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Article
Publication date: 10 April 2017

Magnus Henrekson and Mikael Stenkula

The purpose of this paper is to show that entrepreneurship can be fruitfully analyzed by positing that entrepreneurs are searching for rates of return exceeding the…

Abstract

Purpose

The purpose of this paper is to show that entrepreneurship can be fruitfully analyzed by positing that entrepreneurs are searching for rates of return exceeding the risk-adjusted market rate of return, i.e., they try to create or discover economic rents.

Design/methodology/approach

A conceptual paper trying to bridge the gap between neoclassical economics and the entrepreneurship field by seeing entrepreneurship as the search for and creation of (entrepreneurial) rents.

Findings

In the short to medium term the search for and creation of entrepreneurial rents give rise to supernormal profits if successful. In the longer term these rents are dissipated and accrue to society at large as cheaper and better products. Entrepreneurial rents are crucial for bringing about the innovation and continuous structural change required to generate economic growth.

Practical implications

The search for entrepreneurial rents is crucial for economic development. Without the possibility to earn entrepreneurial rents, no entrepreneur would be willing to exercise entrepreneurship and exploit entrepreneurial opportunities. Successful entrepreneurship attracts imitating firms that push back profits to normal levels and the benefits of the innovation will be diffused to consumers.

Social implications

Understanding the role of entrepreneurship and its compensation is crucial for analyses of potential policy measures. High ex post compensation for successful entrepreneurship cannot be taxed harshly without affecting entrepreneurs’ willingness to supply effort.

Originality/value

The entrepreneurial function and its compensation are often neglected in neoclassical economics. This is a major shortcoming, as the presence of and search for entrepreneurial rents are necessary for bringing about the innovation and structural change that result in economic growth.

Details

Journal of Entrepreneurship and Public Policy, vol. 6 no. 1
Type: Research Article
ISSN: 2045-2101

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Article
Publication date: 12 August 2021

Saurav Pathak

The study examines the role that societal levels of self-control – behavioral and cognitive self-control – play in shaping entrepreneurial intentions after both favorable…

Abstract

Purpose

The study examines the role that societal levels of self-control – behavioral and cognitive self-control – play in shaping entrepreneurial intentions after both favorable and unfavorable prior exits.

Design/methodology/approach

Using Global Entrepreneurship Monitor (GEM) data set on the nature of entrepreneurial exits from 32 countries between 2007 and 2010 and supplementing this data set with country-level scores of behavioral and cognitive self-controls, the authors test five hypotheses on the effects of societal levels of self-control on post-exit entrepreneurial intentions.

Findings

The study finds that individuals who exit entrepreneurship for negative reasons (versus positive reasons) are more likely to form entrepreneurial intentions. Further, societal levels of self-control moderate this likelihood.

Originality/value

The study invokes the psychological construct of self-control in the context of entrepreneurship. The novelty lies in rendering self-control as also a higher order societal level construct and then also empirically testing the role that societal self-control plays in shaping entrepreneurial intentions after prior exits. Societal self-control accounts for cross-country variance in why individuals in some societies are better suited and capable to return to entrepreneurship despite unfavorable prior exits.

Details

International Journal of Entrepreneurial Behavior & Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1355-2554

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Article
Publication date: 7 August 2018

Frank Agyire-Tettey, Charles Godfred Ackah and Derek Asuman

The purpose of this paper is to assess determinants of returns to male and female entrepreneurship in Ghana, Kenya and Uganda at selected quantiles along the distribution…

Abstract

Purpose

The purpose of this paper is to assess determinants of returns to male and female entrepreneurship in Ghana, Kenya and Uganda at selected quantiles along the distribution, as well as examine gender gaps in returns to entrepreneurship and factors contributing these gaps.

Design/methodology/approach

Employing a unique data set collected in the three countries on entrepreneurial motivations, constraints and performance, the authors apply unconditional quantile regression technique to assess the determinants of returns to entrepreneurship at various quantiles along the distribution. Additionally, the authors employ decomposition techniques to assess gender gaps in returns to entrepreneurship at various points along the distribution. The data contain extensive information on entrepreneur’s personal characteristics, including parental background and household composition and structure.

Findings

The study finds substantial differences in determinants of returns to male and female entrepreneurship along the distribution, with firm asset increasing returns to entrepreneurship. There is also the presence of gender gaps in returns to entrepreneurship at the lower-end of distribution, however, gaps disappear at the upper tail of the distribution, indicative of sticky floors in returns to entrepreneurship in Ghana, Kenya and Uganda. The authors also find gender bias against female entrepreneurship in the three countries, as unobserved characteristics largely responsible for the gender gaps in entrepreneurial returns.

