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Papers on Entrepreneurship, Growth and Public Policy

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Papers 2008 [back to top] Top

JERP #2008-029 (PDF)
Nicolas Debarsy, Marcus Dejardin
What do we know about spatial entry?
In his oft-cited "What do we know about entry?", Paul Geroski (1995) gave a survey of empirical works on this central topic regarding industrial organization and, more precisely, market dynamics. Surprisingly, his article remains silent on the spatial dimension of these dynamics. This paper gives first accessory support to some of the Geroski's a-spatial observations with reference to firm entries and exits of a selection of retail and consumer service industries in Belgium over the 1998-2001 period. More important is the proposed application of the Exploratory Spatial Data Analysis (ESDA) that has been developed for in-depth exploring of spatial datasets. Evidences are collected at highly disaggregated geographical and industrial levels. They do not only contribute to a better understanding of the geographical patterns of the industries, but they lead to interesting observations regarding industrial organization and market dynamics by examining the space-time structures of entries and exits. These observations may be considered as an opening tribute towards a spatial extension of what Geroski has presented as stylized facts in his 1995 article.
JERP #2008-027 (PDF)
Hessel Oosterbeek, C. Mirjam van Praag, Auke IJsselstein
The impact of entrepreneurship education on entrepreneurship competencies and intentions: An evaluation of the Junior Achievement Student Mini-Company Program
Both the European Community, its member countries and the United States have stimulated schools to implement entrepreneurship programs into schooling curricula on a large scale, based on the idea that entrepreneurial competencies and mindsets must be developed at school. The leading and acclaimed worldwide program is the Junior Achievement Student Mini-Company Program. Nevertheless, so far, its effects on students' entrepreneurship competencies and attitudes have not been evaluated. This paper analyzes the impact of the program in a Dutch college using an instrumental variables approach in a difference-in-differences framework. The results show that the program does not have the intended effects: students' self-assessed entrepreneurial skills remain unaffected and students' intentions to become an entrepreneur even decrease significantly.
JERP #2008-026 (PDF)
Jagannadha Pawan Tamvada
The Geography and Determinants of Entrepreneurship
Entrepreneurship literature (Parker 2004) has rarely considered spatial location as a micro-determinant of occupational choice, although there are compelling reasons to posit that spatial location influences economic behavior. Using Bayesian semiparametric methodologies and geoadditive techniques, we examine spatial location as a micro-determinant of self-employment choice of Indians, in addition to standard determinants such as age, gender and education. The empirical analysis suggests the presence of spatial occupational neighborhoods and a clear north-south divide in self-employment choice in India when individuals of agricultural and nonagricultural sectors are considered together; however, such spatial patterns are less pronounced when individuals in nonagriculture alone are considered in the analysis. These residual spatial patterns are found to be inversely related to the per-capita GDP of the region. The results further suggest nonlinear relationships between age, wealth and the probability of self-employment.
JERP #2008-020 (PDF)
Diemo Urbig
A Short Measure of Four Types of Personal Optimism: Ability, Rivalry, Chance, and Social Support (ARCS)
Self-efficacy, which can be defined as optimism about one's own ability to exercise required actions, has received a lot of attention in research on entrepreneurs' and managers' decision making. This attention led to the development of corresponding measurement instruments. However, there is no equivalent measure of the more general personal optimism that jointly captures on equivalent bases abilities and other sources of uncertainty, which one might be more or less optimistic about. I develop a measurement instrument of four dimensions of personal optimism: ability optimism (self-efficacy), rivalry optimism (being better than others), chance optimism (being a lucky devil or fearing of bad-luck), and social support optimism (others help and support me and are trustworthy). Correlations between subscales are intuitive and backed by theory. I replicate corresponding results from previous studies that used different measures, e.g. life-orientation (LOT-R), self-efficacy (NGSE), and social optimism at the societal level from the POSO scale. This new personal optimism measurement instrument is very much like the life-orientation test (LOT-R), but it provides more insights regarding the structure of optimism. Whenever self-efficacy or control beliefs are of interest, the ARCS or ACS scales should be used to control for complementary world beliefs. I also illustrate the special role of one item in NGSE, which in contrast to all other NGSE items refers to a comparative instead of an absolute judgment.
JERP #2008-019 (PDF)
Hugo Erken, Piet Donselaar, A. Roy Thurik
Total factor productivity and the role of entrepreneurship
Total factor productivity of twenty OECD countries for a recent period (1971-2002) is explained using six different models based on the established literature. Traditionally, entrepreneurship is not dealt with in these models. In the present paper it is shown that – when this variable is added - in all models there is a significant influence of entrepreneurship while the remaining effects mainly stay the same. Entrepreneurship is measured as the business ownership rate (number of business owners per workforce) corrected for the level of economic development (GDP per capita).
JERP #2008-018 (PDF)
Zoltan J. Acs, Lawrence A. Plummer, Ryan Sutter
Penetrating the Knowledge Filter in "Rust Belt" Economies
A new model of economic growth introduces the knowledge filter between new generic knowledge and economically-useful knowledge. It identifies both the formation of new ventures and the absorptive capacity of incumbent firms as the mechanisms that penetrate the knowledge filter. Recent empirical work has shown that new firms are more proficient at penetrating the knowledge filter than are incumbent firms; however, the analysis has only examined expanding economies and has relied on purely cross-sectional regression methodologies. This study explores the role of new and incumbent firms in penetrating the knowledge filter utilizing recent developments in spatial panel estimation techniques to provide a more robust set of findings. The results suggest that new firms are more proficient at penetrating the knowledge filter in declining and growing regions alike.
JERP #2008-017 (PDF)
Prashanth Mahagaonkar
Corruption and Innovation: A Grease or Sand relationship?
This paper provides a firm-level empirical analysis on the ways in which corruption affects innovative activity. Particularly with respect to the African continent that is striving to reconcile with instability and poverty, this issue seems to be of utmost importance. Using a newly available dataset on African firms, it is shown that corruption has a negative effect on product innovation and organisational innovation. Corruption does not affect process innovation while it facilitates marketing innovation.
JERP #2008-012 (PDF)
Johan E. Eklund, Sameeksha Desai
Ownership, Economic Entrenchment and Allocation of Capital
In an efficient economy, capital should be quickly (re)allocated from declining firms and sectors to more profitable investment opportunities. This process is affected by the concentration of corporate control, which in turn is affected by market institutions. We employ a panel of 12,000 firms across 44 countries to estimate the functional efficiency of capital markets. We adapt a measure for the efficiency of capital allocation using the accelerator principle. Our empirical results show weak property rights and highly concentrated ownership reduce the functional efficiency of capital markets. Findings support the economic entrenchment hypothesis but not the legal origins hypothesis.
JERP #2008-010 (PDF)
Siri Terjesen
Venturing Beyond the Marathon: The Entrepreneurship of Ultrarunning and the IAU World Cup in Korea
This article describes the entrepreneurial development and professionalism of ultradistance running (ultrarunning) in South Korea, culminating with the hosting of the IAU World Cup 100K in 2006. This case study-based research provides evidence of various macro-environmental and individual drivers of a grassroots entrepreneurial process, contextualised in Korea's sporting culture. Macro-environmental factors include the economic crisis and Korean cultural values of comradery, emotional expressiveness and entrepreneurial spirit. At the individual level, self-leadership, focus, persistence, team dynamics and access to resources explain the growth of ultrarunning and the commitment to hosting the IAU World Cup. Implications for sports entrepreneurship and grassroots-initiated mega-sporting events in Asia are discussed.
JERP #2008-009 (PDF)
Siri Terjesen
Female Presence on Corporate Boards: A Multi-Country Study of Environmental Context
A growing body of ethics research investigates gender diversity and governance on corporate boards, at individual and firm levels, in single country studies. In this study, we explore the environmental context of female representation on corporate boards of directors, using data from forty-three countries. We suggest that women's representation on corporate boards may be shaped by the larger environment, including the social, political and economic structures of individual countries. We use logit regression to conduct our analysis. Our results indicate that countries with higher representation of women on boards are more likely to have women in senior management and more equal ratios of male to female pay. However, we find that countries with a longer tradition of women's political representation are less likely to have high levels of female board representation.
JERP #2008-008 (PDF)
Rajshree Agarwal, David B. Audretsch, MB Sarkar
The Process of Creative Construction: Knowledge Spillovers, Entrepreneurship and Economic Growth
Questioning the underlying assumptions of the process of creative destruction, we conceptualize an alternative process of creative construction that may characterize the dynamics between entrants and incumbents. We discuss the underlying mechanism of knowledge spillover strategic entrepreneurship whereby knowledge investments by existing organizations, when coupled with entrepreneurial action by individuals embedded in their context, results in new venture creation, heterogeneity in performance and subsequent growth in industries, regions and economies. The framework has implications for future research in entrepreneurship, strategy and economic growth.
JERP #2008-007 (PDF)
Zoltan J. Acs, Sameeksha Desai, Leora Klapper
What Does "Entrepreneurship" Data Really Show?
We compare two "entrepreneurship" datasets: Global Entrepreneurship Monitor (GEM) captures early-stage entrepreneurship and World Bank Group Entrepreneurship Survey (WBGES) captures business registration. GEM data is higher in developing economies than WBGES data, but this reverses in developed countries. We find differences related to local institutional conditions, after controlling for economic development. A possible explanation is WBGES measures formal entry, whereas GEM measures intent. This can be interpreted as the spread between individuals who could potentially operate businesses in the formal sector – and those that actually do. Our findings suggest entrepreneurs in developed countries have greater ease and incentives to incorporate.
JERP #2008-006 (PDF)
Erik Stam
Entrepreneurship and Innovation Policy
What is meant by entrepreneurship, innovation and economic growth is often not clear or very idiosyncratic. This paper starts with a discussion of the nature of entrepreneurship and its relation to innovation. The second section provides an overview of theory and empirical research on the relation between entrepreneurship, innovation and economic growth. The paper continues with a study on entrepreneurship and innovation in the Netherlands in an international and historical perspective. After these conceptual, theoretical and empirical investigations, we turn to policy issues.

Papers 2007 [back to top] Top

JERP #2007-089 (PDF)
A. Roy Thurik, Martin A. Carree, André van Stel, David B. Audretsch
Does Self-Employment reduce Unemployment?
This paper investigates the dynamic relationship between self-employment and unemployment rates. On the one hand, high unemployment rates may lead to start-up activity of self-employed individuals (the "refugee" effect). On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods (the "entrepreneurial" effect). This paper introduces a new two-equation vector autoregression model capable of reconciling these ambiguities and estimates it for data from 23 OECD countries between 1974 and 2002. The empirical results confirm the existence of two distinct relationships between unemployment and self-employment: the "refugee" and "entrepreneurial" effects. We also find that the "entrepreneurial" effects are considerably stronger than the "refugee" effects.
JERP #2007-088 (PDF)
Oliver Falck, Stephan Heblich
Do We Need National Champions? If So, Do We Need a Champions-Related Industrial Policy? An Evolutionary Perspective
This paper discusses the role of so-called national champions within the context of the EU's ambitious goal to become the most competitive and dynamic knowledge-based economic region in the world by 2010. We find football to be a useful analogy in our discussion of national champions. There are many different types of football players: veteran performers who are past their prime, young stars who have not yet developed their full potential, fans' darlings, and the actual stars - the key performers. For a team to be consistently successful across time, it needs to maintain the right mix of different types of players, particularly in regard to current and future key performers. What makes a key performer a "real" star is not only extraordinary talent but also, and perhaps even more important, ability to be a team player and inspire others to be the same. Applying this analogy to the economic field, we come to the conclusion that the "real" champions in the business environment serve as network pilots within regional networks. By fostering a dynamic economic environment, they create their own rents, unlike less successful firms who concentrate on unproductive rent seeking and shifting.
JERP #2007-087 (PDF)
Alessandra Catozzella, Marco Vivarelli
Beyond the Knowledge Production Function: The Role of R&D in a Multi-faceted Innovative Process
The purpose of this paper is to test the possible catalysing role of in-house R& in fostering the complementarity of innovative inputs on a sample of 3045 manufacturing firms drawn from the third Italian Community Innovation Survey (1998-2000). The interactions between four different sources of innovation – internal and external R&, embodied and disembodied technological acquisitions – have been imultaneously explored through the two (direct and indirect) testing frameworks for complementarity. Results from both the approaches show that the innovative process is a phenomenon combining within itself both complementarity and substitutability relationships, depending both on the typology of the targeted innovation output and on the particular combination of innovative inputs we focus on. In particular, it is in-house R& that seems to create the precondition allowing firms to enjoy complementarity effects. Indeed, the possibility of exploiting synergies between different innovative inputs turns out to be subordinated to having undertaken a minimum amount of internal R&. The implication of this result is that a role for in-house R& emerges, beyond its direct effect in generating an innovative output: even if internal research is not a necessary precondition for a firm to be innovative, it should still be carried out because of its important role in the generation of synergies that amplify the impacts of the other innovative inputs it interacts with.
JERP #2007-086 (PDF)
David B. Audretsch, Erik E. Lehmann, Lawrence A. Plummer
Creating Strategic Advantage through Entrepreneurial Governance in New Ventures
An important literature has made a fundamental link between corporate governance and corporate strategy. According to agency theory, assigning managers stock options aligns their interests with the interests of the owners of the firm. This paper suggests that this may not apply in the context of new ventures. Instead, an alternative perspective offered in this paper suggests that if contracts are incomplete, then managerial stock ownership not only provides a mechanism to align managerial incentives with the owners' goals, as agency theory predicts, it also grants top managers residual control rights to be used in subsequent negotiations with the owners. The ability to exercise residual control rights improves the ex post bargaining position of the CEO as an asset owner, thereby increasing her incentive to make relationship-specific investments that are specific to the new venture. Thus, in the context of new venture strategy assigning asset ownership to those who have the most important relationship-specific resources or who have indispensable human capital is a crucial source of subsequent competitive advantage. This theory of entrepreneurial governance is tested using patent ownership as a proxy for both relationship-specific investments and indispensable human capital of the CEO of the new venture. The empirical results support the main hypothesis posited by the entrepreneurial governance model.
JERP #2007-085 (PDF)
Sameeksha Desai, Zoltan J. Acs
A Theory of Destructive Entrepreneurship
Policy interest since the early 1980s has focused in different ways on the creation of a large, productive, taxable economy – in which entrepreneurship plays a role for employment, income growth and innovation. The current understanding of various forms of entrepreneurship remains incomplete, focusing largely on productive and unproductive entrepreneurship. However, destructive entrepreneurship plays an important role in many, if not most, economies. This paper addresses the conceptual gap in the allocation of entrepreneurship by proposing a theory of destructive entrepreneurship.
JERP #2007-084 (PDF)
Werner Boente, Oliver Falck, Stephan Heblich
Demography and Innovative Entrepreneurship
Demographic change will be one of the major challenges for economic policy in the developed world in the next decades. In this article, we analyze the relationship between age structure and the number of startups. We argue that an individual's decision to start a business is determined by his or her age and, therefore, that a change in a region's age distribution affects the expected number of startups in the region. Using German regional data, we estimate a count-data model and find that the expected number of startups is positively influenced by the fraction of individuals of working age — 20–64 years old. A more detailed analysis of the working-age distribution suggests that startups in knowledge-based (high-tech) manufacturing industries are affected by changes in this distribution whereas firms in other industries are not. In particular, increases in the fraction of individuals in the 20–30 age range and individuals in the 40–50 age range have a positive effect on the number of high-tech startups.
JERP #2007-076 (PDF)
Max-Peter Menzel, Dirk Fornahl
Cluster Life Cycles - Dimensions and Rationales of Cluster Development
We present a model that explains how a cluster moves through a life cycle and why this movement differs from the industry life cycle. The model is based on three key processes: the changing heterogeneity in the cluster describes the movement of the cluster through the life cycle; the geographical absorptive capacity enables clustered companies to take advantage of a larger diversity of knowledge and the stronger convergence of clustered companies compared to non-clustered companies results in a reduction of heterogeneity. We apply these processes to four stages of the cluster life cycle: emergence, growth, sustainment and decline.
JERP #2007-075 (PDF)
David B. Audretsch, Werner Boente, Jagannadha Pawan Tamvada
Religion and Entrepreneurship
While considerable concern has emerged about the impact of religion on economic development, little is actually known about how religion impacts the decision making of individuals. This paper examines the influence of religion on the decision for people to become an entrepreneur. Based on a large-scale data set of nearly ninety thousand workers in India, this paper finds that religion shapes the entrepreneurial decision. In particular, some religions, such as Islam and Christianity, are found to be conducive to entrepreneurship, while others, such as Hinduism, inhibit entrepreneurship. In addition, the caste system is found to influence the propensity to become an entrepreneur. Individuals belonging to a backward caste exhibit a lower propensity to become an entrepreneur. Thus, the empirical evidence suggests that both religion and the tradition of the caste system influence entrepreneurship, suggesting a link between religion and economic behavior.
