Les facteurs de succès des jeunes entreprisesFrançaises · 8 Economic context The economic...

I) Profil, contexte, environnement

II) Comportement réel (sur le marché) et financier (politique d’endettement) ont une influence sur la survie de la nouvelle entreprise.

III) Un modèle qui explique à la fois la création et la survie de l’entreprise : la valorisation du capital humain de l’entrepreneur

Étude à partir de la base Sine (Système d’informations sur les nouvelles entreprises) Environ 30000 représentant 90000 créations-reprises. Base de données très riche…

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Les facteurs de succès des jeunes entreprises Françaises

2

Variables relatives à la firme


3

Variables relatives à l’entrepreneur


4

L’ intensité entrepreneurialeL’ intensité entrepreneuriale


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Première étude descriptive : 3 thèmes retenus :ABDESSELAM R., BONNET J. et N. LE PAPE (2004), "An Explanation of the

Life Span of New French Firms", Small Business Economics, 23: 237-254.

-Le profil de l’entrepreneur (car bien souvent identification entrepreneur-entreprise) âge, statut professionnel, occupation préalable, niveau de formation, nationalité

-le contexte de la création/reprise :

informationnel et technique The informational and technical context deals with the behaviour of

the entrepreneur before the setting-up of his new firm when he wastrying to get new skills and looking for information about the jobitself. It is identified by five variables: obtaining advice, attendingspecific training programmes, carrying out specific surveys orstudies, making contacts with potential customers, and gettingskills during previous occupation.


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Economic context

The economic context sums up a set of variables linked to the size of the firm, its production and its geographical location (branch of industry, geographical location, size of the firm at the date of creation, subcontracting and number of customers ).

Financial context

The financial context takes into account four variables: asking for bank loans, obtaining bank loans, being granted public financial aid and the amount of money that was invested into the project.

The insertion in the entrepreneurial networks

is made up of five variables: the presence of relatives or close relations in these networks, the present exercise of an entrepreneurial function in another structure, the specific relations with customers, the specific relations with suppliers -which facilitate the setting-up of the firm- and the motivations of the entrepreneur

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Le profil de l’entrepreneurLe profil de l’entrepreneur

10

Le contexte de la créationLe contexte de la création

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Le contexte de la créationLe contexte de la création

12

L‘entourage entrepreneurialL‘entourage entrepreneurial

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“Debt, Aggressiveness and young french firms’survival: an empiricalinvestigation”, Jean Bonnet, Amel Gharbi and Nicolas Le Pape, ConferenceESEM, 58th European Meeting of the Econometric Society Stockholm, August20-24, 2003

*A côté des “Founding conditions” de la création d’entreprises, il fauts’intéresser au comportement courant de l’entrepreneur

*Current behavior during the first years of life: a mix of financialbehavior of the firm and real behavior of the firm on its market.

Le comportement réel de l’entreprise représente les efforts que faitl’entreprise pour gagner des parts de marché,

Le comportement financier représente l’intensité du recours à la dette dela part de l’entreprise dans sa stratégie de financement.

Comportement réel (sur le marché) et financier (politique

d’endettement) ont une influence sur la survie de la nouvelle entreprise.

14

Theoretical indetermination on the linkage debt/aggressiveness

Brander and Lewis (1986) : debt = commitment value towards an aggressive production strategy

Opposite result : debt=conciliatory product market strategy :

-Brander and Lewis (1988) (bankruptcy costs)

-Glazer (1994) (long term debt contract)

-Showalter (1995) (mode of competition -price versus quantity-)

Need of empirical tests : impact of financial structure on firm behavior risky debt contract :

Firm survival ?

15

Real behaviour of the firm ≈ Aggressiveness or competitive dynamism

Current behavior

or competitive

environment

Financial behaviour of the firm ≈ financing decisions (or financing mode)

16

Theoretical background in the explanation of the current behavior

Capital structure aggressiveness (competition) : linkages :

I.O. : how to explain a relation between capital structure and product market behaviour ?

