How an Economic Recession Affects Qualitative Entrepreneurship: Focusing on the Entrepreneur's Exit Decision

This study analyzes how an economic recession affects entrepreneurship from a qualitative perspective. We define entrepreneur as a person who takes risks under uncertainty. Based on this definition, an entrepreneur's exit decision is modeled using real options theory to measure entrepreneur's willingness to accept uncertainty. We find that entrepreneurs who entered before a recession exit when their critical revenue stream reaches 0.16 times the average revenue stream value. The equivalent value for entrepreneurs who enter during an economic recession is 0.33 times the average revenue stream. Furthermore, when uncertainty doubles, the exit probability of entrepreneurs who enter during an economic recession is approximately 2.75 times higher than that of entrepreneurs who enter before recession. We conclude that the majority of entrepreneurs who enter during an economic recession are qualitatively disadvantaged, which leads to the overall decrease in qualitative entrepreneurship. Copyright © 2016 John Wiley & Sons, Ltd.     

Entrepreneurship and Firm Boundaries: The Theory of A Firm

abstract In this paper, we consider how a better understanding of entrepreneurial activities can help explain how firm and industry boundaries change over time and how a more comprehensive understanding of boundary setting can explain where entrepreneurial activities are directed. We start from the premise that while entrepreneurs believe themselves to have superior ideas in one or multiple parts of the value chain, they are characteristically short of cash, and of the ability to convince others to provide it. This premise motivates a simple model in which the entrepreneur has a value‐adding set of ideas for ‘upstream’ and ‘downstream’ parts of a value chain, as well as for the ways to make these two parts of the value chain work better when joined under unitary control. Assuming that the entrepreneur's objective is to maximize her wealth, we observe that even in the presence of transactional risks or other factors that might make integration preferable to specialization, initial scope depends also on relatively unexplored factors such as (a) how severe the entrepreneur's cash constraint is, and (b) how much value the entrepreneur's ideas add at each part of the value chain. Entrepreneurs will focus on the areas that provide the maximum profit yield per available cash – a criterion which implies that scope choices depend on cash availability and the depth of the demand for the new idea along the value chain. We also note that entrepreneurs make money not only from the operating profits of their firms, but also from the appreciation of the assets the firm has accumulated. This consideration can change the optimal choice of the firms’ boundaries, as entrepreneurs must be sensitive to choosing the segment that will enable them to benefit not only in terms of profit, but also in terms of asset appreciation. We propose that, in the entrepreneurial context especially, it is helpful to focus on the multiple considerations affecting the choice of boundaries for ‘a’ firm – the context faced by an individual entrepreneur – rather than on generic considerations affecting ‘the’ (representative) firm. Scope choices reflect the entrepreneur's own theory of ‘how to make money’.     

Rural entrepreneurs and institutional assistance: an empirical study from mountainous Italy

Despite the recognition of entrepreneurship as one of the main determinants of rural economic development, empirical research in this field is relatively sparse. Thus, there is little evidence on the role and function of rural entrepreneurs, the driving force behind the birth, survival and growth of rural enterprises. The present work aims at providing a contribution to filling this gap in knowledge. We present and analyse the results emerging from a questionnaire submitted to a sample of 123 rural entrepreneurs and businesses in a mountainous area of central Italy. In particular, we test for six hypotheses concerning the correlation between different factors, reflecting entrepreneur and business-specific characteristics, and the adoption of instruments of institutional assistance. Entrepreneur's and business's variables are related to (1) entrepreneurial human capital; (2) entrepreneur's local knowledge and social capital; (3) firm's size; (4) entrepreneur's age; (5) firm's age; and (6) busines's sector of activity. Empirical results largely support the importance of variables taken into consideration in explaining differences in the adoption of institutional assistance among businesses of the sample. In the light of our empirical findings, we also examine and propose potential policies for fostering entrepreneurship and the development of the rural region under study.     

Networks vs. market methods in high-tech venture fundraising: the impact of institutional environment

This study examines how institutional environmental factors, including cultural norm, state regulatory system and venture capital market, influence the high-tech entrepreneur's choice for using network vs. market methods when approaching prospective investors at the early stage of their new venture creation. We collected comparative data through on-site interviews and questionnaire survey with 128 high-tech entrepreneurs in Singapore (a newly industrialised economy) and 250 in Beijing, China (an emerging economy). Our findings suggest that a culture emphasising the value of social obligation, the under-development of the legal/regulatory system and the immaturity of the venture capital market increased the proclivity of entrepreneurs to use network methods. Moreover, entrepreneurs who value networks higher in social obligation than in information transfer are more likely to choose personal ties instead of business ties. This study enhances our understanding of how high-tech entrepreneurs in emerging economies choose between networks and market methods in venture fundraising, and offers suggestions on how public policy makers in these economies can improve the institutional environment of their regions to promote high-tech new venture creation.     

