nep-ent New Economics Papers
on Entrepreneurship
Issue of 2019‒08‒19
six papers chosen by
Marcus Dejardin
Université de Namur

  1. Heterogeneity and persistence in returns to wealth By Luigi Pistaferri; Davide Malacrino; Luigi Guiso; Andreas Fagereng
  2. The Value of Skill Training Programs for Self-Employment, Entrepreneurship and Non-Cognitive Traits. Evidence from a Regression Discontinuity Design By Shubha Chakravarty; Mattias Lundberg; Plamen Nikolov; Juliane Zenker
  3. Exit of Small Businesses: Differentiating between Insolvency, Voluntary Closures and M&A By Peng XU
  4. Diminishing Role of Young Manufacturing Plants as Drivers of Growth By Kim, Minho
  5. Government R&D Support for SMEs: Policy Effects and Improvement Measures By Lee, Sungho
  6. The creation of start-up companies, a matter of dispositions? By Marion Flécher

  1. By: Luigi Pistaferri; Davide Malacrino; Luigi Guiso; Andreas Fagereng (Statistics Norway)
    Abstract: We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway’s administrative tax records. We document a number of novel results. First, individuals earn markedly different average returns on their net worth (a standard deviation of 8.6%) and on its components. Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within narrow asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the net worth distribution increases the return by 18 percentage points (and 10 percentage points if looking at net-of-tax returns). Fourth, individual wealth returns exhibit substantial persistence over time. We argue that while this persistence partly arises from stable differences in risk exposure and assets scale, it also reflects heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.
    Keywords: Wealth inequality; returns to wealth; financial wealth; net worth; heterogeneity; intergenerational mobility
    JEL: D31 D91 E21 E24 G11
    Date: 2019–07
  2. By: Shubha Chakravarty; Mattias Lundberg; Plamen Nikolov; Juliane Zenker
    Abstract: Using a “fuzzy” regression discontinuity design, we examine the short-run impacts of a vocational training program on self-employment, new business plans, entry into entrepreneurship and entrepreneurial traits using data from the Nepal Employment Fund training program, which funds training workshops offered to eligible individuals. We find striking positive effects of training on self-employment among transformative entrepreneurs. Among individuals who our analysis identifies as transformative entrepreneurs, training provision increases the likelihood of self-employment by 0.21, or equivalent to a 50 percent increase in self-employment from the baseline average. We find impact differences by gender: self-employment increase by 21 percent among women and we detect no impacts among men. The program also generated sizable improvements in self-reported self-regulation and a decreased frequency of anxiety about future income. The female sub-sample and the most labor-intensive training types primarily drive the positive program impacts.
    Keywords: Regression Discontinuity Design; Human Capital; Labor Markets; Self-employment; Entrepreneurship; Nepal
    JEL: J24 M53 L26 O15
    Date: 2017–09–13
  3. By: Peng XU
    Abstract: In this paper, we examine the determinants of M&A, voluntary business closure and bankruptcy of mature SMEs in Japan between 2002 and 2015, using nested logit models. We show that high leverage and extremely poor operating performance are major reasons for exits in the cases of voluntary closures or bankruptcies, while firms involved in M&A are less leveraged and profitability is not as poor as for exited firms. Consistent with previous studies on internal capital markets, group firms or subsidiaries are more likely to be involved in M&A and less likely to go bankrupt. Bankrupt firms have more debt but low cash holdings in comparison with voluntarily closures. Additionally, smaller firms with aging entrepreneur founders are more likely to voluntarily close their businesses, probably due to lack of successors. Our results are driven by independent SMEs.
    Date: 2019–07
  4. By: Kim, Minho
    Abstract: Korea's aggregate productivity growth in the manufacturing industry is on the decline, considerably influenced by the slowing productivity growth of young plants. A particularly sharp decline has been observed in the high-tech industry over the past three years. As such, government support programs need to aim at promoting growth and driving innovation and the numerous targets for support programs should be streamlined towards young innovative firms. The criteria for such firms should involve private sector investment in order to enhance the effectiveness of the programs. - Advanced countries are making renewed efforts to enhance innovation and competitiveness in manufacturing while concerns are growing in Korea over the industry's waning competitiveness. - This study analyzed the changes in the productivity growth of young manufacturing plants and proposed measures to improve the government's entrepreneurship support policy. - Young firms serve as a driving force for job creation and economic growth. - The share of young plants in the manufacturing industry has continued to decline, pointing to a weakening of Korea's economic dynamism. - The manufacturing industry's aggregate productivity growth has declined, particularly over the past three years. - Young plants account for nearly half of the aggregate productivity growth on average in manufacturing while their value-added share is only 13%. - The productivity growth of young plants has decreased over the past decade, diminishing its role as a growth engine. - The stagnating growth of young plants is a bigger factor to their declining productivity growth than the falling number of new entries. - The productivity growth of young plants in the high-tech industry, which has the highest R&D intensity, posted sharp decreases. - Industries with high R&D intensity have been the driving force behind the productivity growth of the manufacturing industry for two decades. But, the last three years have seen a steep decline in the productivity growth of the high-tech industry. - Although the average productivity of young plants is high, their contribution to aggregate productivity growth has declined due to their shrinking share of the industry. - While streamling the targets for the support programs towards innovative firms, the government should refrain from selecting and supporting firms directly and reform regulations that hinder entrepreneurship and the growth of innovative firms. - The government's verification process should be abolished and innovative firms should be defined as young venture capital firms or R&D firms. - Restructuring government programs should be based on objective project evaluations.
