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Frédéric Delmar EMLYON Business School & Research Institute of Industrial Economics Karl Wennberg Imperial College London & Stockholm School of Economics of Economics. Social Conditions for Growth – from Employment P rograms towards Ambitious Entrepreneurship . Today’s Agenda.

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Frédéric Delmar

EMLYON Business School & Research Institute of Industrial Economics

Karl Wennberg

Imperial CollegeLondon & Stockholm School of Economics of Economics

Social Conditions for Growth

– from Employment Programs towards Ambitious Entrepreneurship

today s agenda
Today’s Agenda
  • Entrepreneurship as self-employment(“the petty bourgeoisie”)
  • Growth oriented Entrepreneurship
  • What is the situation in Sweden? Some empirical Evidences
  • Policy implications and practical applications?
i entrepreneurship as self employment 1

Dan Johansson and Magnus Henrekson surveyed the literature or ‘gazelles’ – finding that more than 50% of all new jobs created are created by a small proportion of high-growth firms

Source: Johansson and Henrekson (2008)

I. Entrepreneurship as Self-Employment (1)
  • Sweden has higher rates of self-employment (eget företag) than many OECD countries, including USA… (Shane, 2008)
  • But the level of ambitious (growth-oriented) entrepreneurship is comparatively very low …
i entrepreneurship as self employment 2
I. Entrepreneurship as Self-Employment (2)
  • A majority of Swedish self-employed are ‘combiners’ – i.e. employees with a firm ‘on the side’ (Wennberg, Folta & Delmar, 2008)
  • Few full-time entrepreneurs by international comparison (GEM report, 2007)
instead of encourage self employment encourage growth

Source: Fritsch and Schroeter (2009)

Instead of encourage self-employment, encourage growth!

I. Entrepreneurship as Self-Employment (3)

Michael Fritsch and Alexandra Schroeter in Germany finds that there is an “optimal” level of start-up activity, i.e. too little or too much is not good!

 Instead of encourage self-employment, we should encourage growth-oriented entrepreneurship!

so what is good entrepreneurship
So what is “good” entrepreneurship?
  • Entrepreneurship as self-employment(“the petty bourgeoisie”)
  • Growth oriented Entrepreneurship
  • What is the situation in Sweden?
  • What can be done?
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II. Growth-Oriented Entrepreneurship (1)

Growth oriented entrepreneurship in cities

Source: Sternberg, Bosma Acs (2008)

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II. Growth-Oriented Entrepreneurship (2)

Stockholm – an Entrepreneurial hotspot?

Any entrepreneurship

Growth oriented entrepreneurship

Relative differences between city andoverall country

Source: Sternberg, Bosma Acs (2008)

some empirical evidence from sweden
Some empirical evidence from Sweden?
  • Entrepreneurship as self-employment(“the petty bourgeoisie”)
  • Growth oriented Entrepreneurship
  • What is the situation in Sweden?
  • What can be done?
iii our r esearch project 1 framework
III. Our Research Project(1): Framework
  • Entrepreneurial firms learn from similar others
  • They grow to achieve sustainable profit that are comparable to similar others (their aspiration level)
    • The importance of feedback loops
  • Two types of learning:
    • Rational learning, “the more the better”
    • Behavioral learning, “it is good enough”
  • Learning changes as firms evolve in age and size
  • Barriers to growth vs. barriers to survival

Source: Delmar & Wennberg (2009)

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III. Our Research Project(2): The Model

Probability

Cut–off ?

Rationallearning?

Behaviorallearning?

Probability of growth

Probability of survival

Age and/or size of new venture

iii our r esearch project 3 the data
III. Our Research Project (3): The data
  • The effect of social comparison of profitability among 14,700 Swedish knowledge-intensive consultant Firms (IT-Consultants, Engineers, etc)
  • Data: FAD & LOUISE
  • Independent incorporations (Aktiebolag)started 1995-2002
  • The variable of investigation isemployment growth

Source: Delmar & Wennberg (2009)

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III. Our Research Project (4): The Measures

  • We measure a bunch of cool things:
    • Earnings per employee (industry mean and for each firm)
    • Threat rigidity ( =firms in crisis)
    • Age, size, age*size
    • Survival bias
  • We are interested in differences withinfirm’s evolution over time rather than differences between firms
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III. Our Research Project (4): The Results

  • Firm behavior changes over age and as firms grow
  • “the aspiration level” drives growth
  • Firms acts rational when young and small
    • If things goes well (above aspiration)  invest more
  • Firms more satisfied above a certain age and size:
    • If things goes well  no need to invest
    • If things goes poor  invest more
  • Cut-off point: 5 to12 employees and 5 to 6 yearsold
iii the next research project
III. The next research project…
  • The next project investigate effect of social norms for start-up behavior among 682,154 persons in 68 countries
  • Data: Global Entrepreneurship Monitor 2000-2007
  • Results: Social norms have three times as much impact on probability of entrepreneurial entry compared to a person’s own attitudes
  • Half of the variance in individual-level entrepreneurial behaviors resides in between social groups

Entrepreneurship is a social phenomenon

– difficult to rapidly change with policy measures

– but once entrepreneurial attitudes are in place (lGnosjö) they are likely to persist over time

– take Stockholm or Munich as good examples and learn from these!

Source: Autio & Wennberg (2009)

some empirical evidence from sweden1
Some empirical evidence from Sweden?
  • Entrepreneurship as self-employment(“the petty bourgeoisie”)
  • Growth oriented Entrepreneurship
  • What is the situation in Sweden?
  • What can be done?
iv what can be done 1
IV. What can be done? (1)
  • We know that entrepreneurship is consistently higher in some regions
  • True both for people born there and people moving there, natives as well as immigrants, high educated as well as low educated
  • How does the interaction between culture/norms AND economic policies affect entrepreneurship?
  • The importance of suitable role model
  • Good policies comes from in-depth knowledge of firm behavior
iv what can be done 2
IV. What can be done? (2)
  • Search for profits leads to growth, not the other way around
  • “Suitable profits” defined by social surrounding
  • Growth as a process with important steps that the entrepreneurs need help to overcome:
    • Knowledge
    • Behavior
    • Structure
  • Better communicate both the advantages and disadvantages of growth

- Management & entrepreneurship

- Stability and development

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