Entrepreneurial Profit Research Articles

The non-linear impact of risk tolerance on entrepreneurial profit and business survival

AbstractEntrepreneurs tend to be risk tolerant but is higher risk tolerance always better? In a sample of about 2100 small businesses, we find an inverted U-shaped relation between risk tolerance and profitability. This relationship holds in a simple bilateral regression, and even after controlling for a large set of individual and business characteristics. Apparently, one major transmission goes from risk tolerance via investments to profits. This is quite robust as it applies for both past and planned investments. Considering business survival, we show, first, that less profitable businesses leave the market while moderately risk tolerant entrepreneurs survive more often. Second, the high risk-low profit part of the U-shaped relation seems to disappear among businesses being 4 years and older, indicating that such inferior risk-profit combinations disappear over time. These findings are important for the concept of business readiness trainings as the motivation (and ability) to take risks should potentially be accompanied by some warning that taking too much risk can be detrimental to long-term business success.

The Non-linear Impact of Risk Tolerance on Entrepreneurial Profit and Business Survival

The Non-linear Impact of Risk Tolerance on Entrepreneurial Profit and Business Survival

Fostering Entrepreneurial Growth: The Impact of Institutional Credits

This study is an attempt to find the role played by institutional credit for entrepreneurial growth in Bangladesh. Study is forwarded with 261 actual entrepreneurs selected on purposive convenience simple sampling method. Collected data is analyzed using SPSS 18 and the result is depicted through descriptive tools and Pearson correlations. The study found positive impact of institutional credit support to entrepreneurship development. The study covers actual data from entrepreneurs and analyzed data irrespective of gender and difference of geographical diversity. Amount of credit or portion of credit in total capital have influence on the profitability and the study suggest a ceiling on using credit for entrepreneurial profit. Still fostering of entrepreneurial development may further be triggered by monitoring of credit activities by financial institutions. This study infers some useful insights for potential entrepreneurs, management of credit institutions and policy maker including future researchers. The study is concluded suggesting efficient monitoring of credit activities by financial institutions that can be ensured by concerned authority.

Entrepreneurship as an occupational choice

This article aims to consider the entrepreneurship as an occupational choice and to understand the flow among different forms of occupations. Professionally active people may decide to start their own business or find hired employment as an option of professional occupation, the main difference being the fact that an entrepreneur makes entrepreneurial pro fits with the risk of failure, while an employed person receives risk–free remuneration. The choice of the form of professional activity depends on the perception of attractiveness of both forms, people who perceive entrepreneurial profits as more beneficial than workers’ wages more likely decide to become entrepreneurs than waged employees. However, i n the presented paper, the choice is considered not only between entrepreneurship and employment but also concerns the scale of entrepreneur ship. When starting one’s own business, people also need to decide whether they will hire employees and become proper entrepreneurs or whet her they will abandon the idea of hiring employees and become quasi entrepreneurs, also known as solo entrepreneurs. The issue of entrepreneurship as an occupational choice is presented empirically using the time series data for Poland on a quarterly basis in the years 2003–2018. The influence of the overall economic situation, which determines business opportunities and average salaries, on the choice between a pro per entrepreneur, a quasi–entrepreneur and a hired worker is presented with the use of regression analysis. The results show that changes in the overall economic situation and in the level of average wages lead to flows between proper entrepreneurs and quasi–entrepreneurs, and thus, to changes in the employment structure. Improving market conditions encourage people to follow the path of proper entrepreneurship or to become hired workers, while abandoning quasi entrepreneurship. The deterioration of business opportunities, in turn, is the reason for the reduction of entrepreneurship and employment downsizing, at the same time leading to an increase in the number of quasi entrepreneurs.

