nep-ent New Economics Papers
on Entrepreneurship
Issue of 2019‒11‒04
eighteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Who Gains from Creative Destruction? Evidence from High-Quality Entrepreneurship in the United States By Astrid Marinoni; John Voorheis
  2. Persistence of Entrepreneurship in Different Historical Contexts By Michael Fritsch; Korneliusz Pylak; Michael Wyrwich
  3. Entrepreneurial Ecosystems: A Dynamic Lifecycle Model By Uwe Cantner; James A. Cunningham; Erik E. Lehmann; Matthias Menter
  4. Catching up or Lagging Behind? The Long-Term Business and Innovation Potential of Subsidized Start-Ups out of Unemployment By Marco Caliendo; Steffen Künn; Martin Weißenberger
  5. Types of Institutions and Well-Being of Self-Employed and Paid Employees in Europe By Michael Fritsch; Alina Sornger; Michael Wyrwich
  6. How innovation affects performance By Ksenia Gonchar; Maria Kristalova
  7. GAW survey data linked with administrative data of the IAB (GAW-ADIAB): A documentation and review of empirical evidence and research opportunities By Michael Wyrwich; Michael Fritsch; Elisabeth Bublitz; Alina Sorgner
  8. Power Laws without Gibrat's Law By John Stachurski
  9. The Effect of Physical Collateral and Personal Guarantees on Business Start-ups By HONJO Yuji; ONO Arito; TSURUTA Daisuke
  10. Do Entrepreneurs Have High Life Satisfaction? Evidence from Japan By HONJO Yuji; IKEUCHI Kenta; NAKAMURA Hiroki
  11. Heterogeneous effects of agglomeration on firm innovation in Germany By Niebuhr, Annekatrin; Peters, Jan Cornelius; Schmidke, Alex
  12. Formal Institutional Factors Influencing the Entrepreneurial Intent in Quindío, Colombia By Edwin Tarapuez; Beatriz Guzman-Diaz; Ramiro Parra-Hernandez
  13. Credit scoring in SME asset-backed securities: An Italian case study By Bedin, Andrea; Billio, Monica; Costola, Michele; Pelizzon, Loriana
  14. Small Firms and Domestic Bank Dependence in Europe's Great Recession By Mathias Hoffmann; Egor Maslov; Bent E. Sørensen
  15. Are Equity Crowdfunding Investors Active Investors? By Lars Hornuf; Tobias Schilling; Armin Schwienbacher
  16. Mafia Firms and Aftermaths By Maria Rosaria Alfano; Claudia Cantabene; Damiano Bruno Silipo
  17. The Effect of Personalized Feedback on Small Enterprises’ Finances in Uganda By Seitz, Helke; Menkhoff, Lukas; Grohmann, Antonia
  18. The Role of Traditional Knowledge in Indian Management Education By Maziar Jafary

  1. By: Astrid Marinoni; John Voorheis
    Abstract: The question of who gains from high-quality entrepreneurship is crucial to understanding whether investments in incubating potentially innovative start-up firms will produce socially beneficial outcomes. We attempt to bring new evidence to this question by combining new aggregate measures of local area income inequality and income mobility with measures of entrepreneurship from Guzman and Stern (2017). Our new aggregate measures are generated by linking American Community Survey data with the universe of IRS 1040 tax returns. In both fixed effects and IV models using a Bartik-style instrument, we find that entrepreneurship increases income inequality. Further, we find that this increase in income inequality arises due to the fact that almost all of the individual gains associated with increased entrepreneurship accrue to the top 10 percent of the income distribution. While we find mixed evidence for small positive effects of entrepreneurship lower on the income distribution, we find little if any evidence that entrepreneurship increases income mobility.
    Keywords: entrepreneurship, innovation, income inequality
    JEL: L26 D63
    Date: 2019–10
  2. By: Michael Fritsch (Friedrich Schiller University Jena, Germany); Korneliusz Pylak (Maria Curie Skłodowska University of Lublin, Poland); Michael Wyrwich (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany)
    Abstract: Persistence of entrepreneurship over longer periods of time could indicate a culture of entrepreneurship among the local population that may be an important factor for regional development, but does persistence of economic activity require cultural transmission? We exploit the diverse historical developments in the territory that is Poland today to analyze the level and the sources of persistence from the 1920s until today. Persistence is mainly found in those regions that were part of Germany before World War II. This persistence is noticeable despite the exchange of most of the pre-war population, ruling out that persistence is driven by transmission of culture. In most regions that were already part of Poland before World War II, the relationship between historical and current levels of entrepreneurship is not significant. Persistence of entrepreneurship is related to the historical success of regions, which we capture by the pre-war level of and self-employment in manufacturing industries, particularly in those that can be regarded as knowledge intensive. Our main conclusion is that persistence of entrepreneurship requires a certain level of successful economic development that we capture by the degree of industrialization in the early 20th century, but it does not necessarily require persistence of the local population.
