nep-ent New Economics Papers
on Entrepreneurship
Issue of 2019‒10‒21
twelve papers chosen by
Marcus Dejardin
Université de Namur

  1. Entrepreneurial Persistence Beyond Survival: Measurement and Determinants By Marco Caliendo; Maximilian Goethner; Martin Weißenberger
  2. Innovation and job creation in (high-growth) new firms By Pietro Santoleri
  3. Mafia Firms and Aftermaths By Alfano, Maria Rosaria; Cantabene, Claudia; Silipo, Damiano Bruno
  4. Rule of Law and Female Entrepreneurship By Nava Ashraf; Alexia Delfino; Edward L. Glaeser
  5. The influence of institutions on venture capital: How transaction costs, uncertainty, and change affect new ventures By Hoch, Felix; Lohwasser, Todor S.
  6. Task Discretion, Labor Market Frictions and Entrepreneurship By Canidio, Andrea; Legros, Patrick
  7. Career or Flexible Work Arrangements? Gender Differences in Self-Employment in a Young Market Economy By Buttler, Dominik; Sierminska, Eva
  8. User entrepreneurs for social innovation: The case of patients and caregivers as developers of tangible medical devices By Göldner, Moritz; Herstatt, Cornelius; Canhão, Helena; Oliveira, Pedro
  9. Three Varieties of Africa’s Industrial Future By Naudé, Wim
  10. Small firms and domestic bank dependence in Europe’s great recession By Mathias Hoffmann; Egor Maslov; Bent E. Sørensen
  11. Innovation support in the enterprise sector: Industry and SMEs By Gernot Hutschenreiter; Johannes Weber; Christian Rammer
  12. Bank financing to SMEs in the Republic of North Macedonia: Evidence from Survey Data By Tanja Jakimova; Neda Popovska Kamnar

  1. By: Marco Caliendo (University of Potsdam, IZA Bonn, DIW Berlin, IAB Nuremberg); Maximilian Goethner (Friedrich Schiller University Jena); Martin Weißenberger (University of Potsdam)
    Abstract: Entrepreneurial persistence is demonstrated by an entrepreneur’s continued positive maintenance of entrepreneurial motivation and constantly-renewed active engagement in a new business venture despite counter forces or enticing alternatives. It is thus a crucial factor for entrepreneurs when pursuing and exploiting their business opportunities and to realize potential economic gains and benefits. Using rich data on a representative sample of German business founders, we investigate the determinants of entrepreneurial persistence. Next to observed survival we also construct a hybrid persistence measure capturing also the motivational dimension of persistence. We analyze the influence of individual-level (human capital and personality) and business-related characteristics on both measures as well as their relative importance. We find that the two indicators emphasize different aspects of persistence. For the survival indicator, the predictive power is concentrated in business characteristics and human capital, while for hybrid persistence, the dominant factors are business characteristics and personality. Finally, we show that results are heterogeneous across subgroups. In particular, formerly-unemployed founders do not differ in survival chances, but they are more likely to lack a high psychological commitment to their business ventures.
    Keywords: Entrepreneurship, Persistence, Start-ups, Survival
    JEL: L26 M13
    Date: 2019–09
  2. By: Pietro Santoleri
    Abstract: Recent research has underscored the prominent role played by a small fraction of fast-growing new firms in contributing to aggregate net employment growth. While it is typically assumed that those firms experience this superior performance thanks to their ability in undertaking technological innovation, few empirical studies have explicitly addressed this issue. This article examines the innovation-employment nexus for start-ups using the Kauffman Firm Survey (KFS), a unique longitudinal dataset tracking a single cohort of US firms founded in 2004. Results based on fixed effects panel quantile regressions indicate an overall positive but heterogeneous effect of innovation activities on the conditional employment growth distribution. More in detail, the findings reveal that both research and development (R&D) and patents have a positive association with employment growth especially for those new firms experiencing high-growth.
    Keywords: new firms; high-growth; innovation; employment growth; panel quantile regressions.
    Date: 2019–10–15
  3. By: Alfano, Maria Rosaria; Cantabene, Claudia; Silipo, Damiano Bruno
    Abstract: We use a unique and unexplored dataset to investigate the determinants and effects of mafia firms in Italy. Mafia may use several tools to expand its firms. However, in this paper, we show that they prefer political corruption to violence to expand mafia firms. In particular, they use the latter more to build up their reputation in new established regions. Mafia firms hamper entrepreneurial activity but they can have beneficial effects on unemployment if mafia firms add to not substitute current economic activities. Policy makers should take account of this twofold effects of mafia firms.
