nep-ent New Economics Papers
on Entrepreneurship
Issue of 2018‒05‒21
five papers chosen by
Marcus Dejardin
Université de Namur

  1. Getting the Facts Right on Born Globals By Ferguson, Shon; Henrekson, Magnus; Johannesson, Louise
  2. Cost of Experimentation and the Evolution of Venture Capital By Michael Ewens; Ramana Nanda; Matthew Rhodes-Kropf
  3. Strict duality and overlapping productivity distributions between formal and informal firms By Allen, Jeffrey; Nataraj, Shanthi; Schipper, Tyler C.
  4. Is interest rate still the right tool for stimulating economic growth ? evidence from Japan By Al-Dailami, Mohammed Abdullah; Masih, Mansur
  5. Impacto económico del empredimiento en una economía regional: el caso de Andalucía By Joaquin Garcia-Tapial; M. Alejandro Cardenete

  1. By: Ferguson, Shon (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Johannesson, Louise (Research Institute of Industrial Economics (IFN))
    Abstract: Policymakers in several countries have recently taken steps to promote the rapid export expansion of small- and medium-sized enterprises (SMEs). The goal of these policies has been to create successful export-intensive firms, which are often referred to as born globals. These measures are motivated by studies claiming that born global firms are disproportionately important for job creation and economic growth. Using detailed register data on the universe of Swedish manufacturing firms born between 2001 and 2008, we find that born globals are a very small group of firms whose long-run size and growth do not outperform other exporting firms. Thus, the notion that born globals are superior to firms that follow a more gradual internationalization process, a conclusion largely based on case studies and surveys, does not withstand scrutiny. Policymakers must therefore be aware that encouraging more born globals need not necessarily lead to large benefits for the overall economy, especially in terms of employment.
    Keywords: Born globals; Exporting; Firm growth; Globalization; Job creation
    JEL: F14 F23 L25 M13
    Date: 2018–05–03
  2. By: Michael Ewens; Ramana Nanda; Matthew Rhodes-Kropf
    Abstract: We study how technological shocks to the cost of starting new businesses have led the venture capital model to adapt in fundamental ways over the prior decade. We both document and provide a framework to understand the changes in the investment strategy of venture capitalists (VCs) in recent years — an increased prevalence of a “spray and pray” investment approach — where investors provide a little funding and limited governance to an increased number of startups that they are more likely to abandon, but where initial experiments significantly inform beliefs about the future potential of the venture. This adaptation and related entry by new financial intermediaries has led to a disproportionate rise in innovations where information on future prospects is revealed quickly and cheaply, and reduced the relative share of innovation in complex technologies where initial experiments cost more and reveal less.
    JEL: G24 O31 O32
    Date: 2018–04
  3. By: Allen, Jeffrey; Nataraj, Shanthi; Schipper, Tyler C.
    Abstract: This paper develops a multi-industry general equilibrium model where entrepreneurs within each industry can decide to operate formally or informally. The model generates a rich set of predictions including productivity cut-offs for formal and informal firms to operate within different industries. In doing so, it matches empirical research that finds an overlap in the aggregate productivity distributions of formal and informal firms, while being consistent with theoretical predictions of strict duality within industries. Our explanation for this outcome is that it is natural result of fixed costs varying across industries. We offer evidence that the overlap between formal and informal firms in the aggregate is larger than the overlaps within industries for the case of Indian manufacturing establishments. Our model is also consistent with other features of the data in that it can explain high levels of competition between formal and informal firms that decrease with formal firm size.
    Keywords: informality; competition; dual view; productivity
    JEL: E26 O17
    Date: 2018–04
  4. By: Al-Dailami, Mohammed Abdullah; Masih, Mansur
    Abstract: A lot of advanced economies have reached a stage of stale economic growth and very low inflation rates or even occasionally deflation. Their policy maker’s response was to stimulate the economy through monetary easing in order to make funds available for potential businesses to borrow and grow. Countries such as Japan for example have reduced their interest rates to negative nominal rates in order to try to push the money back into the economy but so far all efforts were futile. This calls for a relook at the real situation and whether interest rates are actually the right tool to stimulate the economy or not. This paper takes a completely different perspective on economic development and attempts to discover the relationship between interest rates and entrepreneurship indicators in Japan with the latter being taken as a proxy for economic development as it is a major driver for economic activity – a proxy that was totally neglected by previous literature. The study performs a time series regression to determine the relationship between interest rates and four drivers of entrepreneurship in order to determine whether interest rates actually stimulate these or not. The study showed that interest rates are rather a driven factor, not a driver when it comes to entrepreneurship and efforts done on interest rates won’t have an impact on the real economic entrepreneurship.
    Keywords: interest rates, entrepreneurship, Variance Decompositions
    JEL: C58 E44
    Date: 2017–12–28
  5. By: Joaquin Garcia-Tapial (Universidad Loyola Andalucía); M. Alejandro Cardenete (Universidad Loyola Andalucía)
    Abstract: Although traditionally entrepreneurship has been considered as one of the engines of economic activity, it has not been until recent years that public authorities have made a planned and organized effort to support the entrepreneurial initiative. However, even though many millions of euros are invested annually in this support, the effectiveness of such investment is rarely measured in terms of the impact of entrepreneurial activity on the economy. For this reason, in this paper we analyze the effect of this activity (entrepreneurship) on a regional economy and its impact on it. To do so, we develop a Computable General Equilibrium (CGE) model for the Andalusian economy for 2015, within a top-down approach. The model is based in the Andalusian Social Accounting Matrix (SAM) updated for the year 2015. A SAM is a statistical-accounting instrument that collects all the information of an economic system and, in addition, closes the circular flow of incomes, considering direct, indirect and induced effects. This gives an overview of the implications of the economic flows on the different sectors of activity and at the same time details and completes them. The SAM for Andalusia 2015 has a disaggregation level of 35 economic activities (27 productive sectors plus 8 endogenous accounts that include items such as capital, consumption, labor, investment, taxes, public sector and sector Exterior). In order to obtain the impact vector for the entrepreneurial activity, necessary to make the estimates for each one of the activity sector, the statistical official information available about business creation in Andalusia has been used. The results will show the effects on Gross domestic product, Productive Output and employment creation and its distribution by sectors of Activity.
    Keywords: Social Accounting Matrix, Entrepreneurship, Andalusia, Regional Economy.
    JEL: C63 C68 D58 L26 R13
    Date: 2018–05

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