Nascent Entrepreneurs and Venture Emergence: Opportunity Confidence,Human Capital,and Early Planning

Nascent entrepreneurs continuously evaluate the merits of the opportunities they pursue and so can abandon those that lack promise and persist with those that remain attractive. This paper articulates this evolving judgment about the opportunity as the nascent entrepreneur's opportunity confidence. It situates this construct in the context of the nascent entrepreneur's human capital and early planning actions in respect to the pursued opportunity, and in respect to the emergence of the nascent venture. Analyses of PSED data show that opportunity confidence positively affects venture emergence and that, through it, entrepreneurial experience and early planning have only indirect effects on venture emergence. In contrast, industry experience has a direct, positive effect on venture emergence. These results provide some novel insights into the nascent entrepreneurial process as well as into the role of human capital and early planning in that process.     

If You Are So Smart,Why Aren't You an Entrepreneur? Returns to Cognitive and Social Ability: Entrepreneurs Versus Employees

How valuable are cognitive and social abilities for entrepreneurs’ relative to employees’ earnings? We answer three questions: (1) To what extent does a composite measure of ability affect an entrepreneur's earnings relative to wages earned by employees? (2) Do different cognitive abilities (e.g., math ability, language, or verbal ability) and social ability affect earnings of entrepreneurs and employees differently?, and (3) Does the balance in these measured ability levels affect an individual's earnings? Our (difference‐of‐difference) estimates of the returns to ability for spells in entrepreneurship versus wage employment account for selectivity into entrepreneurial positions insofar as they are determined by fixed individual characteristics. Our robust results provide the following answers to the three questions: General ability has a stronger impact on entrepreneurial incomes than on wages. Moreover, entrepreneurs and employees benefit from different sets of specific abilities: verbal and clerical abilities have a stronger impact on wages, whereas mathematical, social, and technical ability are more valuable for entrepreneurs. The balance in the various kinds of ability also generates a higher income, but only for entrepreneurs: This finding supports Lazear's Jack‐of‐all‐Trades theory.     

An institutional perspective on consumers' environmental awareness and pro-environmental behavioral intention: Evidence from 39 countries

We adopted an institutional approach to examine the relationship between environmental awareness and pro-environmental behavioral intention at the individual level. We also compared the moderating effects of regulative, normative, and cognitive social institutions on this relationship. Based on survey data representing 42,962 consumers from 39 nations, we found that consumers' environmental awareness promoted their pro-environmental behavioral intention. Moreover, we found that normative social institutions negatively moderated the relationship between environmental awareness and pro-environmental behavioral intention, whereas cognitive social institutions positively moderated this relationship. This paper concludes with a discussion of the implications of these empirical findings.     

Leaders and Laggards in Environmental Innovation: An Empirical Analysis of SMEs in Europe

The main purpose of this article is studying the factors influencing eco‐innovative intensity in the European SMEs. Building upon the 'innovation triangle model', business competences, environmental orientation and network involvement are considered as the main determinants of 'greenness' of innovation in a sample of 3852 SMEs. Four categories of eco‐innovators (leaders, followers, loungers and laggards) are identified, and their profiles/driving factors are described using a generalized ordinal logistic model. Our results confirm that the increasing demand for green products and the adoption of eco‐organizational innovation affect positively the level of environmental innovation, while technological lock‐ins have the opposite effect across all categories. Neither leaders nor laggards are influenced by environmental policies. Small firms and those who give importance to financial constraints tend not to achieve upper categories, while valuing technological capabilities, market power and networks are crucial determinants of being in upper categories of eco‐innovation intensity. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment     

A longitudinal study of habitual entrepreneurs: starters and acquirers

This study provides insights into the characteristics and behaviour of habitual starter entrepreneurs (i.e. individuals who have established more than one business) and habitual acquirer entrepreneurs (i.e. individuals who have purchased/acquired more than one business). A human capital perspective is utilized to illustrate that the human capital accumulated by a habitual entrepreneur may influence their subsequent behaviour. Prior business ownership experience is discussed in relation to an entrepreneur's human capital accumulation, as well as their search and business opportunity identification behaviour. A case study approach is used to develop propositions that highlight the similarities and differences between habitual starter and acquirer entrepreneurs. Implications for researchers and practitioners are discussed.     