Entrepreneurship as an Occupational Choice

This article aims to consider the entrepreneurship as an occupational choice and to understand the flow among different forms of occupations. The choice of the form of professional activity depends on the perception of attractiveness of both forms, people who perceive entrepreneurial profits as more beneficial than workers’ wages more likely decide to become entrepreneurs than waged employees. However, in the presented paper, the choice is considered not only between entrepreneurship and employment but also concerns the scale of entrepreneurship. The issue of entrepreneurship as an occupational choice is presented empirically using the time series data for Poland on a quarterly basis in the years 2003-2018. The influence of the overall economic situation, which determines business opportunities and average salaries, on the choice between a proper entrepreneur, a quasi-entrepreneur and a hired worker is presented with the use of regression analysis. The results show that changes in the overall economic situation and in the level of average wages lead to flows between proper entrepreneurs and quasi-entrepreneurs, and thus, to changes in the employment structure. Improving market conditions encourage people to follow the path of proper entrepreneurship or to become hired workers, while abandoning quasi-entrepreneurship.

Учет природных условий добычи как основа оценки эффективности деятельности предприятия

The tax mechanism in the extractive industries should provide all enterprises with relatively equal terms of business, the differentiation of which is largely due to the influence of natural mineral mining conditions, to the number of the production conditions of mining mining factors of the Reno formation and the quality of minerals. However, the tools of the tax mechanism used, including the differentiation of tax rates for mining, are not able to ensure the necessary equality in mining enterprises’ profitability after taxation. Some economists offer a certain averaging of payments for deposits, which, in fact, is a refusal from the principles of rental taxation of mining enterprises. The differentiation of natural mineral mining conditions is expressed in the differential mining render of the deposit. The withdrawal of the differential mountain rent in the income of the state, the owner of the subsoil, can be ensured by further strengthening the differentiation of tax rates for mining, adding conditions for the development of specific deposits or the use of various forms of non-tax seizures of differential mining. In our opinion, the withdrawal of differential mining rents should be provided with a non-tax method. This is due to the fact that this rental income is fully owned by the state as the owner of the subsoil, for which the tax seizure is inefficient. Another part of the rental deposits of the field is a quasirent, a rent of machines or production capital. The quasirent, fully or partially, but at a rate reduced compared with the level of profit taxation, should be left at the disposal of the mining enterprise to stimulate an increase in the technological and innovative level of production. The last part of rental incomes is an absolute meager, which is formed from the excess of the existing demand for this natural resource. Taxation of absolute rent, as part of the entrepreneurial profit, should be made using the established taxation rates of profits on the general basis. Thus, the taxation of each part of the revenge income of the extractive enterprise should be carried out separately, in accordance with the specified principles, which will ensure the rental nature of the tax mechanism of mining enterprises and will strengthen its stimulating effect on improving the technological and innovative mining level. Contribution of the authors: the authors contributed equally to this article. The authors declare no conflicts of interests.

Основи на съвременната икономика: Франк Х. Найт и концепцията за неопределеността, теорията на капитала и зараждането на Чикагската школа

Frank Knight (1885⎯1972) was an exceptional social scientist and a prolific writer of many reviews and comments on topics in economic theory, philosophy, and ethics. In economics he is best known for his work on uncertainty as a cause for entrepreneurial profit in competitive markets. This is only one of his many contributions that put the market and the price mechanism at center stage. In contrast to many other neoclassical writers, he vehemently criticized the market as a guiding principle to form a society since the market is unethical. Knight considered the economy as a social system and the economic approach as one among many others in social sciences. Knight is a founding father of the Chicago School of Economics. Several of his students became Nobelists.

The German construction industry and industrial self-responsibility in occupied Europe, 1939–45

ABSTRACT This article enquires into the role of private German businesses in the administration of Nazi-occupied Western and Northern Europe during the Second World War. It is argued that the National Socialists were able to rule over occupied Europe with a remarkably low number of administrative personnel because they trusted private industry with central administrative responsibilities and tasks. The focus will be on the German construction industry working under the paramilitary construction unit Organisation Todt, as no other sector relocated its activities to such a degree to the occupied territories. Under the slogan of ‘industrial self-responsibility’, German construction firms played a crucial role as bridgeheads and mediators, especially in the early phase of the occupation, helped to draft procurement contracts for construction projects, to control prices and entrepreneurial profits, to supervise local sub-contractors, and finally, to recruit and supervise forced labour. By investigating these aspects, the article adds not only to our understanding of the German administration of occupied Europe, but also of the functioning of the Nazi state in general. Moreover, the article highlights the consequences of industrial self-responsibility for state-business relations in the Third Reich.

