nep-ent New Economics Papers
on Entrepreneurship
Issue of 2019‒11‒25
fourteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Start-up Subsidies: Does the Policy Instrument Matter? By Hanna Hottenrott; Robert Richstein
  2. What Motivates Innovative Entrepreneurs? Evidence from Three Field Experiments By Guzman, Jorge; Oh, Jean Joohyun; Sen, Ananya
  3. The Silicon Valley Syndrome By Sorenson, Olav; Kwon, Doris
  4. Aspirations, expectations, identities: behavioral constraints of micro-entrepreneurs By Catia Batista; Julia Seither
  5. Accessibility of bank branches and new firm formation in Sweden By Sin Tian Ho, Cynthia; Wilhelmsson, Mats
  6. The influence of bank branch closure on entrepreneurship sustainability By Sin Tian Ho, Cynthia; Berggren, Björn
  7. Networking Frictions in Venture Capital, and the Gender Gap in Entrepreneurship By Sabrina T. Howell; Ramana Nanda
  8. Trademarks as an indicator of regional innovation: Evidence from Japanese prefectures By Joern Block; Christian Fisch; Kenta Ikeuchi; Masatoshi Kato
  9. Training, Human Capital, and Gender Gaps in Entrepreneurial Performance By Brixiová, Zuzana; Kangoye, Thierry
  10. Africa joins the growth capital revolution: Examining the growth of venture capital in the continent By Osborn, Tom L
  11. Innovation modes in SMEs: Mechanisms integrating STI-processes into DUI-mode learning and the role of regional innovation policy By Alhusen, Harm; Bennat, Tatjana
  12. Corporate Entrepreneurship, Strategy Formulation, and the Performance of the Nigerian Manufacturing Sector By OMISORE, Segun; Ho, Toan Manh
  13. Limited Impact of Business Development Programs on Entrepreneurs¡¯ Pro?tability in the Presence of Ambiguity Aversion By Dmitry Shapiro
  14. Key behavioural characteristics of small-business owners: A lab-in-the-field experiment in Myanmar By Rand John; Tarp Finn; Trifkovi? Neda; Rodriguez Paula

  1. By: Hanna Hottenrott (aTUM School of Management, Technical University of Munich, Arcisstraße 21, 80333 Munich, Germany, bZEW – Leibniz Centre for European Economic Research, L7, 1, Mannheim, Germany.); Robert Richstein (cManchot Graduate School, Heinrich Heine University Düsseldorf, Universitätsstraße 1, 40225 Düsseldorf, Germany)
    Abstract: New knowledge-intensive firms contribute to innovation, competition, and employment growth, but externalities like knowledge spillovers can prevent entrepreneurs from appropriating the full returns from their investments. In addition, uncertainty and information asymmetry pose challenges for financing. Public policy programs therefore aim to support start-ups. This study evaluates the effects of participation in such programs on the performance of start-ups in high-tech and knowledge-intensive sectors that were founded in Germany between 2005 and 2012. Distinguishing between grants and subsidized loans and after matching recipients and non-recipients based on a broad set of founder and company characteristics, we find that both grants and subsidized loans facilitate tangible investment, employment and revenue growth. Grants are, however, better suited to increasing R&D investments than loans are. Combined with grants, subsidized loans facilitate turning research results into marketable products by means of investments in tangible assets. Start-ups that participate in both types of programs outperform grant-only recipients in terms of innovation performance, employment and future revenues. Finally, program participation does not crowd out private venture capital.
    Keywords: financing constraints, subsidies, R&D, high-tech start-ups, innovation policy
    JEL: G32 H25 O38
    Date: 2019–11
  2. By: Guzman, Jorge; Oh, Jean Joohyun; Sen, Ananya
    Abstract: Entrepreneurial motivation is central for the process of economic growth. However, evidence on the motivations of innovative entrepreneurs, and how those motivations differ across fundamental characteristics, remains scant. We conduct three field experiments with the MIT Inclusive Innovation Challenge to study how innovative entrepreneurs respond to messages of money and social impact, and how this varies across gender and culture. We find consistent evidence that women and individuals located in more altruistic cultures are more motivated by social impact messages than money, while men and those in less altruistic cultures are more motivated by money than social impact. The estimates are not driven by differences in the type of company, its size, or other observable characteristics, but instead appear to come from differences in the underlying motivations of innovative entrepreneurs themselves.
