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L2 - Firm Objectives, Organization, and Behavior

Firm Objectives, Organization, and Behavior

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Entrepreneurship, Small Businesses, and Economic Growth in Cities: An Empirical Analysis

Does entrepreneurship cause urban economic growth and if so how large is the impact? Empirical analysis of such question is hampered by endogeneity. This paper uses two different sets of variables – the homestead exemption levels in state bankruptcy laws from 1975 and the share of MSA overlaying aquifers - to instrument for entrepreneurship and examine urban growth between 1993 and 2002. Despite using different sets of instrumental variables, the ranges of 2SLS estimates are similar, further supporting the significant impact of entrepreneurship on urban growth.

Do Government Guaranteed Small Business Loans Promote Economic Growth and Entrepreneurship?

This paper examines the impact of government guaranteed small business loans on urban economic growth, and compares the growth impacts of government versus market financed entrepreneurship. OLS estimates indicate a significant and positive relation between the Small Business Administration’s guaranteed loans and metropolitan growth between 1993 and 2002. However, first-difference and instrumental variable regressions show no growth impact from government guaranteed loans. In contrast, market entrepreneurship significantly and positively contributes to local economic growth.

Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises

Innovation is key to technology adoption and creation, and to explaining the vast differences in productivity across and within countries. Despite the central role of the entrepreneur in the innovation process, data limitations have restricted standard analysis of the determinants of innovation to consideration of the role of firm characteristics. We develop a model of innovation which incorporates the role of both owner and firm characteristics, and use this to determine how product, process, marketing and organizational innovations should vary with firm size and competition.

Wages, Employment, and Capital in Capitalist and Worker-Owned Firms

Differences in wages, employment, and capital between worker-owned and capitalist enterprises are computed from a matched employer-worker panel data set from Italy, the market economy with the greatest incidence of worker-owned and worker-managed firms. These differences are related to orthodox models of the capitalist firm and worker co-op. The estimates of the wage, employment, and capital equations largely corroborate the implications of the behavioral models of the two types of enterprise.

The Multitask Theory of State Enterprise Reform: Empirical Evidence from China

The degree of state ownership remains significant in the Chinese economy despite more than two decades of economic reform since 1979. Most of the remaining state-owned enterprises (SOEs) are money losing, and the few exceptional ones tend to be sheltered by government protection in selected industries. Yet China has been enjoying one of the most spectacular growth experiences in world history, and much of the growth is driven by non-state-owned enterprises (non-SOEs).

The Institutional Environment for U.S. Economic Innovation

The institutional environment allows innovators and entrepreneurs to take calculated economic risks. In the U.S, innovation originates from education and research, while competition is made possible by a cluster of laws and financial regulatory institutions. Creative education, innovative research, legal institutions and financial regulations function together to enable a highly dynamic and innovative economy. We first give a brief introduction of the relationship between innovation, entrepreneurship and institutions.

Vertical Integration and Sabotage with a Regulated Bottleneck Monopoly

Consider a bottleneck monopoly that sells “access” at a regulated price and may compete with independent downstream firms through a subsidiary. We systematically study the vertical integration decision and the optimal intensity of sabotage. The main results are as follows. First, unless the subsidiary is implausibly more efficient than independent firms, vertical integration never benefits consumers. Moreover, sabotage may prompt inefficient vertical integration, in which case welfare unambiguously falls.

China’s Decentralized Privatization and Change of Control Rights

A distinctive feature of China’s privatization is that both its design and its implementation are highly decentralized and are administered by the local governments. Based on a survey of three thousand firms in over one hundred Chinese cities, this paper studies how city governments choose among various privatization methods, how these different methods transfer control rights from the government to private owners, and how various privatization methods lead to different restructuring and performance.

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