Showing papers in "Small Business Economics in 2017"
TL;DR: In this paper, the authors outline contributions to the entrepreneurial ecosystem approach and conclude with a promising new line of research to our understanding of the emergence, growth, and context of start-ups that have achieved great impact by developing new platforms.
Abstract: In its most abstract sense, an ecosystem is a biotic community, encompassing its physical environment, and all the interactions possible in the complex of living and nonliving components. Economics has always been about systems that explain differential output and outcomes. However, economics has generally ignored the role of entrepreneurship in economic systems, just as entrepreneurship studies have largely overlooked the role of systems in explaining the prevalence and performance of entrepreneurship. The entrepreneurial ecosystem approach has the promise to correct these shortcomings. Its two dominant lineages are the regional development literature and the strategy literature. Both lineages share common roots in ecological systems thinking, providing fresh insights into the interdependence of actors in a particular community to create new value. But studies of both regional development and strategic management have largely ignored the role of entrepreneurs in new value creation. In this paper, we will outline contributions to the entrepreneurial ecosystem approach and conclude with a promising new line of research to our understanding of the emergence, growth, and context of start-ups that have achieved great impact by developing new platforms.
555 citations
TL;DR: The concept of entrepreneurial ecosystems has quickly established itself as one of the latest ‘fads' in entrepreneurship research as discussed by the authors, however, its lack of specification and conceptual limitations has undoubtedly hindered our understanding of these complex organisms.
Abstract: The concept of entrepreneurial ecosystems has quickly established itself as one of the latest ‘fads’ in entrepreneurship research. At face value, this kind of systemic approach to entrepreneurship offers a new and distinctive path for scholars and policy makers to help understand and foster growth-oriented entrepreneurship. However, its lack of specification and conceptual limitations has undoubtedly hindered our understanding of these complex organisms. Indeed, the rapid adoption of the concept has tended to overlook the heterogeneous nature of ecosystems. This paper provides a critical review and conceptualisation of the ecosystems concept: it unpacks the dynamics of the concept; outlines its theoretical limitations; measurement approaches and use in policy-making. It sets out a preliminary taxonomy of different archetypal ecosystems. The paper concludes that entrepreneurial ecosystems are a highly variegated, multi-actor and multi-scalar phenomenon, requiring bespoke policy interventions.
408 citations
TL;DR: The Digital Entrepreneurial Ecosystem framework as mentioned in this paper is a conceptual framework for studying entrepreneurship in the digital age by integrating two well-established concepts: the digital ecosystem and the entrepreneurial ecosystem.
Abstract: A significant gap exists in the conceptualization of entrepreneurship in the digital age. This paper introduces a conceptual framework for studying entrepreneurship in the digital age by integrating two well-established concepts: the digital ecosystem and the entrepreneurial ecosystem. The integration of these two ecosystems helps us better understand the interactions of agents and users that incorporate insights of consumers’ individual and social behavior. The Digital Entrepreneurial Ecosystem framework consists of four concepts: digital infrastructure governance, digital user citizenship, digital entrepreneurship, and digital marketplace. The paper develops propositions for each of the four concepts and provides a theoretical framework of multisided platforms to better understand the digital entrepreneurial ecosystem. Finally, it outlines a new research agenda to fill the gap in our understanding of entrepreneurship in the digital age.
318 citations
TL;DR: In this article, the authors analyze the full population of universities in Italy, Norway, and the UK to test whether national and university-level initiatives have an influence on the number of spin-offs created and the quality of these spinoffs.
Abstract: The creation of spin-off firms from universities is seen as an important mechanism for the commercialization of research, and hence the overall contribution from universities to technological development and economic growth. Governments and universities are seeking to develop framework conditions that are conductive to spin-off creation. The most prevalent of such initiatives are legislative changes at national level and the establishment of technology transfer offices at university level. The effectiveness of such initiatives is debated, but empirical evidence is limited. In this paper, we analyze the full population of universities in Italy, Norway, and the UK; three countries adopting differing approaches to framework conditions, to test whether national- and university-level initiatives have an influence on the number of spin-offs created and the quality of these spin-offs. Building on institutional theory and using multilevel analysis, we find that changes in the institutional framework conditions at both national and university levels are conductive to the creation of more spin-offs, but that the increase in quantity is at the expense of the quality of these firms. Hence, the effect of such top–down changes in framework conditions on the economic impact from universities seems to be more symbolic than substantive.