Originality/value

This work has been undertaken by the authors and has not been carried out by any other person. The study will add to the existing literature on gender and returns to entrepreneurship.

Details

International Journal of Social Economics, vol. 45 no. 12
Type: Research Article
ISSN: 0306-8293

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Book part
Publication date: 19 June 2019

Nicholas Dew and Stuart Read

Tucked in the back of Venkataraman’s 1997 work on the distinctive domain of entrepreneurship (DDE) lies a pointer to a question each individual must face when choosing to…

Abstract

Tucked in the back of Venkataraman’s 1997 work on the distinctive domain of entrepreneurship (DDE) lies a pointer to a question each individual must face when choosing to start a new venture; “is entrepreneurship worth it?” Inventorying costs associated with risk, uncertainty, and illiquidity against surpluses from financial and psychological factors unique to entrepreneurship, Venkataraman tempts readers to tally entrepreneurial returns. The authors summarize and integrate an academic study of these various cost and return components over the past 20 years using Venkataraman’s original framework. The authors find the answer to the question of “is entrepreneurship worth it?” varies with time. Researcher’s answer to the question has shifted from an early view that entrepreneurs sacrifice financial gain in exchange for soft psychological benefits to a more positive view that entrepreneurs are rewarded both financially and psychologically for the unique costs borne in the DDE. But the rewards are not immediate. In entrepreneur time, break-even emerges by gradually overcoming an initial deficit. As surpluses accrue, returns to entrepreneurs likely eventually exceed those of their wage-earning peers.

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Article
Publication date: 12 October 2015

Michael Crum and Thomas E. Nelson

– This paper aims to examine the relationship between aspects of a country’s institutional environment and entrepreneurial investors’ overall rate of return.

Abstract

Purpose

This paper aims to examine the relationship between aspects of a country’s institutional environment and entrepreneurial investors’ overall rate of return.

Design/methodology/approach

Specifically, monetary stability and property rights are tested against both entrepreneurs’ and angel investors’ expected financial returns and payback periods, respectively. Data from the Global Entrepreneurship Monitor survey including years 2004 through 2006 and encompassing 50 countries are aggregated and examined using random coefficient multilevel modeling.

Findings

We find that strong property rights encourage both angel investors and entrepreneurs to invest in new ventures with longer payback periods and encourage angel investors to invest in ventures with lower expected financial returns.

Practical implications

This suggests that one key to increasing entrepreneurial investment in a country is to guarantee strong property rights. Therefore, both entrepreneurs seeking funding and countries seeking entrepreneurs should incorporate property rights issues into their decision-making.

Originality/value

This finding moves the “attracting entrepreneurs” conversation beyond the typical tax-abatement, infrastructure building, business cluster recommendations prevalent in academic and professional literature and points to one of the more fundamental reasons entrepreneurial “cultures” develop some places, but not others.

Details

Journal of Enterprising Communities: People and Places in the Global Economy, vol. 9 no. 4
Type: Research Article
ISSN: 1750-6204

Keywords

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Book part
Publication date: 24 May 2017

Selwyn Seymour and Yuliana Topazly

This chapter explores the impact of postgraduate entrepreneurship and enterprise (E&E) education in UK Universities on the entrepreneurial actions of foreign students by…

Abstract

This chapter explores the impact of postgraduate entrepreneurship and enterprise (E&E) education in UK Universities on the entrepreneurial actions of foreign students by reference to students from the second largest transition economy, Russia. The research identifies the most popular courses selected by foreign students for UK study and to identify and qualify the related student experience in order to identify correlations with how graduates exploit entrepreneurial opportunities upon return to home country. British universities have placed increasing dependency on foreign students which has increased pressure to enhance curricula to ‘embrace a wider global context’. Universities have been pressured also to play a new role in society by pursuing a ‘third mission’ of economic development to support the traditional roles of research and teaching. The increase in supply of HE providers has increased competition for students so curricula have to be innovative in order to attract them. An interpretivist philosophy and qualitative methods was employed across three phases, to study university managers, selected according to university and contact with foreign students; Russian non-government officials, selected to comment on the nexus of issues around Russian business and college education; and graduates (‘past’ and ‘recent’), selected according to country of origin, focus of studies and choice of university. This study confirmed that ‘the UK has a long tradition of the university third mission role’ where ‘HEIs are independent, self-governing bodies’, ‘most or part-funded by government’ and since 1992, seen an increase in the overall number; universities have been especially aggressive in pursuing foreign students so have led in designing attractive programmes and curricula. Findings show that modern UK University E&E teaching is effective in changing foreign students’ entrepreneurship perception and behaviour. The university/course selection and teaching/learning experience combine to produce measurable post-study entrepreneurial actions, whether in starting new or joining existing businesses with new found knowledge, social capital and ways of viewing the world.

