How do bankruptcy laws affect entrepreneurship development around the world?

How do bankruptcy laws as formal institutions affect entrepreneurship development around the world? Do entrepreneur-friendly bankruptcy laws encourage more entrepreneurship development at a societal level? We posit that if bankrupt entrepreneurs are excessively punished for failure, they may give up potentially high-return but inherently high-risk opportunities to start new businesses. Amassing a cross-country database from 29 countries spanning 19 years (1990-2008), we find that lenient, entrepreneur-friendly bankruptcy laws are significantly correlated with the level of entrepreneurship development as measured by the rate of new firm entry.     

Different paths to economic reform in Russia and China: causes and consequences

Economic reform in Russia has been described as ‘shock therapy’ because rapid industrial privatization, price liberalization and democratic reforms of the political system were introduced simultaneously. However, shock therapy led to insider control of most manufacturing firms, with important consequences for foreign investment. In contrast, China’s ‘gradualist’ reforms, without privatization or significant democratization, facilitated foreign joint ventures as the dominant means of reforming State-owned enterprises incrementally. This paper proposes an explanation for these contrasting reform paths in Russia and China and then traces their consequences for inward foreign domestic investment (FDI), exporting and for corporate governance in the short and long term. The impact of national level policies on enterprises is demonstrated in a matched pair of cases in Russia and China. Conclusions are drawn for policy, for practice and for future research.     

The extent and nature of opportunity identification by experienced entrepreneurs

Guided by insights from cognitive theories, this article explores the links between entrepreneurs' prior business ownership experience and their opportunity identification behavior. Hypotheses were tested using data from 630 entrepreneurs. Experienced entrepreneurs identified more opportunities and exploited more innovative opportunities with greater wealth creation potential. Entrepreneurs that had owned more than 4.5 businesses, however, identified fewer opportunities. The nature of prior business ownership experience also shaped opportunity identification behavior. An inverse U-shaped relationship was detected between the proportion of failed businesses relative to the number of businesses owned and the number of opportunities identified in a given period. Business failure experience was not associated with the innovativeness of exploited opportunities.     

Corporate entrepreneurship: Current research and future directions

In this paper, we suggest future research on the processes and knowledge-based resources in corporate entrepreneurship (CE), argue for the need to appreciate the heterogeneity of CE in relation to new contexts, and suggest appropriate strategies for such contexts. First, we highlight the key contributions of the papers in this special issue, with a particular focus on how they provide insights into structural and process contingencies, the role of management at multiple levels, and organizational and managerial capabilities. We then discuss the limits to the applicability of theories developed in other contexts to CE. Finally, we suggest some future research, with particular emphasis on the corporate governance mechanisms that foster CE and the requisite managerial roles and skills in instigating and supporting entrepreneurial activities at different levels of the organization.     

Insider-controlled Firms in Russia

Privatisation Vouchers in Russia were heavily invested in the holders' own firms. Using data from a recent survey, we show that insider control in firms privatised in 1992-4 through the voucher process (as distinct from the earlier leased buy-out method) is insecure and dependent on managers' support. For employees, investment in insider control appears to have been motivated by employment income insurance rather than expected excess returns on the equity. Managers are predominantly the same individuals as before privatisation and display considerable hostility to outside investors, probably because they fear dismissal should outsiders gain control. Despite insider control, firms are shedding labour quite rapidly through voluntary resignations. Employment dynamics appear to be unrelated to insider equity ownership. This revised version was published online in July 2006 with corrections to the Cover Date.     

Family Firms

We present a model of succession in a firm owned and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on what fraction of the company to float on the stock exchange. We assume that a professional is a better manager than the heir, and describe how the founder's decision is shaped by the legal environment. This theory of separation of ownership from management includes the Anglo‐Saxon and the Continental European patterns of corporate governance as special cases, and generates additional empirical predictions consistent with cross‐country evidence.     

Forecasting Intraday Volatility and Value-at-Risk with High-Frequency Data

In this paper, we develop modeling tools to forecast Value-at-Risk and volatility with investment horizons of less than one day. We quantify the market risk based on the study at a 30-min time horizon using modified GARCH models. The evaluation of intraday market risk can be useful to market participants (day traders and market makers) involved in frequent trading. As expected, the volatility features a significant intraday seasonality, which motivates us to include the intraday seasonal indexes in the GARCH models. We also incorporate realized variance (RV) and time-varying degrees of freedom in the GARCH models to capture more intraday information on the volatile market. The intrinsic tail risk index is introduced to assist with understanding the inherent risk level in each trading time interval. The proposed models are evaluated based on their forecasting performance of one-period-ahead volatility and Intraday Value-at-Risk (IVaR) with application to the 30 constituent stocks. We find that models with seasonal indexes generally outperform those without; RV can improve the out-of-sample forecasts of IVaR; student GARCH models with time-varying degrees of freedom perform best at 0.5 and 1 % IVaR, while normal GARCH models excel for 2.5 and 5 % IVaR. The results show that RV and seasonal indexes are useful to forecasting intraday volatility and Intraday VaR.     

Diversification Categories in Investment Real Estate

This paper continues previous work evaluating the benefits of diversification and analyzes the various dimensions within the commercial real estate opportunity set. The database is large and extends through the 1982 downturn in property values. Due to the low levels of systematic risk, current distinctions by region and property type make little sense in a world of costly diversification. More exacting categories combining property type, SMSA growth rate and lease maturity offer promise for more efficient diversification within the real estate portfolio.     

A fast method for analysing and improving complex software processes

This paper presents a simple, fast method (or management tool) for the analysis and improvement of software-intensive complex products and systems (CoPS) called software analysis-software improvement (SA-SI). The tool relies on outside intervention, rapid data collection and structured in-company workshops. The distinctive feature of the method is that it focuses on the 'soft', human side of the software development process and examines and compares formal (or rational) processes ('what should be') with real, actual practices ('what is'), in order to identify problems, their causes and strategies for improvement. The tool complements existing formal approaches by delivering a 'bottom up', grass roots, practitioner view of real processes in action. The purpose of SA-SI is to help overcome the severe problems of measuring, analysing and improving performance in large scale, complex software projects. An illustrative case example (Company X) is used to show how the tool is applied and how it confronts the problem of actual/real processes differing from ideal/formal processes. It also shows how SA-SI is used to identify process 'hot spots'(severe problems), analyse their causes and identify solutions. The paper provides guidance on typical problems encountered in running SA-SI and how to overcome them. It also shows how the tool has been modified and extended to deal with other complex domains and innovation management issues. Although SA-SI cannot be a substitute for a change programme, it can play a useful part in complementing ongoing improvement activities. From a research perspective, the method helps link up studies from the organisational development and software fields and assists in 'closing the loop' between innovation research and business practice.     

Organizational slack and firm performance during economic transitions: two studies from an emerging economy. Justin Tan and Mike W. Peng. Strategic Management Journal 24(13) 2003, 1249–1263

The original article to which this erratum refers was published in Strategic Management Journal 24 (13): 1249–1263 (2003).