    Keywords: Persistence, entrepreneurship, self-employment
    JEL: L26 M13 O1 O18 R11
    Date: 2019–06–13
  3. By: Uwe Cantner (Friedrich Schiller University Jena, Germany); James A. Cunningham (Northumbria University, Newcastle, United Kingdom); Erik E. Lehmann (University of Augsburg, Germany); Matthias Menter (Friedrich Schiller University Jena, Germany)
    Abstract: The concept of entrepreneurial ecosystems has been used as a framework to explain entrepreneurial activities within regions and industrial sectors. Despite the usefulness of this approach, the concept is under-theorized, especially with regard to the evolution of entrepreneurial ecosystems. The current literature is lacking a theoretical foundation that addresses the development and change of entrepreneurial ecosystems over time and does not consider the inherent dynamics of entrepreneurial ecosystems that lead to their birth, growth, maturity, decline and re-emergence. Taking an industry lifecycle perspective, this paper addresses this research gap by elaborating a dynamic entrepreneurial ecosystem lifecycle model. We propose that an ecosystem transitions from an entrepreneurial ecosystem, with a focus on new firm creation, towards a business ecosystem, with a core focus on the internal commercialization of knowledge, i.e. intrapreneurial activities, and vice versa. Our dynamic model thus captures the oscillation that occurs among entrepreneurs and intrapreneurs through the different phases of an ecosystem's lifecycle. Our dynamic lifecycle model may thus serve as a starting point for future empirical studies focusing on ecosystems and provide the basis for a further understanding of the interrelatedness between and co-existence of new and incumbent firms.
    Keywords: Entrepreneurial Ecosystems, Lifecycles, Dynamism, Transition, Entrepreneurship, Intrapreneurship
    JEL: O31 O32 O33
    Date: 2019–10–18
  4. By: Marco Caliendo (University of Potsdam, IZA Bonn, DIW Berlin, IAB Nuremberg); Steffen Künn (Maastricht University and ROA, The Netherlands, IZA Bonn); Martin Weißenberger (University of Potsdam)
    Abstract: From an active labor market policy perspective, start-up subsidies for unemployed individuals are very effective in improving long-term labor market outcomes for participants. From a business perspective, however, the assessment of these public programs is less clear since they might attract individuals with low entrepreneurial abilities and produce businesses with low survival rates and little contribution to job creation, economic growth, and innovation. In this paper, we use a rich data set to compare participants of a German start-up subsidy program for unemployed individuals to a group of regular founders who started from nonunemployment and did not receive the subsidy. The data allows us to analyze their business performance up until 40 months after business formation. We find that formerly subsidized founders lag behind not only in survival and job creation, but especially also in innovation activities. The gaps in these business outcomes are relatively constant or even widening over time. Hence, we do not see any indication of catching up in the longer run. While the gap in survival can be entirely explained by initial differences in observable start-up characteristics, the gap in business development remains and seems to be the result of restricted access to capital as well as differential business strategies and dynamics. Considering these conflicting results for the assessment of the subsidy program from an ALMP and business perspective, policy makers need to carefully weigh the costs and benefits of such a strategy to find the right policy mix.
    Keywords: Entrepreneurship, Start-up Subsidies, Business Growth, Innovation, Job Creation
    JEL: L26 M13 J68
    Date: 2019–10
  5. By: Michael Fritsch (Friedrich Schiller University Jena, and Halle Institute for Economic Research (IWH), Germany); Alina Sornger (John Cabot University Rome, Italy, and Kiel Institute for the World Economy (IfW), and Institute of Labor Economics (IZA Bonn), Germany); Michael Wyrwich (University of Groningen, The Netherlands)
    Abstract: This paper analyzes the role of different types of institutions, such as entre- preneurship-facilitating entry conditions, labor market regulations, quality of government, and perception of corruption for individual well-being among self-employed and paid employed individuals. Well-being is operationalized by job and life satisfaction of individuals in 32 European countries measured by data from EU Statistics on Income and Living Conditions (EU-SILC). We find that institutions never affected both occupational groups in opposite ways. Our findings indicate that labor market institutions do not play an im- portant role well-being. The results suggest that fostering an entrepreneurial society in Europe is a welfare enhancing strategy that benefits both, the self- employed and paid employees.