JERP #2007-064 (PDF)
Joachim Wagner
Entry, Exit and Productivity - Empirical Results for German Manufacturing Industries
Using panel data from Spain Farinas and Ruano (IJIO 2005) test three hypotheses from a model by Hopenhayn (Econometrica 1992): (H1) Firms that exit in year t were in t-1 less productive than firms that continue to produce in t. (H2) Firms that enter in year t are less productive than incumbent firms in year t. (H3) Surviving firms from an entry cohort were more productive than non-surviving firms from this cohort in the start year. Results for Spain support all three hypotheses. This paper replicates the study using a unique newly available panel data sets for all manufacturing plants from Germany (1995 – 2002). Again, all three hypotheses are supported empirically.
JERP #2007-063 (PDF)
Helmut Fryges, Joachim Wagner
Exports and Productivity Growth – First Evidence from a Continuous Treatment Approach
A recent survey of 54 micro-econometric studies reveals that exporting firms are more productive than non-exporters. On the other hand, previous empirical studies show that exporting does not necessarily improve productivity. One possible reason for this result is that most previous studies are restricted to analysing the relationship between a firm's export status and the growth of its labour productivity, using the firms' export status as a binary treatment variable and comparing the performance of exporting and non-exporting firms. In this paper, we apply the newly developed generalised propensity score (GPS) methodology that allows for continuous treatment, that is, different levels of the firms' export activities. Using the GPS method and a large panel data set for German manufacturing firms, we estimate the relationship between a firm's export-sales ratio and its labour productivity growth rate. We find that there is a causal effect of firms' export activities on labour productivity growth. However, exporting improves labour productivity growth only within a sub-interval of the range of firms' export-sales ratios.
JERP #2007-0 (PDF)
Joachim Wagner
Export Entry, Export Exit, and Productivity in German Manufacturing Industries
This paper contributes to the flourishing literature on exports and productivity by using a unique newly available panel of exporting establishments from the manufacturing sector of Germany from 1995 to 2004 to test three hypotheses derived from a theoretical model by Hopenhayn (Econometrica 1992): (H1) Firms that stop exporting in year t were in t-1 less productive than firms that continue to export in t. (H2) Firms that start to export in year t are less productive than firms that export both in year t-1 and in year t. (H3) Firms from a cohort of export starters that still export in the last year of the panel were more productive in the start year than firms from the same cohort that stopped to export in between. While results for West Germany support all three hypotheses, this is only the case for (H1) and (H2) in East Germany.
JERP #2007-061 (PDF)
C. Mirjam van Praag, Peter H. Versloot
What is the Value of Entrepreneurship? A Review of Recent Research
This paper examines to what extent recent empirical evidence can collectively and systematically substantiate the claim that entrepreneurship has important economic value. Hence, a systematic review is provided that answers the question: What is the contribution of entrepreneurs to the economy in comparison to non-entrepreneurs? We study the relative contribution of entrepreneurs to the economy based on four measures that have most widely been studied empirically. Hence, we answer the question: What is the contribution of entrepreneurs to (i) employment generation and dynamics, (ii) innovation, and (iii) productivity and growth, relative to the contributions of the entrepreneurs' counterparts, i.e. the 'control group'? A fourth type of contribution studied is the role of entrepreneurship in increasing individuals' utility levels. Based on 57 recent studies of high quality that contain 87 relevant separate analyses, we conclude that entrepreneurs have a very important – but specific – function in the economy. They engender relatively much employment reation, productivity growth and produce and commercialize high quality innovations. They are more satisfied than employees. More importantly, recent studies show that entrepreneurial firms produce important spillovers that affect regional employment growth rates of all companies in the region in the long run. However, the counterparts cannot be missed either as they account for a relatively high value of GDP, a less volatile and more secure labor market, higher paid jobs and a greater number of innovations and they have a more active role in the adoption of innovations.
JERP #2007-060 (PDF)
Sameeksha Desai
Post-conflict Microfinance: Assessment and Policy Notes for Iraq
This paper explores the potential of microfinance in post-conflict economies, and specifically examines policy considerations for the case of Iraq. It presents important conditions of the post-conflict economy, and examines three critical requirements for successful microfinance operations, as outlined by the Microenterprises Best Practices Project. Political stability, economic demand and population stability are evaluated in the case of Iraq. Several other considerations are also addressed, including matters of scale, government mechanisms and support, and gender and religious contexts.
JERP #2007-059 (PDF)
Zoltan J. Acs, David J. Brooksbank, Colm O'Gorman, David G. Pickernell, Siri Terjesen
The Knowledge Spillover Theory of Entrepreneurship and Foreign Direct Investment
We explore if the Knowledge Spillover Theory of Entrepreneurship, applied to FDI, provides at least a partial explanation for the greater emergence of recent knowledge-based entrepreneurship in Ireland compared with Wales. In order to examine how FDI and entrepreneurship policy in these two regions might have influenced the levels of knowledge-based entrepreneurship, we outline FDI and entrepreneurship policies for Wales and Ireland and key measures of knowledge creation, and evaluate the extent and nature of FDI activity and its relationship with entrepreneurship in general and knowledge-based entrepreneurship in particular. Implications include possible policy directions for countries that are characterized by weak knowledge-creating institutions yet wish to encourage knowledge-based entrepreneurship.
JERP #2007-058 (PDF)
Zoltan J. Acs, Lawrence A. Plummer, Ryan Sutter
Penetrating the Knowledge Filter in the Rust Belt
A new model of economic growth introduces the knowledge filter between new knowledge and economically useful knowledge. It identifies both new ventures and incumbent firms as the mechanisms that penetrate the knowledge filter. Recent empirical work has shown that new firms are more proficient at penetrating the knowledge filter than are incumbent firms; however, the analysis has only examined expanding economies and has relied on purely cross-sectional regression methodologies. This study explores the role of new and incumbent firms in penetrating the knowledge filter utilizing recent developments in spatial panel estimation techniques to provide a more robust set of findings. The results suggest those new firms are more proficient at penetrating the knowledge filter in declining and growing regions alike.
JERP #2007-057 (PDF)
Bo Carlsson, Zoltan J. Acs, David B. Audretsch, Pontus Braunerhjelm
The Knowledge Filter, Entrepreneurship, and Economic Growth
This paper explores the relationship between knowledge creation, entrepreneurship, and economic growth in the United States over the last 150 years. According to the "new growth theory," investments in knowledge and human capital generate economic growth via spillovers of knowledge. But the theory does not explain how or why spillovers occur, or why large investments in R&D do not always result in economic growth. What is missing is "the knowledge filter" - the distinction between general knowledge and economically useful knowledge. Also missing is a mechanism (such as entrepreneurship) converting economically relevant knowledge into economic activity. This paper shows that the unprecedented increase in R&D spending in the United States during and after World War II was converted into economic activity via incumbent firms in the early postwar period and increasingly via new ventures in the last few decades.
JERP #2007-056 (PDF)
Zoltan J. Acs, Sameeksha Desai
Democratic Capitalism and Philanthropy in a Global Economy
Democratic capitalism has become the popular paradigm in the modern world, and it is spreading further through globalization. It is a model based on growth, expansion and constant innovation. However, it is accompanied by social problems which may worsen despite overall gains in wealth. In this paper, we suggest that democratic capitalist societies may benefit from the application of what has been a primarily American institution: Philanthropy. We present the Entrepreneurship-Philanthropy Cycle, which demonstrates the relationship between wealthy entrepreneurs, philanthropic contributions and economic opportunity. As a nonmarket and nonstate mechanism, philanthropy is unique in its structure and operations, and may offer the ideal approach to solving social problems. We suggest that both the internationalization of American foundations, and the growth of domestic philanthropy, can help developing countries offset social problems.
JERP #2007-0 (PDF)
Rui Baptista, Murat Karöz, Joanna Mendonça
Entrepreneurial Backgrounds, Human Capital and Start-up Success
We examine whether founders' backgrounds influence new firm survival in the early years after start-up. We develop hypotheses linking founders' backgrounds to pre-entry capabilities associated with entrepreneurial human capital, highlighting the cases of spin-offs and habitual entrepreneurs. The subject of unemployment-driven entrepreneurship is also explored. We find that specific human capital more frequently found in spin-off founders plays a key role in enhancing survival chances, while more general forms of human capital may help inexperienced entrepreneurs overcome the barrier posed by the critical early years after start-up.
JERP #2007-0 (PDF)
A. Miguel Amaral, Rui Baptista
Serial Entrepreneurship: Differentiating Direct from Latent Re-entrants
This study is the first to examine the decision to re-enter business ownership by entrepreneurs who have exited their first business using a longitudinal matched employer-employee database. This kind of data allow us to distinguish between those serial entrepreneurs who re-enter business ownership immediately upon exiting their first business (direct serial), and those who do so after an interlude in paid employment, or non-employment (latent serial). Results highlight the importance of human capital in triggering serial entrepreneurship, but the kinds of experiences driving direct and latent serial entrepreneurs are different.
JERP #2007-043 (PDF)
Rui Baptista, Murat Karöz
Turbulence in High Growth and Declining Industries
We examine turbulence over the product life cycle using the lowest possible level of industry aggregation, allowing for the use of panel data to study the evolution of single product markets. We find that replacement of exiting firms by subsequent entry plays a primary role in generating turbulence in high growth markets, while displacement of incumbents by recent entrants is the main selection force in declining markets. As product life cycles progress, trial-and-error entry subsides, and turbulence decreases.
JERP #2007-042 (PDF)
Rob Winters, Erik Stam
Innovation Networks of High Tech SMES: Creation of Knowledge but no Creation of Value
This paper analyses the effects of innovation networks on product and process innovation and sales growth of high technology SMEs. Innovation networks are positively related to both product and process innovation, i.e. knowledge creation. One exception is the negative effect of innovation networks with suppliers on product innovation. Older SMEs are more product innovative than young SMEs. The positive relation between firm size and (process) innovation, disappears when networks are introduced into the analyses. The general conclusion is that vertical innovation networks remove the effect of firm size on process innovation. In other words, high-tech SMEs can 'borrow' size if they co-operate with customers, but especially with suppliers for process innovation. So smallness is not necessarily a disadvantage for innovation, as long as firms cooperate with other organisations. Innovation and networks do not seem to effect value creation, measured as sales growth.
JERP #2007-031 (PDF)
Siri Terjesen
Building a Better Rat Trap: Technological Innovation, Human Capital and the Irula
This case follows Sethu Sethunarayanan, Director of the non-profit Center for the Development of Disadvantaged People (CDDP), which is dedicated to the improvement of the Irula tribe in rural villages of southeast India. The Irulas specialize in catching rats, an activity which provides the bulk of their income and food. Following a routine visit to a local village, Sethu recognized an opportunity for a "better rat trap" to aid the Irula rat catchers. With feedback from rat catchers, Sethu developed an innovative new trap. His innovation won the prestigious Global Development Marketplace award from the World Bank which provided the funding necessary to commercialize the new technology. The venture's implementation involved site visits to identify beneficiaries, health checks and treatment, preparatory workshops, factory establishment, factory training, production, women's micro-credit collectives, distribution and project evaluation. The case focuses on the relationship between human capital and technological entrepreneurship, considering the knowledge and skills required to commercialize technology for the rural poor and the positive impact on this greatly disadvantaged population.
JERP #2007-030 (PDF)
László Szerb, Siri Terjesen, Gábor Rappai
Seeding new ventures - green thumbs and fertile fields: individual and environmental drivers of informal investment
This study explores individual and country-level environmental drivers of informal "seed" investment. We examine four types of informal investors based on business ownership experience (or no such experience) and close family relationship with investee (or no such relationship): "classic love money", "outsider", "kin owner" and "classic business angel" investors. At the environmental level, we are interested in the role of economic development, income tax policies, start-up costs, pro-enterprise government programmes, availability of debt financing, entrepreneurship education and culture. Using Global Entrepreneurship Monitor data from telephone interiews with 257,793 individuals in 31 countries, including 5,960 informal investors, we report drivers for the four types of seed investment. Descriptive statistics are consistent with prior research: informal investors are likely to be older males who work full-time, earn high incomes, perceive start-up opportunities in the environment, and believe that they have the skills to start their own businesses. At the environmental level, we find that countries with higher percentages of informal investors are significantly likely to have higher levels of economic development, higher business start-up costs, higher levels of entrepreneurship education, lower income taxes and lower power distance. Other environmental effects on the four populations of informal investors are reported and discussed, as well as implications for practice, policy and future research.
JERP #2007-029 (PDF)
David B. Audretsch, Max Keilbach
The Localization of Entrepreneurship Capital - Evidence from Germany
Whereas initially physical capital and later, knowledge capital were viewed as crucial for growth, more recently a very different factor, entrepreneurship capital, has emerged as a driving force of economic growth. In this paper, we define a region's capacity to create new firms start-ups as the region's entrepreneurship capital. We then investigate the local embeddedness of this variable and which variables have an impact on this variable. Using data for Germany, we find that knowledge-based entrepreneurship capital is driven by local levels of knowledge creation and the acceptance of new ideas, indicating that local knowledge flows play an important role. Low-tech entrepreneurship capital is rather increased by regional unemployment and driven by direct incentives such as subsidies. All three measures are locally clustered, indicating that indeed, entrepreneurship capital is a phenomenon that is driven by local culture, and is therefore locally bounded.
JERP #2007-022 (PDF)
Zoltan J. Acs, Siri Terjesen
Born Local: Two Avenues to Internationalization
Are firms born Global? Because knowledge spillovers that lead to new venture creation are geographically constrained we believe that firms are born local. It follows that the decision to create sustainable new ventures is independent from the decision to internationalize, even if that is the ultimate goal of the firm. We explore two avenues to internationalize new ventures, a direct path described in much of the extant literature and an intermediated one. New ventures face high entry barriers and intellectual property rights protection to internationalization, which are circumvented by intermediating activities using existing multinational enterprises as facilitators of internationalization. However, new ventures using the intermediated mode of internationalization face transaction costs and rent extraction from multinational enterprises. Therefore, sustainable new ventures face a strategic decision on how to internationalize.
JERP #2007-021 (PDF)
André van Stel, Antonio Golpe
Self-Employment and Unemployment in Spanish Regions in the Period 1979-2001
This paper investigates the relation between changes in self-employment and changes in unemployment at the regional level in Spain in the period 1979-2001. We estimate a vector autoregression model as proposed by Audretsch, Carree, van Stel and Thurik (2005) using a data base for Spanish regions. By estimating the model we are able to empirically distinguish between two directions of causality. On the one hand increases in self-employment may contribute to lower unemployment rates (the 'entrepreneurial' effect). On the other hand, higher unemployment rates may push individuals into self-employment, thereby contributing to higher self-employment rates (the 'refugee' effect). In our analysis of these two effects we distinguish between higher and lower income regions within Spain. We find empirical support for the 'entrepreneurial' effect to exist, both in higher income and in lower income regions. As regards the 'refugee' effect, the evidence is mixed. We find empirical support for this effect for higher income regions. Remarkably, we do not find evidence for a 'refugee' effect in lower income regions of Spain, even though unemployment rates are on average higher in these regions. We argue that this may be partly related to a lack of incentives for unemployed individuals in these regions to find paid employment.
JERP #2007-20 (PDF)
Enrico Santarelli, Francesca Lotti
The Relationship among innovative Output, Productivity, and Profitability. A test comparing USPTO and EPO data
The aim of this paper is to test whether patent-based indicators are still reliable measures of innovativeness in light of organizational changes in the field of Intellectual Property Rights (IPR) protection and the regulatory reforms already under way respectively at the U.S. Patent and Trademark Office (USPTO) and the European Patent Office (EPO). For most high-tech industries, patents represent an outcome of the production process and their number can be taken as a proxy for a firm's ability to improve its productivity growth and profitability. The case study reported here concerns the biotechnology industry in Italy, whose firms, by definition, have Intellectual Property (IP) activities in their portfolios. For this purpose, we use a unique data set which collects balance sheet items and patent information from EPO and USPTO. After linking firms' financial and production data with the patent information, we estimate a modified knowledge production function in which the dependent variable is alternatively (labor) productivity growth and profitability. Our findings show that only patents with the EPO, along with larger firm size, have a statistically significant relationship with productivity growth and profitability. This suggests that firms pursue different strategies when patenting with the USPTO and the EPO, and that this difference reflects statutory changes made to the former during the relevant period.
