TABLE OF CONTENTS
Introduction - Josh Lerner, Antoinette Schoar
DOI: 10.7208/chicago/9780226473109.003.0001
[entrepreneurship, economy, self-employment, emerging economies, market, institutional differences]
Entrepreneurship and self-employment are the major drivers of growth and development for an economy. This book focuses on how research on entrepreneurship has been conducted in developed markets, which have formed the basis for the understanding of academics and policymakers alike about this subject matter. While there are many anecdotes about the importance of entrepreneurs in emerging economies, there is little systematic research to show whether entrepreneurship has a similarly transformational role. The dramatic speed with which developing countries such as Brazil, China, or India have been transitioning from agricultural societies to modern market economies has highlighted the importance of studying the background and differences in the entrepreneurial dynamics across the world. Institutional differences, cultural considerations, and personal characteristics affect the roles that entrepreneurs play in emerging economies. (pages 1 - 14)
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I. International Perspectives on the Nature of Entrepreneurship
Explaining International Differences in Entrepreneurship - Silvia Ardagna, Annamaria Lusardi
DOI: 10.7208/chicago/9780226473109.003.0002
[entrepreneurship, international differences, business, regulatory constraints, labor markets, legal system]
Global entrepreneurship monitor data from thirty-seven countries has been used to estimate the differential effect that individual characteristics such as work status, education, and attitudes toward risk have on entrepreneurship because of cross-country differences in regulatory constraints. By using this data set, this chapter distinguishes between two different types of entrepreneurs: those who enter entrepreneurship to pursue a business opportunity versus those who enter entrepreneurship because they could not find better work. Different measures of regulation, from measures of regulation in the product markets to regulation in the labor markets and the legal system, are addressed. The chapter goes back to the question of how personal characteristics correlate with the choice to become an entrepreneur. However, unlike earlier papers, which mainly bundled different types of entrepreneurial firms together, these authors are able to differentiate between what they term “remedial” entrepreneurs and those who are exploiting growth opportunities. (pages 17 - 62)
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Who Are the Microenterprise Owners? - Suresh de Mel, David Mckenzie, Christopher Woodruff
DOI: 10.7208/chicago/9780226473109.003.0003
[microenterprise owners, wage workers, low-income countries, own-account workers, employers, medium-sized enterprise]
This chapter expands on the idea that people who become entrepreneurs differ systematically from those who become either remedial entrepreneurs or employees. It collects a very rich data set of individual characteristics for a sample of over 700 self-employed entrepreneurs, larger business owners, and employees in Sri Lanka. Two-thirds or more of the own-account workers have characteristics that are closer to wage workers than to small and medium-sized enterprise (SME) owners. Cognitive ability, motivation, and a competitive attitude are among the factors differentiating SME owners from microenterprise owners. Given the large amount of self-employment in low-income countries, these findings suggest that the possibility of job creation from the sector should not be ignored. But the analysis also clearly suggests that finance is not the sole constraint to growth of microenterprises and provides an explanation for the low rates of growth of enterprises supported by microlending. (pages 63 - 88)
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Business Ownership and Self-Employment in Developing Economies - Camilo Mondragón-Vélez, Ximena Peña
DOI: 10.7208/chicago/9780226473109.003.0004
[business ownership, self-employment, developing economies, entrepreneurship, economic sector, education]
The self-employed and entrepreneurs are fundamentally different and thus might react asymmetrically to economic shocks. The transition between the self-employed, entrepreneurs, and employees is examined using a large-scale data set from the Columbian National Household Survey. The panel nature of the data allows one to look at the transition across occupations, particularly between self-employment and entrepreneurship. As in the prior studies, the case of Columbia highlights that the self-employed tend to be less educated and poorer than business owners. They also tend to be more likely to be operating in the informal economy and in the service sector. This chapter explores the question of whether “pure” self-employment in this environment is a form of or a path to entrepreneurship; and whether individuals in developing economies who choose to work by themselves tend to have the same characteristics, motivations, and occupational dynamics as those who clearly run firms that employ others. The characterization of entrepreneurship in Colombia suggests that there are important differences between self-employment and business ownership. These two commonly used definitions of entrepreneurship differ in important dimensions, such as education and the economic sector. (pages 89 - 128)