Guilds and Competition: A Response to Objections of Laissez Faire

This paper offers a critique of laissez-faire objections to the guild system from the perspective of Catholic social teaching a presents the economic reasons for a restoration of the guild system as a functional economic model. The laissez-faire argument is that 1) the free competition on the supply side is in the best interest of the consumer, 2) each member of the society is a consumer, 3) ergo: free competition on the supply side is a common good, i. e. a goal which the state should follow. The author argues that 1) unlike majority of goods and services, two goods are becoming scarcer as a result of free competition on the supply side: time and land, 2) consumers which prefer consumption of leisure time and land are worse off as a result of free competition on the supply side, 3) ergo: the conclusion that free competition on the supply side is always a common good is invalid. According to the author, leisure time and land are essential for a good operation of a well-functioning family which is essential for a well-functioning state. In this connection, the author contends that the primary goal and raison d’etre of the guilds is control of the entrance of new producers to the industry, so that the incumbents who want to pay just (family) wages and/or prefer leisure time necessary for operation of a well-functioning family are not forced to change their behavior by the competitive pressure of the newcomers. Besides, a control of the entrance will limit the pressure to lowering wages below the level of the just (family) wage. To the objection of “no free lunch” the author responds: yes, the employers are facing a trade-off. In exchange for a possibly high but uncertain profit margin they will receive a lower but certain profit margin. To the objection of allocational inefficiency and economic stagnation resulting from suppressing external innovations, the author responds: 1) an external innovator can have his discovery patented and instead of the transitory entrepreneurial profit enjoy the incomes from the licenses; 2) the competitive pressure is only one possible drive of the economic growth, another drive is the human laziness which is constant across the economic systems.

Are Free Market Fiduciary Media Possible? On the Nature of Money, Banking, and Money Production in the Free Market Order

Recent debates in monetary theory have centered on so-called free banking and the role of banks in providing money in the form of fiduciary media in a pure market economy. This paper examines how and to what extent fiduciary media can emerge in a pure market economy. Based on the theory of value, it is argued that those economists are mistaken who claim that money substitutes must in all cases be interpreted as being money titles. Those economists too are mistaken, however, who claim a large role for the circulation of fiduciary media in a pure market economy. It is argued that holding fiduciary media in one’s cash balance is an entrepreneurial error, as fiduciary media by their nature do not have the qualities people demand in holding money. Money is the comparatively most certain good and the present good par excellence, qualities that fiduciary media do not have. Holding fiduciary media instead of money is therefore an entrepreneurial error, and like all errors in the free market, it will tend to be eliminated in the process of entrepreneurial profit and loss, leading to the virtual disappearance of all fiduciary media from the market economy.

Are Free Market Fiduciary Media Possible? On the Nature of Money, Banking, and Money Production in the Free Market Order

Recent debates in monetary theory have centered on so-called free banking and the role of banks in providing money in the form of fiduciary media in a pure market economy. This paper examines how and to what extent fiduciary media can emerge in a pure market economy. Based on the theory of value, it is argued that those economists are mistaken who claim that money substitutes must in all cases be interpreted as being money titles. Those economists too are mistaken, however, who claim a large role for the circulation of fiduciary media in a pure market economy. It is argued that holding fiduciary media in one’s cash balance is an entrepreneurial error, as fiduciary media by their nature do not have the qualities people demand in holding money. Money is the comparatively most certain good and the present good par excellence, qualities that fiduciary media do not have. Holding fiduciary media instead of money is therefore an entrepreneurial error, and like all errors in the free market, it will tend to be eliminated in the process of entrepreneurial profit and loss, leading to the virtual disappearance of all fiduciary media from the market economy.

Waqf institutions as a framework for social enterprises in Islam

This study aims to interconnect the concept of waqf and social entrepreneurship. Interconnection is viewed from social entrepreneurial capital, social entrepreneurial profit and social entrepreneurship model. The data were obtained from the results of previous studies and were analyzed using the content analysis method. The results of the study show that the waqf institution obtains financial capital of people’s funds. Financial capital will increase the impact of public trust as the social capital for waqf institutions. Waqf institutions as Nazhirs are human capital that are required to improve their skills and abilities, especially in business sector. The waqf institutions income from social entrepreneurs are distributed for operational costs, social programs and reinvestment of waqf assets. There was a transformation of waqf institution into a social company as a result of the social enterprises that were carried out.