    Date: 2018
  5. By: Lee, Sungho
    Abstract: The government's R&D grant for SMEs has risen to 3 trillion won a year, placing Korea second among OECD nations. Indeed, analysis revealed that government support has not only expanded corporate R&D investment and registration of intellectual property rights but has also increased investment in tangible and human assets and marketing. However, there has been a lack of improvements found in the value added, sales and operating profit because the recipient selection system, which relies solely on the qualitative assessments of technology experts was ineffective. Nevertheless, if a predictive model was properly applied to the system, the causal effect on the value added could increase by more than two fold. Accordingly, to develop such a model, it is important to focus on the economic performance rather than the technical achievements. Also, more policy experiments should be conducted on small firms and a phased approach for R&D financing should to be adopted (① grant → ② equity investment → ③ loan). - Korea's R&D subsidy for SMEs has risen to approx. 3 trillion won a year, making Korea the second largest spender among OECD nations. - The SBIR, the main R&D support program for SMEs in the US, is structured in three phases. - The US case shows that the small lump sum grants for a large number of small firms is more effective than large funds for a few mid-sized firms. - The Korean government's corporate R&D support mostly targets medium-sized development activities, not small-scaled exploratory research. - Current corporate R&D support which is evaluated by the number of registered patents and publications must be reformed. - The scalability of intangible assets is as important as the economies of scale of tangible assets. - In all indicators, recipients exhibited much better performance than nonrecipients at the time of support. - In most performance indicators, recipients stand lower than non-recipients in terms of growth. The former even posted negative growth in operating profit and R&D investment. - This study estimated the causal effects using the two-step approach which integrates the nonparametric matching method and parametric regression model. - The government's R&D support contributed to SMEs' debt and equity financing, and firms expanded their investment in capabilities/ assets such as intellectual properties, relational assets, tangible assets and human capital. - Using the funding, firms invested more in capabilities/ assets, but it did not lead to improving the value added, operating profit and sales growth. - Firms with high growth prospects were selected as recipients in a smaller proportion while those with low growth prospects were selected as recipients in a larger proportion, making the value added growth of recipients lower than the average. - Estimation of the heterogenous causal effects on the value added increments found a positive effect only in the top four deciles. - If the support given to those with negative treatment effect was redistributed, this could double the positive effect. - In keeping pace with the flexibility in corporate R&D practices, the government needs to explore an operating system in which an active exchange of feedback takes place between R&D experiments and market verification. - This study suggests reforming the existing recipient selection practice which is solely based on the qualitative evaluation by technology experts, and promoting the use of the predictive model and a phased expansion of policy experiments. - Evaluations should target economic performance, not publications, IP rights and R&D amount, and a selection model should be developed to optimize the evaluation results. - In accordance to risks associated with the respective stages of R&D and commercialization, the government needs to choose the most suitable financing methods among grants, equity investment and loan support. - More free contests should be offered.
    Date: 2018
  6. By: Marion Flécher (IRISSO - Institut de Recherche Interdisciplinaire en Sciences Sociales - Université Paris-Dauphine)
    Abstract: This article aims to study the process of creation of start-up companies, that are expected to bear an innovative business with high growth potential. It aims to understand the modes of socialization to the entrepreneurial career, regarding to the dispositions of start-ups' founders. This contribution will highlight the social and gender inequalities that shape the process of creation of start-up companies.
    Abstract: Nous nous proposons de nous intéresser aux start-ups, ces jeunes entreprises censées croitre rapidement en proposant une activité innovante sur des marchés à fort potentiel de croissance. Il s'agira de comprendre les modes d'engagement dans la carrière entrepreneuriale à l'aune des dispositions et des socialisations primaires et secondaires des entrepreneur-es de start-ups. Cette entrée par les dispositions nous permettra de mettre en évidence les inégalités à l'œuvre dans le processus de création de start-ups, en termes de rapports sociaux de genre et de rapports sociaux de classe.
    Keywords: gender,entrepreneurship,socialization,entrepreneurial dispositions,social inequalities,entrepreneuriat,socialisation,dispositions entrepreneuriales,genre,inégalités sociales
    Date: 2019–03–13

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