JERP #2007-019 (PDF)
Erik Stam, André van Stel, Kashifa Suddle, S. Jolanda A. Hessels
High Growth Entrepreneurs, Public Policies and Economic Growth
This paper investigates whether the presence of ambitious entrepreneurs is a more important determinant of national economic growth than entrepreneurial activity in general. We use data from the Global Entrepreneurship Monitor to test the extent to which high growth ambitions of entrepreneurs affect GDP growth for a sample of 36 countries. Our results suggest that ambitious entrepreneurship contributes more strongly to macro-economic growth than entrepreneurial activity in general. We find a particularly strong effect of high-expectation entrepreneurship for transition countries. These results are interpreted in light of the ongoing debate about public policies designed to stimulate high growth start-ups.
JERP #2007-009 (PDF)
Andrea Conte, Marco Vivarelli
Globalization and Employment: Imported Skill Biased Technological Change in Developing Countries
This paper discusses the impact of the international transfer of embodied technological change on the employment evolution of skills in a sample of low and middle income countries (LMICs). A large body of literature has already underlined the occurrence of widening wage and employment differentials between skilled and unskilled workers in high-income countries (HICs) (Katz and Autor, 1999). Such empirical evidence is consistent with both trade- and technology-based explanations while these competing theoretical frameworks predict opposite effects on within- country inequality in LMICs. Recent analytical advancements have found convergent elements between these two lines of research, especially in the prediction of the employment impact of technology transfer. However, a systematic lack of data in LMICs still hampers empirical research on the determinants of the witnessed increase in inequality in these economies. This paper provides a direct measure of technology transfer from HICs, that is from those economies which have already experienced the occurrence of skillbiased technological change, to LMICs. GMM techniques are applied to an original panel dataset comprising 28 manufacturing sectors for 23 countries over a decade. Econometric results provide direct robust evidence of the absolute skill-bias effect of technology import in LMICs which, therefore, represents an important determinant of the growing divide between skilled and unskilled workers in these countries.
JERP #2007-004 (PDF)
C. Mirjam, Bernard M.S. van Praag
The Benefits of Being Economics Professor A (and not Z)
Alphabetic name ordering on multi-authored academic papers, which is the convention in the economics discipline and various other disciplines, is to the advantage of people whose last name initials are placed early in the alphabet. As it turns out, Professor A, who has been a first author more often than Professor Z, will have published more articles and experienced a faster growth rate over the course of her career as a result of reputation and visibility. Moreover, authors know that name ordering matters and indeed take ordering seriously: Several characteristics of an author group composition determine the decision to deviate from the default alphabetic name order to a significant extent.
JERP #2007-003 (PDF)
David B. Audretsch, Mark Sanders
Globalization and the Rise of the Entrepreneurial Economy
This paper argues that globalization has led to a shift in developed countries from an industrial to an entrepreneurial model of production. Globalization is interpreted as a level shock in the supply of unskilled labor to the world economy, a decrease in the level of political risk associated with utward foreign direct investment (offshoring), and the widespread diffusion of a general purpose technology such as ICT. The impact of these exogenous shocks is then analyzed in a variety expansion model that distinguishes among three types of varieties. Following the life cycle we distinguish among new, mature and offshore production. The above shocks all result in a shift in comparative advantage in developed countries towards new varieties which correspond to the early stage of the product life cycle. Moreover, because entrepreneurs serve as agents that move varieties between life cycle stages, their importance increases due to globalization. The many new opportunities for profit benefit entrepreneurs and skilled labor. By contrast, factors of production employed in the mature stages of the life cycle become less important. Thus, the model explains the emergence of what we label an entrepreneurial economy.
#0715 (PDF)
Joachim Wagner
Exports and Productivity in Germany
Using unique recently released nationally representative high-quality longitudinal data at the plant level, this paper presents the first comprehensive evidence on the relationship between exports and productivity for Germany, a leading actor on the world market for manufactured goods. It applies and extends the now standard approach from the international literature to document that the positive productivity differential of exporters compared to non-exporters is statistically significant, and substantial, even when observed firm characteristics and unobserved firm specific effects are controlled for. For West German plants (but not for East German plants) some empirical evidence for self-selection of more productive firms into export markets is found. There is no evidence for the hypothesis that plants which start to export perform better in the three years after the start than their counterparts which do not start to sell their products on the world market. Results for West Germany support the hypothesis that the productivity differential between exporters and non-exporters is at least in part the result of a market driven selection process in which those export starters that have low productivity at starting time fail as a successful exporter in the years after the start, and only those that were more productive at starting time continue to export
#0714 (PDF)
Joachim Wagner
Why more West than East German firms export
Using unique new data and a recently introduced non-linear decomposition technique this paper shows that the huge difference in the propensity to export between West and East German plants is to a large part due to differences in firm size and human capital intensity.
#0713 (PDF)
Joachim Wagner
Productivity and Size of the Export Market Evidence for West and East German Plants, 2004
Using unique recently released nationally representative high-quality data at the plant level, this paper presents the first comprehensive evidence on the relationship between productivity and size of the export market for Germany, a leading actor on the world market for manufactured goods. It documents that firms that export to countries inside the euro-zone are more productive than firms that sell their products in Germany only, but less productive than firms that export to countries outside the euro-zone, too. This is in line with the hypothesis that export markets outside the euro-zone have higher entry costs that can only by paid by more productive firms.
#0712 (PDF)
Wolfgang Sofka, Jörg Zimmermann
Regional Dimensions of Liability of Foreignness: Between a Rock and a Hard Place?
In this paper we develop optimized localization strategies for multinational firms to overcome their liability of foreignness by adding a regional dimension. We explore conceptually whether economic stress in a region has a mitigating or reinforcing effect. We test this analytical framework empirically on the highly internationalized German car market and find that economically depressed regions are promising stepping stones into foreign markets.
#0711 (PDF)
David Audretsch, Ronnie J. Phillips
Entrepreneurship, State Economic Development Policy, and the Entrepreneurial University
In this paper, we discuss the nature of the university-industry relationship and recommend specific policies to help achieve the goal of greater economic growth. We argue that state-supported research universities can be used to integrate entrepreneurship into state economic development and incubate entrepreneurial companies. Regional entrepreneurship policy is a new strategy that regards economic development as a process that goes from supporting research and development to creating and growing new businesses. Specifically, we believe that an entrepreneurial higher education system is a key to state-level economic policies. There is an opportunity at research universities to combine the human capital talent available on faculties with the needs and expertise of private industry to accelerate entrepreneurship and economic growth.
#0710 (PDF)
Jeffery S. McMullen, Lawrence A. Plummer, Zoltan J. Acs
What is an Entrepreneurial Opportunity?
What an entrepreneurial opportunity is and from whence it comes are important issues for understanding how markets function and come into being. In addition to describing the forum held on the topic and summarizing the contributions of the articles that appear in the special issue, this article shares a number of lessons learned during the conference and the editorial process. We explore three of the most important reasons for confusion about the opportunity construct: (1) the "objectivity" of opportunity, (2) the perceived importance of one particular individual in determining the direction of the social world and (3) what distinguishes the sub-class of "entrepreneurial" opportunity from the broader category of opportunity in general. Finally, we offer some directions for future research by illuminating important issues that emerged from the conference but remain largely unanswered by the papers of this special issue.
#0709 (PDF)
Zoltan J. Acs, David Audretsch, Ronnie J. Phillips, Sameeksha Desai
The Entrepreneurship-Philanthropy Nexus: Nonmarket Source of American Entrepreneurial Capitalism
What differentiates American capitalism from all other forms of industrial capitalism is a historical focus on both the creation of wealth (entrepreneurship) and the reconstitution of wealth (philanthropy). Philanthropy has been part of the implicit American social contract that continuously nurtures and revitalizes economic prosperity. Much of the new wealth created historically has been given back to the community to build many of the great social institutions that have paved the way for future economic growth. This entrepreneurship-philanthropy nexus has not been fully explored by either economists or the general public. The purpose of this paper is to suggest that American philanthropists—particularly those who have made their own fortunes—create foundations that, in turn, contribute to greater and more widespread economic prosperity through knowledge creation. Analyzing philanthropy sheds light on our current understanding of how economic development has occurred, as well as the roots of American economic dominance.
#0708 (PDF)
Zoltan J. Acs, Monika I. Megyesi
Creativity and Industrial Cities: A Case Study of Baltimore
Creativity is changing the way cities approach economic development and formulate policy. Creative metropolises base their economic development strategies, at least partly, on building communities attractive to the creative class worker. While there are countless examples of high-tech regions transforming into creative economies, traditionally industrial cities have received much less attention in this regard. This research draws on Baltimore to assess the potential of transforming a traditionally industrial region into a creative economy. It analyses Baltimore's performance on dimensions of talent, tolerance, technology, and territory both as a stand-alone metropolitan area and in comparison to similar industrial metropolises. Using data from the US Census Bureau and research on creativity measures, this case study concludes that Baltimore has the opportunity to capitalize on the creative economy because of its openness to diversity, established technology base, and appealing territorial amenities. An important consideration in the transformation towards a creative economy is Baltimore's geographic proximity and access to the largest reservoir of creative talent in the US: Washington, DC.
#0707 (PDF)
Chetan Ghate
The Political Economy of Infrastructure Investment in India
We construct a simple political economy model with imperfect capital markets to explain infrastructure investments across Indian states. The model predicts that: i) the fixed cost of accessing the modern sector, ii) the initial stock of infrastructure, iii) median voter wealth, and iv) corruption, can all potentially explain why different states have different level of infrastructure investments. The theoretical model is motivated by recent empirical work on India that argues that there as on why per capita income across Indian states have diverged is because of the distribution of infrastructure investments. The model suggests that reducing leakages in funds earmarked for infrastructure and reducing the fixed costs of accessing the modern sector - beyond their other well known effects - are policy complements. Together, they can incentivize politicians to spend more on infrastructure.
#0706 (PDF)
David Audretsch, Erik Monsen
Entrepreneurship Capital: A Regional, Organizational, Team, and Individual Phenomenon
We review the role entrepreneurship capital in regional economic performance and extend it to explain the economic and entrepreneurial performance of organizations, teams, and individuals. Drawing on entrepreneurship and social capital research, we demonstrate that researchers at different level of analysis are in fact modeling the same underlying multi-level concept: entrepreneurship capital. We identify elements of entrepreneurship capital at and across the levels. Where there are gaps, we suggest new directions for research, public policy, and management practice that focus on enhancing organizational, interpersonal, and personal factors which promote entrepreneurial action at and across regional, organizational, team, and individual levels.
#0705 (PDF)
Raquel Ortega-Argilés, Rosina Moreno
Firm Competitive Strategies and the Likelihood of Survival. The Spanish Case
This paper analyses the impact that some managerial competitive strategies followed by a firm may have on its survival. We have not only considered the classic strategies related to the passive learning process defined by Jovanovic (e.g., R&D or advertisement expenses), but we have also taken into account the active learning process ideas given by Ericson and Pakes. This way, we study the effect of product and process innovative strategies, with a detailed desegregation of their functions, on firm's survival likelihood. Several non-parametric, semi-parametric and parametric techniques are computed to check the effect of the active learning theory on business survival in a set of Spanish manufacturing firms (1990-2001).
#0704 (PDF)
Zoltan J. Acs, Catherine Armington, Ting Zhang
The Determinants of New-firm Survival across Regional Economies
Motivated by differences in new-firm survival across regions, this paper explores the impact of regional human capital on new-firm survival rates. New-firm survival is interpreted through formation rates of surviving versus closed firms in the service sector. By incorporating knowledge spillovers through a geographical variation model for Labor Market Areas, we empirically test the relationship between regional human capital stocks and new-firm survival. The expected positive relationship between regional human capital and new-firm survival is supported for the period 1993-1995, but is not as strong for the recession period 1990-1992. Controlling for human capital, the new-firm survival rate is negatively related to service sector specialization and positively related to all industry intensity, suggesting that city size and diversity may be an important determinant of new-firm survival in both periods.
#0703 (PDF)
Zoltan J. Acs, Kadri Kallas
State of Literature on Small to Medium-Size Enterprises and Entrepreneurship in Low-Income Communities
#0702 (PDF)
Isabel Grilo, Roy Thurik
Determinants of entrepreneurial engagement levels in Europe and the US
The process of the entrepreneurial decision is decomposed in seven engagement levels ranging from "never thought about starting a business" to "gave up", "thinking about it", "taking steps for starting up", "having a young business", "having an older business" and "no longer being an entrepreneur". By using a multinomial logit model we allow the effect of covariates to differ across the various entrepreneurial engagement levels. Data from two Entrepreneurship Flash Eurobarometer surveys (2002 and 2003) con-taining over 20,000 observations of the 15 old EU member states, Norway, Iceland, Liechtenstein and the US are used. Other than demographic variables, the set of explanatory variables used includes the percep-tion by respondents of administrative complexities, of availability of financial support and of risk tolerance, the respondents' preference for self-employment and country specific effects. Among our results we find that the perception of lack of financial support has no discriminative effect across the various levels of en-trepreneurial engagement while perception of administrative complexities plays a negative role only for high levels of engagement.
This is an updated version of discussion paper 0207 on 10/27/2008.
#0701 (PDF)
Andrea Conte
The Evolution of the Literature on Technological Change over time: A Survey
This paper reviews the emergence and evolution of major topics in economics of innovation. Throughout the paper, particular attention is devoted to the analysis of the cumulative aspects and complementarities between di_erent paths of research over time. Moreover, this survey highlights the crucial relationship between technological change (TC) and economic growth, and the way in which economics literature has dealt with this issue over time. The structure of this survey distinguishes between different decades and it identifies the key debates in the economics literature in each period. Although relevant steps have been made over time, a systematic and satisfactory integration of di_erent theoretical perspectives appears still to be found. In recent years, there have been more sophisticated empirical and theoretical attempts to deal with TC at several, and more disaggregated, levels of analysis. Notwithstanding such advancements, further research is needed to ensure the development of a more general theory of the determinants and the effects of TC. In turn, such theory has to deal primarily with an assessment of both the complementarities between the economic incentives and the internal mechanisms of the so-called "black box" (Rosenberg, 1994), and the heterogeneity which characterises the innovative process of firms across different sectors, countries and over time.

Papers 2006 [back to top] Top

#0627 (PDF)
Miltiades N. Georgiou
An Empirical Relationship between Entrepreneurship and FDI. A Note.
In the present note an effort will be made for a contribution to economic theory by estimating an econometric relationship between the foreign direct investment [FDI] and total economy's entrepreneurship reward [rEM]. This note is based mainly on the next two papers. First, it will be based on the discussion paper "Understanding the Role of Entrepreneurship for Economic Growth." by Martin Carree and Roy Thurik, MPIoE, #2005, in which the authors show the importance of entrepreneurship to adapt to new technology, to develop capacity and reach economies of scale. Second, it will be based on the discussion paper "Does Entrepreneurship Create Enough Jobs in Europe? A Note." by Miltiades N. Georgiou, MPIoE, #0806, in which entrepreneurship reward [rEM] is measurable and consequently can be related with the other measurable economic variables like the [FDI]. Hence, in the present note a relationship between [FDI] and [rEM] can be numerically estimated. More specifically, it will be pointed out with panel data econometric analysis that in all Western European Countries and the United States [FDI] is positively related with [rEM], and that decisions about [FDI] are mainly affected by [rEM].
#0626 (PDF)
Simon C. Parker, C. Mirjam van Praag
The entrepreneur's mode of entry: Business takeover or new venture start?
We analyse the decision to become an entrepreneur by either taking over an established business or starting a new venture from scratch. A model is developed which predicts how several individual- and firm-specific characteristics influence entrepreneurs'entry mode. The new venture creation mode is associated with higher levels of schooling and wealth, whereas managerial experience, new venture start-up capital requirements and risk promote the takeover mode. Entrepreneurs whose parents run a family firm are predicted to invest the least in schooling, since schooling reduces search costs and these individuals have the lowest probability of needing to search for a business opportunity outside their family. A sample of data on entrepreneurs from the Netherlands provides broad support for the theory; implications for policy-makers concerned about the survival of family firms lacking within-family successors are discussed.
#0625 (PDF)
Michael Fritsch, Dirk Schilder
Is Venture Capital a regional business? – The role of syndication
We investigate whether the supply of Venture Capital (VC) in Germany is driven by spatial influences. The study is based on information from more than 300 VC investments made in Germany between 2004 and 2005. We find evidence that the geographical distance between a VC company and the portfolio firm is not an important factor for German VC investments. Syndication of investments helps to overcome the problem of distance to portfolio firms if one of the investors is located close to the investment. Altogether, we find no evidence for a severe regional equity gap for young and innovative companies in Germany.
#0624 (PDF)
Pamela Mueller, André van Stel, David J. Storey
The effects of new firm formation on regional development over time: The case of Great Britain
This paper re-examines the link between new firm formation and subsequent employment growth. It investigates whether it is possible to have the wrong type of entrepreneurship - defined as new firm formation which leads to zero or even negative subsequent employment growth. It uses a very similar approach to that of Fritsch and Mueller (2004), confirming their findings that the employment impact of new firm formation is in three discrete phases. Then, using data for Great Britain, the paper shows the employment impact of new firm formation is significantly positive in England, but zero in Scotland where formation rates are much lower. It also shows that, in the low enterprise counties of GB, new firm formation has a negative effect on employment, implying that we find that the "wrong type of entrepreneurship" is possible.