Micro-foundations of environmental entrepreneurship resistance in SMEs

This article characterizes theoretical problems regarding the essence of environmental entrepreneurship resistance. The objective of the current research was to search for micro-foundations of environmental entrepreneurship resistance occurring in SME. We relate the concept of resistance in entrepreneurship with the idea of micro-foundations, thus creating new opportunities for analysis in two areas: conceptual view that interprets the phenomenon of resistance in relation to the organization's activities in the field of entrepreneurship, and cognitive supplementary knowledge of micro-foundations, which affect the entrepreneurial behavior of employees. Environmental entrepreneurship resistance in SMEs has been defined in our interpretation as targeted individual or collective daily activities, implemented from the perspective of various intentions, motivations and other internal and external premises, which are in opposition to commonly used pro-environmental activities constituting the CER component of small and medium business. In addition, we identified a group of 20 micro-foundations, which from the level of an individual or organization may constitute the initiation of entrepreneurial activities, focused on environmental protection in SME. The indicated group was examined on a sample of 122 employees of the SME sector in Poland. After performing qualitative and quantitative analyses, it turned out that eight elements could be considered as micro-foundations of environmental entrepreneurship resistance.

     

Optimal financial contracts with hidden effort,unobservable profits and endogenous costs of effort

This paper studies financial contracting in a two-period financing model with double moral hazard, as entrepreneurial effort choices and profits are unobservable and non-verifiable. The optimal financial contract must induce both the high effort level and truthful revelation of profits. The paper further analyses the structure of the optimal contract where the entrepreneur's payoff takes a general functional form that allows for endogenously determined costs of effort. The entrepreneur's performance is influenced by not only extrinsic work motivation factors but also intrinsic factors so that the degree of control imposed by the investor, in the form of end-of-period transfers, affects the entrepreneur's costs of effort. The finding shows that under well-defined conditions, the optimal contract that solves a model with non-verifiable profits also elicits effort, and generally resembles a simple debt contract. The structure of the optimal contract is robust in the general case where the entrepreneur's payoff function is non-linear in transfers.     

促进企业创新的治理机制

企业的全要素生产率决定于企业创新产生的价值增值,而创新则来源于企业家对于投入要素的最佳配置和要素最大潜力的释放.企业家的控制权是推动企业创新的主导力量.相对于所有权而言,企业家的控制权更为重要,因为这种主导权有助于人力资本把握使企业变得更有价值的机会,赋予企业创造关键资源的创新能力,即获得专业化人力资本的能力,这是一种隐形投资,其效果往往在事后表现出来.明智的选择应当是善于在事先就发现和运用这个主导力量来推动企业创新,在面临不确定性市场的情况下,赋予企业家过程决策和事后决策的自由裁量权.企业的多元产权要素形成的共担风险模式,要求以无法直接定价的人力资本与可直接定价的其他投入要素地有机结合与合理配置.这种隐性人力资本投入得越有效或越多,则创新的潜力越大,因而越需要受到激励.     

Examining the success of women of color-owned small and medium-sized enterprises in the United States: A system dynamics perspective

The objective of this study was to unravel the challenges confronting women of color (WoC)-owned small and medium-sized enterprises (SMEs) in the United States. This is based on findings that most WoC-owned SMEs fail within the first few years of establishment. The impact of the global financial crisis resulting from the COVID-19 pandemic on WoC-owned SMEs was also explored. System Dynamics (SD) is a computational modeling approach useful for understanding changes in a system over time and is applied in this study to illustrate WoC entrepreneurs' navigation through the startup and maturation of SMEs. The authors calibrated and validated the model with publicly available data. Findings revealed that more emphasis should be placed on failure reduction in the early years of establishment of these businesses. Also, there is the need for early intervention rather than focusing on the improvement of the successful business exit from the system. Results indicated that the creation of new businesses by WoC after the failure of existing businesses produced an increase in the number of failed enterprises. The authors assert that attention must be paid at the individual level through support to the entrepreneur. This study contributes to the extant literature by providing the first known SD model useful in depicting the SME system for WoC entrepreneurs in the US. The model serves as a potentially useful tool for informing effective policy making, education, and programmatic approaches to support the success of WoC entrepreneurs in the US.

     

Sustainable environmental practices and financial performance: Evidence from listed small and medium‐sized enterprise in the United Kingdom

In this article, we investigate the financial implication of sustainable environmental practices on UK small and medium‐sized enterprises (SMEs)–traded firms. Existing literature indicates that there is a direct relationship between sustainable environmental practices and financial performance. However, studies looking at this relationship have focused mainly on large firms with little attention paid to SMEs. Further, those looking at environmental and financial performance relationships have often used a single measure of performance in their studies. This study bridges these research gaps by focusing on listed SMEs in the United Kingdom using multiple measures of sustainable environmental policy indices on a panel of 201 SMEs on the Alternative Investment Market from 2011 to 2016. Evidence from our panel data analysis suggests significant and a nonlinear (concave) relationship between sustainable environmental practices and firms' financial performance. Specifically, energy efficiency practices, greenhouse gases, material, and resource efficiency revealed an inverted U‐shaped relationship with financial performance. The results will offer guidance to management in terms of allocating resources to sustainable environmental practices investment.     

