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on Entrepreneurship |
| By: | Yujin Kim; Chirantan Chatterjee; Matthew J. Higgins |
| Abstract: | Venture capitalists (VCs) traditionally invest in risky, early-stage innovations. Recent research suggests, however, that VCs may be herding into less risky, later-stage projects. Such a shift can create funding gaps for early-stage firms. Can regulation reverse this trend by providing information that may reduce the risk of early-stage investments? Using the regulatory setting of the European Union and the passage of the Orphan Drug Act (EU-ODA), we examine this question in the biopharmaceutical industry. We provide causal evidence that VCs are more likely to invest in early-stage biopharmaceutical firms operating in sub-fields disproportionately affected by EU-ODA. We also find that the level of syndication declined for early-stage investments and exit performance improved. Importantly, the shift towards early-stage investment did not lead to any higher proportion of bankruptcies. Collectively, our results suggest that the information provided by EU-ODA helped alleviate information asymmetries faced by VCs investing in early-stage biopharmaceutical firms. We conclude by discussing implications for entrepreneurial finance and innovation policy. |
| JEL: | G24 L51 L65 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25202&r=ent |
| By: | Maxin, Hannes |
| Abstract: | This paper investigates an entrepreneur who decides whether to obtain funds from an independent venture capital firm (IVC) or a corporate venture capital firm (CVC) to develop an innovative product. In case of success, the entrepreneur enters a market and competes with an incumbent. The CVC is a subsidiary of an input producer. This input will be required by both the entrepreneur and the incumbent to produce their products. I analyze three different exit routes: (1) IPO, (2) Trade Sale via incumbent and (3) Trade Sale via input producer. I show that the CVC does not exit via a Trade Sale to its parental company due to a loss of demand for the input good. Moreover, I find that the IVC exits more innovative ventures more likely via an IPO, in comparison with the CVC. The analysis generates a number of empirical implications for the difference between IVCs and CVCs and the link between CVCs and the Trade Sale decision of their parental companies. |
| Keywords: | Corporate Venture Capital,Venture Capital,Exit,Complementarity,IPO,Trade Sale |
| JEL: | G24 M13 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc18:181647&r=ent |
| By: | Mthanti, Thanti; Ojah, Kalu |
| Abstract: | Motivated by the long established postulation by Adam Smith and Joseph Schumpeter that human capital and institutions enable Schumpeterian entrepreneurship which, in turn, facilitates economic growth, we sought to establish a more robust empirical support for this relationship. Adopting EO (i.e., innovativeness, proactiveness and risk-taking; Mthanti and Ojah, 2017, Research Policy, 46:4, 724-739) as the measure of Schumpeterian entrepreneurship at the macro-level, and using a sample of 93 countries, over 1980-2008, we employ system-GMM to investigate institutions and human capital as possible determinants of Schumpeterian entrepreneurship (EO). We find that the human capital—EO nexus is robust across economic development levels. However, there is a cross-country variation in the institutions—EO nexus. In line with theoretical predictions, institutions indeed drive EO in middle-to-high income countries. However, in low income countries, building institutions in order to foster EO yields perverse outcomes, which, for us and especially based on deeper analysis, suggest that improving the quality of institutions may not be a necessary precondition for EO/growth policy in low income countries. Furthermore, we find that EO is a highly persistent series, with self-reinforcing network effects; i.e., lofty EO behaviour encourages more lofty EO behaviour. Overall, therefore, we argue that where Schumpeterian entrepreneurship is hampered by low private returns or poor institutional environment, a sensible growth strategy would be to: (1) invest in human capital and (2) subsidize EO directly to exploit its network effects. |
| Keywords: | Institutions, Human capital, Entrepreneurship, Economic growth, Growth model |
| JEL: | O1 O3 O4 O5 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:89551&r=ent |
| By: | Lergetporer, Philipp (Ifo Institute for Economic Research); Ruhose, Jens (Leibniz University of Hannover); Simon, Lisa (CESifo) |
| Abstract: | We study the labor market outcomes of a deregulation reform in Germany that removed licensing requirements to become self-employed in some occupations. Using longitudinal social security data, we implement a matched difference-in-differences design with entropy balancing to account for observable characteristics and unobserved individual heterogeneity. The reform tripled the number of businesses within ten years and led to slower earnings growth and higher unemployment for incumbent workers in deregulated occupations. However, the reform effect seems rather small, which we attribute to the relatively low competitiveness of new businesses. Supporting this view, the reform did not lead to overall employment growth. |
| Keywords: | deregulation, entry barriers, self-employment, labor market outcomes, entropy balancing, matched difference-in-differences |
| JEL: | J31 J24 L11 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11857&r=ent |
| By: | Akcigit, Ufuk; Baslandze, Salomé; Lotti, Francesca |
| Abstract: | Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity - a result that we also confirm using a regression discontinuity design. We build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity. |
| Keywords: | creative destruction; Firm Dynamics; Innovation; Political Connections; productivity |
| JEL: | D7 O3 O4 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13216&r=ent |
| By: | Madaleno, Margarida (London School of Economics); Nathan, Max (University of Birmingham); Overman, Henry (London School of Economics); Waights, Sevrin (DIW Berlin) |
| Abstract: | A growing wave of co-location programmes promises to boost growth for entrepreneurs and young firms. Despite great public and policy interest we have little idea whether such programmes are effective. This paper categorises accelerators and incubators within a larger family of co-location interventions. We then develop a single framework to theorise workspace-level impacts. We summarise available evaluation evidence and sketch implications for regional economic policy. We find clear evidence programmes are effective overall. But we know little about how effects operate – or who benefits. Providers and policymakers should experiment further to establish optimal designs. |
| Keywords: | entrepreneurship, incubators, accelerators, clusters, cities, economic development |
| JEL: | L26 O32 R30 R58 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11856&r=ent |