#0623 (PDF)
Zoltan J. Acs, Pamela Mueller
Employment effects of business dynamics: Mice, Gazelles and Elephants
This paper examines the relationship between business dynamics and employment effects in 320 U.S. Metropolitan Statistical Areas (MSA). Much of the theoretical work on industry dynamics focuses on the role of noisy selection and incomplete information on entry and survival. We extend this research by looking at the impact of firm heterogeneity on employment persistence. We find that only start-ups with greater than twenty employees have persistent employment effects over time and only in large diversified metropolitan regions. Therefore, both the type of entry and the characteristics of the region are important for employment growth.
#0622 (PDF)
Chetan Ghate
Transitional Dynamics in a Growth Model with Distributive Politics
This paper constructs a dynamic analysis of the growth and distribution models of Das and Ghate (2004) and Alesina and Rodrik (1994) when leisure is valued by agents. When leisure enters the utility function, we show that the tax rate on capital income chosen in a political equilibrium is lower than the growth maximizing tax rate. This slows growth down, but for a very different reason than in Alesina and Rodrik (1994). Here, unanimity holds, and slower growth comes together with valued leisure, while in AR, slower growth comes from conflicting choices over the tax rate, with a capital poor median voter prevailing. Our results generalize the work of Alesina and Rodrik (1994) and Das and Ghate (2004) in two ways. First, we assess the impact of redistributive politics on growth by looking at the effect of income inequality on the tax rate and labor supply. Second, using the set up of Das and Ghate (2004), we provide a dynamic analysis of Alesina and Rodrik (1994) where majority voting determines the extent of distribution, and thus, a relationship between inequality and growth. The general insight gained from the analysis is that characterizing the transitional dynamics in a model of redistributive politics and growth with endogenous leisure is not intractable.
#0621 (PDF)
Debajyoti Chakrabarty
Education, Growth, and Redistribution in the Presence of Capital Flight
We construct an overlapping generations model to study the effect of capital controls on human capital investments and the incidence of redistributive politics in a growing economy. We argue that the conventional wisdom linking higher capital controls to lower growth is reproduced only when an economy is sufficiently developed. For under-developed countries, higher capital controls are beneficial for human capital accumulation suggesting that the wisdom does not apply. In an augmented version of the model, we show that a modern sector, characterized by positive levels of investment in education, may not exist unless capital controls are sufficiently high. In particular, higher capital controls make it feasible for a modern sector to exist by lowering the threshold income level required by workers to invest in human capital. These results are consistent with recent evidence suggesting that capital account liberalization positively affects growth only after a country has achieved a certain threshold level of absorptive capacities.
#0620 (PDF)
Erik Stam
Why Butterflies Don't Leave. Locational behaviour of entrepreneurial firms
Entrepreneurship is an important process in regional economic development. Especially the continued growth of a minority of new firms is of major significance to the commercialization of new ideas and employment growth. These growing new firms are transforming on a structural basis, like caterpillars turning into butterflies. However, like butterflies they are at risk to leave their region of origin for better places. This paper analyses how and why the spatial organization of firms develops subsequent to their start-up. A new conceptual framework and an empirical study of the life course of entrepreneurial firms are used to construct a theory on their locational behavior that explains that behavior as the outcome of a process of initiatives taken by entrepreneurs, enabled and constrained by resources, capabilities and relations with stakeholders within and outside of the firm. This study shows that entrepreneurs decide whether or not to move their firm outside of their region of origin for different reasons in distinct phases of the firm life course. Being embedded in social networks, for example, is an important constraint on locational behavior during the early life course of a firm, but over time this becomes less important and other mechanisms like sunk costs increasingly determine the locational behavior of fast-growing firms. The development of the spatial organization is also of major importance: when a multilocational spatial organization has been realized, it is much easier to move the headquarters to another region. The spatial organization of entrepreneurial firms co-evolves with the accumulation of their capabilities. A developmental approach incorporating evolutionary mechanisms and recognizing human agency provides new insights into the age-old study of firm location.
#0619 (PDF)
Michael Fritsch, Pamela Mueller
The Effect of New Business Formation on Regional Development over Time: The Case of Germany
We investigate the effects of new business formation on employment change in German regions. A special focus is on the lag-structure of this effect and on differences between regions. The different phases of the effects of new business formation on regional development are relatively pronounced in agglomerations as well as in regions with a high-level of labor productivity. In low-productivity regions, the overall employment effect of new business formation activity might be negative. The interregional differences indicate that regional factors play an important role.
#0618 (PDF)
Georg Metzger, Michaela Niefert
Restart-Performance and the Returns of Previous Self-Employment
#0617 (PDF)
Miltiades N. Georgiou, Nicholas Kyriazes
Banking Entrepreneurship Differentials between Europe and USA. A Note
#0616 (PDF)
Brett Anitra Gilbert, Mika Tatum Kusar
The Influence of Geographic Clusters and Knowledge Spillovers on the Product Innovation Activities of New Ventures
Geographic clusters have an impressive track record for producing innovative firms. In this research, we examine whether a geographic cluster location and the knowledge spillovers new ventures assimilate influence both their explorative and exploitative innovation activities. We hypothesize a stronger relationship of industry clustering on exploitative innovations but a stronger relationship of knowledge spillovers on explorative innovations. We expect the interaction will result in more exploitative innovations than explorative innovations. The data support most hypotheses.
#0615 (PDF)
Joachim Wagner
International Firm Activities and Innovation: Evidence from Knowledge Production Functions for German Firms
Using a knowledge production framework and a rich set of plant level data this study demonstrates that in Germany firms that are active on international markets as exporters or foreign direct investors do generate more new knowledge than firms which sell on the national market only. These differences are not only due to a larger firm size, or different industries, or the use of more researchers in these firms, but due to the fact these globally engaged firms learn more from external sources, too. The importance of these knowledge sources varies with the type of innovation. These results, which are broadly in line with the findings of a recent study using UK firm level data, can help to explain the strong positive correlation between productivity and international activities of firms. Firms that are active on markets beyond the national borders generate higher levels of new knowledge that feed into higher productivity.
#0614 (PDF)
Michael Fritsch, Dirk Schilder
Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation
We examine the role of spatial proximity for Venture Capital (VC) investments in Germany. The main database is a survey of 85 personal interviews with representatives of different types of financial institutions. The analysis shows that spatial proximity is far less important for VC investments than is often believed. For example, the results indicate that syndication is partly used as an alternative to spatial proximity. Telecommunication does not work as a substitute for face-to-face contact. On the whole, regional proximity is not a dominant factor in VC partnerships. Therefore, the absence of VC firms in a region does not appear to cause a severe regional equity gap.
#0613 (PDF)
David B. Audretsch, Max Keilbach
Entrepreneurship, Growth and Restructuring
#0612 (PDF)
Zuoquan Zhao
A Spatial Model of Growth: Taking Technology Seriously
This paper attempts to develop a spatial model of economic growth in which technology and externalities are assumed to be accountable for production in geographical space. Linking externalities to the extent of intensity of production across locations in continuous space, we introduce spatial range into the production function for technological, human, and physical capitals. Our model argues that the long-run growth rate of an economy is determined not just by the growth rates of the three factors of production but by their rates of change in spatial range over the territory of the economy. In other words, spatial intensity and accumulation matter for growth. Our model is consistent with studies on knowledge spillovers, geographical agglomeration, urban and regional growth, and trade. The primary policy implication of our model is the significance of establishing efficient mechanisms or channels that promote innovation, diffusion, trade, and factor mobility over the territory of an economy. It is not as if we always have it everywhere, but there is a process in which knowledge is being created all the time in different places, and is then being diffused. This evolving distribution should be reflected in a model of production, if it is to describe an entire economy in which different people know different things. As a consequence, the idea of an aggregate production function becomes very dubious, unless a new variable is introduced, representing the distribution and diffusion of new knowledge.
#0611 (PDF)
David B. Audretsch, Taylor Aldridge, Alexander Oettl
The Knowledge Filter and Economic Growth: The Role of Scientist Entrepreneurship
This paper examines the prevalence and determinants of the commercialization of research by university scientists funded by grants from the National Cancer Institute (NCI). Because the two publicly available modes of scientist commercialization – patents and Small Business Innovation Research (SBIR) grants – do not cover the full spectrum of commercializing activities undertaken by university scientists, the study also includes two additional measures obtained from detailed scientist interviews: licensing of intellectual property and starting a new firm. These measures are used to assess both the prevalence and determinants of scientist commercialization of research. In particular, the empirical findings suggest seven important insights: 1) Scientists receiving funding from the National Cancer Institute exhibit a robust propensity to commercialize their research. However, the prevalence of commercialization depends highly upon the actual mode of commercialization. Some modes of commercialization, such as patents, are more prevalent, while other modes, such as funding by the SBIR program are rarely used. 2) Scientist entrepreneurship is the sleeping giant of commercializing university research. More than one in four patenting NCI scientists have started a new firm. 3) Two paths for commercialization of scientist research are identified - the TTO route and the entrepreneurial route. Scientists who select the TTO route by commercializing their research through assigning all patents to their university TTO account for 70 percent of NCI patenting scientists. Scientists who choose the entrepreneurial route to commercialize their research, in that they do not assign patents to their university TTO, comprise 30 percent of patenting NCI scientists. 4) Social capital enhances the propensity for scientists to commercialize their research. The impact of social capital is particularly high for the commercialization mode of scientist entrepreneurship. 5) Technology Transfer Offices are found to be helpful for the mode of commercialization involving licenses. There is less evidence suggesting that they promote scientist entrepreneurship.6) For scientists who perceive that they are helped by their Technology Transfer Office, licensing is not only the most prevalent mode of commercialization, but it also is a substitute for entrepreneurship. For scientists who perceive that they are not helped by their Technology Transfer Office, entrepreneurship emergences as a much more important mode of commercialization and is complementary to licensing. 7) Scientists choosing the entrepreneurial route to commercialize their research, by not assigning patents to their university to commercialize research, tend to rely on the commercialization mode of entrepreneurship. By contrast, scientists who select the TTO route by assigning their patents to the university tend to rely on the commercialization mode of licensing.
#0610 (PDF)
Veronique Schutjens, Erik Stam
Starting anew: Entrepreneurial intentions and realizations subsequent to business closure
We know that most businesses fail. But what is not known is to what extent failed ex-entrepreneurs set up in business again. The objective of this article is to explore potential and realized serial entrepreneurship. Based on three disciplines - psychology, labour economics, and the sociology of careers - we formulated propositions to explain (potential) serial entrepreneurship. We tested these propositions empirically with a longitudinal database of 79 businesses that had closed within 5 years after start-up. A large majority of the ex-entrepreneurs maintained entrepreneurial intentions subsequent to business closure, while almost one in four business closures were followed by a new business (serial entrepreneurship). Our results show that the determinants of restart intention (potential serial entrepreneurship) and actual restart realization (realized serial entrepreneurship) are different. Ex-entrepreneurs who are young, who worked full-time in their prior business, and who recall their business management experience positively are likely to harbour restart intentions. Only 'being located in an urban region' transpired to have a significant effect on the start of a new business. Although entrepreneurial intentions are a necessary condition for the start of a new business, this study shows that the explanation of entrepreneurial intentions is distinct from the explanation of new business formation subsequent to business closure.
#0609 (PDF)
Deniz Ucbasaran, Paul Westhead, Mike Wright
Entrepreneurial Entry, Exit and Re-Entry: The Extent and Nature of Opportunity Identification
This study utilizes a human capital framework to explore whether business ownership experience is associated with the number of business opportunities identified, the number of identified opportunities that are pursued, and the nature of those opportunities. Information from a large representative sample of owners of 631 private independent firms is utilized. Controlling for various dimensions of entrepreneurs' general and specific human capital, we find that experienced (habitual) entrepreneurs identify more business opportunities, pursue more of these opportunities and are associated with more innovative opportunities. We can infer that business ownership experience acts as an important guide for entrepreneurs in processing information in a manner than allows them not only identify more opportunities but potentially more innovative ones too.
#0608 (PDF)
Miltiades N. Georgiou
Does Entrepreneurship create enough Jobs in Europe? A Note
In the present note an effort will be made for a contribution to economic theory by extending the discussion paper "Entrepreneurship, Regional Development and Job Creation: The Case of Portugal" by R. Baptista, V. Escárta and P. Madruga, MPI, #0605, in which the authors conclude (among others) that entrepreneurship creates jobs and reduces unemployment. This extension will be feasible by estimating the total economy´s entrepreneurship reward for Western European countries and relating it with the total economy´s unemployment rate. A regression based on the estimation of total economy´s entrepreneurship reward will yield the same main results with the above article not only for Portugal but also for all Western European countries, that in any Western European country entrepreneurship creates enough jobs to reduce unemployment. This generalization with panel data econometric analysis is based on the discussion paper "A Practical Method to Measure Entrepreneurship´s Reward: A Note" by M. N. Georgiou, MPI, #3805.
#0607 (PDF)
Andrew E. Burke, Felix R. FitzRoy, Michael A. Nolan
Education and Regional Job Creation by the Self-Employed: The English North-South Divide
Using decomposition analysis, the paper investigates the reasons why Northern England has less but higher performing self-employed businesses than the South. It finds the causes are mainly structural differences rather than due to regional variation in people's characteristics. The paper also unearths a regional dimension behind the impact of education on entrepreneurial job creation. It finds that, in the less developed North, education boosts self-employment job creation by enhancing performance per venture (quality). In the South, it reduces it by having no effect on quality alongside a negative effect on the number of people who become self-employed (quantity).
#0606 (PDF)
Erik Stam, David Audretsch, Joris Meijaard
Renascent Entrepreneurship - Entrepreneurial Preferences Subsequent to Firm Exit
Why should individuals that have exited their firm consider re-entering into entrepreneurship, i.e. become renascent entrepreneurs? According to the logic of economic models of firm dynamics there is no reason to re-enter into entrepreneurship following termination of a previous firm. In contrast, research on nascent entrepreneurship has shown the positive effect of entrepreneurial experience on planning a new firm start. Based on the empirical evidence from a database consisting of ex-entrepreneurs, this study shows that renascent entrepreneurship is a pervasive phenomenon in current society. Especially entrepreneurial human and social capital induce renascent entrepreneurship. In addition, the nature of the firm exit also affects the probability of renascent entrepreneurship.
#0605 (PDF)
Andre van Stel, Roy Thurik, Ingrid Verheul, Lendert Baljeu
The Contribution of Business Ownership in Bringing Down Unemployment in Japan
The relationship between entrepreneurship, measured by fluctuations in the business ownership rate, and unemployment in Japan is examined for the period 1972-2002. We conclude that, although Japan's unemployment rate has been influenced by different exogenous shocks as compared to other OECD countries, the effects of entrepreneurship on unemployment are not distinct. In the past small firms in Japan benefited from the protective environment of the keiretsu structure. This secure environment no longer exists, and a new market environment conducive to new venture creation and growth is not yet established. We argue that the Japanese government should actively stimulate an entrepreneurial culture.
This is an updated version of discussion paper #09-2004.
#0604 (PDF)
Andre van Stel, David Storey, Roy Thurik
The effect of business regulations on nascent and actual entrepreneurship
This paper investigates the effect of business regulations on various measures of entrepreneurship. Using data for a sample of countries participating in the Global Entrepreneurship Monitor between 2002 and 2005, we estimate a two-equation model explaining the nascent and the actual entrepreneurship rate, while taking into account the interrelationship between the two variables. Various determinants of entrepreneurship reflecting the demand and supply side of entrepreneurship as well as business regulation measures are incorporated in the model. Data on various categories of business regulations are taken from the World Bank Doing Business data base. Our estimation results suggest that, while entry regulations only have a small and indirect impact on the actual entrepreneurship rate, the impact of labour market regulations is more important. We also find that the determinants of opportunity and necessity entrepreneur-ship are fundamentally different.
This is an updated version of discussion paper #35-2005.
#0603 (PDF)
Andrea Conte, Marco Vivarelli
One or Many Knowlede Production Functions? Mapping Innovative Activity Using Microdata
This paper discusses the determinants of three alternative measures of innovative output by looking at firm's own formal R&D activities and at the acquisition of external technology (TA) in its embodied and disembodied components. These input-output relationships are also discussed by distinguishing between small and large firms and those belonging to low-tech and high-tech sectors. The empirical analysis focuses on the Italian industrial sector over the period 1998-2000, using a subsample of 2,949 firms from the third European Community Innovative Survey (CIS 3). A bivariate probit analysis framework is used to investigate the determinants of product and process innovations, while truncated regressions are used to discuss innovation intensity. This paper also discusses an alternative test procedure that permits an extension of Cragg's test in the analysis of survey data with weighted observations. Results show that R&D is strictly linked to product innovation, while TA is crucial in fostering process innovation; however, both inputs increase a firm's innovative intensity. Significant evidence is also found that small firms and firms belonging to low-tech sectors rely more on the acquisition of external technologies and on cooperation agreements, while larger firms in high-tech sectors rely more on their own formal R&D.