The impact of government financial support on the performance of new firms: the role of competitive advantage as an intermediate outcome

This research examines the influence of government financial support on new firms' performance. Extant empirical research on the topic has found mixed results, which warrants an exploration of the theoretical basis for the impact of support policies on new firms' performance. Grounding the theoretical model in the resource-based view and institutional theories, this study contends that performance outcomes – e.g. revenues or profits – should not be the first outcomes of public policies to be examined. Instead, competitive advantage formation is suggested as a link between support policies and new firms' performance. Using new firms from the USA, we examine the impact of government financial support measures – government loans, guarantees and government equity – on firms' overall competitive advantage and more specific types of competitive advantage based on innovation, licensing-in, marketing and human capital. Controlling for family funding, bank financing, equity of business angels and venture capitalists, industry, size as well as entrepreneur's characteristics, the results reveal that government guarantees and government equity have a direct effect on new firms' competitive advantage and only an indirect impact on performance. Our results suggest to policy-makers to focus on helping new firms build the necessary capabilities to compete successfully in the marketplace.     

Entrepreneurial orientation,environmental sustainability and new venture performance: Does stakeholder integration matter?

Previous research has theorised that the link between entrepreneurial orientation (EO) and performance is mediated by environmental sustainability orientation (ESO). However, firm‐level factors that may moderate this relationship are lacking. This paper attempts to fill this gap by examining how and when EO enhances new venture performance by considering ESO as mediator and stakeholder integration as an important contingent factor. Using primary data obtained from 242 chief executive officers/entrepreneurs, it was found that the indirect relationship between EO and new venture performance is strengthened at high levels of stakeholder integration. Theoretical and practical implications are discussed.     

Influence of the entrepreneur's capacity in business performance

The article presents a theoretical model of the entrepreneur's capacities and their influence on business performance. Starting from the traditional theory of dynamic capacities, those related to entrepreneurship and/or that influence the entrepreneur's capacities are identified, determining factors such as training, experience and confidence. In addition, other factors such as the environmental and institutional environment have been taken into account as they affect the entrepreneurship. For this purpose, a study was carried out with the Smart PLS software in a sample of companies in the tourism sector in the Mar Menor Region (Spain). An essential factor in the development of entrepreneurship in the region is the sustainability of the coastal lagoon. Some considerations are obtained from the study of the factors that determine the model of capacities, in which the confidence of the entrepreneur and the environmental sustainability, exert a positive and significant influence in the business performance. Furthermore, among the mentioned capacities of the entrepreneurial influence, experience and trust are the ones that most influence the success of the tourism business.     

Economic insecurity,conservatism, and the crisis of environmentalism: 30 years of evidence

There is an ongoing scientific debate about how environmental concern develops in a population, and under which circumstances it might decline at some point. In this paper, by analysing thirty years of microdata from the German Socio-Economic Panel (SOEP), I investigate the role of socioeconomic factors and political preferences in altering and addressing environmental perceptions in Germany, Europe's green leader. Results from correlated random-effects models reveal, inter alia, that economic insecurity and support for right-wing political parties significantly contribute to lowering environmental concern. Hence, policymakers ought to focus on economic insecurity in order to increase citizens' environmental concern and, eventually, bring an enhancement in pro-environmental behaviour as a result of the voters' political will.     

Optimal Loyalty‐Based Management

We study an agency model in which an entrepreneur selects a manager from a candidate set. The selected manager's effort improves the project's potential environment, and is a hidden action. The realized project environment is the entrepreneur's private information. A manager's utility has two components—(i) loyalty, with which the manager values the organization's profit, and (ii) selfishness, with which the manager values the monetary transfer he receives from the entrepreneur. We find that if the manager's task is easy enough, it is optimal to use a purely loyal manager. Otherwise, it can be optimal to use a manager with mixture of loyalty and selfishness—the manager's mixed motivation alleviates the entrepreneur's misrepresenting incentive, and as a result, the output distortion in the optimal contract can be reduced. In addition, when it is optimal to use a manager with mixed motivations, the entrepreneur selects someone who is more selfish than loyal.     

Reciprocated community support and small town - small business success

This paper presents an empirical test of the significance of reciprocated community support, in contrast with traditional economic factors and unilateral support, in the success of small businesses in small towns. The central hypothesis is that entrepreneurs who make non-market contributions to their community and whose community supports them, are more likely to consider their businesses to be successful. Logistic regression is used to analyse survey data from over 800 small businesses in 30 small towns of the state of Iowa (USA). The authors found that the interaction effect of an entrepreneur's service to the community, reciprocated by community support of the business, is the single most significant determinant of business success among dozens of indicators and characteristics of the respondent, the business, and the small towns in the sample. In addition, it was found that business people who feel successful expect to expand. These findings are relevant to rural development. The expansion of existing businesses is an important component of regional job growth.