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Imperfect Transmission of Tacit Knowledge and other Barriers to Entrepreneurship

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  • Vesa Kanniainen
  • Panu Poutvaara

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Abstract

This paper identifies several distortions which create barriers to entrepreneurship. First, in addition to the innate entry cost, there are entry costs caused by regulation. Second, union wage policies raise the opportunity cost of entrepreneurship. Third, inefficiencies in the transmission of tacit knowledge between generations of entrepreneurs can arise: with access to within-family ownership transfer, the outside market for entrepreneurship operates as a lemon’s market. This problem becomes relevant when the economic life of a business idea exceeds the active life of an entrepreneur.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-07/cesifo1_wp2053.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2053.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2053

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Keywords: barriers to entrepreneurship; tacit knowledge; occupational choice;

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References

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  1. Poutvaara Panu, 2002. "Income Redistribution and Risky Occupational Choices," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 2(1), pages 1-19, July.
  2. Simeon Djankov & Rafael La Porta & Florencio LopezdeSilanes & Andrei Shleifer, 2000. "The Regulation of Entry," NBER Working Papers 7892, National Bureau of Economic Research, Inc.
  3. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(3), pages 55-74, Summer.
  4. Kanniainen, V. & Vesala, T., 2000. "Enterprise Formation and Labor Market Institutions," University of Helsinki, Department of Economics, Department of Economics 483, Department of Economics.
  5. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, Elsevier, vol. 13(2), pages 187-221, June.
  6. Parker,Simon C., 2006. "The Economics of Self-Employment and Entrepreneurship," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521030632.
  7. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, Elsevier, vol. 82(3), pages 591-629, December.
  8. BOADWAY, Robin & MARCHAND, Maurice & PESTIEAU, Pierre, . "Optimal linear income taxation in models with occupational choice," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -958, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  11. de Meza, David & Webb, David, 1999. "Wealth, Enterprise and Credit Policy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(455), pages 153-63, April.
  12. Vesa Kanniainen & Mikko Leppämäki, 2009. "Union power, entrepreneurial risk, and entrepreneurship," Small Business Economics, Springer, Springer, vol. 33(3), pages 293-302, October.
  13. Marta Coelho & David de Meza & Diane Reyniers, 2004. "Irrational Exuberance, Entrepreneurial Finance and Public Policy," International Tax and Public Finance, Springer, Springer, vol. 11(4), pages 391-417, 08.
  14. Robin Boadway & Michael Keen, 2006. "Financing and Taxing New Firms under Asymmetric Information," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 62(4), pages 471-502, December.
  15. Cressy, Robert, 1996. "Are Business Startups Debt-Rationed?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(438), pages 1253-70, September.
  16. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
  17. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 42(3), pages 227-45, September.
  18. Robert Cressy, 2006. "Why do Most Firms Die Young?," Small Business Economics, Springer, Springer, vol. 26(2), pages 103-116, 03.
  19. de Meza, David & Webb, David C, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(2), pages 281-92, May.
  20. Kanbur, S M, 1979. "Of Risk Taking and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(4), pages 769-97, August.
  21. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  22. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
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Cited by:
  1. Bas, Maria & Ledezma, Ivan, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/6913, Paris Dauphine University.
  2. Hessels, Jolanda & Brixy, Udo & Naudé, Wim & Gries, Thomas, 2014. "Skill Variety, Innovation and New Business Formation," IZA Discussion Papers 7889, Institute for the Study of Labor (IZA).
  3. Gries, Thomas & Naude, Wim, 2008. "Entrepreneurship and Structural Economic Transformation," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) RP2008/62, World Institute for Development Economic Research (UNU-WIDER).
  4. Gries, Thomas & Naude, Wim, 2009. "When to Start a New Firm?: Modelling the Timing of Novice and Serial Entrepreneurs," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  5. Jolanda Hessels & Udo Brixy & Wim Naudé & Thomas Gries, 2014. "Skill Variety, Innovation and New Business Formation," Tinbergen Institute Discussion Papers 14-011/VII, Tinbergen Institute.
  6. Naude, Wim, 2008. "Entrepreneurship in Economic Development," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) RP2008/20, World Institute for Development Economic Research (UNU-WIDER).

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