nep-ent New Economics Papers
on Entrepreneurship
Issue of 2018‒10‒22
eight papers chosen by
Marcus Dejardin
Université de Namur

  1. Does Social Pressure Hinder Entrepreneurship in Africa? The Forced Mutual Help Hypothesis By Alby, Philippe; Auriol, Emmanuelle; Nguimkeu, Pierre
  2. Prediction Based on Entrepreneurship-Prone Personality Profiles: Sometimes Worse Than the Toss of a Coin By Alexander Konon; Alexander Kritikos
  3. Migrant STEM Entrepreneurs By Baum, Christopher F; Dastory, Linda; Lööf, Hans; Stephan, Andreas
  4. Does high growth persist? A focus on growth formulas and the influence of firm exits By Erhardt, Eva
  5. Enhancing dynamism in SMEs and entrepreneurship in Korea By Randall S. Jones; Jae Wan Lee
  6. Post-acquisition dynamics of technology start-ups: drawing the temporal boundaries of post-acquisition restructuring process By Xiao, Jing
  7. Export innovation of SMEs through the extensive margin in Latin America By Park, Hyunju; Mulder, Nanno; Park, Yuri
  8. The Aggregate Consequences of Tax Evasion By Di Nola, Alessandro; Kocharkov, Georgi; Scholl, Almuth; Tkhir, Anna-Mariia