144 citations
TL;DR: The authors found that women entrepreneurs are more likely than men to emphasize social value goals over economic value creation goals, and as levels of post-materialism rise among societies, the relationship between value creation goal and gender changes, intensifying both the negative effect of being female on economic value goals and the positive effect on social value goal.
Abstract: We examine entrepreneurs’ economic, social, and environmental goals for value creation for their new ventures. Drawing on ethics of care and theories of societal post-materialism, we develop a set of hypotheses predicting patterns of value creation across gender and countries. Using a sample of 15,141 entrepreneurs in 48 countries from the Global Entrepreneurship Monitor, we find that gender and cultural values of post-materialism significantly impact the kinds of value creation emphasized by entrepreneurs. Specifically, women entrepreneurs are more likely than men to emphasize social value goals over economic value creation goals. Individuals who start ventures in strong post-materialist societies are more likely to have social and environmental value creation goals and less likely to have economic value creation goals. Furthermore, as levels of post-materialism rise among societies, the relationship between value creation goals and gender changes, intensifying both the negative effect of being female on economic value goals and the positive effect on social value goals. In other words, post-materialism further widens the gender gap in value creation goals.
133 citations
TL;DR: In this article, the authors studied the role of personality characteristics and age-appropriate entrepreneurial competencies (leadership, self-esteem, creativity, and proactivity motivation) in the prediction of entrepreneurial alertness and career intention.
Abstract: Given the importance of entrepreneurial thinking and acting as a meta-skill in the future world of work, we focus on the emerging entrepreneurial mind-set in the transition to adulthood. We study the role of personality characteristics and age-appropriate entrepreneurial competencies (leadership, self-esteem, creativity, and proactivity motivation) in the prediction of entrepreneurial alertness and career intention. Using two-wave longitudinal data from high schools in Helsinki, Finland (N = 523), we tested a mediation model with competencies as mediators between personality and entrepreneurial alertness and intention. The findings suggest that entrepreneurial alertness and career intention (a) are rather independent career development constructs of the emerging entrepreneurial mind-set, (b) are both an expression of an entrepreneurial personality structure, and (c) are predicted by different underlying competencies: leadership and self-esteem mediated the personality-entrepreneurial intention link, and leadership, creativity, and proactivity motivation the personality-entrepreneurial alertness link. Consistent with the balanced skill approach to entrepreneurship, the intraindividual variety of these competencies was also a valid mediator; it did not show incremental predictive power though. Implications for research and practice are discussed.
133 citations
TL;DR: In this article, the authors employ Frederick Jackson Turner's Frontier Thesis of American democracy to construct a framework for understanding the US university campus as an entrepreneurial ecosystem and suggest that the open, innovative American frontier that closed at the end of the twentieth century has reemerged in the entrepreneurial economy on the US campus.
Abstract: This paper employs Frederick Jackson Turner’s Frontier Thesis of American democracy to construct a framework for understanding the US university campus as an entrepreneurial ecosystem One question that immediately comes to mind when studying ecosystem performance is what the proper unit of analysis is: the country, the state, the city, the region, or something smaller, like an incubator or accelerator? This paper suggests that the open, innovative American frontier that closed at the end of the twentieth century has reemerged in the entrepreneurial economy on the US campus The contemporary campus entrepreneurial ecosystem offers the characteristics of Turner’s frontier: available assets, liberty, and diversity while creating opportunity, and fostering entrepreneurship and innovation A case study of the University of Chicago explores governance of the campus as an entrepreneurial ecosystem and the output produced by that campus ecosystem
132 citations
TL;DR: In this article, the authors show that too strong investor protection may harm small firms and entrepreneurial initiatives, which contrasts with the traditional "law and finance" view that stronger investor protection is better.
