Baltic International Centre for Economic Policy Studies Overview of - - PowerPoint PPT Presentation

Vyacheslav Dombrovsky Stockholm School of Economics in Riga, Baltic International Centre for Economic Policy Studies

 Overview of our research program at SSE-

Riga, TeliaSonera Institute, and BICEPS

• Global Entrepreneurship Monitor (GEM)
• Panel Study of Entrepreneurial Dynamics (PSED)
• Survey of Innovative Businesses in Latvia (SIBiL)

 Suggestions for building a research program

in Estonia

 Discussion…

• Research programme that aims to assess

entrepreneurial activity across countries and

• ver time
• 42 countries participated in the 2007 exercise
• Common methodology, basically a (CATI)

survey of about 2,000 adults in each country

• Latvia is the only Baltic state in the GEM

consortium

• We‟ve conducted GEM surveys since 2005

 GEM generates reasonable publicity and is

relatively good to gauge the overall situation with entrepreneurship, especially with nascent entrepreneurs

 However, (cheaper) competing indicators

begin appearing (World Bank, OECD, European Commission)

 Also badly suited for analysis of

entrepreneurs because of small sample sizes

 Collection of the data procedures could have

been more rigorous…

 Panel Study of Entrepreneurial Dynamics (PSED)

• riginated in the U.S. in 1990s

 The aim is to study nascent entrepreneurs, i.e.

those who are at the earliest stage of business creation

 The survey is expensive because of the need to

identify a sufficient and representative group of nascents (only about 4% of adult population in Latvia)

 Latvian PSED covers 400 nascent entrepreneurs, to

date two rounds have been conducted (longitudinal data)

 Business start-up process  Market and competition  Owners and financing (Section D)  Future expectations and motivation  Attitudes  Knowledge of the tax system  Demographic information

 49% of all nascents fund their start-up

entirely by their own savings

 4% received a loan from family members  1.25% received an asset-backed loan  39% refused to disclose their source of

financing

 Geared to understanding the process of

creation of new ventures

 Sample sizes are typically insufficient for the

analysis of the more innovative and hi-tech businesses

 Community Innovation Survey (CIS) and its

problems

• reliability of the survey instrument (mailed

questionnaires)

• Only covers firms with >10 employees
• A relatively short survey

 From CIS to SIBiL

• Focus on micro (<10) and small (10-49) firms, especially

in hi-tech sectors

• Face-to-face interviews (N=1,271)
• Panel aspect (two waves)
• Full control of the survey design and implementation

(using Lursoft)

1.

Innovation section (adapted from CIS)

• product or process innovations, ongoing or abandoned,

cooperation, intellectual property, etc.

2.

Financing section (adapted from the Fed‟s Survey of Small Business Finance)

• loan applications, successful or not, reasons for unsuccessful

3.

Competitive strategy

4.

Background of three largest owners

• gender, ethnicity, education (level and field), previous work

experience

5.

Balance sheets for 1996-2007 (Lursoft)

6.

Profit and loss accounts for 1996-2007 (Lursoft)

7.

Ownership variables for 2007 (Lursoft)

• foreign owners, country of origin, ownership concentration

 A striking aspect of SIBiL is that it shows that a

very high proportion of firms with product innovations (55% in manufacturing) as compared with „official‟ CIS (about 20%)

 One paper tries to find empirical evidence on the

theory of „symbiosis‟ between large and small firms; it looks at the background of owners

 The second paper attempts to address the

question whether there is learning from exporting, using owners ethnicity as an instrument

Total 1,271 100.00 don't know/ na 13 1.02 100.00 not at all 874 68.76 98.98 more than once 208 16.37 30.21

• nce 176 13.85 13.85

new loans? Freq. Percent Cum. not at all for than once, or

• nce, more

did you apply

Total 208 100.00 don't know/ na 9 4.33 100.00 sometimes approved, sometimes denied 35 16.83 95.67 always denied 15 7.21 78.85 always approved 149 71.63 71.63 applications always approved? Freq. Percent Cum. Total 211 100.00 don't know/ na 30 14.22 100.00 denied 28 13.27 85.78 approved 153 72.51 72.51 denied? Freq. Percent Cum.

Total 44 100.00 don't know 3 6.82 100.00 increase in overdraft/credit line limit 1 2.27 93.18 some other type of loan (please specify 5 11.36 90.91 industrial lease 1 2.27 79.55 vehicles lease 1 2.27 77.27 loan for real estate acquisition for pr 5 11.36 75.00 equipment loan 18 40.91 63.64 capital lease 8 18.18 22.73 new line of credit 2 4.55 4.55

• f credit was applied for? Freq. Percent Cum.

for the most recent denial, what type 99% 1500000 1500000 Kurtosis 8.875512 95% 1500000 1500000 Skewness 2.652207 90% 300000 1000000 Variance 1.51e+11 75% 200000 300000 Largest Std. Dev. 388188.1 50% 50000 Mean 204688 25% 11000 5000 Sum of Wgt. 32 10% 5000 5000 Obs 32 5% 3000 3000 1% 15 15 Percentiles Smallest amount? for this most recent denial, what was the total

Total 1,271 100.00 don't know/ na 20 1.57 100.00 no 1,078 84.82 98.43 yes 173 13.61 13.61 apply? Freq. Percent Cum.

 Insufficient collateral or no guarantee

available (18%)

 Poor balance sheet, financial situation (6.4%)  Loan too large (5%)  Firm too small for institution (6%)  Firm too highly leveraged (7%)

 You need to be careful in talking about “financing

gap” e.g. is there a „Mercedes gap‟?

 Typically, most businesses get started with

• wners‟ savings or family loans

 This is not a bad thing as it gives future potential

investors a signal about the entrepreneurs

 However, the distribution of incomes may not

coincide with the distribution of ideas

 Even though there should be substantial

correlation

 Also, is there an “equity gap”?

 How to contract research?  Permanent basis vs. occasionally  Preferred researches vs tenders  How to monitor quality?  Think about designing program

evaluation studies

• treatment group vs control group