    Keywords: Entrepreneurship, institutions, well-being, life satisfaction, job satisfaction
    JEL: L26 I31 D01 D91 P51
    Date: 2019–05–02
  6. By: Ksenia Gonchar (National Research University Higher School of Economics, Moscow); Maria Kristalova (Bremen University and Friedrich-Schiller-University Jena)
    Abstract: This paper studies how innovation strategies of Russian manufacturing firms affect various features of firm performance. A multi stage model is used, which relates the firm's decision to undertake R&D to its innovation output, technical efficiency, labor productivity, and growth. We also include imports into the knowledge production function, because catching up economies may adopt technologies embodied in imported hardware. Additionally, we link productivity and innovation output to survival. We find that both types of knowledge input - R&D and imports - strongly determine innovation. Innovations yield the strongest performance return in the case of catching up to technological frontier. Product innovation is more beneficial than process innovation in all performance features except for labor productivity. However, higher efficiency does not improve the growth rates or survival time of manufacturing firms. Taken together, these results show that innovation is not uniformly rewarded across all features of firm performance.
    Keywords: innovation, productivity, growth, survival, Russia
    JEL: C30 D24 O30
    Date: 2019–02–25
  7. By: Michael Wyrwich (University of Groningen); Michael Fritsch (FSU Jena); Elisabeth Bublitz (University of Hamburg); Alina Sorgner (John Cabot University Rome)
    Abstract: New business formation plays an important role for economic development. Therefore, policy makers put emphasis on fostering start-up activity. Aims and scope of entrepreneurs can be just as heterogeneous as the structure of new ventures. The project "New business formation and the labor market in East and West German growth regimes" within the Collaborative Research Center (SFB 580) "Social developments in post-socialistic societies: discontinuity, tradition, structural formation" at the Friedrich-Schiller University Jena investigated the development and structures of new firms. To this end, the project team conducted the GAW survey by means of computer-assisted telephone interviewing (CATI). In total, there have been 1,105 interviews with founders of firms. The data include personal information on the founder and his or her firm. This information can be merged with administrative data of the Establishment History Panel (BHP = Betriebs-Historik Panel) of the Research Data Centre of the German Institute for Employment Research (IAB). The BHP comprises detailed information on establishment characteristics. Therefore, the GAW survey data provide the unique opportunity to link characteristics of the entrepreneur with detailed information about the characteristics of his or her company and firm growth.
    Keywords: Firm growth, Labour market, Growth, East and West Germany
    JEL: L26 P30
    Date: 2018–11–06
  8. By: John Stachurski
    Abstract: This paper shows that the power law property of the firm size distribution is a robust prediction of the standard entry-exit model of firm dynamics. Only one variation is required: the usual restriction that firm productivity lies below an ad hoc upper bound is dropped. We prove that, after this small modification, the Pareto tail of the distribution is predicted under a wide and empirically plausible class of specifications for firm-level productivity growth. We also provide necessary and sufficient conditions under which the entry-exit model exhibits a unique stationary recursive equilibrium in the setting where firm size is unbounded.
    Date: 2019–10
  9. By: HONJO Yuji; ONO Arito; TSURUTA Daisuke
    Abstract: This study examines whether financial constraints discourage individuals from starting businesses by using individual-level micro data that identify nascent entrepreneurs and actual entrepreneurs in Japan. As proxies for financial constraints, we use regional variations in the use ratios of physical collateral and personal guarantees. We find that individuals are less likely to become nascent entrepreneurs if they live in regions where the use ratio of personal guarantees is higher. However, we do not find a negative relationship between the use ratio of physical collateral and the likelihood of becoming entrepreneurs. Our findings indicate that the low level of Japan's entrepreneurship is due to the lack of risk-taking by potential entrepreneurs, rather than a lack of collateralizable physical assets.
    Date: 2019–10
  10. By: HONJO Yuji; IKEUCHI Kenta; NAKAMURA Hiroki
    Abstract: This study investigates the impact of entrepreneurial experience on life satisfaction. Using a unique survey about entrepreneurial experience, level of wealth, and personal attributes of individuals in Japan, we examine the factors that mediate the association between entrepreneurial experience and subjective well-being. As a result, we do not find any evidence on the total effect of entrepreneurial experience on subjective well-being. However, we find a positive indirect effect of entrepreneurial experience on subjective well-being through wealth, in addition to a negative indirect effect through debt. Our findings suggest that monetary incentives motivate Japanese individuals to become entrepreneurs.