| By: | Iñiguez, David; Ortega, Raquel; Rivero, Alejandro; Velilla, Jorge |
| Abstract: | The objective of the work is to know the behavior of new Spanish companies in social networks and the use they make of them, trying to establish relationships between the type of company and its behavior in the digital world. We obtain information on the almost 30,000 companies constituted between October 1, 2016 and September 30, 2017 from the Official Bulletin of the Mercantile Registry (BORME), using the classification of economic activities CNAE when defining the type of company. The newly created companies show interest in visualizing themselves in social networks, 36% in Facebook, 23% in LinkedIn and 15% in Twitter, detecting also activity in Instagram and YouTube for some particular niches, being the commercial activity (Group C of CNAE) the predominant in the presence of new Spanish companies in social networks. |
| Keywords: | Entrepreneurship, New Companies, Social Networks, Spain, Facebook, LinkedIn, Twitter |
| JEL: | L26 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:89652&r=ent |
| By: | Vitaly M. Bord; Victoria Ivashina; Ryan D. Taliaferro |
| Abstract: | We show that since 2007, there was a large and persistent shift in the composition of lenders to small firms. Large banks impacted by the real estate prices collapse systematically contracted their credit to all small firms throughout the U.S.. However, healthy banks expanded their operations and entered new banking markets. The market share gain of these banks was a standard deviation above the long-run historical market share growth and persists for years following the financial crisis. Despite this offsetting expansion, the net effect of the contraction in credit was negative, with lower aggregate credit and deposits growth, and lower entrepreneurial activity through 2015. |
| JEL: | G21 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25184&r=ent |
| By: | Adam Dewitte (IAE Lille - Institut d'Administration des Entreprises - Lille - Université de Lille, Sciences et Technologies) |
| Abstract: | The concept of business model innovation has lead to numerous research in strategy. However, little attention has been given on topics related to entry strategies. Consequently, this theoretical paper aims to link two research streams, i.e. the literature on business model and that of entry strategy, to provide insightful knowledge for both fields. In particular we try to better understand the role of business model innovation on entry barrier' effectiveness. Using previous theoretical works and empirical examples, we first discuss the ability of an innovative business model (1) to lower entry barriers and (2) to provide first mover advantages for a new entrant. These advantages may lead to new entry or mobility barriers development. We finally identify four research propositions to guide future empirical research. |
| Keywords: | Mots-clés : Business Model,Business Model Innovation,Entry Strategy,Entry Barriers,Strategic Management |
| Date: | 2017–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01896940&r=ent |
| By: | Negrete Garcia, Ana Karen |
| Abstract: | This paper investigates the existence and nature of constraints prevailing among Mexican microenterprises. It provides inter-temporal insights by relying on firm-level data spanning from 1994 to 2012. A performance index is defined based on firm levels of capital stock and monthly profits, and is used to estimate the empirical probability of a business's success. The predicted values are used to classify every microenterprise into one of three categories: upper, middle, or lower segment. Overall, the study provides evidence of constrained productivity and capital misallocation. Specifically, middle-segment firms exhibit entrepreneurial features and their average marginal returns are 15 percent. Because this segment faces mainly external constraints, cost-effective interventions are plausible. Regarding the lower-segment firms, it is estimated that their average monthly marginal returns are 30 per cent, compared to 1 per cent for the upper segment. It is also shown that, over time, the share that middle-segment firms represent relative to all microenterprises increased from 16 to 22 percent. Lastly, the sources of variation in monthly profits among segments are explored using the Oaxaca-Blinder decomposition method. |
| Keywords: | microenterprises,returns to capital,constrained productivity,Mexico,decomposition method,empirical probability |
| JEL: | C25 D22 D24 N86 O12 O17 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gigawp:309&r=ent |
| By: | Petra Leonora Cvitanović |
| Abstract: | This paper focuses on somewhat underused window of opportunity and unrecognized entrepreneurial possibilities at Croatian natural and organic cosmetics market. There is a unique opportunity for starting a company in Croatia which will produce and sell cosmetic products of natural and organic origin. The aim of this research is to analyse the existing market situation and entrepreneurial climate for starting such a business, and to define general business goals and correct positioning of the new brand. The global natural and organic cosmetics market will grow up to 22 billion USD in 2024. The attractiveness of this industry in Croatia is influenced by barriers to entry such as consumers’ price sensitivity and strong competitive brands. By choosing the optimal sales and communication channels, the company will be able to reach the consumers, achieve greater brand awareness and larger market share. Marketing and financial goals should be related to social goals, such as opening of job vacancies, rising of awareness with Croatian citizens on the importance of conscientious treatment of nature, and educating them on toxic substances in regular cosmetic products. The main risks which the entrepreneur can expect include unwillingness of consumers in Croatia to accept the new brand and a general incomprehension of ecological business focus. If the company implements new technologies and integrates in its business environmentally friendly actions along with ethics in branding, advertising and marketing activities, it will be able to develop competitive advantage through recognizable reputation which will affect consumers' attitudes and purchase intentions. Developing a socially responsible business strategy should include a list of social projects that will be supported by the company and most appreciated by the community. In this research, online sources covering natural and organic cosmetics were used, together with books and scientific articles on social responsibility, marketing ethics, entrepreneurship and branding. |
| Keywords: | entrepreneurship possibilities, socially responsible business strategy, environmentally friendly business, relationship marketing, marketing ethics, brand awareness, ethical brand positioning |
| JEL: | M39 |
| Date: | 2018–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:zag:wpaper:1807&r=ent |