Brander and Lewis (1986), Poitevin (1989) or Showalter (1995) :

capital structure = commitment device

- Debt induces aggressiveness :

Brander and Lewis (1986) : debt = commitment value towards an aggressive production strategy

Hypotheses :

-owner-manager with a limited wealth ( debt choice)

-limited liability status ( bounded in losses)

17

Two-stage game =

• First stage (=strategic), the firm chooses a debt level

• Second stage (= competitive), the firm produces (considering as given the level of the debt to be reimbursed).

Operating income (R(.)) is uncertain = demand uncertainty demand to the firm (a: hazard on the demand distributed on the support )

Risky debt contract exhibits a specific state of the world which separates the states of bankruptcy from the states of solvency

Level of the debt to be reimbursed at the end of the period = D.

a

0;h

18

0 â h

states of

bankruptcy states of solvency

support of repartition

of the uncertainty

(R<D) (R>D)

19

Solvability

Bankruptcy

Owner

manager

creditor

R-D

D

R

0Owner

manager

creditor

20

Owner-manager protected by the limited liability:

If R>D : he receives (R –D)

If R< D : he receives 0 (limited liability protection)

Consequence : reimbursement function :

Creditor (bank) :

If R>D : the bank receives : D

If R<D : the bank receives : R (residual claimant in case of bankruptcy)

Consequence : reimbursement function :

.

}0;max{ DRVE

};min{ DRVD

21

The owner-manager opt for a strategy which is susceptible

of generating a high value of the residual profit

Owner

manager

R(a)

Debt induces risk taking strategies

(≈ Jensen et Meckling, 1976) :

)ˆ(aRD

22

Creditor

R(a)

D

)ˆ(aRD

23

Objective function of a leveraged firm :

= Max E[R-D\ R>D]

Objective function of a non leveraged firm :

= Max E[R]

adaf Da,.,qRVEMax

h

a

adafa,.,qRVEMax

h

0

24

If strategy = choice of a level of production the amount produced by the firm is such that :

Then :

Debt induces agressive strategy

Context : Cournot competition + demand uncertainty

D more risk loving q

Debt = strategic value

0adaf q

a,.q,R0

qVE

h

a

D

0dD

dq

25

q2

q1

-Brander and Lewis

(1986)

-duopoly settingR.F. (1)

R.F. (2)

D1

26

2 main reasons : because of the willingness to take risks. Why ? Entrepreneurial optimism → de Meza and Southey (1996)

Weaker bankruptcy costs → reputation cost, social cost...

because an aggressive price policy is a way to obtain additional liquidities → stronger financial constraints (credit cost and credit rationing are higher). Why ? costs of the banking control are higher with small

projects.

insufficient information and guarantees → risk of moral hazard (Jensen et Meckling, 1976) = aggressiveness

What is the impact of the interaction (debt/aggressiveness) on the duration of the

new firm ?

Why does the Debt make the firm more aggressive in the case of new firms ?

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Still running firms in 1997 and which had been set-up or taken over during 1994 : 43 507.

Qualitative information on real and financial behaviour

interaction

Situation of firms in 1999 (still running or closed down between 1997/1999)

survival

The data basis

28

Financial decisions ≈ intensity in resorting to debt

*Financing sources of investments :

- only "Equity capital“ instruments (reserves, private resources, increase in equity…)

- only "Debt" instruments (bank loans, leasing…)

- Mixed

*Management of cash requirement :

- only "Equity capital“ instruments

- only "Debt" instruments

- Mixed

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5 classes of the « intensity of reorting to debt » :

Intensity in resorting to debt Classes

The firm never resort to debtD1 : minimal intensity in

resorting to debt

The firm resort to debt only for its

cash requirement

D2 : weak intensity in

resorting to debt

The firm finances its investments

both through equity capital and debt

D3 : medium intensity in

resorting to debt

The firm always resort to debt to

finance its investments

D4 : high intensity in

resorting to debt

The firm always resort to debt to

finance its investments and its cash

requirement

D5 : maximal intensity in

resorting to debt

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Real decisions ≈ aggressiveness of the firm

Questions Modalities of replyAggressiveness

index

What has been your global

approach towards your firm

over the last two years?