#0602 (PDF)
Martin Carree, Roy Thurik
The Lag Structure of the Impact of Business Ownership on Economic Performance in OECD Countries
This note investigates the impact of changes in the number of business owners on three measures of economic performance, viz. employment growth, GDP growth and labor productivity growth. Particular attention is devoted to the lag structure. The analysis is performed at the country level for 21 OECD countries. Our results confirm earlier evidence on three stages in the impact of entry on economic growth: an initial direct positive effect, followed by a negative effect due to exiting capacities and finally a stage of positive supply-side effects. The net effect is positive for employment and GDP growth. Changes in the number of business owners have no effect on labor productivity.
#0601 (PDF)
Ingrid Verheul, Martin Carree, Roy Thurik
Allocation and Productivity of Time in new Ventures of Female and Male Entrepreneurships
This paper investigates time allocation decisions in new ventures of female and male entrepreneurs using a new model that distinguishes between effects of preferences (what they like) and productivity (what they are good at) on the number of working hours. Using data of 1203 entrepreneurs we find that the preference for work time in new ventures is related to the motivation for starting up a business, the propensity to take risk and the availability of other income. Productivity of work time is explained by human, financial and social capital and outsourcing. This study also evaluates actual profit effects one year after start-up. With respect to gender we find that on average women invest less time in the business than men. This can be attributed to a lower productivity per hour worked, due to lower endowments of human, social and financial capital.
updated version (01/2009)

Papers 2005 [back to top] Top

#0538 (PDF)
Miltiades N. Georgiou
A Practical Method to Estimate Entrepreneurship's Reward
In the present note, an effort will be made for a contribution to the economic theory by introducing a practical method to estimate entrepreneurship's reward. As an example, a regression, based on the estimation of entrepreneurship's reward, with baning panel data will yield the same main results as in the article of Governance Structures, Efficiency and Firm Profitability, by E. E. Lehmann, S. Warning and J. Weigand, MPI, that firms with more efficient governance have higher profitability.
#0537 (PDF)
Jean Bonnet, Sylvie Cieply, Marcus Dejardin
Financial Constraints on New Firms: Looking for Regional Disparities
Financial constraints affecting new firms are some of the factors most cited for impeding entrepreneurial dynamics from flourishing. This article introduces the problem of regional patterns of financial constraints. The research is conducted with regard to the French regions and the new French firms being tracked at the firm level. As regard to new firms, the research relies mainly on the use of the Information System on New Firms (SINE) that is released by the French National Institute of Statistical and Economic Studies (INSEE). The SINE dataset does not refer to the general entrepreneurial intention in the French population but to entrepreneurial projects that are concretized in new firms. As a consequence, entrepreneurial intentions that are aborted due to financial constraints are not reported. The point is of importance as the firm financing conditions are considered. First, an assessment of the global situation of the banking density and activity within and between the French regions leads to the conclusion of a relatively homogeneous banking supply and banking activity, with the activity of the core-region Île-de-France appearing however more contrasted. Second, the financial constraints affecting new firms are distinguished according to a four-case typology. Additionally to the "no credit rationing" situation, "weak" or "strong credit rationing" are distinguished from the "self-constraint" situation, a situation describing the case when firms do not ask for a bank loan although they declare facing financial constraints subsequently. It appears that a majority of new firms is not facing credit rationing, but also that a non-negligible share is "self-constrained". The classification is, third and finally, differentiated according to the regions. Despite the relative homogeneity of the banking supply, it appears that some regional differences may still be at work. The given explanations are still hypothetical at this stage but the empirical results suggest already that the regional dimension should definitely deserve further attention.
#0536 (PDF)
Mickey Folkeringa, Joris Meijaard, André van Stel
Innovation, strategic renewal and its effect on small firm performance
In this paper, we investigate the relationship between strategic renewal and the performance of smaller firms (less than 100 employees). We use a panel of micro data on about 1000 Dutch firms. The dataset contains information on aspects of strategic renewal, including process innovation and knowledge management. In our regression analyses we explain the variation in firm performance and we explicitly control for reversed causality, business cycle effects, sector effects, and firm age. We find that market research, an active external network for knowledge acquisition and strategic efforts into the improvement of internal processes are positively related to turnover growth. Furthermore, codification of knowledge, cooperation with partner firms and the provision of training to employees directly relates to employment growth. The results emphasize the importance of both knowledge absorption and knowledge creation to the success of innovative efforts in small firms. We find that the impact of the various measures varies with firm size. One further notable finding is that the ownership of patents negatively impacts small firm performance, particularly for the smallest firms in our sample.
#0535 (PDF)
André van Stel, David Storey, Roy Thurik, Sander Wennekers
From nascent to actual entrepreneurship: the effect of entry barriers
This exploratory study focuses on the conversion from nascent to actual entrepreneurship and the role of entry barriers in this process. Using data for a sample of countries partici-pating in the Global Entrepreneurship Monitor between 2002 and 2004, we estimate a two-equation model explaining the nascent entrepreneurship rate and the young business entre-preneurship rate, while taking into account the interrelationship between the two variables (i.e. the conversion). Furthermore various determinants of entrepreneurship reflecting the demand and supply side of entrepreneurship as well as government intervention are incor-porated in the model. We find evidence for a strong conversion effect from nascent to ac-tual entrepreneurship. We also find positive effects on entrepreneurial activity rates of la-bour flexibility and tertiary enrollment and a negative effect of social security expenditure. Concerning the effect of entry regulations we find mixed results. Using one set of entry regulation measures we find no effects whereas using data from a second source we find a weak negative effect of more burdensome entry regulations on the rate of entrepreneurship.
An updated version of this Discussion Paper can be found under #04-2006.
#0534 (PDF)
Ingrid Verheul, André van Stel, Roy Thurik
Explaining female and male entrepreneurship at the country level
Using Global Entrepreneurship Monitor data for 29 countries this study investigates the (differential) impact of several factors on female and male entrepreneurship at the country level. These factors are derived from three streams of literature, including that on entrepreneurship in general, on female labor force participation and on female entrepreneurship. The paper deals with the methodological aspects of investigating (female) entrepreneurship by distinguishing between two measures of female entrepreneurship: the number of female entrepreneurs and the share of women in the total number of entrepreneurs. The first measure is used to investigate whether variables have an impact on entrepreneurship in general (influencing both the number of female and male entrepreneurs). The second measure is used to investigate whether factors have a differential relative impact on female and male entrepreneurship, i.e., whether they influence the diversity or gender composition of entrepreneurship. Findings indicate that – by and large – female and male entrepreneurial activity rates are influenced by the same factors and in the same direction. However, for some factors (e.g., unemployment, life satisfaction) we find a differential impact on female and male entrepreneurship. The present study also shows that the factors influencing the number of female entrepreneurs may be different from those influencing the share of female entrepreneurs. In this light it is important that governments are aware of what they want to accomplish (i.e., do they want to stimulate the number of female entrepreneurs or the gender composition of entrepreneurship) to be able to select appropriate policy measures.
This is an updated version of discussion paper #08-2004.
#0533 (PDF)
Zoltan J. Acs, Colm O'Gorman, Laszlo Szerb, Siri Terjesen
Could The Irish Miracle Be Repeated in Hungary?
In today's global knowledge economy, foreign direct investment (FDI) plays a major role in the economic development of emerging economies. Knowledge spillovers from multinational enterprises create entrepreneurial opportunities. These knowledge spillovers could have a positive effect on entrepreneurial activity and move a country from a knowledge-using to a knowledge-creating economy. Using case studies and data from Global Entrepreneurship Monitor (GEM), we explore how inward FDI impacts indigenous entrepreneurial activity in two countries, Ireland and Hungary. We find significant differences in entrepreneurial activity between Ireland and Hungary and suggest that enterprise development policies should focus on enhancing knowledge spillovers from FDI, increasing human capital and promote occupational choice, and enable the commercialization of new technology.
updated version
#0532 (PDF)
Zoltan J. Acs, David B. Audretsch, Pontus Braunerhjelm, Bo Carlsson
Growth and Entrepreneurship: An Empirial Assessment
This paper suggests that the spillover of knowledge may not occur automatically as has typically been assumed in models of endogenous growth. Rather, a mechanism is required that serves as a conduit for the spillover and commercialization of knowledge from the source creating it to the firm actually commercializing the new ideas. In this paper, entrepreneurship is identified as one such mechanism facilitating the spillover of knowledge. Using a panel of entrepreneurship data for 18 countries, empirical evidence is found that in addition to measures of R&D and human capital, entrepreneurial activity also serves to promote economic growth.
#0531 (PDF)
Holger Patzelt, Dodo zu Knyphausen-Aufseß, Yasmin Habib
Portfolio strategies of life science venture capital firms in the USA and Europe
Motivated by the different development stages of both, the venture capital (VC) as well as the life science industry in the USA and Europe, we investigate portfolio strategies of US-American and European VC firms active in this sector. We analyse portfolios of 88 VCs financing a total of 1050 life science ventures. Our results show that US life science VCs are equally likely to have a focus on early stage ventures and to diversify across investment stages as their European counterparts. However, the latter invest more in the US industry than vice versa, more in traditional life science technologies developing therapeutics and diagnostics, and less in new medical technology and healthcare/IT firms. Regarding the VCs' internationalisation strategies, our results reveal that VCs investing globally and US VCs focusing on their home market invest more in medical technology and healthcare/IT and less in diagnostics firms than European VCs with European investees only. We conclude that European life science ventures developing medical and healthcare/IT technologies should internationalise early enough into the USA in order to access the US VC market. Therapeutics and diagnostics companies in the USA, on the other hand, may find good opportunities to raise VC in Europe.
#0530 (PDF)
Max Keilbach
Quantitative, Non-Experimental Approaches to the Microeconomic Evaluation of Public Policy Measures - A Survey
The objective of evaluating public policy measures is to assess its implications and thus to obtain a measure for weather the respective program has been successful. In this paper, we consider and classify microeconomic and microeconometric approaches to measuring this success. To do so, the evaluation problem is outlined and three estimation priciples are presented. For each of these, underlying assumptions are identified and the consequences of their violation discussed.
#0529 (PDF)
Isabel Grilo, Roy Thurik
Entrepreneurial engagement levels in the European Union
A multinomial logit model and survey data from the 25 EU member states and the US are used to establish the effect of demographic and other variables on various entrepreneurial engagement levels. These engagement levels range from "never thought about starting a business" to "thinking about it", "taking steps for starting up", "having a young business", "having an older business" and "no longer being an entrepreneur". Data of the 2004 Entrepreneurship Flash Eurobarometer survey containing over 13,500 ob-servations is used. Other than demographic variables such as gender, age, education level and whether par-ents are self-employed, the set of explanatory variables used includes country specific effects, measures of risk tolerance, internal and external locus of control and four perceptions of 'obstacles'. The 'obstacle' vari-ables include the perception by respondents of administrative complexities, of availability of financial sup-port, of accessibility of information for start-up and whether the current economic climate is favorable. Among the four perception variables only administrative complexities displays an unambiguous obstacle profile in that its presence has a significant negative impact on higher entrepreneurial engagement levels. Country effects suggest a clear underperformance of Europe relative to the US in less mature entrepreneu-rial phases.
#0528 (PDF)
Georgios Fotopoulos
Twin - Peaks in E.U. Regional Productivity Dynamics: a nonparametric analysis
Working within the 'distributional approach', this research offers evidence, based on empirical density estimates and modality tests, of past polarization in regional labour productivity in EU-15. Most importantly, it provides evidence on the related ergodic density which suggests that this polarization may persist in the future. This past and probably future polarization is primarily related to the service sector of the regional economies and not to manufacturing industries sector.
#0527 (PDF)
Zoltan J. Acs, David B. Audretsch, Pontus Braunerhjelm, Bo Carlsson
The Knowledge Spillover Theory of Entrepreneurship
Contemporary theories of entrepreneurship generally focus on the decision-making context of the individual. The recognition of opportunities and the decision to commercialize them is the focal concern. While the prevalent view in the entrepreneurship literature is that opportunities are exogenous, the most prevalent theory of innovation in the economics literature suggests that opportunities are endogenous. This paper bridges the gap between the entrepreneurship and economic literature on opportunity by developing a knowledge spillover theory of entrepreneurship. The basic argument is that knowledge created endogenously via R&D results in knowledge spillovers. Such spillovers give rise to opportunities to be identified and exploited by entrepreneurs. Our results show that there is a strong relationship between knowledge spillovers and new venture creation.
#0526 (PDF)
Georgios Fotopoulos
A Business-Demographics Adjusted Shift-Share Analysis: the effects of business demography on regional employment and output growth
This paper proposes a business-demographics adjusted shift-share analysis. This can be used when data availability does not allow direct association of employment changes to business demographics at the regional level. The method may be also used as an exploratory step before any explanatory econometric work is undertaken as a means of identifying classes of potential control variables. Applying the method to Greek data suggests that firm-size heterogeneity should not be ignored, that local conditions matter more than regional economic structure and that the latter are not symmetrical across sectors when it comes to the effects of business demographics on regional employment or output growth.
#0525 (PDF)
Isabel Grilo, Roy Thurik
Determinants of entrepreneurial engagement levels in Europe and the US
Determinants from different streams of literature and spanning different disciplines are used to explain entrepreneurial decisions. A multinomial logit model and survey data from the old 15 EU member states, Norway, Iceland, Liechtenstein and the US are used to establish the effect of demographic and other variables on various entrepreneurial engagement levels. These engagement levels range from "never thought about starting a business" to "thinking about it", "taking steps for starting up", "having a young business", "having an older business" and "no longer being an entrepreneur". Data of two Entrepreneurship Flash Eurobarometer surveys (2002 and 2003) containing over 20,000 observations are used. Other than demographic variables, the set of explanatory variables used includes the perception by respondents of ad-ministrative complexities, of availability of financial support and of risk tolerance, the respondents' prefer-ence for self-employment and country specific effects. The most striking result is that the perception of lack of financial support has no discriminative effect across the various levels of entrepreneurial engagement.
An updated version of this discussion paper can be found under #02-2007.
#0524 (PDF)
Isabel Grilo, Roy Thurik
Latent and actual entrepreneurship in Europe and the US: some recent developments
This paper uses 2004 survey data from the 15 old EU member states and the US to explain country differences in latent and actual entrepreneurship. Other than demographic variables such as gender, age and education, the set of covariates includes the perception by respondents of administrative complexities, of availability of financial support and of risk tolerance as well as country-specific effects. A comparison is made with results using a similar survey in 2000. While a majority of the surveyed population identifies lack of financial support as an obstacle to starting a new business, the role of this variable in both latent and actual entrepreneurship appears to be even more counterintuitive in 2004 than in 2000: it has no impact on actual entrepreneurship and is positively related to latent entrepreneurship. Administrative complexities, also perceived as an obstacle by a large majority of the population, have the expected negative impact both for latent and actual entrepreneurship in both years. Country-specific effects are important both for latent and actual entrepreneurship and the comparison of 2000 and 2004 results suggests that, once all other factors are controlled for, an improvement in actual entrepreneurship in the EU relative to the US has taken place in the last four years. However, in terms of unweighted averages actual entrepreneurship remained about the same. Latent entrepreneurship dropped while this drop seems to have occurred evenly in the US and the EU member states.
#0523 (PDF)
Andrew E. Burke, Felix R. FitzRoy, Michael A. Nolan
What makes a Die-Hard Entrepreneur? Trying, or Persisting in, Self-Employment
The paper makes three contributions to the economics literature on entrepreneurship. We offer a new measure of entrepreneurship which accounts for variations in persistence in self-employment. We outline an econometric methodology to account for this approach and find that it is superior to probit/logit models which have dominated the literature. While our results indicate that this existing literature is good at explaining an individual's propensity to try self-employment, we find that entrepreneurial persistence is determined by a different model and unearth some new insights into the roles of early career experience, finance, role models, gender and the unemployment push effect.
#0522 (PDF)
Max Keilbach, Dirk Engel
Firm Level Implications of Early Stage Venture Capital Investment - An Empiri cal Investigation
The paper analyses the impact of venture capital finance on growth and innovation activities of young German firms. Among other variables, our panel of firm data includes data on venture capital funding and patent applications. With statistical matching procedures we draw an adequate control group of non­venture funded but otherwise comparable firms. The analysis confirms other findings that venture funded firms in Germany have higher number of patent applications than those in the control group. However, they do so already before the venture capitalists engagement. After this engagement, the number of patent applications does not differ significantly from that of the control group, however the venture funded firms display significantly larger growthrates. We conclude that the higher innovation output of venture funded firms is mainly driven by the selection process made by the venture capitalist.