Abstract: In this paper, we show that too strong investor protection may harm small firms and entrepreneurial initiatives, which contrasts with the traditional “law and finance” view that stronger investor protection is better. This situation is particularly relevant in equity crowdfunding, which refers to a recent financial innovation originating on the Internet that targets small and innovative firms. In many jurisdictions, securities regulation offers exemptions to prospectus and registration requirements. We provide an into-depth discussion of recent regulatory reforms in different countries and discuss how they may impact equity crowdfunding. Building on a theoretical framework, we show that optimal regulation depends on the availability of an alternative early-stage financing such as venture capital and angel finance. Finally, we offer exploratory evidence from Germany on the impact of securities regulation on small business finance.
127 citations
TL;DR: In this article, a cross-country study statistically investigates the determinants of environmental orientation of entrepreneurial activity, finding that environmental orientation is frequently used as a source for securing legitimacy of entrepreneurial ventures.
Abstract: This cross-country study statistically investigates the determinants of environmental orientation of entrepreneurial activity. It builds on a new institutional theory framework and uses data gathered in the course of the Global Entrepreneurship Monitor to examine the institutional impacts and individual characteristics which influence the degree of environmental orientation of entrepreneurial activity, using a multilevel analysis. Our key findings are threefold: First, the results indicate that environmental orientation is frequently used as a source for securing legitimacy of entrepreneurial ventures. Second, we find lower degrees of environmental orientation among more educated entrepreneurs. Third, for many variables, such as age, gender and income, differences are observed when compared to earlier findings on the determinants of social entrepreneurship. Policy makers can learn from the analysis that policy measures should not only be designed specifically for environmental entrepreneurship, but also be adapted to the domestic economic circumstances, as, for example, environmental taxes only show significant effects on environmental orientation of entrepreneurial ventures in OECD countries. From a practitioner’s perspective, this indicates that a lack of regulation can provide opportunities for environmentally oriented entrepreneurial ideas.
120 citations
TL;DR: In this article, a person-oriented approach focusing on intraindividual dynamics seems to be particularly fruitful to infer realistic implications for practice such as entrepreneurship education and promotion, since the individual functions as a totality of his or her single characteristics (involving the interplay of biological, psychosocial, and context-related levels).
Abstract: Understanding the psychological nature and development of the individual entrepreneur is at the core of contemporary entrepreneurship research. Since the individual functions as a totality of his or her single characteristics (involving the interplay of biological, psychosocial, and context-related levels), a person-oriented approach focusing on intraindividual dynamics seems to be particularly fruitful to infer realistic implications for practice such as entrepreneurship education and promotion. Applying a person-oriented perspective, this paper integrates existing psychological approaches to entrepreneurship and presents a new, person-oriented model of entrepreneurship, the Entrepreneurial Personality System (EPS). In the empirical part, this model guided us to bridge two separate research streams dealing with entrepreneurial personality: research on broad traits like the Big Five and research on specific traits like risk-taking, self-efficacy, and internal locus of control. We examine a gravity effect of broad traits, as assumed in the EPS framework, by analyzing large personality data sets from three countries. The results reveal a consistent gravity effect of an intraindividual entrepreneurial Big Five profile on the more malleable psychological factors. Implications for entrepreneurship research and practice are discussed.
115 citations
TL;DR: In this paper, an empirical framework for assessing the vibrancy and trajectory of regional entrepreneurial ecosystems is proposed, and the authors apply this framework to study the US National Capital Region's localized cluster of biotechnology-related entrepreneurship by building their analysis around a set of indicators of ecosystem vitality.
Abstract: We propose an empirical framework for assessing the vibrancy and trajectory of regional entrepreneurial ecosystems We apply this framework to study the US National Capital Region’s localized cluster of biotechnology-related entrepreneurship by building our analysis around a set of indicators of ecosystem vitality proposed by Stangler and Bell-Masterson (2015) This application constitutes an initial attempt at mapping the dynamics of an industry cluster within the adaptive life cycle of a wider regional ecosystem We find that the biotechnology cluster in the National Capital Region entered a “reorientation” stage in the early 2000s, building up stored energy, capital, and connectedness in non-research-oriented activities An increasing regional presence of large biotech firms in the past 5 years, a highly active and diverse start-up sector, increasing merger and acquisition activity, and declines in regional public funding for medical and clinical trials all suggest a transition of entrepreneurial activity in the region from a dynamic driven by federal research spillovers to one increasingly driven by private sector actors
TL;DR: In this article, the authors proposed a new approach to establish legitimacy for new ventures within and beyond an entrepreneurial ecosystem by integrating ideas from the entrepreneurship and innovation literature with insights from the legitimacy literature.
