1.3 The Value of Entrepreneurship (Van Praag & Versloot 2007)

Question 1

How do vPnV define entrepreneurial firms (start-ups) and entrepreneurs?

Answer 1

• fewer than 100 employees
• less than 7 years old
• new entrants to the market

all other firms are the control group

entrepreneurs: owner-managers of incorporated businesses

Question 2

Which variables did they use to adress the research question?

Answer 2

1) Employment, (jobs created, firm growth of number of jobs, wage levels)
2) Innovation (patents, commercialisation, adoption)
3) Productivity and Growth (growth of value added, lab. prod., factor prod.)
4) Individual utility (returs to self-empl., job risk, satisfaction)

Question 3

How are e.firms related to Employment (results vP&V)

Answer 3

• growth rates are decreasing in firm size and age: the smaller/jounger the business, the larger the growth
• -> increase the overall labour demand
• the jobs e.firms create are more insecure bc higher prob. of firm dissolution
• employees are paid less but more satisfied (bc of intrinsic motivation)

Question 4

How are e.firms related to Innovation? (results vP&V)

Answer 4

• fewer innovations, patents, products
• but higher quality and produce more efficient
• lower sales probability: larger firms have more marketing power
• innovations have larger sales share –> are more important
• -> overall equal contributions to society

Question 5

How are e.firms related to Productivity and Growth? (results vP&V)

Answer 5

• production value grows fast
• labour prod levels are equal, but growth is higher
• same with factor productivity

larger firms have economies of scale: higher growth

Question 6

How are e.firms related to ind. Utility? (results vP&V)

Answer 6

• lower median incomes (however upper 5% earn more than large firms)
• riskier incomes
• entrepreneurs are more satisfied because of non-monetary utility

Question 7

Why do E´s not quit after profits turned out worse than expected?

Answer 7

possible reasons:

• E is tied because of investments she made (e.g. specialised machine)
• psychological cost of giving up independence
• hoping for sunshine
• liabilities against creditors –> e.g. bank loans

Question 8

What critique is there on the vP&V paper?

Answer 8

• low amount of studies for each variable, not a real meta study
• there might be interaction effects between the variables which were left out
• possible causes in economic areas are left out