Profit margins in Japanese retailing

Using a rich data source, we explain differences and developments in profit margins of medium-sized stores in Japan. We conclude that the protected environment enables the retailer to pass on all operating costs to the customers and to obtain a relatively high basic income. High service levels are positively related with high profit margins, illuminating the importance of service in Japan. Small store competition does not affect performance of medium-sized stores, because small stores operate under circumstances different from those of medium and large stores.     

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.     

Genome-wide association studies in economics and entrepreneurship research: promises and limitations

The recently developed genome-wide association study (GWAS) design enables the identification of genes specifically associated with economic outcomes such as occupational and other choices. This is a promising new approach for economics research which we aim to apply to the choice for entrepreneurship. However, due to multiple testing issues, very large sample sizes are needed to differentiate between true and false positives. For a GWAS on entrepreneurship, we expect that a sample size of at least 30,000 observations is required.     

Drivers of entrepreneurial aspirations at the country level: the role of start-up motivations and social security

This paper investigates whether various start-up motivations and a country’s level of social security can explain the prevalence of entrepreneurial aspirations. For entrepreneurial aspirations and motivations we use country-level data from the Global Entrepreneurship Monitor (GEM) for the year 2005. We distinguish between the necessity motive, independence motive and increase wealth motive and between aspirations in terms of innovativeness, job growth and export orientation. Our findings indicate that social security negatively affects a country’s supply of ambitious entrepreneurship. Our results also suggest that entrepreneurial aspirations in terms of job growth and export relate positively to the increase wealth motive.     

Do small firms compete with large firms?

Despite the pervasive phenomenon of scale economies, the majority of firms have always been small firms. The emergence of small firms as a means of economic development on both sides of the Atlantic has been one of the major new topics of economic policy since the 1980s. This has drawn renewed attention to the question: How are small firms able to exist? The theories of strategic niches and dynamic complementarity imply that small firms seek out markets where they are able to avoid competition with their larger counterparts. This paper tests the validity of these theories by examining the extent to which small-firm profitability is set by large-firm profitability. Considerable evidence shows that the price-cost margins of small firms do not tend to follow those of large firms. This supports the theory that small firms pursue a strategy of producing in distinct product niches.     

Economic Development and Business Ownership: An Analysis Using Data of 23 OECD Countries in the Period 1976–1996

Small Business Economics - In the present paper we address the relationship between business ownership and economic development. We will focus upon three issues. First, how is the equilibrium rate...     

Uncertainty avoidance and the rate of business ownership across 21 OECD countries, 1976–2004

Persistent differences in the level of business ownership across countries have attracted the attention of scientific as well as political debate. Cultural as well as economic influences are assumed to play a role. This paper deals with the influence of cultural attitudes towards uncertainty on the rate of business ownership across 21 OECD countries. First, the concepts of uncertainty and risk are elaborated, as well as their relevance for entrepreneurship. An occupational choice model is introduced to underpin our reasoning at the macro-level. Second, regression analysis using pooled macro data for 1976, 1990 and 2004 and controlling for several economic variables, yields evidence that uncertainty avoidance is positively correlated with the prevalence of business ownership. According to our model, a restrictive climate of large organizations in high uncertainty avoidance countries pushes individuals striving for autonomy towards self-employment. Regressions for these 3 years separately show that in 2004, this positive correlation is no longer found, indicating that a compensating pull of entrepreneurship in countries with low uncertainty avoidance may have gained momentum in recent years. Third, an interaction term between uncertainty avoidance and GDP per capita in the pooled panel regressions shows that the historical negative relationship between GDP per capita and the level of business ownership is substantially weaker for countries with lower uncertainty avoidance. This suggests that rising opportunity costs of self-employment play a less important role in this cultural environment, or are being compensated by increasing entrepreneurial opportunities.

Firm Survival in the Netherlands

The purpose of this paper is to examine whether the dynamics of industrial organization differ in the Netherlands from what has emerged as a Stylized Fact in other countries. Because the Netherlands has pursued a unique set of institutions and policies comprising what has become known as the Polder Model, the factors leading to firm failure may systematically differ from those in other countries. We address this question using a longitudinal database from Statistics Netherlands (CBS) that identifies over two thousand firms in manufacturing and then tracks their performance over time.     

Strategies,Uncertainty and Performance of Small Business Startups

Personal strategies of owners/founders of small business startups are related to performance and to environmental uncertainty. This is done using a longitudinal data set. Personal strategies are operationalized by a behavioral measure of the manners in which small business founders deal with situations. The results suggest a dynamic process between strategy and performance. Business owners that perform poorly employ a Reactive Strategy, with poor performance leading to increased use of reactive behavior. High performing business owners start out focussing on the most crucial issues (Critical Point Strategy), with high performance leading to a more top-down (Complete Planning) approach. These relations are controlled for characteristics of the environment of the firm. Strategy use is dependent upon the type and level of environmental uncertainty. Complete Planning strategy is used less frequently in a fast changing environment and more often in a complex environment. Use of Opportunistic Strategy is negatively related to the complexity of the environment, while the Reactive Strategy is used more frequently in a non-munificent environment. This revised version was published online in August 2006 with corrections to the Cover Date.     

Start-Up Capital: "Does Gender Matter?"

Female and male entrepreneurs differ in the way they finance their businesses. This difference can be attributed to the type of business and the type of management and experience of the entrepreneur (indirect effect). Female start-ups may also experience specific barriers when trying to acquire start-up capital. These may be based upon discriminatory effects (direct effect). Whether gender has an impact on size and composition of start-up capital and in what way, is the subject of the present paper. The indirect effect is represented by the way women differ from men in terms of type of business and management and experience. The direct effect cannot be attributed to these differences and is called the gender effect. We use of a panel of 2000 Dutch starting entrepreneurs, of whom approximately 500 are female to test for these direct and indirect effects. The panel refers to the year 1994. We find that female entrepreneurs have a smaller amount of start-up capital, but that they do not differ significantly with respect to the type of capital. On average the proportion of equity and debt capital (bank loans) in the businesses of female entrepreneurs is the same as in those of their male counterparts.