#0521 (PDF)
Zoltan J. Acs, David B. Audretsch
Entrepreneurship and Innovation
#0520 (PDF)
Lorraine Uhlaner, Roy Thurik
Post-Materialism Influencing Total Entrepreneurial Activity Across Nations
The study of predictors of entrepreneurial activity at the country level has been dominated by economic influences. However, the relative stability of differences in entrepreneurial activity across countries suggests that other forces such as institutional and/or cultural factors are at play. The objective of this paper is to explore more specifically how post-materialism may help to explain differences in entrepreneurial activity across countries. A distinction is made between nascent entrepreneurship, new business formation and a combination of the two, referred to as total entrepreneurial activity, as defined within the Global Entrepreneurship Monitor. The model is also tested for the rate of established businesses, as distinct from nascent and young firms. The measure for post-materialism is based upon Inglehart's four-item post-materialism index. Because of the known interactions between economic, cultural, and social factors found in previous research, a set of economic, demographic and social factors is included to investigate the independent role post-materialism plays in prediction of entrepreneurial activity levels. In particular, per capita income is used to control for economic effects. Education rates at both secondary and tertiary levels are used as demographic variables. Finally, life satisfaction is included to control for social effects. Data from 27 countries, world-wide, are used to test the hypotheses, based on intersecting data available from the Global Entrepreneurship Monitor, World Values Survey and other published sources. Findings confirm the significance of post-materialism in predicting total entrepreneurial activity and more particularly, new business formation rates, even when controlling for these other factors.
This is an updated version of discussion paper #07-2004.
#0519 (PDF)
Sharon A. Alvarez
Two Theories of Entrepreneurship: Alternative Assumptions and the Study of Entrepreneurial Action
#0518 (PDF)
Simon C. Parker
The Economics of Entrepreneurship: What We Know and What We Don't
This introductory, non-technical, article offers a reflective overview of what Economics adds to our understanding of entrepreneurship. It is designed primarily to showcase to young entrepreneurship scholars several interesting research questions and a toolbox of methods to answer them. First, I will illustrate the kinds of questions that can be posed and answered using Economics. Then I will present and discuss a selective list of "canonical" theoretical and empirical models that form the intellectual bedrock of the Economics of Entrepreneurship. After that, I present and discuss some well-established theoretical contributions and empirical findings that have been generated by the approach. I conclude by discussing aspects of "What we don't know" and should. This part of the article identifies several ideal future trends in research that build on and complement the foundations of entrepreneurship that are delineated in the main body of the article.
#0517 (PDF)
Erik Stam, Veronique Schutjens
The Fragile Success of Team Start-ups
This article describes the benefits and pitfalls of starting a firm with an entrepreneurial team, drawing on a longitudinal empirical analysis of the life course of 90 team start-ups and 1196 solo start-ups in the Netherlands. In the first three years of their existence, team start-ups perform better than solo start-ups on several success indicators. However, after this start phase, entrepreneurial teams face particular problems in realizing further growth. These team-specific bottlenecks can even threaten firm survival. In later life course phases we found a clear distinction between entrepreneurial teams with stagnating growth and teams that succeeded in solving these problems and went on to realize further growth.
#0516 (PDF)
Heike Grimm, David B. Audretsch
Das Enable-Programm im Kontext der Europäischen Politik für Unternehmerische Initiative
Der Europäische Rat von Lissabon hat ein klares strategisches Ziel für die Europäische Union gesetzt: "Die Europäische Union soll zum wettbewerbsfähigsten und dynamischsten wissensbasierten Wirtschaftsraum der Welt gemacht werden - einem Wirtschaftsraum, der fähig ist, ein nachhaltiges Wirtschaftswachstum mit mehr und besseren Arbeitsplätzen und einem größeren sozialen Zusammenhalt zu erzielen" (Romano Prodi, 12. November 2003). Mit dem Mandat von Lissabon hat die Europäische Union sich das Ziel gesetzt, Entrepreneurship als Hauptantrieb für Innovationen, Wettbewerbsfähigkeit und Wachstum zu fördern. Die Proklamation alleine reicht für die Schaffung eines unternehmerischen Europas allerdings nicht aus. Wir haben uns die Frage gestellt, ob und inwiefern die neue übergreifende EU-Strategie zur Förderung ökonomischen Wachstums auf regionaler Ebene umgesetzt wird und exemplarisch das ENABLE-Programm in unserer Analyse aufgegriffen.
#0515 (PDF)
Niels Noorderhaven, André van Stel, Sander Wennekers, Roy Thurik
Uncertainty Avoidance and the Rate of Business Ownership across 22 OECD Countries, 1976-2000
Persistent differences in the level of business ownership across economically developed nations have attracted the attention of scientific as well as political debate. Cultural rather than economic influences are assumed to play a decisive role. This paper deals with the influence of cultural attitudes towards uncertainty on the level of business ownership across OECD countries. First, the concepts of uncertainty and risk are elaborated, as well as their relevance for entrepreneurship. Second, cross-sectional regression analysis using data for three separate years in twenty Western countries and Japan and controlling for GDP per capita, yields evidence that in 1976 and 1988 uncertainty avoidance is positively correlated with the prevalence of business ownership. Possibly, a restrictive climate of large organizations in high uncertainty avoidance countries pushes enterprising individuals towards self-employment. However, in 2000 this positive correlation is no longer found, indicating that a compensating pull mechanism in countries with low uncertainty avoidance may have gained momentum in recent years. Third, we carry out pooled panel regressions with respect to business ownership rates in two distinct cultural country clusters for the years 1976, 1988 and 2000. In the group of high-uncertainty avoidance countries a strongly negative relationship between GDP per capita and the level of business ownership is found, suggesting that rising opportunity costs of entrepreneurship are the dominant perception in this cultural environment. In a group of low-uncertainty avoidance countries no such influence of per capita income is found, but the profits associated with being self-employed are positively associated with business ownership.
#0514 (PDF)
Sander Wennekers, André van Stel, Roy Thurik, Paul Reynolds
Nascent entrepreneurship and the level of economic development
Based upon two strands of literature, this paper hypothesizes a U-shaped relationship between a country's rate of entrepreneurial dynamics and its level of economic development. This would imply a different scope for entrepreneurship policy across subsequent stages of development. Regressing GEM's 2002 data for nascent entrepreneurship in 36 countries on the level of economic development as measured either by per capita income or by an index for innovative capacity, we find support for a U-shaped relationship. Testing our results against several control variables, evidence is again found for this relationship with economic development, in addition to significant effects of the business ownership rate (+), social security expenditure (-), aggregate taxes (+) and population growth (+). The results suggest that a 'natural rate' of nascent entrepreneurship is to some extent governed by 'laws' related to the level of economic development. For the most advanced nations, improving incentive structures for business start-ups and promoting the commercial exploitation of scientific findings offer the most promising approach for public policy. Developing nations, however, may be better off pursuing the exploitation of scale economies, fostering foreign direct investment and promoting management education.
#0513 (PDF)
Andrew Burke, Stuart Fraser
The Impact of Intellectual Property Rights on Self-Employed Entrepreneurship: an International Analysis
The importance of IPR regimes for large firm innovation is well documented but less is known about their impact on typically less innovative self-employed entrepreneurship. The paper sets out to estimate the net effect of the various elements that comprise an IPR regime including the political system, the laws, and institutions as well as a general familiarity with and respect for IPR related products. Cumulatively, the analysis indicates that a well developed IPR regime has a net positive effect on the self-employed sector. Since the self-employed sector is possibly the only segment of the enterprise base where IPRs may be expected to have a negative effect it provides a useful contribution to our empirical understanding of the welfare effects of IPRs on the entrepreneurial economy more widely.
#0512 (PDF)
Andrew Burke, Holger Görg, Aoife Hanley
Market Concentration, Market Dynamism and Business Survival
The paper uses a unique dataset comprising the population of new ventures that enter the UK market in 1998. We argue that we would expect the effect of market concentration on firm survival to be different according to whether an industry is static (low entry and exit) or dynamic. In our empirical analysis we find support for this hypothesis. Industry concentration rates reduce the survival of new plants but only in markets marked by low entry and exit rates. Specifically, a 10 percent increase in the 5-firm concentration ratio or the Herfindahl index in a dynamic market, raises the survival rate of new ventures by approximately 2 percent. Our results suggest greater leniency towards more dominant firms in industries showing buoyant entry and exit rates.
updated version
#0511 (PDF)
Mark Sanders
The Origin of Technical Change; Knowlege Generation, Opportunities and Entrepreneurship
#0510 (PDF)
Martin Carree, Roy Thurik
Understanding the role of entrepreneurship for economic growth
#0509 (PDF)
Frank G. van Oort, Erik Stam
Agglomeration economies and entrepreneurship: testing for spatial externalities in the Dutch ICT industry
Although there is growing evidence on the role of agglomeration economies in the formation and growth of firms, both the concepts of agglomeration economies and entrepreneurship tend to be ambiguously defined and measured in the literature. In this study, we aim to improve the conceptualisations and measures of agglomeration economies and entrepreneurship. Indicators of agglomeration economies are analysed in clearly defined urban regimes on three spatial scales in the Netherlands - national zoning, labour market connectedness, and urban size. This is done in order to uncover their effect on two entrepreneurial phases in the firm life cycle - new firm formation and the growth of incumbent firms in the relatively new ICT industry in the Netherlands. In comparison with new firm formation, the growth of incumbent firms is not so much related to spatial clustering of the ICT industry and other localized sources of knowledge economies associated with urban density. Instead, knowledge as an input for growth of incumbent firms is associated with more endogenous (firm internal) learning aspects, reflected by a significant correlate with R&D-investments. Also the effect of local ICT firm competition differs between the two types of firms: a positive effect on new firm formation, but a negative effect on incumbent firm growth. In general, agglomeration economies have stronger effects on the formation of ICT firms than on the growth of ICT firms.
#0508 (PDF)
Zoltan J. Acs, David B. Audretsch, Pontus Braunerhjelm, Bo Carlsson
The Missing Link
The intellectual breakthrough contributed by the new growth theory was the recognition that investments in knowledge and human capital endogenously generate economic growth through the spillover of knowledge. Endogenous growth theory does not explain how or why spillovers occur. The missing link is the mechanism converting knowledge into economically relevant knowledge. This paper develops a model that introduces a filter between knowledge and economic knowledge and identifies entrepreneurship as a mechanism that reduces the knowledge filter. A cross-country regression analysis over the period 1981-2001 provides empirical support for the model. We conclude that public policies facilitating knowledge spillovers through entrepreneurship may be an important new approach to promoting economic growth.
#0507 (PDF)
David B. Audretsch, M. A. Carree, André van Stel, Roy Thurik
Does Self-Employment Reduce Unemployment?
This paper investigates the dynamic interrelationship between self-employment and unemployment rates. On the one hand, unemployment rates may stimulate start-up activity of self-employed. On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods. These two effects have resulted in considerable ambiguities about the interrelationship between unemployment and entrepreneurial activity. This paper introduces a two-equation vector autoregression model capable of reconciling these ambiguities and tests it for data of 23 OECD countries over the period 1974-2002. The empirical results confirm the two distinct relationships between unemploy-ment and self-employment, i.e. "refugee" and "entrepreneurial" effects. We also find that the "entrepreneu-rial" effects are considerably stronger than the "refugee" effects.
#0506 (PDF)
Rui Baptista, Vítor Escária, Paulo Madruga
Entrepreneurship, Regional Development and Job Creation: the Case of Portugal
This paper investigates whether a high level of new business formation in a region stimulates employment in that region. The study looks at the lag structure of these effects, using a data set covering a fairly large time span (1982-2002). The indirect supply-side effects of new firm births, whether due to greater competition, efficiency or innovation, seem to be at least as important as the direct effects associated with employment creation by the new entrants. However, such supply-side effects only occur after a time lag of about eight years, leading to a pattern of lagged effects that is somewhat u-shaped. This finding suggests that new entrants bring about improvements to overall regional competitiveness, but that such improvements only become significant after some time.
#0505 (PDF)
André van Stel
COMPENDIA: Harmonizing business ownership data across countries and over time
This paper presents a harmonized data set over the period 1972-2002, containing two-yearly data on the number of non-agricultural business owners and the size of the labour force for 23 OECD countries, as well as the quotient of these two variables which is called the business ownership rate of a country. The data set is called COMPENDIA, which means COMParative ENtrepreneurship Data for International Analysis. It has been constructed making use of OECD statistics as well as other relevant sources. We make an attempt to make business ownership rates comparable across countries and over time.
#0504 (PDF)
André van Stel, Martin Carree, Roy Thurik
The effect of entrepreneurial activity on national economic growth
Entrepreneurial activity is generally assumed to be an important aspect of the organization of industries most conducive to innovative activity and unrestrained competition. This paper investigates whether total entrepreneurial activity influences GDP growth for a sample of 36 countries. We test whether this influence depends on the level of economic development measured as GDP per capita. Adjustment is made for a range of alternative explanations for achieving economic growth by incorporating the Growth Competitiveness Index. We find that entrepreneurial activity by nascent entrepreneurs and owner/managers of young businesses affects economic growth, but that this effect depends upon the level of per capita income. This suggests that entrepreneurship plays a different role in countries in different stages of economic development.
This is an updated version of discussion paper #34-2004.
#0503 (PDF)
Mark Sanders
Market Size or Acceleration Effects; Comparing Hy pothese s to Explain Skill Biased Technical Change
Skill-biased technical change has occupied empirical economists for much of the 90s. However, the empirical literature has not progressed much beyond observing a positive correlation between technology indicators and demand shifts. Two hypotheses on the root causes of skill biases in technical change, the acceleration effect and the market size effect, have been suggested in the literature. In this paper both are studied in a unified theoretical framework to derive the sufficient and necessary conditions for both hypotheses. Confronting them with the evidence the paper concludes that it favors the acceleration hypothesis but further empirical work needs to be done.
#0502 (PDF)
Michael Fritsch, Pamela Mueller
The Persistence of Regional New Business Formation-Activity over Time - Assessing the Potential of Policy Promotion Programs
We investigate regional differences in the level and the development of regional new business formation activity. There is a pronounced variance of start-up rates across the regions. The level of regional new firm formation is rather path-dependent so that changes are relatively small. The main factors determining the level of regional start-ups are innovation and entrepreneurship. These factors also seem to be responsible for changes in the level of regional new business formation. In addition, unemployment plays a role. Steering innovation and creating an entrepreneurial atmosphere could be an appropriate starting point for policy measures that try to promote start-ups. Our empirical evidence strongly suggests that such measures may have significant effect only in the long run.
#0501 (PDF)
Isabel Grilo, Jesús Maria Irigoyen
Entrepreneurship in the EU: to wish and not to be
It is now widely acknowledged that the entrepreneurial capacity in an economy is a key determinant of economic growth and productivity improvements. This paper uses survey data from the 15 EU Member States and the US to establish the effect of demographic and other variables on latent and actual entrepreneurship. Latent entrepreneurship is measured by the probability of a declared preference for self-employment over employment. Other than demographic variables such as gender, age and education level, the set of explanatory variables used includes country specific effects, the perception by respondents of administrative complexities and of availability of financial support and a rough measure of risk tolerance. The most striking result is the lack of explanatory power of the perception of lack of available financial support in the latent entrepreneurship equation.

Papers 2004 [back to top] Top

#0446 (PDF)
Charles Wessner
Entrepreneurship and the Innovation Ecosystem Policy Lessons from the United States
#0445 (PDF)
Andrew Burke, Aoife Hanley
Bank Interest Margins and Business Start-Up Collateral: Testing for Convexity
The paper investigates the relationship between bank interest rate margins and collateral for loans issued to new ventures. The analysis finds a convex U-shaped relationship. The results indicate that while provision of collateral initially reduces bank exposure to risk (through security, more optimal levels of capital and lower moral hazard among entrepreneurs) that beyond a point the positive risk-wealth association gives rise to greater risk taking propensity among entrepreneurs and ultimately higher interest rates. This indicates that a lender's pricing policy may even somewhat help to level the competitive playing field between ventures launched by higher and moderately wealthy entrepreneurs.
#0444 (PDF)
Paul Reynolds
Entrepreneurship over Time: Measures of Activity and Recent Changes in the US: 1993-2002
Data from three different research programs, all measuring the prevalence rate of new firm creation in the US adult population, suggest that from 1993 to 2002 the level of entrepreneurship may have increased up to three fold, from 4 to over 13 percent of those 18-74 years of age - a shift from one in twenty adults to one in six adults. In 1993 entrepreneurial activity was more prevalent than marriages or parenting, by 2001 it was twice as common as marriages and parenting combined. Current evidence indicates that the high level of participation in start-ups in 1999-2002 was not reflected in the presence of new firms, suggesting that a smaller proportion of start-ups made the transition to an operating business. This may reflect a "rush to entrepreneur" among those with insufficient preparation or resources to successfully launch a new firm.