    Keywords: Research Methods/ Statistical Methods
    Date: 2019–10–17
  4. By: Nava Ashraf; Alexia Delfino; Edward L. Glaeser
    Abstract: Commerce requires trust, but trust is difficult when one group consistently fears expropriation by another. If men have a comparative advantage at violence and there is little rule-of-law, then unequal bargaining power can lead women to segregate into low-return industries and avoid entrepreneurship altogether. In this paper, we present a model of female entrepreneurship and rule of law that predicts that women will only start businesses when they have both formal legal protection and informal bargaining power. The model's predictions are supported both in cross-national data and with a new census of Zambian manufacturers. In Zambia, female entrepreneurs collaborate less, learn less from fellow entrepreneurs, earn less and segregate into industries with more women, but gender differences are ameliorated when women have access to adjudicating institutions, such as Lusaka's “Market Chiefs” who are empowered to adjudicate small commercial disputes. We experimentally induce variation in local institutional quality in an adapted trust game, and find that this also reduces the gender gap in trust and economic activity.
    JEL: J16 K40 O15 R12
    Date: 2019–10
  5. By: Hoch, Felix; Lohwasser, Todor S.
    Abstract: Institutional dynamics and uncertainty in a country are crucial considerations for investors when searching for venture capital opportunities. International entrepreneurship literature has focused on the impact of unidimensional measures of institutions, despite that institutional environments undergo substantial and continuous changes in multiple dimensions. This study connects literature on the institution-based view and transaction cost economics by examining the effects of reduced transaction costs and uncertainty as institutional outcomes on entrepreneurial activities. Empirical results from 85,711 ventures in 120 countries during the period from 1996 to 2018 show that ventures raise higher funding in countries with (1) generally lower transaction costs that are not constrained by overregulation, (2) higher uncertainty, and (3) institutional environments undergoing change. Funded ventures are more likely to survive in countries with (1) lower transaction costs, (2) lower uncertainty, and without (3) general or (4) disruptive institutional change. Hence, we promote a dynamic perspective for investors and founders when assessing entrepreneurial opportunities in heterogeneous countries since institutional effects driven by uncertainty and transaction costs depend on the individual business purpose.
    JEL: D02 D23 G24 L26 M13 O57 P48
    Date: 2019
  6. By: Canidio, Andrea; Legros, Patrick
    Abstract: Each job can be performed in several ways, which we call tasks An agent's performance at a task is informative about his productivity at different tasks. But tasks are not contractible: choosing tasks is the prerogative of management within firms, and of the agent if he is an entrepreneur. Firms will invest in the discovery of their workers' productivity at different tasks only if they cannot easily move to other firms. Therefore, labor-market frictions determine whether learning an agent's talent occur within firms, or whether an agent may become an entrepreneur to acquire task discretion.
    Keywords: entrepreneurial failures; entrepreneurship; labor-market frictions; learning; organizational choice; Task discretion
    JEL: D83 J24 J62 J63 L26 M13
    Date: 2019–08
  7. By: Buttler, Dominik (Poznan University of Economics); Sierminska, Eva (LISER (CEPS/INSTEAD))
    Abstract: We examine supply-side determinants of transition from the wage and salary sector to self-employment of women and men living Poland. The empirical analysis is made possible due to a unique and under explored longitudinal survey -- Social Diagnosis – that contains rare indicators such as job preferences and work events. The empirical results in the 2007-2015 period indicate that women and men transitioning into self-employment are differently motivated. In terms of job attributes, women find independence at work and for those in professional occupations a job matching their competences as a desirable job attribute, while for men the lack of stress, a good salary and independence is key. The analysis of work events and its influence on self-employment weakly confirms the glass-ceiling hypothesis. In line with other research, our analysis indicates that financial constraints strongly determine the entry into self-employment. A key human capital determinant is past entrepreneurial experience indicating a slow, cautious transition process into self-employment.
    Keywords: risk, self-employment, work conditions, gender, Poland
    JEL: D31 G11 J61
    Date: 2019–09
  8. By: Göldner, Moritz; Herstatt, Cornelius; Canhão, Helena; Oliveira, Pedro
    Abstract: Prior research has shown that some patients and caregivers such as relatives are innovating in relation to their unmet medical needs. However, there is little evidence whether and how these ideas are later implemented into market-ready solutions and subsequently commercialized. We analyze cases of patients and their caregivers becoming user entrepreneurs - persons who develop and market medical devices according to their own and/or their relatives' needs. We apply the framework of opportunity recognition and exploitation and conduct 14 case studies with medical device developers who have successfully brought their product to market. Our findings show that these innovation opportunities were mostly recognized during time-consuming and exhausting daily routines when no suitable medical device or other solutions were present. In 12 cases, the inventor founded a company to commercialize a product; in the remaining two cases, the idea was licensed after IP was secured. In all cases, the innovation had significant impacts on the quality of lives of the patients and, in case of caregivers, on both the patients and relatives. Since technical knowledge was not present in most cases, knowledgable friends and relatives were consulted and often integrated into the product development. The most prevalent motivation for further development and diffusion turned out to be the aspiration to validate the product idea and to deliver the benefits to others with the same ailment. This finding on innovation's social component complements current research on lead-users, as the solution of one's own problem was previously regarded as the key motivation. One major constraint to diffusing a medical device are regulations in the healthcare sector. Ten of 14 products in our sample were approved medical devices, with five classified as a higher-risk products and five as lower-risk products. We observe that patients and caregivers who recognize and exploit their ideas in the medical devices market did so despite particularly high market entry barriers in this sector. Few patients and caregivers were capable to bring even higher-risk medical devices to the market. This is unsurprising, because neither patients nor cargivers are experienced or trained to go through these time-consuming, demanding, and sometimes costly procedures. Healthcare companies should establish measures to support innovative patients and to systematically integrate them into their innovation processes.
