nep-ent New Economics Papers
on Entrepreneurship
Issue of 2018‒12‒24
seven papers chosen by
Marcus Dejardin
Université de Namur

  1. Born to be an entrepreneur? How cultural origin affects entrepreneurship By Katharina Erhardt; Simon Haenni
  2. The Causal Link between Relative Age Effect and Entrepreneurship: Evidence from 17 Million Users across 49 Years on Taobao By Youwei Wang; Yuxin Chen; Yi Qian
  3. How Do Nascent Social Entrepreneurs Respond to Rewards? A Field Experiment on Motivations in a Grant Competition By Ganguli, Ina; Le Coq, Chloé; Huysentruyt, Marieke
  4. Capital gains taxation and funding for start-ups By Edwards, Alexander; Todtenhaupt, Maximilian
  5. Brilliant Technologies and Brave Entrepreneurs: A New Narrative for African Manufacturing By Naudé, Wim
  6. Determinants of Trademarking: Evidence from Arizona and New Mexico Startups By Wang, Haoying; Dou, Shuming
  7. A kis- és középvállalati szektor Magyarországon By Vértesy, László

  1. By: Katharina Erhardt; Simon Haenni
    Abstract: Persistent differences in entrepreneurial activity between regions and countries remain unexplained. This paper argues that cultural heritage is an important determinant. We exploit a quasi-experimental setting comparing entrepreneurial activities of individuals with different cultural ancestry from within Switzerland but who live in the same municipality today and are hence exposed to the same economic and institutional environment. We find that individuals with cultural origin on the German-speaking side of the Swiss language border found 20% more firms than their counterparts with cultural origin on the French-speaking side ─ no matter if they currently live in the German-speaking or French-speaking region. These newly founded firms are identical in terms of survival rate, industry composition, legal form, and firm size, independent of the cultural origin of firm founders. A model of entrepreneurial choice suggests that the empirical patterns of firm entry and performance are more likely driven by differences in risk aversion or preferences for entrepreneurship rather than by skill.
    Keywords: Culture, entrepreneurship, natural experiment
    JEL: D22 L26 Z10
    Date: 2018–12
  2. By: Youwei Wang; Yuxin Chen; Yi Qian
    Abstract: We use an extensive panel of 17 million individuals born between 1947 and 1995 from China’s largest online marketplace, Taobao, to study the impact of RAE on the propensity to become an entrepreneur. Using events surrounding the Cultural Revolution and the issuance of the Compulsory Education Law whereby COD policies varied, we conceptualize a natural experiment to identify the RAE effects. The youngest students are 5.4% less likely to become an entrepreneur compared to the oldest within the cohort, translating to approximate 43.7 thousand additional sellers born in September with an estimated USD 1.29 billion in additional annual sales.
    JEL: I24 I38 J21 J24
    Date: 2018–11
  3. By: Ganguli, Ina (University of Massachusetts Amherst); Le Coq, Chloé (Stockholm Institute of Transition Economics); Huysentruyt, Marieke (HEC Paris)
    Abstract: We conducted a field experiment to identify the causal effects of extrinsic incentive cues on the sorting and performance of nascent social entrepreneurs. The experiment, carried out with one of the United Kingdom’s largest support agencies for social entrepreneurs, encouraged 431 nascent social entrepreneurs to submit a full application for a grant competition that provides cash and in-kind mentorship support through a one-time mailing sent by the agency. The applicants were randomly assigned to one of three groups: one group received a standard mailing that emphasized the intrinsic incentives of the program, or the opportunity to do good (Social treatment), and the other two groups received a mailing that instead emphasized the extrinsic incentives - either the financial rewards (Cash treatment) or the in-kind rewards (Support treatment). Our results show that an emphasis on extrinsic incentives strongly affects who applies for the grant and consequently the type of submissions received. The extrinsic reward cues “crowded out” the more prosocial candidates, leading fewer candidates to apply and fewer applicants targeting disadvantaged groups. Importantly, while the full applications submitted by candidates in the extrinsic incentives groups were more successful in receiving the grant, their social enterprises were less likely to be successful at the end of the one-year grant period. Our results highlight the critical role of intrinsic motives to the selection and performance of social enterprises and suggest that using extrinsic incentives to promote the development of successful social enterprises may backfire in the longer run.