Details

Entrepreneurship Education
Type: Book
ISBN: 978-1-78714-280-0

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Article
Publication date: 3 October 2016

Michael B. McDonald and Ramon P. DeGennaro

The purpose of this paper is to examine the literature on angel investors. Research on angel investors is sparse because data are sparse. Most comprehensive studies of…

Abstract

Purpose

The purpose of this paper is to examine the literature on angel investors. Research on angel investors is sparse because data are sparse. Most comprehensive studies of angel investors have focused on the USA and UK. In these studies, definitions of angel investors and estimates of returns on angel investments vary dramatically. What can one make of this wide range of reported returns?

Design/methodology/approach

The authors examine the literature and find that the calculations of reported results are vague.

Findings

Most researchers do not explicitly report if their estimates are equal-weighted or value-weighted, nor do they say whether the results are weighted by the duration of the investment. The authors show that the unit of analysis – investment, project or angel – affects interpretations.

Practical implications

Limitations on the comparability between various studies of angel investing returns leave the current literature incomplete. They also offer opportunities for future study in the area.

Originality/value

The authors are the first to examine the angel investing literature in a comprehensive fashion, comparing between various returns found across all major studies of the subject done to date.

Details

Studies in Economics and Finance, vol. 33 no. 4
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 6 June 2016

Aleksander Kucel and Montserrat Vilalta-Bufi

Promotion of entrepreneurial skills is often considered as an adequate policy to enhance job creation and economic growth. However, neither the definition of…

Abstract

Purpose

Promotion of entrepreneurial skills is often considered as an adequate policy to enhance job creation and economic growth. However, neither the definition of entrepreneurial skills, nor the costs and benefits of such a policy are clear. The purpose of this paper is to check whether the benefits of entrepreneurial skills extent beyond self-employment. The authors denote entrepreneurial skills as those competencies that enhance the likelihood of self-employment. Then the authors analyze whether they are rewarded in wage employment.

Design/methodology/approach

The authors estimate a Heckman selection model with wages in a salaried job as the main dependent variable and working in wage employment vs self-employment as the selection equation. The authors use a sample of higher education graduates from Spain, from the year 2000 interviewed in 2005 within the REFLEX survey.

Findings

Results reveal that alertness to new opportunities, ability to mobilize others and knowledge of other fields are the competencies that enhance self-employment in Spain. Yet, these skills are not rewarded in a salaried job. Therefore, benefits of policies fostering entrepreneurial skills do not extend to wage employment in Spain.

Research limitations/implications

The exclusion restriction used in the analysis is father’s education. The authors assume that all the effect of parental education on wages goes through education attainment of the individual and her ability (proxied by her grade in secondary education). A better proxy for ability would be desirable.

Originality/value

The authors identify which competencies enhance self-employment in Spain. The authors find that these competencies are not rewarded in wage employment, so the benefits of policies promoting entrepreneurial education remain within self-employment activity only.

Details

International Journal of Manpower, vol. 37 no. 3
Type: Research Article
ISSN: 0143-7720

Keywords

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Book part
Publication date: 14 March 2003

Douglas J. Cumming and Jeffrey G. MacIntosh

This paper considers efficient venture capital investment duration for different types of entrepreneurial firms so that on exit information asymmetries between the venture…

Abstract

This paper considers efficient venture capital investment duration for different types of entrepreneurial firms so that on exit information asymmetries between the venture capitalist (as seller) and the new owners of the investment are minimized, and capital gains maximized. We hypothesize that a number of factors are likely to affect investment duration, and our empirical tests confirm the statistical significance of some of these variables (stage of firm at first investment, capital available to the venture capital industry, whether the exit was preplanned, and whether the exit was made in response to an unsolicited offer). However, the fit between our theoretical model and the data is stronger in the United States than in Canada, offering evidence in support of the view that institutional factors have distorted investment duration in Canada.

Details

Issues in Entrepeneurship
Type: Book
ISBN: 978-1-84950-200-9

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Abstract

“Economics is a Serious Subject.” Edwin Cannan.

Details

Wisconsin, Labor, Income, and Institutions: Contributions from Commons and Bronfenbrenner
Type: Book
ISBN: 978-1-78052-010-0

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