What is the Effect of the Current Financial Crisis on Venture Capital Financing? Empirical Evidence from US Internet Start-ups

Employing a large dataset regarding venture capital investments in US Internet firms, we analyze the effect of the current financial crisis on the venture capital market. Using regression analysis, we find that the financial crisis led to a 20% decrease in the average amount of funds raised per funding round. This effect, however, can only be found in later funding rounds. We argue that firms in later financing rounds that need capital to survive cannot avoid a deduction induced by the financial crisis, whereas firms that seek initial funding postpone their funding and expansion plans until the capital markets have stabilized. Furthermore, firms in later phases of the venture cycle are more likely to be negatively affected by the weak IPO market than firms seeking initial funding. Our results suggest that the financial crisis can lead to a severe "funding gap" in the financing of technological development and innovation.Entrepreneurship; Financial Crisis; Venture Capital; Innovation Finance

Necessity and Opportunity Entrepreneurs in Germany: Characteristics and Earnings Differentials

Our paper uses data from the German Socio Economic Panel Study (GSOEP) to analyze how necessity and opportunity entrepreneurs differ in kind and in earnings and what the determinants of the latter are. We estimate probit and random effects panel data models in order to address these questions. We find that the two types of entrepreneurs differ as concerns age, gender and other characteristics, but not with regard to education levels. Furthermore, opportunity entrepreneurs earn significantly more in our sample and the determinants of earnings levels differ to some degree. We conclude that our findings indicate a need to distinguish between the two groups in entrepreneurship policy-making. The results also show that commonly used specifications of earnings equations in labour economics seem to work better for opportunity than for necessity entrepreneurs.opportunity entrepreneurship; necessity entrepreneurship; earnings equation; wage equation; entrepreneurship; Germany; GSOEP

The Effect of Motivation on Self-Employment Duration in Germany: Necessity versus Opportunity Entrepreneurs

Using data from the German Socio-Economic Panel Study (GSOEP), we analyze whether necessity and opportunity entrepreneurs differ in terms of self-employment duration. We find that the two types of entrepreneurs differ regarding their duration in self-employment. Once controlled for educational variables however, this effect turns out to be no longer significant. We therefore conclude that the difference observed is no original effect but is due to selection. We then go on to discuss the implications of our finding for entrepreneurship-policy making. Suggestions to improve governmental start-up support programmes are given. Estimations are carried out with discrete time hazard rate models controlling for unobserved heterogeneity.Self-employment; Firm survival; Necessity entrepreneurs; Opportunity entrepreneurs; Hazard rates; GSOEP

Ownership versus Management Effects on Performance in Family and Founder Companies: A Bayesian Analysis

There are ongoing debates in the literature concerning the performance of family firms: some studies find superior performance among these companies, others find negative or neutral per-formance effects. In this research we employ agency theory to argue that the effects of family ownership vs. family management will be quite different: the former is expected to contribute positively to performance, the latter is argued to erode performance. Previous studies, due to problems of omitted variables or multicollinearity have been unable to distinguish these effects. Using a Bayesian approach that avoids these problems, we find that whereas family and founder ownership are associated with superior performance, the results for family management and even founder management are far more ambiguous. Our results have implications regarding the own-ership and management of lone founder and family firms.Family firms; lone founder firms; performance; Bayesian analysis; agency theory

Do risk attitudes differ within the group of entrepreneurs?

The notion of risk and entrepreneurship has been widely discussed in the entrepreneurship literature. Starting a business involves risk and requires a risk-taking attitude. Most studies have com-pared entrepreneurs with non-entrepreneurs such as managers or bankers. So far, little research exists on the risk attitudes of different types of entrepreneurs. This study aims to fill this gap. Our particular focus is on the entrepreneurs’ motivations to start their business. The results show that opportunity entrepreneurs are more willing to take risks than necessity entrepreneurs. In addition, entrepreneurs who are motivated by creativity are more risk-tolerant than other entrepreneurs. The study contributes to the literature about risk attitudes of entrepreneurs and to the literature about necessity and opportunity entrepreneurship.Entrepreneurship; Self-employment; Risk attitude; Necessity entrepreneurship; Creativity entrepreneurship

Social policy as a motivation for start-up subsidies: supporting start-ups out of unemployment

Support of business start-ups is partially motivated by social policy objectives. The paper discusses these social policy objectives on a conceptual and empirical basis. Its focus is on start-ups out of unemployment. Implications for the design and the evaluation of socially motivated start-up subsidies are discussed.Start-up subsidies; social policy; entreprenership, unemployment

Institutional reforms and entrepreneurial growth ambitions

Institutional reforms have resulted in deep transformations of the global economy. Yet, the theoretical development and accumulating insights about the effects of institutional reforms on entrepreneurial outcomes have been inconclusive. Our study applies categorisation theory to argue that flexibility- and stability-enhancing reforms may affect entrepreneurial growth ambitions in distinct ways, depending on whether more innovative versus less innovative entrepreneurs perceive specific reforms as an opportunity or a threat. Our study employs a multi-source, repeated cross-sectional dataset of approximately 150,000 entrepreneurs from 65 countries, covering the period from 2002 to 2016. Our findings indicate that flexibility-enhancing reforms lead to higher growth ambitions. They are particularly favoured by less innovative entrepreneurs. On the contrary, stability-enhancing reforms do not affect growth ambitions of entrepreneurs in general but rather increase growth ambitions of more innovative entrepreneurs. Our study provides important theoretical and practical implications about the consequences of institutional reforms on growth ambitions of entrepreneurs with different levels of innovation.</p

Are Education and Entrepreneurial Income Endogenous and do Family Background Variables make Sense as Instruments? A Bayesian Analysis

Education is a well-known driver of (entrepreneurial) income. The measurement of its influence, however, suffers from endogeneity suspicion. For instance, ability and occupational choice are mentioned as driving both the level of (entrepreneurial) income and of education. Using instrumental variables can provide a way out. However, three questions remain: whether endogeneity is really present, whether it matters and whether the selected instruments make sense. Using Bayesian methods, we find that the relationship between education and entrepreneurial income is indeed endogenous and that the impact of endogeneity on the estimated relationship between educa-tion and income is sizeable. We do so using family background variables and show that relaxing the strict validity assumption of these instruments does not lead to strongly different results. This is an important finding because family background variables are generally strongly correlated with education and are available in most datasets. Our approach is applicable beyond the field of returns to education for income. It applies wherever endogeneity suspicion arises and the three questions become relevant

Education and Entrepreneurial Choice: An Instrumental Variables Analysis

Education is argued to be an important driver of the decision to start a business. The measurement of its influence, however, is difficult since it is considered to be an endogenous variable. This study accounts for this endogeneity by using an instrumental variables approachand a data set of more than ten thousand individuals from 27 European countries and the US. Theeffect of education on the decision to become self-employed is found to be strongly positive,much higher than the estimated effect in case no instrumental variables are used. That is, thehigher the respondent's level of education, the greater the likelihood that he/she starts a business.Implications for entrepreneurship research and practice are discussed