Jorn H. Block

I Can't Get No Satisfaction: Necessity Entrepreneurship and Procedural Utility

We study a unique sample of 1,547 nascent entrepreneurs in Germany and analyze which factors are associated with their self-reported satisfaction regarding their start-up. Our study identifies a new facet of procedural utility and offers new insights about the motivations and goals of nascent entrepreneurs. Most importantly, we identify a group of nascent entrepreneurs that “cannot get satisfaction” with their start-up—not because their start-up fails to deliver financial returns, but because they did not choose to become entrepreneurs in the first place. This group of unsatisfied entrepreneurs includes individuals starting a business after a period of long-term unemployment and those individuals with a lack of better employment alternatives (necessity entrepreneurs). In addition, we provide additional evidence for the importance of both financial and non-financial incentives of entrepreneurs. While financial success is the most important determinant of start-up satisfaction, achievement of independence and creativity is also highly important. Our results emphasize the relevance of procedural utility for understanding economic behavior.

Family Management, Family Ownership, and Downsizing: Evidence From S&P 500 Firms

Little is known about the relationship between family firms and downsizing. This study aims to close this gap. The study distinguishes between family management and family ownership as two distinct dimensions of family firms and analyzes their respective influences on downsizing. The findings suggest that the extent of family ownership decreases the likelihood of deep job cuts, whereas family management has no impact. However, family management is found to moderate the relationship between firm profitability and the likelihood of downsizing. It is suggested that family owners care more about their reputation for social responsibility than do other owners, motivating them to avoid deep job cuts.

The Market Value of R&D, Patents and Trademarks

This paper investigates the effects of trademarks on the market value of firms. The results show that trademarks have a positive effect on firm value. Next, the firms’ market values are regressed on indicators of trademark value such as trademark seniorities, the number of oppositions filed, and the number of product and services classes covered. We found that they at least partially reflect trademark value.

Education and entrepreneurial choice: An instrumental variables analysis

Education is argued to be an important driver of the decision to start a business. However, the measurement of its influence is difficult since it is considered to be an endogenous variable. This study accounts for this endogeneity by using an instrumental variables approach and a dataset of more than 10,000 individuals from 27 European countries and the USA. The effect 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, the higher the respondent’s level of education, the greater the likelihood that they will start a business. Implications for entrepreneurship research and practice are discussed.

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

Employing a large dataset of venture capital investments in US Internet firms, we analyse the effect of the current financial crisis on the venture capital market. Using regression analysis, we find that the financial crisis is associated with 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.

How to Pay Nonfamily Managers in Large Family Firms: A Principal—Agent Model

A large number of family firms employ nonfamily managers. This article analyzes the optimal compensation contracts of nonfamily managers employed by family firms using principal—agent analysis. The model shows that the contracts should have low incentive levels in terms of short-term performance measures. This finding is moderated by nonfamily managers’ responsiveness to incentives, their level of risk aversion, and measurement errors of effort related to short-term performance. The model allows a comparison between the contracts of family and nonfamily managers. This comparison shows that the contracts of family managers should include relatively greater incentives in terms of short-term performance measures. A number of propositions regarding the compensation of nonfamily managers employed by family firms are formulated. The implications of the model for family business research and practice are discussed.

Business Takeover or New Venture? Individual and environmental determinants from a cross-country study.

Whereas the determinants of entrepreneurial choice have been thoroughly analyzed in the literature, little is known about the preferred mode of entry into entrepreneurship, such as taking over an existing business or starting a new venture. Using a large international data set, this study reports considerable differences in takeover preferences across 33 countries. Hierarchical (multilevel) regressions are performed to explore individual–level and country–level determinants of the preferred mode of entry. At the individual level, a persons human capital, risk attitude, and inventiveness influence the preference for starting a new venture versus taking over an existing business. At the country level, the culture–inherent level of risk tolerance, the countrys level of innovation output, and the administrative difficulty of starting a new business are found to explain the between–country variation in the preferred mode of entry. Implications of our findings for research and practice are also discussed.

Family Firm Density and Regional Innovation Output: An Exploratory Analysis

Family firms are important not only for a region but for the economy as a whole. In particular, the long-term orientation and the local embeddedness of family firms suggest a positive effect on regional innovation activity. Yet, despite the widely acknowledged importance of family firms for the economy, little research exists on this issue. This paper analyses the effect of family firms on regional innovation. Using a dataset of 326 German regions, our regressions show that regions with a higher share of family firms also show higher levels of innovation activity, as measured by the number of successful patent applications. The implications of these findings for policy and research are discussed.Family firms long-term orientation and strong local roots suggest positive effects on regional R&D cooperation and regional innovation output. This article analyzes the effect of family firm density on regional innovation output. Combining a dataset of 326 German regions with the locations of 526 medium- to large-scale family firms in innovative industries, our regressions show that regions with a higher family firm density also show higher levels of innovation output, as measured by the number of successful patent applications. The implications of these findings for family firms and regional policy are discussed.

Are Education and Entrepreneurial Income Endogenous? 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 instru-mental variables can provide a way out. However, two questions remain: whether endogeneity is really present and whether it matters for the size of the estimated relationship. Using Bayesian methods, we find that the relationship between education and entrepreneurial income is indeed en-dogenous and that the impact of endogeneity on the estimated relationship between education and income is sizeable. Implications of our findings for research and practice are discussed.

Why do SMEs file trademarks? Insights from firms in innovative industries

Trademark filings have increased markedly over time. Although prior research has investigated the outcomes of trademark registration, including its effects on firm market valuation and productivity, little is known about why firms file trademarks. However, to interpret the increase in trademark filings and its economic effects, it is important to know and understand why firms file trademarks. Because trademarks are particularly important to small and medium-sized enterprises (SMEs), this study analyzes trademarking motives using a survey of 600 SMEs in innovative industries. An exploratory factor analysis yields three distinct motives: protection, marketing, and exchange. A cluster analysis reveals four distinct clusters of firms with respect to the three trademarking motives. A comparison of these clusters reveals significant differences in several industry- and firm-level characteristics, including participation in service industries and relationships with external parties. Implications for research on SMEs, trademarks, and intellectual property management are discussed.