    Keywords: social entrepreneurship; field experiment; incentives; motivations; grants
    JEL: C93 J24 L31
    Date: 2018–12–01
  4. By: Edwards, Alexander; Todtenhaupt, Maximilian
    Abstract: We examine how capital gains taxes affect investment in start-up (i.e., pre-IPO) firms. Using data on capital raised by start-up firms in individual funding rounds, we estimate the effect of the SBJA of 2010, which implemented a full exemption from federal capital gains tax on the sale of qualified shares. Because of higher expected after-tax returns (lower future capital gains taxes), we hypothesize and find evidence consistent with this capital gains tax reduction increasing the amount of investment in start-up firms per funding round by about 12%. We also provide evidence that this effect is concentrated in start-up firms that are likely to be more financially sophisticated.
    Keywords: Capital Gains Taxes,Start-ups,Tax Capitalization
    JEL: M13 G24 H25
    Date: 2018
  5. By: Naudé, Wim (Maastricht University)
    Abstract: In this paper I argue that the manufacturing sector still has an important role to play in Africa's development. Despite failing to industrialize in the past, there may be a new window of opportunity. This is due to the convergence of what has been called 'brilliant' new technologies associated with the Fourth Industrial Revolution (4IR) and a resurgence of start-up entrepreneurship. In this light I (i) show why manufacturing is vital for African economies, (ii) critically analyse the nature and impact, both in terms of opportunities and risks, of the new technologies associated with the 4IR for Africa; (iii) describe the resurgence of technological start-up entrepreneurship in Africa and (iv) call for policy support in the form of complimentary investments and regulations to allow entrepreneurs to utilize opportunities and to minimize threats. In short, a new narrative for African manufacturing is possible.
    Keywords: technology, industry 4.0, entrepreneurship, development, Africa
    JEL: O33 O14 O55 L52 L26
    Date: 2018–11
  6. By: Wang, Haoying; Dou, Shuming
    Abstract: Trademarks are considered an important indicator of entrepreneurial innovation, especially among nontechnology-based service firms and startups. Therefore, it is essential to understand the motivations and drivers behind trademark applications to get a grasp of firm innovation behavior. This study focuses on the trademark decisions of startup firms. The paper assembles a unique dataset of startup firms linking firm trademark application and registration information with firm characteristics. The goal is to empirically examine the determinants of startup trademark decisions. The key results show that firm size is important, and startups of 51-200 employees have the highest propensity of seeking trademarks. Startup location, firm age, and firm type also matter. Within our study area, for example, startups in the Phoenix metro area are significantly more likely to file trademark applications than those in the Albuquerque metro area. Technology-related startups find trademarks less attractive compared to other startups.
    Keywords: Startup, Trademarks, Intellectual Property, SMEs
    JEL: L2 L26 O3 O34 R1
    Date: 2018–04–18
  7. By: Vértesy, László
    Abstract: In Hungary, more than 670,000 SMEs operate (99% coverage), which employ the 70% of all employees, more than 1.9 million people. The operating small and medium-sized enterprises are characterized by a strong territorial concentration: Central Hungary's weight is outstanding (40%). In the case of organizations, micro-enterprises dominate in all regions, at national level more than 94% of enterprises operate in this form. The main goal is to bring productivity and wage rise simultaneously, thus enabling Hungary to rise above the labor-cost – benefit competitiveness model and the medium-level trap. In terms of its labor productivity per employee, Hungary is somewhat below the average of the Visegrád countries (Czech Republic, Hungary, Poland and Slovakia). In the Visegrád region, the productivity of Hungarian manufacturing SMEs grew to a small extent (2.7%), while the growth rate of the service sector (3.5%) was the highest in the region. Six main themes can be identified, which clearly reduce the domestic and international competitiveness of small and medium-sized enterprises: weaknesses in the state and Union support system, low productivity and wage levels, moderate research and innovation performance, high public burdens and a lot of administrative burden. Therefore, the main objective is to strengthen the competitiveness.
    Keywords: Small and medium-sized enterprises, SME, economy, employment, competitiveness, R&D, taxation
    JEL: H0 H21 O4 O40 P42
    Date: 2018

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