    Keywords: user innovation,social innovation,user entrepreneurship,patient,caregiver,medical device,opportunity recognition,opportunity exploitation
    Date: 2019
  9. By: Naudé, Wim (Maastricht University)
    Abstract: This paper shows that African economies have generally not de-industrialized, that manufacturing growth is very possible, and moreover that the contribution of manufacturing in Africa has been underestimated. As far as the future is concerned, African countries will in differing degrees experience three varieties of industrialization, all influenced by new and emerging technologies. In one variety, labelled "acquiring traditional manufacturing capabilities" technological change is too fast and complex for some countries to immediately benefit, requiring an estimated 15-year window to put the complementary investments and business ecosystems in place, while promoting old-fashioned labor-intensive manufacturing. In a second variety, technological innovation is changing the nature of manufacturing and is turning services into the main sector for structural transformation. This variety is labelled "fostering sectors with the characteristics of manufacturing" to denote that services now perform functions previously expected from manufacturing. A third variety of future industrialization is labelled "resurgent entrepreneurship-lead industrialization" denoting that some African countries will take part in new and advanced types of manufacturing, through indigenous entrepreneurs starting high-technology firms. This third variety is elaborated with reference to recent examples. The paper concludes with broad suggestions for industrial policies that are consistent with these varieties of industrialization.
    Keywords: technology, entrepreneurship, manufacturing, industrial policy, Africa
    JEL: O47 O33 J24 E21 E25
    Date: 2019–10
  10. By: Mathias Hoffmann; Egor Maslov; Bent E. Sørensen
    Abstract: Small businesses (SMEs) depend on banks for credit. We show that the severity of the Eurozone crisis was worse in countries where firms borrowed more from domestic banks (“domestic bank dependence”) than in countries where firms borrowed more from international banks. Eurozone banking integration in the years 2000–2008 mainly involved cross-border lending between banks while foreign banks’ lending to the real sector stayed flat. Hence, SMEs remained dependent on domestic banks and were vulnerable to global banking shocks. We confirm, using a calibrated quantitative model, that domestic bank dependence makes sectors and countries with many SMEs vulnerable to global banking shocks.
    Keywords: Small and medium enterprises, SME access to finance, Banking integration, Domestic bank dependence, International transmission, Eurozone crisis
    JEL: F30 F36 F40
    Date: 2019–10
  11. By: Gernot Hutschenreiter (OECD); Johannes Weber (OECD); Christian Rammer (Centre for European Economic Research)
    Abstract: This policy paper outlines major policy trends in public support of innovation activities in industry and SMEs across OECD countries. It discusses the policy mix to strengthen business R&D and innovation, and possible avenues to improve this mix in response to evolving needs, driven new trends in technology and other factors. Across the OECD, governments strive to reinforce international competitiveness through a variety of policy initiatives supporting business innovation. In particular, these initiatives facilitate the technological upgrading of existing industries and the development of strategic sectors. Twelve case studies discuss selected initiatives in the following areas: Support for innovative enterprises and clusters, development of strategic industrial sectors in particular in manufacturing, and the transition of industry towards new production methods (Industry 4.0). While the dimensions for the effective implementation of these initiatives vary, this paper identifies some features that may help identify good practices in their design, implementation and evaluation.
    Date: 2019–10–17
  12. By: Tanja Jakimova (National Bank of the Republic of North Macedonia); Neda Popovska Kamnar (National Bank of the Republic of North Macedonia)
    Abstract: This paper presents the main findings of the Survey for bank financing to small and medium enterprises (SMEs). The key objective was to capture the main features of the “supply side” of SMEs financing in the Republic of North Macedonia and to identify institutional and policy constraints of banks involvement with SMEs. The findings reveals that banks considered SMEs lending market as large, competitive, not very saturated, but with very positive outlook. While the main driver for bank involvement with SMEs sector is profitability and the good prospects of the SME segment, a number of obstacles are present, including SME-related factors, macroeconomic factors, legal and contractual environment and some bank-specific factors. The overall conclusion is that SMEs access to finance should be further supported and encouraged in order to increase their contribution to growth of the economy.
    Keywords: small and medium enterprises, bank finance, survey data
    JEL: G20
    Date: 2019

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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