan)
    Abstract: In June 2017, the Japanese Diet passed “the Act on the Partial Revision of the Small and Medium-sized Enterprise Credit Insurance Act to Promote Improvements and Developments of SME's Business Management” (Credit Guarantee System Reform Act in short) in order to enhance the roles that credit-guarantee system plays in terms of supporting SMEs. In this paper, the author, who was a member of the Small and Medium Enterprise Policy-Making Council's Financial Working Group (the Financial WG), tries to explain what this reform aims.
    Keywords: Credit guarantee, SMEs, Bank, Government support, Japan
    Date: 2018–02
  13. By: Dhahri, Sabrine; Omri, Anis
    Abstract: Compared to the prior discussion of the emerging research on entrepreneurship and sustainable development, the purpose of this study is to investigate the ability of the entrepreneurial activity to simultaneously enhance economic growth, advance environmental objectives, and improve social conditions in developing countries. We mainly found that entrepreneurship in these countries positively contributes to the economic and social dimensions of sustainable development, while its contribution to the environmental dimension is negative. The results of causality test confirm the interactions among entrepreneurship and these three dimensions in both short and long-run. Limitations and future research directions, some managerial and policy implications for entrepreneurial action in sustainable development are also discussed.
    Keywords: Entrepreneurship; Pillars of sustainable development; Developing countries.
    JEL: M21 O10 Q5
    Date: 2018–01–17
  14. By: Boonzaaier, Wian; Harju, Jarkko; Matikka, Tuomas; Pirttilä, Jukka
    Abstract: We study the responsiveness of small and medium-sized firms to corporate income taxes using population-wide administrative data from South Africa. We find sizable bunching of firms at the corporate income thresholds where the corporate tax rate increases, implying active responses to corporate income taxes. The observed bunching is very sharp, and reacts immediately to changes in the location of the kink points. These observations suggest that a sizable part of the response is driven by reporting responses rather than real economic behavior. We find indicative evidence that reporting behavior is linked with underreporting of sales and legal tax planning activities.
    Keywords: corporate taxation, small firms, emerging economies, bunching, Social security, taxation and inequality, H21, H25, H32, O12,
    Date: 2017
  15. By: Michał Pietrzak (Nicolaus Copernicus University [Toruń]); Adam Balcerzak (Nicolaus Copernicus University [Toruń]); Artur Gajdos (University of Lódź); Łukasz Arendt (University of Lódź)
    Abstract: Globalization process creates fovurable conditions for dynamic development of economic centers both at national and regional level. Yet, it may be an obstacle for growth for peripheral countries and regions. In the European Union one can confirm convergence process at national level. However, in Central European countries the convergence of national economies does not support sustainable growth at regional level and regional convergence process. This situation often leads to the problem of draining up of scarce resources from peripheral regions, which negatively affects their entrepreneurship potential and sustainable socioeconomic development. In the longer run this unbalanced spatial growth can become a significant obstacle for welfare improvements. In this context, the purpose of the article is to analyze the quality of entrepreneurial environment in Poland at regional level within the context of sustainability framework. The research was done for NUTS 2 regions in the years 2010-2014. The quality of entrepreneurial environment is considered here as a multiple-criteria phenomenon that should be treated as a latent variable. Thus, in the research Structural Equation Modeling (SEM) analysis was applied. Values of the latent variable were assessed based on confirmatory factor analysis, which provided information on the socioeconomic development of Polish regions, which determinates the entrepreneurial conditions. In order to group the regions to homogenous subsets natural breaks method was used. The conducted research confirms the process of improvement of entrepreneurial conditions in most of the NUTS 2 regions in Poland. From the perspective of regional convergence process, on the one hand, one can point some positive factors such as noticeable improvements in some underdeveloped regions. However, the dominance of the central region and significant disparities between the NUTS 2 are still relatively stable and extensive. From the methodological perspective the article shows the applicability of SEM methodology to national and regional analysis with application of data from national statistics.
    Keywords: Poland,regional sustainability,entrepreneurial environment,entrepreneurship at regional level,multiple-criteria analysis,Structural Equation Modeling (SEM)
    Date: 2017–12–29
  16. By: Damien Besancenot (LIRAES - EA 4470 - Laboratoire Interdisciplinaire de Recherche Appliquée en Economie de la Santé - UPD5 - Université Paris Descartes - Paris 5); Radu Vranceanu (Essec Business School)
    Abstract: Crowdfunding platforms are providing funds to an increasing number of projects, among which many have a strong social/community impact. Under a all-or-nothing program, the success of the investment depends on the ability of a crowd of potential investors to put their funds into the project without an explicit coordination device. With heterogeneous information, such a problem can be analyzed as a typical global game. We assume that signals of at least some agents present a systematic positive bias, driven by positive emotions about projects with high social/community impact. The analysis reveals that if the number of such overenthusiastic persons is large enough, crowdfunding finance might support financially inefficient projects. We then analyze how a monopolistic platform optimally determines transaction fees and unveil the relationship between overenthusiasm and the profit of the platform.
    Keywords: Crowdfunding,Entrepreneurship,Global games,Overenthusiasm,Behavioral IO
    Date: 2018–02–22

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