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Entrepreneurship and Firm Formation across Countries - Leora Klapper, Raphael Amit, Mauro F. Guillén
DOI: 10.7208/chicago/9780226473109.003.0005
[entrepreneurship, firm formation, private sector, macroeconomics, business ecology, economic development]
This chapter explores a different approach to get at measuring entrepreneurial trends by measuring the formalization of businesses. The information is obtained by surveying business registries and other government sources via surveys and follow-up phone calls across a sample of eighty-four countries. The chapter discusses a methodology for collecting data on new business creation, serving as a first step in enabling research on the dynamics of entrepreneurial activity. The data can be used as a benchmark for changes in the composition of the private sector and may advance the study of the impact of regulatory, political, macroeconomic, and institutional changes on entrepreneurship and growth. Data collected could become the base for further studies in business ecology. The distribution of businesses per sector could be used for a deeper research paper aimed at answering questions such as which kinds of business are easier to incorporate into challenging business environments, which sectors are interdependent on one another, and which contribute more to a country's economic development. The results shed light on the dynamics of firm registration as a function of the economic and financial development of a country and its regulatory environment. (pages 129 - 158)
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Does Less Market Entry Regulation Generate More Entrepreneurs? - Sendhil Mullainathan, Philipp Schnabl
DOI: 10.7208/chicago/9780226473109.003.0006
[economic development, business formalization, business licensing, rent extraction, government regulation, entrepreneurs, market entry regulation]
This chapter discusses the microdynamics of business formalization in Lima, Peru. It investigates a business licensing reform that simplified and removed many of the licensing procedures for businesses in the municipality. Business licensing reform that simplified and removed many of the licensing procedures for businesses in the municipality is investigated. Regulatory steps, such as changes in the time and cost it takes to register a business, can affect the decision of businesses to enter the formal sector. The reform significantly reduced the median licensing time from forty to fifteen days and lowered the average licensing cost by 42 percent. The largest impact of the reforms was in encouraging existing businesses to change their registration status. Regulatory changes can have an effect on the incentives and ability of local bureaucrats to engage in rent extraction. Simplifying government regulations—registration procedures—reduce the opportunities of bureaucrats and government officials to engage in rent extraction, and thus reduce the barriers to entry. (pages 159 - 178)
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The International Asian Business Success Story? - Robert W. Fairlie, Julie Zissimopoulos, Harry Krashinsky
DOI: 10.7208/chicago/9780226473109.003.0007
[Asian immigrants, entrepreneurship, micro data, education levels, immigration policy]
This chapter discusses the flow of Asian immigrants to Canada, the United Kingdom, and the United States, to analyze the selection in with regard to entrepreneurship and success in running the business. The microdata from the censuses of the three countries are used to compare differences across the ethnic backgrounds that entrepreneurs come from—in particular, Chinese, Indian, and other Asian immigrant groups. A few striking facts emerge from the research. Asian immigrants to all three countries have education levels that are higher than the national average, and in the United States, the education levels of Asian immigrants are particularly high relative to the entire population. Some of the variation in the education of Asian immigrants across the United States, Canada, and the United Kingdom is likely to be due to immigration policy. Business ownership rates of Asian immigrants in the United States and Canada are similar to the national average, and in the United Kingdom, they are substantially higher than the national average and the highest among all three countries. Businesses owned by the various immigrant groups are found to concentrate in different industries, which may be related to their relative skills and selection. (pages 179 - 208)
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Are There Cultural Determinants of Entrepreneurship? - Rajkamal Iyer, Antoinette Schoar
DOI: 10.7208/chicago/9780226473109.003.0008
