Competence Value Emersion: A Key to Sound Practices in Entrepreneurial Finance: From 'Q' to 'T' Ratios in the North-Eastern Italian Experience

Abstract:     
The determinants of the value of entrepreneurial competences in incomplete financial markets are examined. We find out that time is the economic link between marginal productivity of capital asset and human competence. This being the case, we show the basics of a potential methodology for measuring the, “competence value,” and compare it against standard goodwill estimation methods. We suggest that only contingent-claim finance solution may be a useful support for enterprises aiming to transform competence value in goodwill. Finally, we show the result of an empirical analysis conducted to estimate the competence value and the goodwill for a sample of over than 3,000 Italian Companies inside the high competitive Treviso’s District. The empirical evidence shows that the proposed Intato-T-Ratio may be a good proxy of competence value estimation in financial activities and show possible upgrading of the indicator. Impacts over banking procedures while adopting next Basel-3 agreement can be dramatic for capital allowances diverting capital from long term opportunities to short term profit margin, thus increasing economic volatilty.

Number of Pages in PDF File: 31

Keywords: Entrepreneurship, Valuation, Incomplete markets, SME

JEL Classification: G13, G24, G32, L26, M13

working papers series