nep-ent New Economics Papers
on Entrepreneurship
Issue of 2019‒04‒08
nine papers chosen by
Marcus Dejardin
Université de Namur

  1. Do private enterprises outperform state enterprises in an emerging market? The importance of institutional context in entrepreneurship By Boudreaux, Christopher
  2. Automation and Top Income Inequality By Omer Faruk Koru
  3. An Analysis of the Importance of Both Destruction and Creation to Economic Growth By Gregory Huffman
  4. Does a Guaranteed Basic Income Encourage Entrepreneurship? Evidence from Alaska By Robert M. Feinberg; Daniel Kuehn
  5. Federal Regulation, Job Creation, and the Moderating Effect of State Economic Freedom By Lucas, David; Boudreaux, Christopher
  6. R&D Subsidies and Firms' Debt Financing By Andrea Bellucci; Luca Pennacchio; Alberto Zazzaro
  7. Review of Statistical Modeling Approaches for Sustainability Analysis of Small and Medium sized Enterprises By Malesios, Chrisovalantis; De, Debashree; Moursellas, Andreas; Dey, Prasanta; Evangelinos, Konstantinos
  8. Supporting Entrepreneurs at the Local Level By Kathy Qian; Victor Mulas; Matt Lerner

  1. By: Boudreaux, Christopher
    Abstract: Do private-owned enterprises (POEs) outperform state-owned enterprises (SOEs) in an emerging market? Due to political and social connections, SOEs have several advantages over POEs in emerging markets and transition economies, but we hypothesize that these advantages wane in pro-market institutional environments that prioritize market competition, rule of law, and the rewards to profitable enterprise. In this study, therefore, we explore how institutional quality moderates the relationship between privatization and entrepreneurs’ sales performance. To do this, we blend agency theory and entrepreneurial cognition theory with insights from institutional economics to develop a model of emerging market venture performance. Using data from the World Bank’s Enterprise Survey of entrepreneurs in China, our results suggest that POEs outperform SOEs but only in environments with high-quality market institutions. In environments with low-quality market institutions, SOEs outperform POEs.
    Keywords: privatization, institutional quality, entrepreneurship, China, agency theory, entrepreneurial cognition theory
    JEL: L2 L26 M2 M21 P12 P2
    Date: 2019–03–30
  2. By: Omer Faruk Koru (Department of Economics, University of Pennsylvania)
    Abstract: For almost 40 years, inequality within the top percentile of the income distribution,measured as the ratio of income share of top 0:1% to the income share of top 1%, has been increasing in the US. The income of super-rich people increased more than the income of rich people. In this paper, we show that improvements in automation technology (the number of tasks for which capital can be used) is an important factor contributing to this inequality. We consider a model in which labor has a convex cost and capital has a linear cost. This leads to a decreasing returns to scale pro t function for entrepreneurs. As capital replaces labor in more and more tasks, the severity of diseconomies of scale diminishes, hence the market share of top-skilled entrepreneurs increases. If entrepreneurial skill is distributed according to a Pareto distribution, then top income distribution can be approximated by a Pareto distribution. We show that the shape parameter of this distribution is inversely related to the level of automation. Finally, we rationalize convex cost of labor using the theory of efficiency wage.
    Keywords: automation, top income inequality, entrepreneurship, efficiency wage
    JEL: E23 J23 J3 O33
    Date: 2019–03–12
  3. By: Gregory Huffman (Vanderbilt University)
    Abstract: A growth model is studied in which the destruction (or exit) decision is decoupled from the creative (or research) decision. In contrast with the existing literature, the approach adopted here emphasizes that these important decisions are made by different agents, but they ultimately influence each other. As such, the destruction decision is just as important as that of creation, and in the model if destruction ceases, then so will growth. Any distortion introduced into one of these decisions will then inevitably affect the other as well. It is then possible to characterize endogenous features of the equilibrium such as the number of workers and firms, the determinants of income mobility, income inequality (Gini Coefficient), the growth rate, the lifespan of a firm, and the effect of various taxes or distortions. A planning problem is also studied, and it is shown that a multitude of factors may yield an optimum exit decision that is different from the equilibrium decision rule. This may mean that the equilibrium can give rise either too high or low a level of innovation, but also the destruction or exit rate may also be too high or low. It is then shown that a non-linear tax/subsidy scheme, which alters the research and exit decisions, may improve welfare, relative to the equilibrium level. The model also yields welfare benefits/costs that are considerably different from what one might normally expect.
    Keywords: Economic Growth, Creative Destruction, Innovation, Firm Exit, Tax Policy, Inequality
    JEL: E0 O3
    Date: 2019–03–25
  4. By: Robert M. Feinberg; Daniel Kuehn
    Abstract: While the concept has been around for years, recently the policy notion of a “guaranteed basic income (GBI) or universal basic income has had a resurgence of interest. In addition to rationales relating to fairness and response to structural employment shifts due to automation and globalization, another motivation sometimes put forward for these plans is to encourage risk-taking by providing a safety net. One would think this would imply greater entrepreneurial activity if an unsuccessful entrepreneur had the GBI to fall back on. In this paper we investigate a rare long-standing example similar to a GBI in the US, the Alaska Permanent Fund Dividend program. This was not put forth as a GBI and is frankly too small an annual amount to fully allow an individual to rely on these funds, but for a moderate-to-large family the APF can replace a large share of a poverty-level of income. Receipt of the APF also does not preclude a family from receiving other safety net benefits (e.g., food stamps, unemployment compensation), suggesting that the downside risk for a potential entrepreneur may be lower than in other US states. We initially examine trends in small-firm births in Alaska over time from the Census Bureau's Business Dynamics Statistics 1977-2014 before and after the institution of the APF program (the first payment was in 1982) relative to other US states to investigate a possible impact on entrepreneurship, with results suggestive of a positive effect (perhaps wearing off over time). We then turn to micro data to look at changes in self-employment behavior in Alaska, with somewhat similar findings.