Increasing the activity 1

Maintaining the activity

at its level0

Attempting to safeguard

the activity0

Have you made advertising

efforts over the last two

years?

Yes 1

No 0

Have you made efforts to

prospect new clients over the

last two years?

Yes 1

No 0

Have you made any effort on

your prices over the last two

years?

Yes 1

No 0

Have you been

subcontracting work (to other

firms) over the last two

years?

Yes 1

No 0

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Global index representative of the firm's aggressiveness = [0;5] scale

Interaction debt/agressiveness : a stratification in sub-populations

Chi-2 test : aggressive firms = indexes 3, 4; 5

Descriptive statistics

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Investment decision

Firms which

invested

Firms which did not

invest

SubsidiariesIndependent

firms

Unlimited

liabilityLimited

liability

Capital structure

Legal status

Debt

aggressiveness

34

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

45,00%

D

0

D

1

D

2

D

3

D

4

D

5

Classes of the intensity of resorting to debt

Pro

po

rtio

n o

f ag

ressiv

e f

irm

s *

Still living firms Closed down firms

Average proportion

of agressive firms in

the population

25,45 %

Comparison of the proportion of aggressive firms according

to the decision to invest and to the classes of intensity of

resorting to debt

35

Main results :

1. The proportion of aggressive firms is higher for the firms which did invest.

2. For the population which did invest, the greater proportion of aggressive firms is obtained in the class D3. Explanation : aggressiveness if firms have access to the widest financing range (equity and debt).

3. A decreasing proportion of aggressive firms is observed between D3 and D5. Possible explanation could be that aggressiveness (lower prices, advertising efforts) could induce a large risk of bankruptcy for these firms.

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20,00%

25,00%

30,00%

35,00%

40,00%

45,00%

D

1

D

2

D

3

D

4

D

5

Classes of the intensity of resorting to debt

Pro

po

rtio

n o

f a

gre

ss

ive

fir

ms

Independent firms Subsidiaries

Average proportion

of agressive firms in

the population :

28,88 %

Comparison of the proportions of aggressive firms

according to the ownership’s structure

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Results :

1.globally the shape of the curve is identical to the one of the previous figure : U inverted curve.

2.subsidiaries are on the whole more aggressive that independent firms

Explanation : financial support subsidiaries can obtain from the parent company aggressiveness.

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10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

45,00%

50,00%

D

1

D

2

D

3

D

4

D

5Classes of the intensity of resorting to debt

Pro

po

rtio

n o

f ag

ressiv

e f

irm

s

Limited liabilities Unlimited liabilities

Average proportion of

agressive firms in the

population :

28,34 %

Comparison of the proportions of aggressive firms

according to the legal structure of independent firms

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Results :

1.whatever the intensity of resorting to debt, limited liability firms have a proportion of aggressive firms significantly greater than unlimited liability firms. In line with Brander and Lewis.

2.nevertheless, for firms under limited liability, from the D3 class that the proportion of aggressive firms decreases with the intensity of resorting to debt.

Explanation : the owner exposes his private capital, even under limited liability status, if private guarantees or securities are demanded for access to bank credit.

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Survival analysis -Cox's model-

Variables

Firms which did not

invest

Firms which did invest

Risk ratio:

exp()

(Pr>2) Risk ratio:

exp()

(Pr>2)

AGRESS.3

AGRESS.2

AGRESS.1

LIM. LIABILITY

UNLIM. LIABILITY

SUBSIDIARY

INDEP. FIRM

IMP. COMPETITION

OTHER

COMPETITION

-2LogL

LR statistic

Number of firms

Percent Censored

1,558***

Ref

1,535***

1,332***

Ref

0,576***

Ref

1,043

Ref

22003.022

379,616***

9832

87.53

(0.0051)

(<0.0001)

(<0.0001)

(0.0041)

(0.765)

(<0.0001)

1.014

Ref

1.296***

1.065

Ref

1.010

Ref

1.248***

Ref

56544.813

645.068***

30503

90.88

(0.8438)

(<0.0001

)

(0.1748)

(0.9285)

(0.0064)

(<0.0001

)

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Results :1. For the population which did not invest, the harmful effect

of a too low or a too high aggressiveness appears. Explanations :-A too low aggressiveness can expose the firm to the risk of

seeing its customers turn away to its competitors (no effort on prices or no advertising efforts, no effort to contact customers).