Abstract: The current rise in research on entrepreneurial ecosystems notes that many questions are still unanswered. We, therefore, theorize about a unique paradox for entrepreneurs trying to establish legitimacy for their new ventures within and beyond an entrepreneurial ecosystem; that is, when pursuing opportunities with high levels of technological or market newness, entrepreneurs confront a significant challenge in legitimizing their venture within an entrepreneurial ecosystem, while those entrepreneurs pursuing ventures using existing technologies or pursuing existing markets have a much easier path to garnering legitimacy within that ecosystem. However, the diffusion of that legitimacy beyond the ecosystem will be wider and more far-reaching for those pursuing the newer elements compared to those using existing technologies or pursuing existing markets, thus, creating a paradox of venture legitimation. Prior research outlines approaches for new venture legitimacy but it is unclear when these approaches should be applied within and beyond an entrepreneurial ecosystem. To address this paradox, we integrate ideas from the entrepreneurship and innovation literature with insights from the legitimacy literature to describe how different types of venture newness employ different legitimation strategies which results in different levels of legitimacy diffusion beyond an ecosystem. We conclude with a discussion of our concepts and offer suggestions for future research efforts.
TL;DR: In this article, the authors define the entrepreneurial ecosystem as a multidimensional set of interacting factors that moderate the effect of entrepreneurial activity on economic growth and use a combination of a multilevel growth regression and latent class analysis.
Abstract: In this paper, we propose a method by which the entrepreneurial ecosystem, if present, reveals itself in the data. We first follow the literature and define the entrepreneurial ecosystem as a multidimensional set of interacting factors that moderate the effect of entrepreneurial activity on economic growth. The quality of such an ecosystem, by its multidimensionality, is impossible to measure directly. But so defined, we argue that variation in entrepreneurial ecosystem quality should result in variation in the estimated marginal effect of entrepreneurial activity on economic growth. Testing for such variation is possible using a combination of a multilevel growth regression and latent class analysis. We motivate and validate our approach in simulated data before illustrating its applicability in a data set covering 107 European NUTS1-2 regions across 16 EU member states. For this dataset, we cannot reject the hypothesis of a homogeneous contribution of entrepreneurship to regional growth. That is, in this dataset, we find no evidence of statistically significant heterogeneity in the estimated slope coefficients for entrepreneurial activity across regions. There are several possible explanations for this negative result. The two we deem most likely are first that the NUTS1-2 level may not be disaggregated enough to coincide with the relevant boundaries of the entrepreneurial ecosystem. We suspect our method would reveal significant differences across smaller geographical units, but the data unfortunately do not yet allow us to empirically test this hypothesis in a multi-country regional analysis. The second possible explanation is that the growth rates from 2006 to 2014 coincided with the global financial and the European crisis, and during this time, the effect of entrepreneurship on (long-run average) growth overall has been obscured. Our simulations also suggested a third reason. If measurement error is large (in the order of 33 or 0.015% point annual GDP-growth), the effects may also have been obscured.
TL;DR: In this article, the authors investigated the role of individualism-collectivism in moderating the effect of political freedom, corruption, and education on entrepreneurial activity across nations and found that individualism positively moderated the effects of these factors.
Abstract: A review of literature in entrepreneurship and public policy suggests that the level of political freedom, corruption, and education are important antecedents to the rate of entrepreneurial activity in nations. However, empirical analysis of the effect these factors have on entrepreneurial activity across nations remains ambiguous. This study proposes that the cultural context of nations moderates the effect of these factors. Consistent with this argument, it investigates the role of individualism-collectivism in moderating the effect of political freedom, corruption, and education on entrepreneurial activity across nations. Macro-level data on 84 nations is obtained from multiple reliable sources and used to test the hypotheses. Results support the theorized arguments and suggest that individualism positively moderates the effect of political freedom, negatively moderates the effect of corruption, and positively moderates the effect of education, on the rate of entrepreneurial activity across nations.