Innovation management based on judgmental decision

The relevance of the topic analyzed is of emerging interest in the innovation and entrepreneurial field of economic and social scientific research. The object of the study is to penetrate the differences between business management and innovation management. International independent science, which excludes all kinds of endogenous and exogenous involvement in the scientific process, is the methods behind the study. The issues discussed in the article are the roots and traditional meaning of management, the philosophy of business and social entrepreneurship, ethical and practical principle of money and vanity as motivating factors and driving forces behind the outcomes for the worker, the principles and consequences of judgmental discussion making, non-hedonistic and motivating factors for the entrepreneur, development and entrepreneurial profit, the creation of a better world for everyone based on the capacity of the social entrepreneurs. The goal of international independent science as a method is to present the scientific truth, which manifests the conclusion of this article.

Bet against yourself: integrating insurance and entrepreneurship

AbstractThis paper revisits and fine-tunes a spin-off from Knight's (1921, Risk, Uncertainty and Profit) influential distinction between risk (‘probability of unknown events’) and uncertainty (‘unquantifiable randomness’): the contrast between actuarial institutions and entrepreneurship. It contends that this opposition is not exclusive and argues that the act of insurance does not automatically reduce entrepreneurial profits. To maintain this claim, the paper emphasizes hedging and, more specifically, draws on an innovative actuarial scheme – parametric (or index-based) insurance – which, unlike indemnity-based insurance, does not rely on a damage assessment but indemnifies the policyholder according to the variation of an index. This argument sheds new light on the function habitually assigned to actuarial institutions, amends the theory of entrepreneurial profits, and integrates hedging within entrepreneurial judgment.

Israel Kirzner On Dynamic Efficiency And Economic Development

Israel Kirzner lays the foundations of entrepreneurship as the driving force of the market process by referring to alertness, uncertainty, and plan coordination. His approach, following the footsteps of Mises and Hayek, legitimizes entrepreneurial creativity and profit-making as the heart of the dynamic market process. He argues that an accurate insight into the economic system requires exploring how entrepreneurial dynamics work in society. This statement contrasts with the theories and models that govern modern development economics, such as randomized controlled trials (RCTs), in which the zero-intelligence agents replace the flesh-and-blood entrepreneur.
 Randomized controlled trials are considered the gold standard in modern development economics to assess treatment intervention efficacy in underdeveloped countries (Rodrik 2009). As a causal inference method, RCTs seek to determine whether a program had the outcome for which it was designed. Experts often utilize purely quantitative and experimental strategies for their guiding insights through trial and error of different interventions. In the ethics domain, experts seek to maximize the cost-benefit of specific interventions subject to a given set of data to rectify the inequalities generated by the market economy in underdeveloped economies. The economist becomes a kind of plumber who designs the creation and distribution of the “social pie,” assigning the respective slices to the specific individuals who participate in the experiments. Consequently, RCTs have justified active government intervention in the market process on behalf of policy advisers.However, Kirzner’s theory of entrepreneurship indicates that modern development economics’s core problem is epistemological and related to using the criterion of static efficiency in applied economics. Although RCTs are considered one of the most rigorous methods to inquire into the effectiveness of development policies, their design lacks interpretative capacity on the essence of economic phenomena. Experts on RCTs do not recognize that economic development is the byproduct of achieving social cooperation and coordination driven by purposeful human action under the division of labor. If the essence of economic phenomena is disregarded, it is impossible to address poverty causes adequately. Accordingly, RCTs are limited to testing cosmetic problems of economic underdevelopment.This article does not seek to offer specific proposals to remedy RCTs’ shortcomings, but it provides a theoretical foundation to guide further theoretical and empirical work. It argues that development economists have overlooked Kirzner’s theory of efficiency, which cannot be omitted without impairing the premise that development theory involves studying the dynamic process of plan coordination. Its relevance lies in the fact that Kirzner’s research can reshape modern development economics, which implies a theoretical advancement in several areas:• Kirzner’s analysis of static efficiency reveals the epistemological and ethical problems of modern development economics.• The framework of Kirzner’s dynamic efficiency clarifies the role of entrepreneurship in understanding how the market works.• Dynamic efficiency recognizes the creative and coordinating potential of entrepreneurship and capital accumulation in economic development.• Kirzner’s economic development theory responds to ethical dilemmas about (in)equality and pure profit within a market economy.• Contemporary research on dynamic efficiency explores new branches, such as the role of psychology, culture, and morality in economic development.Most research on efficiency and underdevelopment is still packaged in mathematical models that reduce the market’s complexity to comparative statics. Fortunately, a growing number of theories have begun to challenge this state of affairs by examining the following: First, psychology’s impact on productivity or the unproductiveness of entrepreneurial profit opportunities. Second, the role of culture in the dynamic process of institutional change and the adaptation of the entrepreneurial performance that ensures or deter economic development. Third, the relationship between personal morality and dynamic efficiency concerns private property and contractual ties. Hence, there are several strands of new literature on dynamic efficiency and development economics. This article focuses on one aspect that concerns both economists and governments in terms of modern thinking and practice: the role of efficiency (static and dynamic) in economic development.