  1. By: Alby, Philippe; Auriol, Emmanuelle; Nguimkeu, Pierre
    Abstract: In the absence of a public safety net, wealthy Africans have the social obligation to share their re- sources with their needy relatives in the form of cash transfers and inefficient family hiring. We develop a model of entrepreneurial choice that accounts for this social redistributive constraint. We derive pre- dictions regarding employment choices, productivity, and profitability of firms ran by entrepreneurs of African versus non-African origin. Everything else equal, local firms are over-staffed and less productive than firms owned by nonlocals, which discourages local entrepreneurship. Using data from the manu- facturing sector, we illustrate the theory by structurally estimating the proportion of missing African entrepreneurs. Our estimates, which are suggestive due to the data limitation, vary between 8% and 12.6% of the formal sector workforce. Implications for the role of social protection are discussed.
    Keywords: Entrepreneurship; Family Solidarity; Formal Sector; Africa
    JEL: C51 H53 H55 O14 O17 O55
    Date: 2018–09
  2. By: Alexander Konon; Alexander Kritikos
    Abstract: The human personality predicts a wide range of activities and occupational choices—from musical sophistication to entrepreneurial careers. However, which method should be applied if information on personality traits is used for prediction and advice? In psychological research, group profiles are widely employed. In this contribution, we examine the performance of profiles using the example of career prediction and advice, involving a comparison of average trait scores of successful entrepreneurs with the traits of potential entrepreneurs. Based on a simple theoretical model estimated with GSOEP data and analyzed with Monte Carlo methods, we show, for the first time, that the choice of the comparison method matters substantially. We reveal that under certain conditions the performance of average profiles is inferior to the tossing of a coin. Alternative methods, such as directly estimating success probabilities, deliver better performance and are more robust.
    Keywords: Advice, personality, entrepreneurship, profiles
    JEL: C15 D81 L26
    Date: 2018
  3. By: Baum, Christopher F (Boston College, DIW Berlin, and Centre of Excellence for Science and Innovation Studies (CESIS)); Dastory, Linda (The Department of Industrial Economics and Management, Royal Institute of Technology); Lööf, Hans (Centre of Excellence for Science and Innovation Studies (CESIS), Royal Institute of Technology); Stephan, Andreas (Jönköping University, DIW Berlin, and Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: STEM workers are considered to be key drivers for economic growth in the developed world. Migrant workers play an increasing role in the supply of this occupational category. We study the universe of STEM workers in the Swedish economy over the period 2003-2015 and find that migrants are less likely to form their own business, but those who are entrepreneurs earn income at least as large as that of their native-born counterparts. While the income differential for economic migrants may be partially explained by self-selection, the estimated effect is not significantly different between natives and refugee migrants.
    Keywords: STEM; migration; entrepreneurship; income; panel data
    JEL: F22 J44 J61 L26 O14
    Date: 2018–10–15
  4. By: Erhardt, Eva
    Abstract: This study investigates the development of firms after high-growth. We argue that the formula used for measuring growth determines results. Implications from different formulas are tested with data from Amadeus on Bulgarian firms for the years 2001-2010. We provide first evidence for an absolute growth formula and its systematic comparison to alternative choices. The focus is on growth in employees, but we offer additional evidence for sales and profits. Using a two-part regression model with separate equations for survival and growth, we find that high-growth does not persist when size of exits is accounted for. Losses by exiting high-growth firms outweigh further gains in size by survivors. This result equally holds for the 1 percent fastest growers in absolute terms, the top 1 percent in terms of log growth and high-growth firms defined according to Eurostat-OECD. Implications for the future study of high-growth firms and policies focused at them are discussed.
    Keywords: high-growth firms,persistence,growth formulas,firm size,firm exit
    JEL: L26 J23 C18 D22 P23 L11 L25 D22 C18 P23
    Date: 2018
  5. By: Randall S. Jones; Jae Wan Lee
    Abstract: Making SMEs and start-ups a driver of growth and job creation requires a number of policies to improve the performance of SMEs, whose labour productivity in the manufacturing sector has fallen to less than a third of that in large companies. The large-scale support for SMEs should shift from supporting the survival of firms to raising productivity. Measures to accelerate SMEs' take-up of new technology and increase their participation in international trade would boost productivity and inclusive growth. Given the chronic labour shortages facing SMEs, reforming the education system to reduce labour market mismatch is a priority. Relaxing the regulatory burden and government control would allow innovative SMEs to create new products and services. Entrepreneurship is lagging, reflecting a higher fear of failure and a lack of skills in Korea. Upgrading entrepreneurship education and lowering the personal costs faced by entrepreneurs who fail would be beneficial. A greater role for venture capital, in part by activating the M&A market to allow investors to recuperate their funds, would encourage firm creation. This Working Paper relates to the 2018 OECD Economic Survey of Korea ( y-korea.htm)
    Keywords: business angels, digitalisation, ecosystem, entrepreneurship, incubators, innovation, insolvency regime, Korea, productivity, public procurement, regulatory reform, small and medium-sized enterprises, SMEs, start-ups, subcontractors, R&D, venture capital
    JEL: L26 M13 O3
    Date: 2018–10–10
  6. By: Xiao, Jing (CIRCLE, Lund University)
    Abstract: The evolutionary perspective is important in order to understand post-acquisition restructuring as a dynamic process. In particular, this paper focuses on how the survival pattern of target start-ups as autonomous business units changes over time. This study observes a large sample of Swedish technology start-ups entering from 1997 to 2002 and follows them until 2009. Based on a discrete-time duration analysis, we find that acquisition affects the survival of target start-ups differently in the short-run and the long-run. Within 4 years after acquisition, acquisition is found to lower the probability of survival of start-ups as autonomous business units. However, from the 5th year after acquisition, the acquisition effects tend to become positive, although not statistically significant after possible endogeneity of acquisition is controlled for. It is inferred that acquired start-ups experience an extensive selection and experimentation internally by acquirers through post-acquisition restructuring within 4 years after acquisition. During the process, target start-ups’ operations are temporally disrupted
    Keywords: Temporality; post-acquisition survival; post-acquisition restructuring; technology start-ups; Discrete-time duration models; Inverse-probability-of-treatment weights (IPTW); Sweden
    JEL: C41 G34 L25 L26 O32
    Date: 2018–10–15
  7. By: Park, Hyunju; Mulder, Nanno; Park, Yuri
    Abstract: In Latin America and the Caribbean, there is little direct evidence on export innovation of small and medium-sized enterprises in (SMEs). This type of innovation refers to the adaptation of products and business processes to technical standards, tastes and other customer requirements in the target markets. The successful fulfillment of these requirements by a firm can be measured indirectly through the sale of a new product to an existing market, the entry of an existing product to a new destination, or both. These movements can be measured using firm-level customs data, as is done in this study for Chile, Colombia, Costa Rica, and Mexico for the period 2000 to 2015. The results confirm the well-known fact that a high share of SMEs enter and leave the universe of exporting firms each year. Among the four countries, exporting SMEs in Costa Rica had the lowest entry and exit rates and the highest survival rates. On average, SMEs in Costa Rica and Mexico incorporated more new products into their export basket than those in Chile and Colombia. This is because SMEs in the latter two countries exported mostly natural resources concentrated in few products, while SMEs in the former two countries were selling a relatively more diversified basket of manufactures. Within the sample, Costa Rica was the country where exporting SMEs added more destinations to their export basket each year. In contrast, Mexico was the one where SMEs added the smallest number of new destinations (less than one) on average, due to their great dependence on the United States as an export market. Export innovation is also analyzed with respect to the three dimensions (firms, products, and markets) simultaneously. For this purpose, the change in export value of each firm during this period is broken down into two parts. The first is the intensive margin, which refers to the change in export value of the same firms selling the same products to the same destinations. The second is the extensive margin, which has two components: (i) the extensive margin of entry (which reveals export innovation), including new combinations of companies, products and target markets, and (ii) the extensive margin of exit, referring to combinations of companies, products and destination markets that cease to exist. In all countries except Costa Rica, the extensive margin contributed proportionately more to the growth of exports of SMEs than to that of large companies. In Chile and Colombia, export innovation was concentrated in selling existing products to new markets. In contrast, in Costa Rica and Mexico the export of new products to established destinations was the predominant type of export innovation.
    Date: 2018–10–02
  8. By: Di Nola, Alessandro; Kocharkov, Georgi; Scholl, Almuth; Tkhir, Anna-Mariia
    Abstract: There is a sizeable overall tax gap in the U.S., albeit tax noncompliance differs sharply across income types. While only small percentages of wages and salaries are underreported, the estimated misreporting rate of self-employment business income is substantial. This paper studies how tax evasion in the self-employment sector affects aggregate outcomes and inequality. To this end, we develop a dynamic general equilibrium model with incomplete markets in which heterogeneous agents choose between being a worker and being self-employed. Self-employed agents may hide a share of their business income but are confronted with the probability of being detected by the tax authority. Our model replicates important quantitative features of U.S. data, in particular, the misreporting rate, wealth inequality, and the firm size distribution. Our quantitative findings suggest that tax evasion induces self-employed businesses to stay small. In the aggregate, tax evasion increases the size but decreases the productivity of the self-employment sector. Moreover, it increases aggregate savings and reduces wealth inequality. We show that tax revenues follow a Laffer curve in the size of the tax evasion penalty.
    Keywords: Tax evasion,Self-Employment,Wealth inequality,Tax policy.
    JEL: H24 H25 H26 C63 E62 E65
    Date: 2018

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