    Date: 2019–10–10
  3. By: Sorenson, Olav; Kwon, Doris
    Abstract: How does expansion in the high-tech sector influence the broader economy of a region? We demonstrate that an infusion of venture capital in a region appears associated with: (i) a decline in entrepreneurship, employment, and average incomes in other industries in the tradable sector; (ii) an increase in entrepreneurship and employment in the non-tradable sector; and (iii) an increase in income inequality in the non-tradable sector. An expansion in the high-tech sector therefore appears to lead to a less diverse tradable sector and to increasing inequality in the region.
    Date: 2019–10–17
  4. By: Catia Batista; Julia Seither
    Abstract: This paper presents empirical evidence on the relationship between behavioral constraints and entrepreneurial success of micro-firms. Approximately 600 micro-entrepreneurs were randomized into treatments providing information about a role model, additionally the importance of establishing realistic goals, and how to maintain funds within their enterprises. Six months after implementation we find significant positive effects of shifts in aspirations on effort levels and savings. These effects can be precisely estimated even one year after implementation. On average, changes in investment behavior translate to increases in sales of 99% and 89% in profits compared to a control group. In contrast, human capital improvements have no effect on investment behavior. Furthermore, setting business goals mitigates the positive effects of role models on economic growth. Despite similar effects on effort levels, participants that condition their aspirations increase on a one-year goal save less and the positive effects on firm outcomes disappear over time.
    Date: 2019
  5. By: Sin Tian Ho, Cynthia (Department of Real Estate and Construction Management, Royal Institute of Technology); Wilhelmsson, Mats (Department of Real Estate and Construction Management, Royal Institute of Technology)
    Abstract: Drawing on location theory, the local relationships between new firm formation and its determinants are explored in 290 municipalities across Sweden. From the robust geographically weighted regression (GWR) models, mostly positive relationships with new firm formation are shown for firm density, human capital level, industry diversification level and percentage of immigrants living in the area. In contrast, mostly negative relationships are shown for weighted mean distance to the nearest bank branches, establishment size, unemployment rate, industry specialization. Spatially constrained multivariate clustering is also applied to group municipalities with similar conditions. Patterns in the industry composition and the location attributes are then analysed for each cluster.
    Keywords: GWR; new firm formation; entrepreneurship; Sweden
    JEL: C31 G21 M13 R50
    Date: 2019–11–14
  6. By: Sin Tian Ho, Cynthia (Department of Real Estate and Construction Management, Royal Institute of Technology); Berggren, Björn (Department of Real Estate and Construction Management, Royal Institute of Technology)
    Abstract: We study the influence of bank branch closure on new firm formation in Sweden, with a panel database that captures the geographical locations of all the Swedish bank branches from 2000 to 2013. Using spatial econometric analysis at a municipal level, we show that bank proximity to firms is vital for entrepreneurship to thrive and sustain in Sweden. From the Fixed-Effects spatial models, the increase in distance to the banks due to bank branch closure is shown to affect new firm formation negatively. The further a firm is located away from the bank, the higher the monitoring cost is for the banks. The increase in distance also results in an increase in information asymmetries because of the banks’ eroded ability to collect soft information about the borrower firm. Due to high risks associated with the lack of information and uncertainty, banks might not be as willing to loan money to a distant firm compared to a nearby firm. Furthermore, the presence of neighbourhood spillover effects is evidenced through the Moran’s I statistics, which means that the omission of spatial effects in the analysis would have resulted in biased estimates.
    Keywords: bank branches; entrepreneurship; financing; new firm formation; Sweden
    JEL: C31 R10
    Date: 2019–11–14
  7. By: Sabrina T. Howell; Ramana Nanda
    Abstract: Exploiting random variation in the number of venture capitalist (VC) judges assigned to panels at Harvard Business School’s New Venture Competition (NVC) between 2000 and 2015, we find that exposure to more VC judges increases male participants’ chances of founding a VC-backed startup after HBS much more than this exposure increases female participants’ chances. A survey suggests this is in part because male participants more often proactively reach out to VC judges after the NVC. Our results suggest that networking frictions are an important reason men benefit more than women from exposure to VCs. Such frictions can help explain part of the gender gap in entrepreneurship, and also have implications for how to design networking opportunities to facilitate financing of the best (rather than just the best networked) ideas.