Credit Constraints and Rural Households’ Entrepreneurial Performance in China

ABSTRACT Based on data from the China Household Finance Survey, this article investigates the relationship between formal sector credit constraints and rural households’ entrepreneurial performance. Using an endogenous switching regression model, we find that credit-constrained entrepreneurial households’ profits are significantly and positively affected by credit access, which is measured by total formal and informal production loans owed. With an extra RMB 10,000 in credit, constrained entrepreneurial households’ average profits would be raised from RMB 10,604 to RMB 10,732 (i.e. by 1.2%). Entrepreneurial profits of households that are not credit-constrained do not depend on loan sizes. Based on our findings, we stress the importance of the development of new-type rural financial institutions, proper compensations for expropriated land, and stimulating savings and investments in different types of assets for improving the performance of rural entrepreneurs.

Understanding the Roles of Effectuation and Bricolage in the Opportunity Creation Framework

The process of entrepreneurship is identifying and exploiting opportunities. Entrepreneurial action can also result in forming, rather than merely encountering opportunities. Researchers, like Alvarez and Barney (2007), also distinguish two approaches to entrepreneurial action, discovery and creation. In opportunity creation, opportunities for entrepreneurial profit are formed endogenously through action.Effectuation processes focus on what can be done, given the capacity to influence and means at hand, to move toward a future endpoint. Effectuation was developed in the context of entrepreneurship and it assumes that an opportunity may arise through control-based strategies.Bricolage was initially described by Levi-Strauss (1967) as ‘making do with what’s on hand’. This was extended by Baker and Nelson (2005) and applied to the process of value creation. They observed that some entrepreneurs prefer to engage in a process of “making do by applying combinations of resources at hand to new problems and opportunities”.These are new concepts to most entrepreneurship researchers, yet extremely useful in the understanding of opportunity creation. This conceptual paper will assist in the understanding of these concepts, and clarify the roles of effectuation and bricolage in the opportunity creation framework. A discussion section should attempt to bring the concepts to reality by highlighting realistic examples.