- A too high aggressiveness generates costs which weakens the firm.

2. The limited liability increases the risk of exit on the sole population of the firm which did not invest.

Explanation : when the firm invest some personal assets of the entrepreneur are used as collateral if the investment is debt financed.

42

Duration model : Cox model (1972)

Event : exit by cessation of activity between 1997 and 1999.

Question : impact of aggressiveness and debt on survival ?

43

Aggressiveness

Survival of the

firm

Debt choice

3 sub-populations :

*Low aggressive firms

*Medium aggressive firms

*High aggressive firms

Theoretical

background

44

Firms which did invest (number of firms, 30503, percent censored, 90,88)

Variables Level of Aggressiveness

Low Medium High

DEBT5

DEBT4

DEBT3

DEBT2

DEBT1

LIM. LIABILITY

UNLIM. LIABILITY

SUBSIDIARY

INDEP. FIRM

IMP. COMPETITION

OTHER

COMPETITION

-2LogL

LR statistic

Percent Censored

0.985 (0.8721)

1.080 (0.4911)

Réf

1.362***(0.0039)

0.472***(<.0001)

1.188**(0.0163)

Réf

1.434**(0.0301)

Réf

0.957 (0.7371)

Réf

21519.479

543,0***

89.99

1.054 (0.5210)

0.960 (0.7030)

Réf

1.594***(<.0001)

0.615***(<.0001)

1.087 (0.2029)

Réf

0.955 (0.7634)

1.169 (0.2076)

Réf

25709.131

432.4***

91.62

0.843 (0.3813)

0.548**(0.0402)

Réf

0.904 (0.6322)

0.088***

(<.0001)

0.523***(<.000

1)

Réf

N.S.

Réf

1.522*(0.0836)

Réf

3416.386

385.5265***

90.11

Survival analysis -Cox's model-

45

Results :

1. Whatever the level of aggressiveness, the minimal intensity of resorting to debt has a positive effect on firm survival.

2. Generally, an increasing in debt resort does not imply an increasing risk of cessation of activity.

3. Firms which have a weak intensity propensity to indebtedness exit more when firms have a low or a medium aggressiveness.

Explanation : a large proportion of these enterprises are financially constrained. A low intensity of resort to debt ≈ sign of their financial fragility.

4. Limited liability has a negative impact for low aggressive firms with but a positive impact for high aggressive firms.

46

DEM. AND REFUSAL

DEM. AND OBTAINED

NO DEMAND

MAN

WOMAN

AGE <25

35 < AGE < 45

AGE >45

25 < AGE < 35

NO EXP. AND DIPLOMA

EXP. AND NO DIPLOMA

EXP. AND DIPLOMA

NO EXP. AND NO DIPLOMA

UNEMPLOYED

NONE WORK. POP.

WORK. POP.

NEW IDEA

OPPORTUNITY

WI. EMPLOY

ENT. EXAMPLE

TASTE ENTREP.