    Keywords: Alaska Permanent Fund, Entrepreneurship, Universal Basic Income, Guaranteed Basic Income
    JEL: L10
    Date: 2019
  5. By: Lucas, David; Boudreaux, Christopher
    Abstract: Regulation is commonly viewed as a hindrance to entrepreneurship, but heterogeneity in the effects of regulation is rarely explored. We focus on regional variation in the effects of national-level regulations by developing a theory of hierarchical institutional interdependence. Using the political science theory of market-preserving federalism, we argue that regional economic freedom attenuates the negative influence of national regulation on net job creation. Using U.S. data, we find that regulation destroys jobs on net, but regional economic freedom moderates this effect. In regions with average economic freedom, a one percent increase in regulation results in 14 fewer jobs created on net. However, a standard deviation increase in economic freedom attenuates this relationship by four fewer jobs. Interestingly, this moderation accrues strictly to older firms; regulation usually harms young firm job creation, and economic freedom does not attenuate this relationship.
    Keywords: Regulation; entrepreneurship; job creation; economic freedom; market-preserving federalism
    JEL: L26 L51 P48 R10
    Date: 2018–12–11
  6. By: Andrea Bellucci (European Commission - Joint Research Centre); Luca Pennacchio (Parthenope University of Naples); Alberto Zazzaro (University of Naples Federico II, CSEF and MoFiR)
    Abstract: This study investigates the impact of public subsidies for research and development (R&D) on the debt financing of small and medium-sized enterprises (SMEs). It examines a public program implemented in the Marche region of Italy during the period 2005–2012. The study combines matching methods with a difference-in-difference estimator to examine whether receiving public subsidies affects total indebtedness, the structure and cost of debt of awarded firms. The results indicate that R&D subsidies modify firms' (especially young firms') debt structure in favor of long-term financing, and help firms to limit the average cost of debt. Subsidies also foster the use of bank financing, but do not affect the overall level of debt. Taken together, these findings suggest that public funding of SMEs' innovation projects plays a certification role in access to external financial resources for firms receiving subsidies.
    Keywords: R&D subsidies; Finance gap; Debt financing; Debt structure; Certification effects; Resource effects.
    JEL: G30 H25 O31 O38 R58
    Date: 2019–02
  7. By: Malesios, Chrisovalantis; De, Debashree; Moursellas, Andreas; Dey, Prasanta; Evangelinos, Konstantinos
    Abstract: Sustainability of small and medium sized enterprises (SMEs) is one of the major concerns to today’s economy as SMEs contribute to GDP considerably and employ large proportion of entire population, but negatively affect environment. Sustainability analysis of SMEs has recently gained momentum and many statistical modeling approaches have been adopted across the industries and geographical locations to reveal relationship between independent and dependent variables within the system. However, till date there is no review work that develops a better understanding on the variables for SMEs’ sustainability and their relationship, and methods for analysis. This study bridges these gaps by reviewing research papers that have been published in leading journals during last decade. First, this research undertakes objective content analysis in order to identify independent and dependent variables along with their frequency of usage. Second, the correlation between the independent and dependent variables is studied. Third, all the published articles are categorised according to types of journals, geographical locations, industries, variables and methods. Lastly, a framework that depicts correlation among the high level variables is presented for sustainability analysis of SMEs.
    Keywords: Sustainability drivers, sustainability performance, small and medium enterprises, modeling, SME.
    JEL: Q5 Q56
    Date: 2019
  8. By: Kathy Qian; Victor Mulas; Matt Lerner
    Keywords: Private Sector Development - Business Development Services Private Sector Development - Enterprise Development & Reform Private Sector Development - Microenterprises Private Sector Development - Small and Medium Size Enterprises Social Protections and Labor - Vocational & Technical Education
    Date: 2018–09
  9. By: S. Lemoussou (STAR ENGINEERING); J.C. Chaudemar; R.A Vingerheds
    Abstract: Summary Recently, several Small and Medium Enterprises (SME) innovate and propose new means of transportation. These projects have to deal with some important issues regarding the regulation whereas it is not fully available for this kind of development. The certification process, critical activity for any enterprise in this industry, constitutes a major challenge for this SME who are not completely aware of all requested constraints. These SME, disadvantaged on this complex market, may ask for a methodological support. We offer in our research to build a Model Based Systems Engineering (MBSE) framework and a structured process modeling to answer to this specific concern.
    Abstract: Récemment, des Petites et Moyennes Entreprises (PME) innovent en proposant de nouveaux moyens de transport aériens. Ces projets posent des questions importantes par rapport à la réglementation alors que celle-ci n'est pas complètement disponible pour ces types de développement. Le processus de certification, activité critique pour toute entreprise du marché aéronautique, demeure un enjeu pour ces entreprises non familières avec l'ensemble des contraintes imposées. Les PME concernées, démunies face à la complexité du marché, requièrent un support méthodologique. Nous proposons dans notre recherche de répondre à cette demande spécifique par une approche d'ingénierie système basée sur les modèles et une modélisation hiérarchisée des processus d'entreprise.
    Date: 2018–10–16

This nep-ent issue is ©2019 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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