[entrepreneurial culture, cultural determinants, stationary industry, up-front payment, self-employment]
This chapter explores the role of entrepreneurial culture in determining contractual outcomes among entrepreneurs in countries where the legal environment makes contracts very difficult to enforce. Entrepreneurs from different communities vary in how they conduct business and negotiate contracts. Culture is an important factor in explaining how people from different backgrounds negotiate business deals. Across all communities, prices are lower when there is a match between the entrepreneur and wholesaler. However, there is no difference in the level of up-front payment, which suggests that community affiliation does not seem to function as a trust-building device but seems to invoke social norms for “fairer treatment.” There is a lot of variation in the types of individual who start businesses, and it might not be easy to predict who among these will be successful and how their transition from self-employment to larger businesses will proceed. While the underlying challenge for every investment decision is to differentiate the good from the bad projects, the difficulties might be especially increased for small businesses. (pages 209 - 240)
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II. International Perspectives on Policies toward Entrepreneurship
Entrepreneurship and Credit Constraints - Claire Lelarge, David Sraer, David Thesmar
DOI: 10.7208/chicago/9780226473109.003.0009
[entrepreneurship, credit constraints, loan guarantee program, insurance]
This chapter evaluates the introduction and expansion of a loan guarantee program in France in the mid-1990s. This indirect subsidy program provides (partial) insurance to banks against default risk when making loans to start-ups and small businesses that have low levels of collateral. The often-subsidized insurance premium is paid for the borrower but the screening and loan origination fulfill function by the banks. To maintain incentives for the banks, the government only insures part of the loans. Many countries, including the United States and the United Kingdom, have introduced versions of the loan guarantee schemes. The program is not free of all perverse effects. Greater access to the loan guarantee scheme seems to induce firms to take on riskier projects, which manifests itself in a higher likelihood of firms going bankrupt. (pages 243 - 274)
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Government Sponsored versus Private Venture Capital - James A. Brander, Edward J. Egan, Thomas F. Hellmann
DOI: 10.7208/chicago/9780226473109.003.0010
[government program, finance, start-up firms, venture capital, interventions]
This chapter discusses a government program that aims to provide access to finance for start-up firms, providing in-depth forensic analysis of government-sponsored public venture capital programs in Canada. It provides information on the different government programs to support venture capital and their outcomes, and compares them to private venture funds. The chapter identifies an interesting instrument that uses the exogenous variation in the political leadership of provincial governments. Funding by government-sponsored venture capitalists is related to having left-leaning provincial governments. The negative effect of government funding on various outcome measures becomes even stronger in the instrumental variable specifications. The data do not allow for a definitive welfare analysis; the effectiveness of these direct government interventions in the venture capital market is questionable. (pages 275 - 320)
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Is Entrepreneurship Missing in Shanghai? - Yasheng Huang, Yi Qian
DOI: 10.7208/chicago/9780226473109.003.0011
[entrepreneurship, Chinese industry census, state-owned enterprises, self-employment]
This chapter looks at a wide-ranging government intervention aimed at structuring access to finance for large and small firms. The example of Shanghai, a city that has gone through a massive economic transformation over the past decade, is discussed. The empirical findings are based on the Chinese Industry Census, which is compiled by the National Bureau of Statistics. The chapter provides information on industrial firms across all ownership types that havea sales value above 5 million yuan. China as a whole has seen an enormous surge in entrepreneurship, while the level of entrepreneurship in Shanghai is conspicuously low. Shanghai has low levels of de novo private businesses—that is, those which were set up by new entrepreneurs during the transformation and did not emerge from existing state-owned enterprises (SOEs). The preferential treatment of former SOEs has come at a staggering social cost by actively discouraging self-employment as a means of remedial income generation. The chapter points to the potential role of entrepreneurship in affecting wealth distribution within the economy. (pages 321 - 346)
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Contributors
Author Index
Subject Index