-2 Log L

LR statistic

1,182 (0,2237)

0,65*** (<0,0001)

Ref

1,086 (0,2301)

Ref

0,98 (0,8759)

1,026 (0,7338)

1,545*** (<0,0001)

Ref

0,85 (0,1025)

0,746*** (0,0002)

0,662*** (<0,0001)

Ref

1,389*** (0,0002)

1,312*** (0,0062)

Ref

1,361*** (0,0018)

0,799*** (0,0031)

0,779** (0,0142)

1,134 (0,3832)

Ref

21519.479

547,0***

1,51*** (0,0006)

0,893*(0,0999)

Ref

0,975 (0,6974)

Ref

1,083 (0,5033)

1,194*** (0,0079)

1,199** (0,0163)

Ref

1,149 (0,1122)

0,728*** (<0,0001)

0,831** (0,0226)

Ref

1,93*** (<0,0001)

1,133 (0,2472)

Ref

1,739*** (<0,0001)

1,056 (0,4485)

0,917 (0,3912)

1,881*** (<0,0001)

Ref

25709.131

432.4261***

1,506 (0,0843)

0,658** (0,0253)

Ref

1,314 (0,1102)

Ref

1,12 (0,6827)

1,334* (0,0861)

0,881 (0,541)

Ref

0,383***(0,0002)

0,895 (0,5233)

0,528***(0,0028)

Ref

1,541** (0,0336)

1,119 (0,6707)

Ref

0,553** (0,0178)

1,337 (0,1174)

1,1162 (0,4988)

0,123** (0,0403)

Ref

3416.386

385.5265***

Variables Level of Aggressiveness

Low Medium High

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Result : the variable “Human Capital” :

-for low and medium aggressive firms, the experience is more important that the diploma in terms of survival the acquired human capital that is important.

-for high aggressive firms : the diploma is more important for the survival that the experience it is the initial human capital which have the beneficial effect.

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Troisième étude Un modèle de choix occupationnel : la valorisation du capital humain

BONNET J., LE PAPE N. and R. RENAULT, 2005, “Inferring the Unobserved

Human Capital of Entrepreneurs”, colloque de l’International Industrial Organization

Conference (IIOC), Atlanta (USA), 8 et 9 Avril.

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Traditional determinants of Entrepreneurship Risk aversion

Self-employment involves some specific risky rewards that may not be captured while holding a wage position, (Khilstrom and Laffont 1979).

A connection could be made with some psychological characteristics of individuals,Shapero (1975).

50

Wealth A set of theoretical articles show that new

entrepreneurs are financially constrained(Jaffee et Russell (1976), Stiglitz et Weiss (1981).

Empirical findings: with Evans et Leighton (1989) and Georgellis et

Wall (1998) on german data lead to the results that net wealth increases the probability to set up a new firm.

Yet financial capital could be correlated with unobservable factors such as Managerial Skills or more generally Human Capital.

Empirical findings: Introduction of an exogenous financial event: inheritance, donations, lottery gains Lindh et Ohlsson (1996), Blanchflower et Oswald (1998)

51

Managerial skills

- The existing theoretical literature on entrepreneurship usually assumes that it requires some specific human capital, the managerial ability, which may not be sold in the labor market (see Lucas, 1978, Jovanovic, 1982, Evans and Jovanovic, 1989, Fonseca et al., 2001).

- Lazear (2005) argues that the choice between becoming an entrepreneur and staying in a salaried position is driven by the distribution of skills.

Limits of these theories :

Risk aversion: prime for wage earners which benefits to less risk-adverse individuals

Wealth: two extremes in the cumulated distribution of wealth (Hurst and Lusardi, 2004)

Managerial abilities: (appreciated abilities) may be valued in the firm.

52

53

1) Parmi les nouveau entrepreneurs, une proportion importante

provient de la population au chômage.

2) La décision de créer une entreprise est la plupart du temps

associée avec la décision de créer son propre emploi (becoming

self-employed). En France environ 80% des nouvelles

entreprises n’ont pas de salariés au départ.

Faits stylisés:

Entrepreneurship investments are riskier and have returns

comparable to those on financial markets (Moskovitz and Vising-

Jorgensen, 2002)

The decision to start a business is most of the time associated

with a decision to become self-employed.

Decision to become an entrepreneur comes mainly from occupational choice perspective.

Trade off between being in a salaried position and becoming self-employed. (expected payoffs)

The choice regards Human Capital Valuation.

Our objective : to explore entrepreneurship in relationship with imperfections in the labour market.