    JEL: D83 D85 G24 J16 L26
    Date: 2019–11
  8. By: Joern Block (Faculty of Management, Trier University / Erasmus School of Economics (ESE) and Erasmus Institute of Management (ERIM), Erasmus University Rotterdam); Christian Fisch (Faculty of Management, Trier University / Erasmus School of Economics (ESE) and Erasmus Institute of Management (ERIM), Erasmus University Rotterdam); Kenta Ikeuchi (Research Institute of Economy, and Trade and Industry (RIETI)); Masatoshi Kato (School of Economics, Kwansei Gakuin University)
    Abstract: Regional science has long been concerned with measuring the spatial distribution of innovation activity. While patents are frequently used as an indicator of regional innovation, we introduce trademarks as an additional indicator. Specifically, we explore the spatial distribution of trademark applications using a detailed and comprehensive dataset of 47 Japanese prefectures from 1999 to 2012. In addition to mapping differences in trademarks across regions, we identify correlates at the regional level that provide initial insights into potential determinants of regional innovation. For example, regional trademark activity is positively associated with regional entrepreneurship and with strong private service and finance sectors. Overall, our results reveal associations unique to trademarks that patent-based measures of innovation cannot uncover. With these results, we contribute to research in regional science and to the evolving literature on trademarks of this discipline.
    Keywords: Trademarks; regional innovation; Japan; prefectures; spatial distribution; patents.
    JEL: L80 O34 O53 R12
    Date: 2019–11
  9. By: Brixiová, Zuzana; Kangoye, Thierry
    Abstract: In the aftermath of the global financial crisis, policymakers have been increasingly striving to support female entrepreneurship as a possible growth driver. This paper contributes to reconciling mixed findings in the literature on the effectiveness of entrepreneurial training with an analysis that links training and human capital, including tertiary education and non-cognitive skills, with gender gaps in entrepreneurial performance in Africa. We have found that while financial literacy training directly benefits men, it does not raise the sales level of women entrepreneurs. Instead, tertiary education has a direct positive link with the performance of women. Consistent with our theoretical model where different skills are complements, tertiary education can act as a channel that makes training effective. Regarding non-cognitive skills, evidence shows that women entrepreneurs who are tenacious achieve stronger sales performance. Our results underscore the importance of incorporating tertiary education and entrepreneurial training programs focused on a balanced set of skills, including non-cognitive skills, among policies for women entrepreneurs.
    Keywords: Female entrepreneurship,training,non-cognitive skills,tertiary education
    JEL: L53 O12 J4
    Date: 2019
  10. By: Osborn, Tom L (Shamiri Institute)
    Abstract: Small businesses play an important role in African economies. But because of a funding gap, many of these businesses struggle to access adequate growth capital. Venture capital (VC) can fill this funding gap and has emerged as an important global source of growth capital. While VC can help grow African businesses, our understanding of VC activities in Africa remains limited. Sparse research has limited the ability of small business owners to expand their financing options. We use a sample of 120 VC funds that primarily invest in Africa to investigate trends in the growth of VC activities in Africa, as well as to examine the associations between VC fundraising and micro-level firm variables between 2000-2018. We find that at least $4.57b of VC funding has been raised during this period by African VC funds. We observe that most funds keep diversified portfolios and invest in businesses at various stages of growth, and that funds prefer to keep their investment activities within domiciled countries. Using a multiple linear regression model, we find significant associations between VC fundraising and VC fund type, location focus, and vintage year. We do not find any associations between VC fundraising and industry focus, fund manager domicile or fundraising target size. These findings are important because small businesses can better assess their funding options, VC firms can update their strategies, and policy makers can update their policy priorities.
    Date: 2019–04–17
  11. By: Alhusen, Harm; Bennat, Tatjana
    Abstract: Innovation processes consist of interactive learning mechanisms that combine different knowledge sources. Using a set of 72 exploratory interviews with small- and medium-sized enterprises (SMEs) and regional innovation consultants, this paper analyzes the combination of STI (science-technology -innovation) and DUI (innovation based on learning-by-doing, -using and -interacting) modes of innovation. We show that SMEs integrate STI-based knowledge into DUI-routines through mechanisms with varying levels of complexity. The mechanisms we describe differ with respect to a) effects on innovativeness, b) the absorptive capacities required and c) incurred costs. Based on these mechanisms, d) cognitive, organizational and financial barriers to combinatorial innovation modes are derived. We find that e) regional innovation consultancies play an important role in fostering combinatorial innovation modes. We therefore explore the role of regional innovation policy and its effects on firms' combination of innovation modes. Our findings point out innovation drivers that facilitate SMEs' capacity to absorb STI-based knowledge. Based on our empirical findings, we derive implications for innovation policy with regards to absorptive capacities in SMEs.