    Date: 2019–10
  11. By: Niebuhr, Annekatrin; Peters, Jan Cornelius; Schmidke, Alex
    JEL: D22 O31 R12
    Date: 2019
  12. By: Edwin Tarapuez (Universidad del Quindío, Armenia, Colombia); Beatriz Guzman-Diaz (Universidad del Quindío, Armenia, Colombia); Ramiro Parra-Hernandez (Universidad del Quindío, Armenia, Colombia)
    Abstract: The objective of this research is to analyze the formal institutional framework that influences the intention to create companies in the department of Quindío, Colombia. The study is descriptive and uses the transversal-nature non-experimental methodology. According to the structure of the project and the type of information collected, the research is mixed natured. This work involves obtaining information from two groups of sources that were chosen by convenience: fourteen public and private institutions connected to entrepreneurship in the region, to which a semi-structured questionnaire was applied, and four experts on entrepreneurship on whom an unstructured interview was applied. The research uses the theoretical institutional framework proposed by Douglas North as regards formal institutions. The findings conclude that the works by the different formal entities that support entrepreneurship in Quindío is disperse and that they are not articulated in a specialized and collaborative work scheme that fosters the achievement of a common goal to generate a positive impact of greater magnitude at the departmental level.
    Keywords: Douglas North, entrepreneurial intent, entrepreneurship, institutionalism
    Date: 2019–08
  13. By: Bedin, Andrea; Billio, Monica; Costola, Michele; Pelizzon, Loriana
    Abstract: We investigate the default probability, recovery rates and loss distribution of a portfolio of securitised loans granted to Italian small and medium enterprises (SMEs). To this end, we use loan level data information provided by the European DataWarehouse platform and employ a logistic regression to estimate the company default probability. We include loan-level default probabilities and recovery rates to estimate the loss distribution of the underlying assets. We find that bank securitised loans are less risky, compared to the average bank lending to small and medium enterprises.
    Keywords: credit scoring,probability of default,small and medium enterprises,asset-backed securities
    Date: 2019
  14. 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 F45
    Date: 2019
  15. By: Lars Hornuf; Tobias Schilling; Armin Schwienbacher
    Abstract: It is often assumed that entrepreneurs retain more control of their venture when they opt for equity crowdfunding as compared to venture capital, notably because crowd investors are passive. We study whether crowd investors are indeed passive by analysing the cash flow and control rights crowd investors receive in equity crowdfunding in Germany, where more flexible contracts are offered than in many other countries. We document that in Germany many of the rights used in venture capital investment contracts are also used in equity crowdfunding contracts. We find that crowd investors are asked to pay higher prices if they receive more cash flow and exit rights, consistent with the fact that these rights are valuable to the crowd. However, these rights have no meaningful economic impact, since they do not affect campaign outcome, the likelihood of securing follow-on funding, nor the likelihood of liquidation of the venture. These results are inconsistent with control rights theory that predicts positive impacts, in contrast to results documented for venture capital contracts. Rather, our results suggest that crowd investors are passive investors whose control rights are ineffective or not exercised.
    Keywords: crowdfunding, crowdinvesting, financial contracting, venture capital
    JEL: G34
    Date: 2019
  16. By: Maria Rosaria Alfano (Università degli Studi della Campania); Claudia Cantabene (Università degli Studi della Campania); Damiano Bruno Silipo (Università della Calabria)
    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: Organized Crime, Mafia Firm, Mafia and Development
    JEL: D02 K14 L11
    Date: 2019–10
  17. By: Seitz, Helke; Menkhoff, Lukas; Grohmann, Antonia
    JEL: O12 D22 O16 L26
    Date: 2019
  18. By: Maziar Jafary (School of Sociological and Anthropological Studies, University of Ottawa)
    Abstract: This paper investigates various roles that traditional knowledge can play in Indian managerial education. As it is shown in previous studies, Indian management schools in general and Indian MBA programs in particular lead Indian prospective entrepreneurs toward different sorts of entrepreneurial activities. Although new managerial education in post-cold-war India which mostly endorses entrepreneurship are not bounded to bureaucratic and industrial capitalism, Indian management education is still largely influenced by western and particularly American management schools’ structures and syllabuses. According to such scientific management, unlike modern knowledge which is highly entrenched in rational modes of production, traditional knowledge has been confined to pre-capitalist modes of production and distribution of commodities. Still, new movements for reintegration and revival of traditional knowledge in Indian managerial education pretend that India can largely benefit from its traditional treasures for economic boosts. Thus, the conjunction point of modern managerial education and Indian traditional knowledge remains in new types of leadership as well as genuine entrepreneurial skills which are raised and developed by some of Indian managerial scholars. These novel ideas implicate the need for what is called “spiritual leadership†as well as tradition-based projects in Indian entrepreneurship. As such, I will explain in this paper, the ways by which Indian traditional knowledge can intrigue Indian managerial education in numerous ways, both in elite and popular levels.
    Keywords: Sociology of managerial education, India, Indian traditional knowledge, Indian management studies, Business schools, Management education, MBA education
    Date: 2019–08

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