54

55

Valuation of human capital and Entrepreneurship: a reinterpretation of the pull and push effects

Two main effects :

A pull effect: Entrepreneurship as a response to opportunities –alertness Kirzner (1979,1985) - and market interstices due to growth (gap fillers and input completers capacities) (Leibenstein, 1968).

We can add another unconstrained motive: innovative motive not rewarded as a salaried man.

A push effect : Entrepreneurship as a response to a low opportunity cost, unemployed people (Evans and Leighton, 1989).

There exist also another constrained motive: the human capital depreciation.

56

Pull effect

In the case of the pull effect, the actual human capital of the individual is higher

than the observed level of his human capital

Observed

Human CapitalUnobserved or not

rewarded Human Capital

Total

Human

Capital

Positive

link with

duration

of the

firm

Proportion of Human Capital not rewarded

incentive to set up a firm

59

Labor market rigidities and informationasymmetry: the worker can not attain his preferred job.He is unemployed or he works in a wrong branch ofactivity. This implies that earnings are less than could beexpected regarding the observed human capital of theindividual (from a static point of view). From a dynamicpoint of view, Entrepreneurship becomes a mean to avoidthe depreciation of his human capital (push and pulleffects).

Incentives concerns: the worker is not rewarded atthe height of his human capital even if he is employed inhis good branch of activity (pull effect).

Our explanation: Entrepreneurship as a Response to

Imperfections in the Labor Market

60

*SINE 94/97 Survey of French firms

founded in Jan.1994 with survival data over

48 months.

*Extracted subsample of firms with French

male entrepreneurs (start-up)

age 30-50.

61

L’importance de l’occupation préalable et de l’expérience acquise dans le même secteur d’activité

62

Observed human Capital is not always a goodpredictor of the survival of the firm.

Evidence gives rise to a new question, the questionof the possibility of unobserved Human Capitalthat could complete the explanatory frameworkthat is proposed by the current Human Capitalliterature

.Furthermore there is a need for a theory thatcould explain, for that point of view,simultaneously the setting-up and the survival ofthe new firms.

.

63

Theoretical Model of Entrepreneurial Choice

The Actual Human Capital of an individual is Low or High

is the average probability to a high level of actual human capital for

employers. random variable which distribution depends on K:

We denote by the probability to a high human capital given the observed human capital of the individual (level of education, experience).

Revision process from employers that may have more information (interviews, tests) than the observed level of human capital.

KKE

HLK ,

K

64

We are interested here in the two extreme cases :

1) The employers observe perfectly the actual human capital of the individual.

2) The employers do not observe the actual human capital of the entrepreneur anymore than the econometrician does.

65

2 states i, before the setting-up of the firm , 1 employed in the good branch of activity, 0 unemployed or employed in the wrong branch of activity.

When his initial state is 0, the agent’s human capital depreciates. This depreciation is correctly taken into account by future employers, so that future wages will be negatively affected. Thus, this depreciation of actual human capital also affects future employers' beliefs and future earnings.

Let be the expected benefits from staying in state i.

))(( KiW

)0()0( and 0101 WWWW

negative bemay and 001 ''' WWW

)1,0( i

66

An agent in state i with actual human capital K willstart a new business if:

random variable with c.d.f. F and density f,satisfies the increasing hazard rate condition.

The entrepreneurial choice happens with theprobability

)()( LvHv

)()(KiWKv

))())(((1),( KvWFKP Kii

67

The probability of a high human capital given that a firm has been created (Bayes’law):

),()1(),(),(

)(,LPHP

HPii

iie

Characterization of the distribution of posterior distribution of human capital conditional on :

– Observed human capital (µ)– Initial state (i)– Choice of self-employment (P)

68

Exemple numérique

)(

)()/(

CP

CPCP

)(

)(*)/()/(

CP

PCPCP

Bayes’law:

Si =1/3 1- = 2/3

Probabilité d’avoir un haut capital humain sachant

que la firme a été créée =1/2.