    Keywords: Innovation modes,DUI,Regional Innovation System,R&D cooperation,Knowledge bases,Regional innovation policy
    JEL: D23 D83 L10 L22 O31 O33 O38
    Date: 2019
  12. By: OMISORE, Segun; Ho, Toan Manh (Thanh Tay University Hanoi)
    Abstract: Corporate entrepreneurship is a process that encourages formulating and implementing new ideas, taking risks, and creating new ideas to start new businesses. It is associated with innovation, which results in entrepreneur wealth and adds value for an organisation and the customers that buy the products. The Nigerian manufacturing sector has been underperforming in the past decade with numerous firms in the sector operating at less than 30% of initially installed capacity. Despite various industrial transformation programmes initiated by the successive governments to boost manufacturing outputs, most firms in this sector do not seem to have made any significant progress in response. Reasons for this underperformance is arguably due to the misalignment between ‘externally-driven’ policies and the ‘internal processes’ within the individual firms of various sizes. To explore and unravel the undercurrents impelling the seeming strategy- environment misalignment, this study takes a recourse to the strategic management literature. It draws from the intersectionality of strategy-environment congruence and the attendant moderating effect on performance. In order to drill down to conceptual specifics, it builds on the 3Cs framework (competence, commitment and co-ordination) initially propounded by Jha and Iyer (2007). Based on a sample of 32 manufacturing firms and leaning on the qualitative methodological approach (using interpretative phenomenological analysis), the study sought to gain situated, contextual, insights into the perceptions of the phenomenon as demonstrable in the strategic configuration. It interrogated respective processes of strategy formulation and implementation in the degree to which they are moderated by the contending environmental variables and the cumulative impact on corporate performance. This is the level of analysis at which corporate entrepreneurship behaviour, in terms of both antecedents and consequences, profoundly manifests itself; mirroring management behaviour, sensitivity and predilections towards environmental scanning capabilities. The sample of firms was drawn from firms of varying sizes in four geopolitical zones of Nigeria – South West, South East, South, and North Central. Results indicate profound ambivalences in the nature of the operating environment and the signals emitted there from which, in turn, truncates entrepreneurial behaviours of firms. Essentially, negative perceptions of the environment militated against strategic coherence, thus adversely impacting corporate performances. Essentially, the eclectic 3Cs paradigm holds strong explanatory as well as diagnostic force in explicating the setbacks of the Nigerian manufacturing sector. The analytical prism is a novelty and offers tremendous latitude for sketching out appropriate turnaround intervention strategies.
    Date: 2019–07–31
  13. By: Dmitry Shapiro
    Abstract: This paper develops a theoretical framework to explain a limited e?ect of business development programs (BDPs) on entrepreneurs¡¯ profit. We argue BDPs limited effect is due to mismatch between a BDPs¡¯ narrow focus on business-promoting strategies and a wider context in which microentrepreneurs operate. Entrepreneurs are ambiguity-averse and have multiple sources of income, e.g. business and wage incomes, that are correlated with each other. We show that for a sufficiently ambiguity-averse entrepreneur with multiple income sources e?cient training can result in pro?t decline. We, further, show that both the ambiguity aversion and the multiplicity of income sources are crucial for our results. Only when the wider context (multiple income sources, ambiguity-aversion) is considered, the business-training impact is limited and can result in post-training profit decline. The limited impact is caused by the diversifying role that the business income plays in households¡¯ finances.
    Keywords: Business development programs; ambiguity aversion; microentrepreneurship
    JEL: O12 O16 D1
    Date: 2019–02
  14. By: Rand John; Tarp Finn; Trifkovi? Neda; Rodriguez Paula
    Abstract: This study investigates the role of owners’ personal preferences and behaviour in determining the success of micro, small and medium-sized enterprises using a lab-in-the-field experiment with small-business owners in Myanmar. The study is a complement to a 2017 quantitative survey conducted within the project ‘Towards inclusive development in Myanmar’.The lab-in-the-field experiment comprised five behavioural games: dictator, bargaining, trust, public goods, and risk-preference elicitation. It was conducted in 12 townships in 11 states and regions of Myanmar in September and October 2018. The sample comprised 397 enterprise owners, managers, and employees.This study has a twofold contribution. First, we present for the first time the behavioural profile of small-business owners in Myanmar. Second, we link the results of different behavioural games to the main participant and enterprise characteristics. Finally, we reflect on the implications for enterprise performance and for policy as it relates to micro, small and medium-sized enterprises.
    Keywords: Entrepreneurship,Altruism,Bargaining,Behaviour,Trust,Risk-taking
    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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