#0443 (PDF)
Henry R. Hertzfeld, Albert N. Link, Nicholas S. Vonortas
Intellectual Property Protection Mechanisms in Research Partnerships
A set of U.S.-based companies is investigated regarding the effectiveness of intellectual property protection mechanisms (IPPMs) in the formation of research partnerships. Patents are the most frequently used IPPM to protect both background and foreground knowledge in partnerships. Other IPPMs are used to protect know-how, especially in the early, forming stages of a partnership. Existing IP titles are quite useful when negotiating new partnerships. IPR negotiations are reported to be more complex in horizontal partnerships and when universities are involved.
#0442 (PDF)
Doga Kayalar Erdem, David B. Audretsch
Determinants of Scientist Entrepreneurship: An integrative research Agenda
#0441 (PDF)
Michael Fritsch
Entrepreneurship, Entry and Performance of New Businesses Compared in two Growth Regimes: East and West Germany
The paper provides an outline of the concept of regional growth regimes and empirically illustrates the relevance of the concept. The empirical examples are entrepreneurship, entry and the performance of new businesses in East and West Germany. The differences of the factors determining the formation of new businesses as well as their development between these two growth regimes are immense and clearly demonstrate the relevance of region specific factors.
#0440 (PDF)
Rui Baptista, Roy Thurik
The Relationship between Entrepreneurship and Unemployment: is Portugal an Outlier?
The present paper examines the relationship between entrepreneurship, as measured by the variation in business ownership rates, and unemployment in Portugal in the period from 1972-2002. It concludes that Portugal has been a relative outlier in regard to the effects of entrepreneurship on unemployment when compared with the OECD average. Although the nature of entrepreneurship may be different in the Portuguese case, due to a high proportion of "micro-businesses" created for subsistence which have little impact on growth and employment, this factor does not seem to be the primary reason for the observed discrepancies. The differences between observed levels of unemployment for Portugal and those predicted by a model based on OECD data seem to be mostly associated with macroeconomic fluctuations associated with European business cycles and EU "cohesion" funding, as well as with adjustment costs to new technology adoption which lead to productivity slowdowns, thus increasing the time lag for the effect of entrepreneurship on employment beyond the OECD average.
#0439 (PDF)
Rui Baptista
Culture, Institutions and Government Attitudes towards New Firm Entry
This paper examines the relationship between cultural values, political institutions and government regulation of entry. For this, it couples data for 53 countries from a variety of sources in comparative political economy and cross-cultural psychology. A society's general attitude towards risk and uncertainty and power inequality are embedded in its institutions; hence, such values should mediate the intensity with which economic incentives affect regulatory procedures and outcomes. Results suggest that entry regulation levels are correlated with the way people in different countries deal with risk and uncertainty and accept inequality of power in their dealings with government institutions. Moreover, these intrinsic cultural values act as moderators for the correlation between economic and political variables, and regulatory intensity. Regulation thus emerges a response from government institutions to societies' needs deriving from cultural values.
#0438 (PDF)
Lawrence A. Plummer, Zoltan J. Acs
Penetrating the "Knowledge Filter" in Regional Economies
New knowledge in the form of products, processes and organizations leads to opportunities that can be exploited commercially. However, converting new ideas into economic growth requires turning new knowledge into economic knowledge that constitutes a commercial opportunity. Acs, Audretsch, Braunerhjelm, and Carlsson (2003) develop a model that introduces a "knowledge filter" between new knowledge and economic knowledge and identifies both new ventures and incumbent firms as the mechanism that reduces the knowledge filter and increases regional growth. This paper tests the hypotheses that new venture creation is a better mechanism than the absorptive capacity of incumbent firms for converting new knowledge into economic knowledge. Our results support the contention that new venture creation is a superior method of penetrating the regional "knowledge filer" than incumbent firms.
#0437 (PDF)
Max Keilbach, David B. Audretsch
Entrepreneurship Capital - Determinants and Impact on Regional Economic Performance
The literature focusing on the geography of entrepreneurship has developed some-thing of a schizophrenic approach. On the one hand is a series of studies, which have tried to identify characteristics specific to particular regions that account for inter-spatial variations in entrepreneurship. On the other hand is a literature that has ex-amined the impact of entrepreneurship on the economic performance of that region. While the emergence of a statistical link between economic performance and entre-preneurial activity is of considerable interest to both scholars and policy makers alike, it considers the amount of entrepreneurial activity specific to a region as an exogenous endowment. Thus, little guidance is provided as to how policy could ac-tually influence economic performance by generating more entrepreneurial activity. The purpose of this paper is explicitly link these two disparate literatures by suggest-ing that entrepreneurial activity is not exogenous, as this second strand of literature implies, but rather, as the earlier studies indicated, shaped by a number of factors specific to the particular location. Moreover, if entrepreneurship capital cannot be assumed to be exogenous, a single equation estimation would lead to biased results. We therefore estimate both equations simultaneously using three stage least square estimation. The empirical evidence suggests that the degree of spatially specific entrepreneur-ship capital is shaped by regional-specific factors reflecting both entrepreneurial op-portunities and the entrepreneurial capabilities. In turn, the extent of entrepreneur-ship capital has a positive impact on regional economic performance.
#0436 (PDF)
Michael Fritsch, Pamela Mueller
The Effects of New Business Formation on Regional Development over Time
In our analysis of the impact of new business formation on regional employment change we identified considerable time lags. We investigated the structure and extent of these time lags by applying the Almon lag model and found that new firms can have both a positive and a negative effect on regional employment. The results indicate that the indirect effects of new business formation (crowding-out of competitors, improvement of supply conditions and improved competitiveness) are of greater magnitude than the direct effect, i.e. the jobs that are created in the new entities. The peak of the positive impact of new businesses on regional development is reached about eight years after entry.
#0435 (PDF)
André van Stel, Viktor Stunnenberg
Linking Business Ownership and Perceived Administrative Complexity: An Empirical Analysis of 18 OECD Countries
Administrative burdens are known to be a major business constraint for incumbent SMEs in modern economies. Far less is known about the influence of these burdens on the startup of new firms. The current paper examines to what extent perceived administrative complexity related to starting a new business influences the number of business owners across 18 OECD countries. We test this relationship combining data on business ownership from EIM's COMPENDIA data base and data on perceived administrative complexity from the Eurobarometer public opinion surveys coordinated by the European Commission. Our regression model enables to explicitly control for the influence of unemployment on the level of business ownership ('refugee effect'). We also control for risk tolerance and access to finance. Our results suggest that perceived administrative complexity has a negative impact on the level of business ownership. However, the effect is not immediate but rather seems to emerge in the long run.
#0434 (PDF)
André van Stel, Martin Carree, Roy Thurik
The effect of entrepreneurship on national economic growth: an analysis using the GEM database
The increased importance of knowledge as a source of competitiveness for modern economies suggests that the organization of industries most conducive to innovative activity and unrestrained competition will be linked to higher growth rates. Entrepreneurial activity is generally assumed to be an important aspect of this organization. In the present paper we investigate whether a new and promising concept, <em>Total Entrepreneurial Activity</em>, influences GDP growth for 36 countries in a recent period. We will also test whether this influence depends upon the level of economic development measured as GDP per capita. With this test we aim to investigate to what extent the role of entrepreneurship has changed in the last decades of the 20th century. Although the limited number of observations does not allow for many competing explanatory variables, we will examine the role of the so-called <em>Growth Competitiveness Index</em>. This variable captures a range of alternative explanations for achieving sustained economic growth. In addition, we incorporate the initial level of economic development to correct for convergence. We find that entrepreneurial activity indeed affects economic growth, but that this effect depends upon the level of per capita income. This suggests that entrepreneurship plays a different role in countries in different stages of economic development.
An updated version of this discussion paper can be found under #04-2005.
#0433 (PDF)
Adriaan J. van Stel, David J. Storey
The link between firm births and job creation: Is there a Upas Tree effect?
This paper examines the relationship between firm births and job creation in Great Britain. We use a new data set for 60 British regions, covering the whole of Great Britain, between 1980 and 1998. The relationship between new-firm startups and employment growth has previously been examined either with no time-lag or with only a short period lag. We find, for GB as a whole, no significant relationship between startups and employment creation in the 1980s, but a negative relationship for the 'low enterprise' area of the North East of England. For the 1990s we find a significant positive relationship for GB as a whole but for Scotland, which focussed policy on startups, a negative relationship. We feel this raises questions over policies designed to raise rates of new firm formation as a strategy for employment creation, particularly in 'low enterprise' areas.
#0432 (PDF)
André van Stel, Bart Diephuis
Business dynamics and employment growth: a cross-country analysis
This paper examines the relationship between business dynamics (entry and exit of firms) and employment growth at the country-industry level. We use a cross-country data set with harmonized data on numbers of entries and exits for a selection of fast-growing and innovative industries in six developed economies. In our regression analysis we allow for separate effects of both the extent of business dynamics (volatility of firms) and the composition of business dynamics (net-entry of firms). We also test for the existence of an 'optimal' level of business volatility, possibly indicating that entry and exit levels are too high in certain industries. We find positive employment effects of net-entry rates, both for manufacturing industries and for services industries. Regarding volatility, we find a positive effect for manufacturing but no significant effect for services. This implies that different government policies may be required to achieve growth in these sectors. We find no evidence for an 'optimal' level of business volatility.
#0431 (PDF)
Michael Fritsch, Udo Brixy, Oliver Falck
The Effect of Industry, Region and Time on New Business Survival - A Multi-Dimensional Analysis
We analyze the effect of industry, region and time on new-business survival rates by means of a multi-dimensional approach. The data relate to West German districts in the 1983-2000 period. The survival chances of start-ups tend to be relatively low in industries characterized by a high minimum efficient size and high numbers of entries. Regional growth has a rather pronounced positive influence on survival rates, while the relationship between the nationwide development of the particular industry and survival tends to be negative. We also find a remarkably high level of spatial autocorrelation.
#0430 (PDF)
Isabel Grilo, Roy Thurik
Determinants of entrepreneurship in Europe
This paper presents an Eclectic Framework explaining (developments in and determinants of) entrepreneurship incorporating different streams of literature and spanning different disciplines. The Eclectic Framework integrates factors shaping the demand for entrepreneurship on the one hand, with those influencing the supply of entrepreneurs on the other hand. It also creates insight into the role of public policy identifying the channels through which the demand or the supply of entrepreneurship can be shifted. In its empirical part the present paper estimates a multinomial logit using survey data from the 15 EU member states, Norway, Iceland, Liechtenstein and the US to establish the effect of demographic and other variables on various entrepreneurial engagement levels. Other than demographic variables, the set of explanatory variables used includes the perception by respondents of administrative complexities, of availability of financial support, a rough measure of risk tolerance, the respondents' preference for self-employment and country specific effects. The most striking result is that the perception of lack of financial support has no discriminative effect across the various levels of entrepreneurial engagement.
An updated version of this discussion paper can be found under #25-2005.
#0429 (PDF)
Enrico Santarelli
Patents and the Technological Performance of District Firms Evidence for the Emilia-Romagna Region of Italy
This paper investigates some crucial aspects of the recent development of industrial districts in the Emilia-Romagna region of Italy, where this type of spatial agglomeration of industrial firms has flourished since the period immediately after the Second World War. In particular, it is aimed at comparing the technological strength (in terms of patents registered with the European Patent Office) of innovative firms located within and outside industrial districts, in order to determine whether the prediction that innovative activity favors those firms or industries with direct access to knowledge producing inputs applies also to the case of industrial districts in the Emilia-Romagna region. The analysis deals with the population of firms with their headquarters in the region which registered at least one patent with the European Patent Office during the 1986-1995 period. Results from panel model estimates show that being located within an industrial district resulted in a technological advantage during the overall 1986-1995 period. However, on breaking down this period into two sub-periods (1986-1990 and 1991-1995) it is found that such advantage was strong in the first one, whereas it was lost in the first half of the 1990s.
#0428 (PDF)
Francesca Lotti, Enrico Santarelli, Marco Vivarelli
Gibrat's Law and Market Selection
According to Gibrat' Law of Proportionate Effect, the growth rate of a given firm is independent of its size at the beginning of the period examined. In contrast to the previous literature on the subject, this paper seeks to test the Law by taking account of both the entry process and the role of survival/failure in reshaping a given population of firms over time. It does so by focusing on the entire population of firms (including newborn ones) in the Italian Radio, TV & Telecommunications equipment industry and tracking them over seven years. Consistently with the previous literature, it finds that - in general - Gibrat' Law is to be rejected, since smaller firms tend to grow faster than their larger counterparts. However, the paper' main finding is that this rejection of Gibrat' Law may be due to market dynamics and selection. In other words, it is due to the entry process and the presence of transient smaler firms. Indeed, whilst it is found that Gibrat' Law has to be rejected over a seven-year period during which both incumbent and newborn firms are considered, for both sub-populations of surviving firms a convergence towards Gibrat-like behavior over time can be detected. Thus, market selection "leans" the original population of firms and the resulting industrial "ore" (mature, larger, well-established and most efficient firms) does not seem to depart from a Gibrat-like patern of growth.
#0427 (PDF)
Julie Ann Elston, Richard Hofler, Junsoo Lee
Dividend Policy and Institutional Ownership: Empirical Evidence using a Propensity Score Matching Estimator
This study investigates the relationship between institutional ownership and dividend payout behavior of the firm in Germany. Using a propensity scoring method estimator to control for endogeneity problems, we find evidence that neither institutional ownership nor bank control is statistically significant in determining dividend payouts. These findings are consistent with stylized facts regarding the nature of the German institutional environment, which, through the rights of management to retain a significant percentage of the net profits of the firm and lack of tax incentives, reduce agency costs associated with conflicts between management and shareholder interests regarding use of the firm's free cash flow.
#0426 (PDF)
Julie Ann Elston, Robert S. Chirinko
Finance, Control, and Profitability: The Influence of German Banks
Bank intermediated finance has been cited frequently as the preferred means for channeling funds from savers to firms. Germany is the prototypical economy where universal banks allegedly exert substantial influence over firms. Despite frequent assertions about the considerable power of German banks and the advantages of a bank relation, empirical support is mixed. With a unique dataset and a focus on the fragility/sturdiness of inferences, this paper evaluates German bank influence in terms of three hypotheses :1) do bank influenced firms enjoy lower finance costs? [No]; 2) is bank influence a solution to control problems? [Yes]; 3) do bank influenced firms have higher profitability? [No]. Coupled with results about the control consequences of concentrated ownership, these results suggest that bank influence serves as a substitute control mechanism, one of several available for addressing corporate control problems.
#0425 (PDF)
Julie Ann Elston, David B. Audretsch
Can Institutional Change Impact High-Technology Firm Growth?: Evidence from Germany's Neuer Markt
To facilitate the transformation of the German economy from the traditional manufacturing industries towards emerging new technologies, a new segment of the Frankfurt exchange was introduced in 1997 - Der Neue Markt. This study provides evidence that not only did many new firms obtain funding from the Neuer Markt, but that for the first time in recent history, Germany succeeded in enabling smaller firms to grow faster than larger firms. This suggests that the new policies were not only successful in promoting a new type of firm that otherwise might not exist, but in transforming the sources of growth and innovation within the German economy.
#0424 (PDF)
Zoltan J. Acs, Laszlo Szerb, Attila Varga, Jozsef Ulbert, Eva Bodor
Az uj vallalkozasok gazdasagra gyakorolt hatasainak vizsgalata nemzetközi összehasonlitasban
The analysis of the effect of new ventures on the economy has been widely investigated over the last decade. However, the Global Entrepreneurship Monitor (GEM) international research was the first that provided a consistent and comparable estimation of the entrepreneurial activity over nations. The present study describes the most important result of the GEM research over the 2001-2003 time period with focusing on Hungary. Using the two most important rates, the Total Entrepreneurial Activity (TEA) index and the Firm Entrepreneurial Index (FEI), Hungary can be found in the middle range of the participating countries. Our situation is better in terms of regional comparison in the Central Eastern European region - Croatia, Poland, Russia and Slovenia -, and slightly better comparing to the European Union average. Since the new firm formation effect on economic growth and employment creation outweigh that of the existing companies by five to six times, Hungarian entrepreneurship policy should focus more on supporting the newly created enterprises.