Elle est supérieure à 1/3 qui est la proportion

d’individus çà haut niveau de capital humain dans

la population totale. Le fait de créer constitue

toujours un bon signal.

5/1)/( HPk 10/1)/( LPk

69

Proposition 1. With perfectly informed employers,

for all

for sufficiently high

Proposition 2. With strong information asymmetries, for all

for sufficiently low

)()( 1,0, ee

0,1, '' ee

)()( 2,1, ee

0,1, '' ee

72

Simulation

75

Assumption: A better posterior on Human Capital (actual)

translates into an improved survival of the firm.

The model with information asymmetry is relevant regarding the

data.

Three testable implications for entrepreneurship:

The posterior on Human Capital is more favourable for the state 1.

The impact of education on actual human capital depends on the labor

market imperfections (previous occupation and information asymmetry).

For the state 0 an improved prior (e.g. more education) does not always

imply a better posterior on actual human capital.

In contradiction with Bates (1990) : positive impact of the level of

education (observed human capital) on the survival of the new firm.

76

Empirical analysis

*SINE 94/97 Survey of French firms

founded in Jan.1994 with survival data over

48 months.

*Extracted subsample of firms with French

male entrepreneurs (start-up)

age 30-50.

77

A priori le capital humain et la survie de l’entreprise sont liées positivement(Bates, 1990).

• Qu’est ce que c’est que le KH ?

• Combinaison d’un niveau d’instruction et d’uneexpérience professionnelle

1) Comportement courant de l’Entreprise (HK from

experience/ HK from education)

2) Occupation préalable de l’entrerpreneur (KH observé/ HK inobservé)

3) Psychological characteristics (Entrepreneurial HK )

78

Plus control variables to take into account the heterogeneity of the

population

80

Proportional Hazard Model Relevance of Labour Market Imperfections as an issue

for Entrepreneurship is to check if Observed Human capital is always a good predictor of the duration of the new firm.

Duration analysis COX (1972) the probability of cessation of activity is expressed by

In the Cox model, the baseline hazard is not specified

Rank and not value enter in the determination of the coefficients

Robustness

)(0 th

)exp()(); ( 0 ii xthxth

81

Estimated with Maximum Partial Likelihood

The population concerned in the denominator has not ceased its activity before ti. Yet

the terms corresponding to censor information are effectively excluded from the

denominator because ai=0 for those cases.

1) Estimations run over four subgroups:

– Employed same sector

– employed different sector

– unemployed for less than one year

– unemployed for more than one year

2)Unobserved heterogeneity that is correlated with observed human

capital should lead to different ’ s across groups for education and

experience.

ia

n

ij

n

j

ij

i

xY

xPL

1

1

)exp(

)exp(

where ijijijij ttYttY if 0 and ; if 1 .

82

Estimated with maximum partial likelihood methods without modeling

unobserved heterogeneity. Table 4

83

Control variables on the global population. Table 5

84

Shared frailty model

Estimation assigns a random effect to 12 subgroups (previous

occupation x level of education x experience)

Assumption : all individuals in a subgroup share the same random

effect.

Where : i : observation and j : subgroup

• Heterogeneity is assumed to have a Gamma distribution: mean

0 and variance (intergroup)

• Estimates for realizations of frailties for different subgroups are

consistent with previous results

)() /( j ijjij thth

j

85

)log( jj

0 LR Chibar2(8)=258,61is rejectedH0:

86

Conclusion Actual Human Capital Valuation and labour market

rigidities could be a way to explain Entrepreneurship,

maybe in a broader approach than the alternative

theories.

2 main dimensions of these imperfections

Rigidities Which may prevent from finding a job or a new job.

Related to national characteristics on the labor market

may be relaxed by public policies

Information asymmetries Not specific to any country

difficult to eliminate by a public policy

87

Labor market rigidities induce self-employment for

unemployed or mismatched people. Some of these

individuals set up their business because of a

restrained choice or a low opportunity cost.

Labor market rigidities may also prevent

entrepreneurship for unobserved human capital

motives (innovative motive)

Conclusion

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