NATURAL RESOURCES AND RENTAL PAYMENTS: DIFFERENTIATION OF THE CONCEPTS

In the article the issue of concepts of natural resource rent and rent payment differentiation is actualized. It is stated that rent payment can be considered only that payment, which is made from entrepreneurial profit in the amount, which is caused by the difference between its normal level and surplus. The main criteria for rent payment are the following: it is shown as part of the entrepreneur's income. If you do not expect to receive entrepreneurial income, then such a payment can not be considered as rent. Then it is only a payment for the use of a resource in an economic activity, that is, a fee (formed at a cost approach or as a result of market equilibrium mechanisms) or a levy (quasi-fiscal fiscal payment of a permissive nature, that is, a fiscal levy), or a license fee for the use of a resource; it is paid not for the fact of using the resource in economic activity, but for receiving excess entrepreneurial income for the labor and capital expended because of more favorable conditions than other entrepreneurs. If there is no such excess profit, then the rent payment cannot be considered as it does not have an excess, rent component. It is noted that the rent payment today is a payment for the use of the resource or property rights tax, instead of fully removing the rent from the user's income. It is pointed out the need to revise the terminology used in the tax legislation, to clearly distinguish between concepts and, accordingly, fiscal instruments, such as: the fee for the special use of the resource, which is compensatory, compensatory and unconditionally paid by the natural resource for the involvement of the natural resource in its economic management and use economic purposes; the object of taxation is actually the resource (its quality, quantity), and the fact that determines the fiscal obligation is the exploitation of the resource by the user; tax, which is of a general nature and is paid by the owner of the taxable resource, whether or not the resource is used in business and income generation; rent (payment), which should be deducted from entrepreneurial profits in order to remove the income earned by an entrepreneur from his or her certain advantages over other entrepreneurs of the industry or business sector due to more favorable conditions than other business entities. Amendments to the national tax legislation need to be made to clearly define the terminology and appropriate mechanisms for applying these fiscal instruments in the economic activity of the state, which will, on the one hand, effectively tax property and apply a mechanism for levying resources to offset environmental costs, and the other is to fully remove from the entrepreneurs the rents they have earned for government purposes.

Социальное предпринимательство в России: проблемы и перспективы

The article is devoted to the problems and prospects of the development of social entrepreneurship in Russia. The author notes the need to stimulate this kind of activity and create an appropriate institutional and regulatory legal framework. However, there is no common understanding and definition of ‘social entrepreneurship’, which gives the existing experience and scientific research a fragmented character. In practice, the concept of social entrepreneurship as an activity aimed at generating commercial profit, rather than creating social value and solving social problems, is widespread. The article gives an attempt to identify the causes of this condition, analyzes existing research approaches and practical experience, as well as draws the appropriate conclusions and offers recommendations. The existing traditional and modern approaches to the interpretation of entrepreneurship as a special type of human activity are analyzed. The analysis showed that entrepreneurial activity is traditionally associated with innovation, risk, uncertainty and entrepreneurial profit. Particular attention is paid to existing research approaches to the study of ‘social entrepreneurship’ as a modern phenomenon. The characteristic features of ‘social entrepreneurship’ that distinguish it from other types of entrepreneurial activity are identified, the definitions existing in the Russian scientific environment that are most common when trying to draw up the theoretical and conceptual foundations of social entrepreneurship are highlighted. As a Russian experience, the activities of the non-profit partnership ‘The World of the Older Generation’, which not only unites social entrepreneurs, but also operates as an institution for the development of the social sphere, are considered. Conclusions are made about the research prospects in this area and directions for further study of social entrepreneurship are proposed. The author suggests examining the experience of social entrepreneurship accumulated in Russia when formulating recommendations for the further development of the regulatory framework.

The improvement of marketing management in agrarian sphere

Purpose. The aim of the article is consideration of theoretical and methodological aspects of marketing management and identification of its main features in the agricultural sector of the economy. Methodology of research. The systems and synergetic approach was applied as the theoretical and methodological basis for the research. Abstractive, logical and empirical methods were used in the process of highlighting the problems of marketing management in agribusiness. The tabular and graphical methods were used for visual presentation of analyzed data. Findings. The study brings up considerations for the clarification of the marketing concept in agribusiness. The changes that take place in the global market can stimulate Ukraine’s food marketing system development. Agrimarketing has been defined as a concept which is broader than agriselling. The main elements of marketing mix (product, price, place and promotion) highlighted in the context of reflecting consumer preferences, achieving entrepreneurial profits, leveling of contradictions between market institutions. The causes of seasonal price fluctuation for agricultural products were identified with the aim of developing the risk management mechanisms and governing regulatory programs. Geographical indications have been defined as the tools for attaining the sustainable food system and strengthening competitive positions of agricultural producers. The ethical entrepreneurship issues in agrifood system were discussed in order to reflect current trends in consumer preferences. Originality. The concept of ethical entrepreneurship in agribusiness has been further developed. Practical value. The proposed scientific and methodological approaches to the development of marketing management in agrarian sphere can be applied for the improvement of agricultural trade policy and development of regional marketing programs. Key words: marketing management, price volatility, agricultural commodities, agricultural trade policy, ethical entrepreneurship.