TL;DR: In this article, the effects of R&D promotion policy on SME performance were explored using a large panel data set on public R&DI subsidies to Korean manufacturing firms. And they found significant evidence for positive effects of the public RDI subsidy on both the RDI expenditure and the value added productivity of Korean manufacturing SMEs.
Abstract: This paper explores the effects of R&D promotion policy on SME performance. We use a large panel data set on public R&D subsidies to Korean manufacturing firms. We control for counterfactual outcomes employing the DID (difference in differences) estimation procedure as well as for the endogeneity of the R&D investment and the R&D subsidy using the 2-stage Tobit/Logit DPD (dynamic panel data) procedure. We find significant evidence for positive effects of the public R&D subsidy on both the R&D expenditure and the value added productivity of Korean manufacturing SMEs. The policy thus appears to have been successful in fostering technological advancement and in promoting economic growth.
TL;DR: In this article, the authors apply the American Nations and Patchwork Community Types approaches and explore in which way these distinct spatially based cultural regions are reflected by significant differences in entrepreneurial activity and underlying biologically based propensities.
Abstract: What are the entrepreneurial places in the USA? Although seminal theorizing on the determinants of entrepreneurship gives culture a unique and important role, systematic empirical evidence linking the distinct cultural identity of regions to their local entrepreneurial spirit and vitality is still scarce. This study offers a first, systematic overview on the nexus between regional cultural identity and latent and manifest entrepreneurship across the USA. To directly assess regional cultural identity, we apply the American Nations and Patchwork Community Types approaches and explore in which way these distinct spatially based cultural regions are reflected by significant differences in entrepreneurial activity and underlying biologically based propensities. We combine annual entrepreneurship rates at the county level with personality data collected in a large-scale, Internet-based study of 3,457,270 US residents. The findings suggest that entrepreneurship culture reflects the dynamic interplay between the region’s cultural identity and its latent and manifest entrepreneurship.
TL;DR: In this paper, the role of different information and communication technology (ICT) capacities in the internationalisation of small and medium-sized firms is investigated, and the decision to export and the export intensity are explored in this respect.
Abstract: Based on harmonised and uniquely linked firm-level datasets for a large group of European countries, this study investigates the role of different information and communication technology (ICT) capacities in the internationalisation of small- and medium-sized firms (defined as having 10–249 employees). Both the decision to export and the export intensity are explored in this respect. The different ICT capacities are captured by online presence (having a website), online transactions (e-sales activities) and proportion of employees with broadband internet access or post-upper secondary ICT education. The results show a significant and positive relationship between the ICT capacities and the engagement in exporting activities of small- and medium-sized firms, although the kind of ICT capacity of importance seems to vary across countries. In countries where the ICT usage in firms is less developed, mainly basic capacities such as online presence are related to the decision to export. There are also indications that the export intensity is more strongly related to advanced ICT capacities than the pure decision to export.
TL;DR: In this paper, the mediating role of cognitive logic in explaining venture performance in differing cultural contexts is examined, and the findings indicate that both venture cognitive logics have positive effects on new venture performance and serve as mediators in the culture-performance relationship.
Abstract: Studies examining the relationship between national culture and entrepreneurial activity have largely ignored the influence of culture on individual decision-making. Recent years have witnessed considerable interest in cognitive logics employed by entrepreneurs. A growing body of literature examines factors contributing to the relative reliance on causal and effectual reasoning as entrepreneurs attempt to launch and grow new ventures, with evidence suggesting expert entrepreneurs engage more heavily in effectual reasoning than do novice entrepreneurs. The present study examines the mediating role of cognitive logic in explaining venture performance in differing cultural contexts. A series of hypotheses are tested using a sample of 3411 new ventures started by student entrepreneurs from 24 countries based on the Global University Entrepreneurial Spirit Students’ Survey. The findings indicate that both venture cognitive logics have positive effects on new venture performance and serve as mediators in the culture-performance relationship. Based on these findings, we conclude entrepreneurial reasoning is shaped not only by personal characteristics of entrepreneurs but also by aspects of the cultural context.