#0423 (PDF)
Zoltan J. Acs, Pontus Braunerhjelm
The Entrepreneurship-Philanthropy Nexus: Implication for Internationalization
This paper examines how Sweden and the United States have been impacted by philanthropic activities, commercialization of university-based knowledge and international entrepreneurship. The analysis comprises a detailed case study of Swedish and U.S. universities, as well as a statistical analysis of the impact of philanthropy on economic growth. The results show that the United States has prompted a university system based on competition and variety, with an emphasis on philanthropy, promoting knowledge creation. International entrepreneurship has been an important mechanism by which this knowledge is globalized leading to increased economic growth. Conversely, Swedish universities were characterized by less commercialized R&D and weak links to the commercial sector, rooted traditionally in dependence on tax-financed and homogenous university structure. The Swedish model has begun to change with important implications for development in smaller domestic markets. The analysis has important implications for knowledge creation as a source of economic growth through international entrepreneurship taking advantage of globalization, especially for smaller countries.
#0422 (PDF)
Erik Lehmann, Susanne Warning, Jürgen Weigand
Governance Structures, Efficiency, and Firm Profitability
Using a panel data set of 361 German corporations for the period 1991 to 1996 we test the hypothesis that firms with more efficient governance structures have higher profitability. To determine efficiency we compare firms with respect to ownership concentration, the identity of owners, capital structure, investment and firm growth by a multi-input/multi-output Data Envelopment Analysis (DEA). This non-parametric linear programming technique considers both multiple in- and outputs. Based on the concept of pareto efficiency, it computes an efficiency score where the associated weights of the inputs and outputs are determined endogenously. The DEA efficiency scores are then used as explanatory variables in panel data regressions of profitability. Our main finding is that the efficiency scores indeed contribute significantly to explaining profitability differences between firms, even after controlling for industry effects and unobserved systematic firm effects.
#0421 (PDF)
Erik E. Lehmann
Does Venture Capital Syndication Spur Employment Growth and Shareholder Value? Evidence from German IPO Data
This study examines empirically the syndication of equity by multiple venture capitalists in Germany. Following the literature, there are mainly two competing views as to why venture capitalists syndicate investments. First, syndication can be viewed as a means of risk-sharing. Second, venture capitalists may provide important productive resources to firms, capital and information. We test hypotheses based on these two aspects. The results show that the syndication of equity and the number of venture capitalists involved cannot be fully explained by firm characteristics like size, age or industry affiliation. Although syndicated investments do not differ significantly in stock-market performance, they show significantly higher growth rates.
#0420 (PDF)
David B. Audretsch, Erik E. Lehmann
The Effects of Experience, Ownership, and Knowledge on IPO Survival: Empirical Evidence from Germany
We study the implications of ownership and its induced incentives on firm survival on the stock market for young and high-tech firms. Using a unique data set of all 341 firms listed on the Neuer Markt, the German counterpart of the NASDAQ, our results differ from studies on more traditional firms. Ownership by CEOs has no influence on firm survival when introducing measurements of human capital and intellectual property rights. This confirms assumptions that firms in the knowledge based industries differ also in their governance structure from traditional firms.
#0419 (PDF)
David B. Audretsch, Erik E. Lehmann
Financing High-Tech Growth: The Role of Debt or Equity
Using a data set of the firms listed on the Neuer Markt in Germany, this paper demonstrates that venture backed firms differ from firms with other financial resources, especially debt. Thus, the results of this study provide evidence for the hypothesis that small and innovative firms are more likely to be financed by venture capitalists instead of banks. We also provide evidence that the presence of venture capitalists enhance the growth rates of firms positively.
#0418 (PDF)
Zoltan J. Acs, Attila Varga, Luc Anselin
Regional Innovation in the US over Space and Time
Modeling the spatial aspect of growth has finally become an important subject of economics as exemplified by the increasing popularity of the new economic geography. However, new economic geography models have still not been able to develop a consistent approach to integrate innovation, space and economic growth into a coherent theoretical framework A potential reason for this is that the spatial dimension of knowledge production is still only partly understood in the empirical literature. To shed some additional light on the spatial dimension of innovation we present results of a first-cut analysis building on a recently developed cross sectional-time series data set of US innovation, private and university research and high technology employment. The novelty of this data set is that it opens up the possibilities to incorporate the time dimension into knowledge production function analysis at an appropriate level of spatial aggregation (i.e., US metropolitan areas) that has not been possible in empirical research yet.
#0417 (PDF)
Richard Florida, Sam Youl Lee, Zoltan J. Acs
Creativity and Entrepreneurship: A Regional Analysis of New Firm Formation
Understanding the factors that promote or mitigate new firm birth is crucial to regional economic development efforts, since a high level of new firm creation significantly contributes to regional economic vitality and is a major signal of a dynamic economy. The literature suggest that various factors such as unemployment, population density/growth, industrial structure, human capital, the availability of financing, and entrepreneurial characteristics significantly influence regional variation in new firm birth rates.
#0416 (PDF)
Catherine Armington, Zoltan J. Acs
Job Creation and Persistence in Services and Manufacturing
An important new literature on gross employment flows has produced a great outpouring of stylized facts. In this paper we examine one aspect of this literature through the lens of dynamic models and theories of industrial evolution. We extend the Davis and Haltiwanger methodology for analysis of the persistence of gross job creation, distinguishing the persistence of new jobs from business births and from expansions. The persistence rates are then compared with those expected in each sector if average annual job creation and destruction were distributed across the business population independently of the prior year's changes. The results provide a basis for discussing aspects of the different dynamics of job creation in services and manufacturing.
#0415 (PDF)
Zoltan J. Acs, Catherine Armington
The Impact of Geographic Differences inHuman Capital on Service Firm Formation Rates
Although human capital externalities are a key variable in theories of economic growth, there has been little investigation of the mechanism by which these externalities are realized. We examine the relationship between the local levels of human capital and firm formation rates and find that formation rates differ with the share of adults with college degrees, especially for industries that normally require college-educated founders. They also differ strongly with the local concentration of existing establishments in the same sector, especially for industries serving non-local markets, suggesting that an important mechanism is the spillover of relevant knowledge.
#0414 (PDF)
Zoltan J. Acs, Catherine Armington
New Firm Survival and Human Capital
#0413 (PDF)
Zoltan J. Acs, Catherine Armington
Employment Growth and Entrepreneurial Activity in Cities
Recent theories of economic growth have stressed the role of externalities in generating growth. Using data from the Census Bureau that tracks all employers in the whole U.S. private sector economy, we examine the impact of these externalities, as measured by entrepreneurial activity, on employment growth in Local Market Areas. We find that differences in levels of entrepreneurial activity, diversity among geographically proximate industries, and the extent of human capital are positively associated with variation in growth rates, but the manufacturing sector appears to be an exception.
#0412 (PDF)
David Audretsch, Roy Thurik
A Model of the Entrepreneurial Economy
The present paper deals with the distinction between the models of the managed and entrepreneurial economies. It explains why the model of the entrepreneurial economy may be a better frame of reference than the model of the managed economy in the contemporary, developed economies. This is done by contrasting the most fundamental elements of the managed economy model with those of the entrepreneurial economy model. Building upon Audretsch and Thurik (2000 and 2001), Audretsch, Thurik, Verheul and Wennekers (2002) and Thurik and Verheul (2003), fourteen dimensions are identified as the basis for comparing models of the entrepreneurial and the managed economy.
#0411 (PDF)
Sander Wennekers, Andre van Stel, Niels Noorderhaven, Roy Thurik
The role of Dissatisfaction and Per Capita Income in Explaining Self-Employment across 15 European Countries
This paper deals with explaining the sizable differences in the rate of self-employment (business ownership) across 15 European countries in the period 1978-2000, within a framework of occupational choice, focusing on the influence of dissatisfaction and of per capita income. Using two different measures of dissatisfaction, in addition to the level of economic development and controlling for several other variables, we find that, in addition to a negative and significant impact of per capita income, dissatisfaction at the level of societies has a positive and significant influence on self-employment levels. Both dissatisfaction with life and dissatisfaction with the way democracy works are found to influence self-employment. It is concluded that these are proxies for job dissatisfaction and at the same time represent other negative 'displacements' known to promote self-employment. The findings indirectly point at the potential importance of push factors within the incentive structures of modern economies.
#0410 (PDF)
Ingrid Verheul, Lorraine Uhlaner, Roy Thurik
Business Accomplishments, Gender and Entrepreneurial Self-Image
Drawing on Bem's psychological theory of self-perception, this paper presents and tests a model that examines the impact of business accomplishments and gender on entrepreneurial self-image and explores the definition of entrepreneurship according to Vesper's entrepreneu-rial typology. Regression techniques are used to identify those business accomplishments that university alumni associate with self-perceptions of entrepreneurship. Experience as a small business person (founding, running, and/or owning a small business) most clearly predicts en-trepreneurial self-image. Results also support predictions of both direct and indirect effects of gender as well as direct effects of education and business degree. Results of a separate expert panel study are used to rank business accomplishments according to degree of entrepreneur-ship. Results of both studies reveal stark contrasts in the implied definition of entrepreneur-ship between entrepreneurship experts (academic and practitioner alike) and the general busi-ness community (as represented by the alumni). This raises questions about the meaning of the term "entrepreneurship", what the word "entrepreneur", in particular, conveys to the gen-eral public, and the implications for practice and future research.
#0409 (PDF)
Joost van Acht, Joop Stam, Roy Thurik, Ingrid Verheul
Business Ownership and Unemployment in Japan
The influence of industrial structure, more specifically of business ownership, is investigated on the level of unemployment in Japan. The question is to what extent business ownership, i.e., entrepreneurship, can reduce the level of unemployment. It will be concluded that Japan is hardly an outlier when using a simple model of the relationship between unemployment and the rate of business ownership. The model is calibrated using recent data of 23 OECD countries. It shows a minor underestimation of the rise in unemployment in Japan in the period 1984-2002. Arguments are brought forward why this might be the case. We argue that small firms in Japan have benefitted in the past from the protective environment of the keiretsu structure. In the current process of industrial restructuring, keiretsu support is dissipating, but has not yet been adequatly replaced with a market environment conducive to the establishment and growth of entrepreneurial firms. The underestimation of the rise in unemployment is a reflection of the limited access of small firms to the market in Japan.
An updated version of this discussion paper can be found under #05-2006.
#0408 (PDF)
Ingrid Verheul, André van Stel, Roy Thurik
Explaining female and male entrepreneurship across 29 countries
The present study aims at explaining female and male entrepreneurship from a country perspective. Explanatory variables are derived from three streams of literature, including the literature on the determinants of entrepreneurship in general, on female labor force participation, and on female entrepreneurship. To test hypotheses we make use of Global Entrepreneurship Monitor data, including total entrepreneurial activity rates for both women and men for 2002, as well as a range of possible determinants from standardized national statistics. We find that female and male entrepreneurship are largely influenced by the same factors in the same direction. A remarkable exception is life satisfaction for which we find a positive impact on female entrepreneurship and no impact on male entrepreneurship. The paper pays explicit attention to several methodological aspects of investigating determinants of female and male entrepreneurship.
An updated version of this discussion paper can be found under #34-2005.
#0407 (PDF)
Lorraine Uhlaner, Roy Thurik
Post-Materialism: A Cultural Factor Influencing Total Entrepreneurial Activ-ity Across Nations
The study of predictors of entrepreneurial activity at the country level has been dominated by economic influences. However, the relative stability of differences in entrepreneurial activity across countries suggests that other forces such as institutional and/or cultural factors are at play. The objective of this paper is to explore more specifically how post-materialism may help to explain differences in total entrepreneurial activity across countries. Total entrepreneurial activity is defined as the share of adults in the total population of 18 to 64 years old who are either actively involved in starting a new business or in managing a business less than 42 months old. The measure for post-materialism is based upon Inglehart's four-item post-materialism index. Because of the known interactions between economic, cultural, and social factors found in previous research, a set of economic, demographic and social factors is included to investigate the independent role post-materialism plays in prediction of entrepreneurial activity levels. In particular, per capita income is used to control for economic effects. Education rates at both secondary and tertiary levels are used as a demographic variables. Finally, life satisfaction is included to control for social effects. Data from 28 countries, world-wide, are used to test the hypotheses, based on intersecting data available from the Global Entrepreneurship Monitor, World Values Survey and other published sources. Findings confirm the significance of post-materialism in predicting total entrepreneurial activity even when controlling for these other factors.
An updated version of this discussion paper can be found under #20-2005.
#0406 (PDF)
Zoltan J. Acs, Attila Varga
Entrepreneurship, Agglomeration and Technological Change
Technological change is a central element in macroeconomic growth explanation. Endogenous growth models take a revolutionary step towards better understanding the economic growth process by deriving technological change from profit-motivated individual behavior. In endogenous growth theory knowledge spillovers play a fundamental role in the determination of the rate of technological progress. As such the efficiency of transmitting knowledge into economic applications is a crucial factor in explaining macroeconomic growth. Endogenous growth models take this factor exogenous. We argue that variations across countries in entrepreneurship and the spatial structure of economic activities could potentially be the source of different efficiencies in knowledge spillovers and ultimately in economic growth. We develop an empirical model to test both the entrepreneurship and the geography effects on knowledge spillovers. To date the only international data that are collected on the basis of exactly the same principles in each country are the Global Entrepreneurship Monitor (GEM) data. We use the 2001 GEM cross-country data to measure the level of entrepreneurship in each particular economy. For this purpose we apply the TEA index developed within the framework of the GEM project and calculated for each country participating in this international research. Additionally, data on employment, production, patent applications, public and private R&D expenditures originating from different international and national sources are applied in the paper.
#0405 (PDF)
Claudio A. Piga, Marco Vivarelli
Internal and External R&D: A Sample Selection Approach
This study explicitly takes into account that the decision to enter into an external R&D relationship is related to an antecedent decision to carry out R&D. This calls for a methodological approach that, at the same time, permits the joint analysis of the determinants of the two decisions and corrects for the sample selectivity that is intrinsic in the analysis of external R&D. Based on a sample of Italian manufacturing firms, the results confirm the need to consider explicitly the selectivity issue in the empirical analysis of external R&D. Another contribution made by this study is the managerial implications that can be derived from its empirical model, which provide a better understanding of the factors determining a firm's decision to engage in R&D both independently and with external partner.
#0404 (PDF)
Michael Fritsch, Pamela Mueller
Regional Growth Regimes Revisited - The Case of West Germany
Audretsch and Fritsch (2002) proposed two explanations for the mixed evidence regarding the relationship between new firm formation and regional development. Firstly, they found evidence for the existence of long time lags needed before the main effects of new firm formation on employment change become evident. Secondly, they suggested that regions may be characterized by different growth regimes in which new firms and entrepreneurship assume different roles and accordingly lead to different effects. This paper reports the results of re-estimating the main relationships investigated by Audretsch and Fritsch (2002) in a somewhat different way. One main difference is that we now have information on a longer time-period available and have chosen shorter time intervals for the analysis. This enabled us to investigate the transition between different types of growth regimes in further detail. Furthermore, our analysis is not on the level of planning regions but on the level of districts ('Kreise') and we have explicitly accounted for spatial autocorrelation in the analysis, which turns out to be highly relevant.
#0403 (PDF)
Mariacristina Piva, Enrico Santarelli, Marco Vivarelli
Technological and Organizational Changes as Determinants of the Skill Bias: Evidence from a Panel of Italian Firms
Recent empirical literature has introduced the "kill Biased Organizational Change" hypothesis, according to which organizational change can be considered as one of the main causes of the skill bias (increase in the number of highly skiled workers) exhibited by manufacturing employment in developed countries. In this paper, a specific branch of the Italian capital goods industry is analyzed, that producing specialized industrial machinery; from the estimation of a transcendental logarithmic firm cost function it turns out that skill upgrading is not a consequence of technological change alone, but is also an effect of the overall reorganization of the firm, which in turn may be linked to technological change.
#0402 (PDF)
David B. Audretsch, Erik E. Lehmann, Susanne Warning
University Spillovers and New Firm Location
This paper examines the impact of locational choice as a firm strategy to access knowledge spillovers from universities. Based on a large data set of young high-technology start-ups publicly listed in Germany, this study tests the propositions that geographic proximity to the university is shaped by different spillover mechanisms, research and human capital, and by different types of knowledge spillover, natural sciences and social sciences. The results suggest that spillover mechanisms as well as the type of spillovers are heterogeneous. Furthermore, it turns out that spillover effects are locally bounded.
#0401 (PDF)
David B. Audretsch, Max Keilbach
Entrepreneurship Capital and Economic Performance
The neoclassical model of the production function, as applied by Robert Solow to build the neoclassical model of growth, linked labor and capital to output. More recently, Romer and others have expanded the model to include measures of knowledge capital. In this paper we introduce a new factor, entrepreneurship capital, and link it to output in the context of a production function model. This paper explains what is meant by entrepreneurship capital and why it should influence economic output. A production function model including several different measures of entrepreneurship capital is then estimated for German regions. The results indicate that entrepreneurship capital is a significant and important factor shaping output and productivity. These results suggest a new direction for policy that focuses on instruments to enhance entrepreneurship capital.


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