TL;DR: This article investigated how perceived parents' performance in entrepreneurship (PPE) affects the entrepreneurial career intentions of offspring and found that perceived PPE enhances the offspring's perceived entrepreneurial desirability and feasibility because of exposure mechanisms, but it inhibits the translation of both desi cability or feasibility perceptions into entrepreneurial career intention due to upward social comparison mechanisms.
Abstract: We investigate how perceived parents’ performance in entrepreneurship (PPE) affects the entrepreneurial career intentions of offspring. We argue that while perceived PPE enhances offspring’s perceived entrepreneurial desirability and feasibility because of exposure mechanisms, it inhibits the translation of both desirability and feasibility perceptions into entrepreneurial career intentions due to upward social comparison mechanisms. Thus, perceived PPE acts as a double-edged sword for the intergenerational transmission of entrepreneurship. Our predictions are tested and confirmed on a sample of 21,895 individuals from 33 countries. This study advances the literature on intergenerational transmission of entrepreneurship by providing a foundation for understanding the social psychological conditions necessary for such transmission to occur.
TL;DR: This article analyzed differences existing between new and established agri-entrepreneurs as well as differences in relation to their counterparts in non-agricultural ventures and found that new entrants into agriculture are more entrepreneurially oriented than established ones.
Abstract: This study analyzes differences existing between new and established agri-entrepreneurs as well as differences in relation to their counterparts in non-agricultural ventures. This study uses the resource-based view and institutional economics as conceptual frameworks and focuses on the analysis of the resources and capabilities; entrepreneurial orientation (risk-taking, proactiveness and innovativeness); and legitimation affecting the entrepreneurial process. The literature points out that the specific characteristics of the sector (strong family links and institutional support) can condition the entrepreneurship process. Thus, hypotheses are developed to test these relationships. We use random effects models to test our hypotheses with the Global Entrepreneurship Monitor (GEM) for 20 European countries. Results show that agri-entrepreneurs have weaker entrepreneurial capabilities than other sectors. However, new entrants into the agricultural sector are not less entrepreneurial in relation to other sectors. On the other hand, established agri-entrepreneurs are less proactive than other sectors. Results suggest that new entrants into agriculture are more entrepreneurially oriented than established ones. Our study contributes to the entrepreneurship literature by contextualizing the entrepreneurship process and providing valuable insights for policy-makers to enhance farmers’ entrepreneurial skills and entrepreneurial orientation.
TL;DR: In this article, the authors present a new Schumpeterian-theory of economic growth, where growth is generated by innovative entrepreneurs, entrepreneurial investments respond to incentives that are themselves shaped by economic policies and institutions, and new innovations replace old technologies.
Abstract: This lecture is the story of an intellectual journey, that of elaborating a new—Schumpeterian—theory of economic growth. A theory where (i) growth is generated by innovative entrepreneurs; (ii) entrepreneurial investments respond to incentives that are themselves shaped by economic policies and institutions; (iii) new innovations replace old technologies: in other words, growth involves creative destruction and therefore involves a permanent conflict between incumbents and new entrants. First, we motivate and then lay out the Schumpeterian paradigm and point to a set of empirical predictions which distinguish this paradigm from other growth models. Second, we raise four debates on which the Schumpeterian approach sheds new light: the middle income trap, secular stagnation, the recent rise in top income inequality, and firm dynamics. Third and last, we show how the paradigm can be used to think (or rethink) about growth policy design.
TL;DR: In this article, the authors argue that individual members in entrepreneurial teams may differ in their dispositions to act in entrepreneurial ways, that is, in their individual entrepreneurial orientation (iEO) and that these differences have meaningful implications for team performance.
Abstract: While prior research has focused on differences in entrepreneurial orientation between organizations, we direct attention to differences in entrepreneurial orientation within organizations. We propose that individual members in entrepreneurial teams may differ in their dispositions to act in entrepreneurial ways, that is, in their individual entrepreneurial orientation (iEO) and that these differences have meaningful implications for team performance. Drawing upon research in team diversity and entrepreneurial orientation, we argue that the three iEO diversity dimensions—proactiveness, risk taking, and innovativeness diversity—affect team outcomes in different ways, although they belong to the same diversity type and even belong to a common superordinate construct. Empirical data gathered in 104 dyadic entrepreneurial teams supports our theory: Diversity in proactiveness within a team impairs team performance. Risk-taking diversity also harms team performance by heightening relationship conflict. However, innovativeness diversity facilitates team performance. The present study contributes to two streams of research, namely, entrepreneurial team research and research on entrepreneurial orientation and is of practical significance to entrepreneurial team formation and performance.
TL;DR: The authors examined antecedents of high-quality entrepreneurship in European countries before and after the financial crisis that burst in 2008 and found that the perception of business opportunities has a particularly pronounced effect on high quality entrepreneurship in adverse economic conditions.
Abstract: This paper examines antecedents of high-quality entrepreneurship in European countries before and after the financial crisis that burst in 2008. In a context of ambitious entrepreneurship, we consider three quality aspects of early-stage entrepreneurship referring to innovativeness, export orientation, and high-growth intentions of entrepreneurs. Using microlevel data retrieved from Global Entrepreneurship Monitor (GEM) annual surveys, we investigate whether the role of gender, education, opportunity perception, and motives of early-stage entrepreneurs changes between crisis and noncrisis periods. Our results show that the perception of business opportunities has a particularly pronounced effect on high-quality entrepreneurship in adverse economic conditions. We also find that the beneficial effects of educational attainment on growth intentions strengthen in times of crisis. Finally, the gender effect on entrepreneurs’ high-growth intentions and export orientation appears to be stronger in the crisis period, implying that ambitious female entrepreneurship suffers more in the midst of crisis.
TL;DR: In this article, the authors study 282 Swedish firms and show that various innovative activities mediate the growth orientation-firm growth relationship, including informal activities and the launch of new products, but not formal R&D.
Abstract: Growth orientation is important for understanding why some young firms grow but not others, but research remains silent on the intermediary mechanisms mediating the growth orientation–firm growth relationship. We study 282 Swedish firms and show that various innovative activities mediate the growth orientation–firm growth relationship. These mediating innovative activities include informal activities and the launch of new products, but not formal R&D. Our findings offer a more complete explanation for how growth orientation translates into realized growth, serving to reconcile empirical inconsistencies about the relationship between innovation and young firm growth.
TL;DR: In this article, the authors analyzed the pricing of cash flow rights in start-up companies using a unique data set of 44 equity crowdfunding campaigns and found that campaign characteristics, investor sophistication, progress in funding, herding, and stock market volatility influence backers' willingness to pay in an economically meaningful manner.
Abstract: We analyze the pricing of cash flow rights in start-up companies using a unique data set of 44 equity crowdfunding campaigns. Our sample consists of 499 backers who invested during the period from November 6, 2011, to March 25, 2014, on the German equity crowdfunding portal Innovestment. In contrast with all other European equity crowdfunding portals, Innovestment runs a multi-unit second-price auction in which backers themselves can specify the price of an investment ticket. We exploit this unique auction mechanism to analyze backers’ willingness to pay for cash flow rights. We find that campaign characteristics, investor sophistication, progress in funding, herding, and stock market volatility influence backers’ willingness to pay in an economically meaningful manner, while geographic distance, learning effects, and sniping at the end of an auction have no effect.
TL;DR: In this paper, the authors analyzed Danish matched employer-employee data to understand how solo entrepreneurs add their first employee and the antecedents of hiring, and found that those who hire enjoy superior sales outcomes in subsequent years, while the dispersion in profits increases.
Abstract: The challenge for solo entrepreneurs to add their first employee is arguably the single biggest growth event facing any growing firm. To understand how this event affects performance, and the antecedents of hiring, we analyse Danish matched employer–employee data. Those who hire enjoy superior sales outcomes in subsequent years, while the dispersion in profits increases. Furthermore, those that hire enjoy faster sales growth in the previous year, suggesting that sales growth precedes the first hire. Finally, we show that founders with a stronger profile in terms of education and previous income are more likely to increase profits, while the characteristics of the employee are less important. The latter finding is important from a job creation perspective, in light of the suggested sorting of more marginalized employees into new and established firms.
TL;DR: In this paper, the authors examined the drivers of small and medium-sized enterprise (SME) growth, adopting a holistic multivariate modelling approach, integrating macroeconomic determinants with the internal characteristics and firm strategy.
Abstract: To examine the drivers of small- and medium-sized enterprise (SME) growth, we adopt a holistic multivariate modelling approach, integrating macroeconomic determinants with the internal (firm characteristics and firm strategy) drivers more commonly investigated in firm growth studies. Utilising such an extended set of variables addresses a gap in the extant firm growth literature in relation to external growth factors, offering novel insights on the seeming randomness of firm growth. Our system generalised method of moments estimation results indicate that the macroeconomic environment influences firm growth both directly and indirectly. Based on the study of manufacturing SME growth in Ireland, our findings provide evidence on the integrated effects of macroeconomic conditions, firm characteristics and firm strategy for SME growth. They also highlight, from a theoretical perspective, the need to acknowledge the multidimensional nature of SME growth.
TL;DR: This article explored how foreign direct investment (FDI) inflows, measured by lagged cross-border mergers and acquisitions (M&A), affect entrepreneurial entry in the host economy and found the relationship between FDI inflows and domestic entrepreneurship to be negative across all economies.
Abstract: There are conflicting predictions in the literature about the relationship between FDI and entrepreneurship. This paper explores how foreign direct investment (FDI) inflows, measured by lagged cross-border mergers and acquisitions (M&A), affect entrepreneurial entry in the host economy. We have constructed a micro-panel of more than two thousand individuals in each of seventy countries, 2000–2009, linked to FDI by matching sectors. We find the relationship between FDI inflows and domestic entrepreneurship to be negative across all economies. This negative effect is much more pronounced in developed than developing economies and is also identified within industries, notably in manufacturing. Policies to encourage FDI via M&A need to consider how to counteract the prevailing adverse effect on domestic entrepreneurship.
TL;DR: In this article, the authors investigated whether high-growth performance is sustained over time and, if so, what are the factors enabling persistent high growth patterns, and they found that high growth firms are characterized by higher productivity and leverage, and that persistent highgrowth firms do not systematically differ from other high-growing firms in none of the considered economic and financial dimensions.
Abstract: Theoretical and empirical studies of firm–industry dynamics have extensively focused on the process of growth. Theory predicts innovation, efficiency, profitability and financial status as the central channels through which firms can possibly achieve outstanding growth performance. The question is whether such high-growth performance is sustained over time and, if so, what are the factors enabling persistent high-growth patterns. Exploiting panels of Italian, Spanish, French and UK firms, we relate high growth, persistent high growth and other growth patterns to measures of efficiency, innovativeness, profitability and financial conditions. We find that high-growth firms are characterized by higher productivity and leverage, and that persistent high-growth firms do not systematically differ from other high-growth firms in none of the considered economic and financial dimensions. The findings are robust across countries, manufacturing and services.
TL;DR: The authors examined the effect of ethnic heterogeneity on various outcomes associated with entrepreneurship and the institutional environment for entrepreneurship and showed that ethnic heterogeneity negatively influences entrepreneurship, including trust, social network, and innovation.
Abstract: The vast majority of the literature on ethnicity and entrepreneurship focuses on the construct of ethnic entrepreneurship. However, very little is known about how ethnic heterogeneity affects entrepreneurship, and the institutional arrangements affecting entrepreneurship. This study attempts to fill the gap, and thus examines the effect of ethnic heterogeneity on various outcomes associated with entrepreneurship and the institutional environment for entrepreneurship. Using indices of ethnic and linguistic fractionalization, we show that ethnic heterogeneity negatively influences entrepreneurship. We argue that potential channels that can explain the negative effect of fractionalization on entrepreneurship include trust, social network, and innovation, among others. This study provides a new perspective on the existing debate that seeks to understand why the levels of entrepreneurial success vary across countries.