nep-ent New Economics Papers
on Entrepreneurship
Issue of 2018‒09‒24
fourteen papers chosen by
Marcus Dejardin
Université de Namur

  1. The labor market integration of refugees to the United States: Do entrepreneurs in the network help? By Anna Maria Mayda; Olivier Dagnelie; Jean-Francois Maystadt
  2. Community Networks and the Growth of Private Enterprise in China By Dai, R.; Mookherjee, D.; Munshi, K.; Zhang, X.
  3. Pathways to Formalization: Going beyond the Formality Dichotomy By Diaz, Juan Jose; Chacaltana, Juan; Rigolini, Jamele; Ruiz, Claudia
  4. The European Index of Digital Entrepreneurship Systems By Erkko Autio; Laszlo Szerb; Eva Komlosi; Monika Tiszberger
  5. Firm Dynamics, Misallocation and Targeted Policies By In Hwan Jo; Tatsuro Senga
  6. Does Health Insurance Provision Improve Self-Employment and Entrepreneurship? Evidence from State Insurance Mandates By Li, Yajuan; Palma, Marco A.; Towne, Samuel
  7. The evaluation of the Italian “Start-up Act” By Carlo Menon; Timothy DeStefano; Francesco Manaresi; Giovanni Soggia; Pietro Santoleri
  8. On Average Establishment Size across Sectors and Countries By Pedro Bento; Diego Restuccia
  9. Firm Failure in Russia during Economic Crises and Growth : A Large Survival Analysis By Iwasaki, Ichiro; Kim, Byung-Yeon
  10. Corporate Income Tax, Legal Form of Organization, and Employment By Don Schlagenhauf
  11. Factors Affecting Access to Formal Credit by Micro and Small Enterprises in Uganda By Faisal Buyinza; Anthony Tibaingana; John Mutenyo
  12. Insecure Property Rights and the Missing Middle By Aram Grigoryan; Mattias Polborn
  13. Influences of Entrepreneurial Competencies on Product Development Decision: Longan Processing Enterprises in Thailand By CHANITA PANMANEE; KASEM KUNASRI
  14. Compétences externes et innovation: le cas des firmes de l'industrie manufacturière algérienne By Messaoud Zouikri; Mounir Amdaoud

  1. By: Anna Maria Mayda (Department of Economics and SFS, Georgetown University); Olivier Dagnelie (Universite de Caen Normandie); Jean-Francois Maystadt (Department of Economics, Lancaster University Management School)
    Abstract: We investigate whether entrepreneurs in the network of refugees – from the same country of origin – help refugees’ labor-market integration by hiring them in their businesses. We analyze the universe of refugee cases without U.S. ties who were resettled in the United States between 2005 and 2010. We address threats to identification due to sorting of refugees into specific labor markets and to strategic placement by resettlement agencies. We find that the probability that refugees are employed 90 days after arrival is positively affected by the number of business owners in their network, but negatively affected by the number of those who are employees. This suggests that network members who are entrepreneurs hire refugees in their business, while network members working as employees compete with them, consistent with refugees complementing the former and substituting for the latter.
    Keywords: Refugees, labor market integration, entrepreneurship
    JEL: F22 J61
    Date: 2018–09–09
  2. By: Dai, R.; Mookherjee, D.; Munshi, K.; Zhang, X.
    Abstract: This paper identifies and quantifies the role played by birth-county-based community networks in the growth of private enterprise in China. We develop a network-based model that generates predictions for the dynamics of firm entry, concentration, and firm size across birth counties with varying social connectedness (measured by population density). These predictions are verified over the 1990-2009 period with administrative data covering the universe of registered firms. Competing non-network-based explanations can explain some, but not all, of the results. Moreover, supplementary evidence indicates that network spillovers occur within the birth county and, going down even further, within clans within the county. Having validated the model, we estimate its structural parameters and conduct counter-factual simulations, which estimate that entry over the 1995-2004 period would have been 40% lower (with a comparable decline in the stock of capital) in the absence of community networks. Additional counter-factual simulations shed light on misallocation and industrial policy in economies where networks are active.
    Keywords: Community Networks, Entrepreneurship, Misallocation, Institutions, Growth and Development.
    JEL: J12 J16 D31 I3
    Date: 2018–09–11
  3. By: Diaz, Juan Jose (GRADE); Chacaltana, Juan (ILO International Labour Organization); Rigolini, Jamele (World Bank); Ruiz, Claudia (ILO International Labour Organization)
    Abstract: Too often, academics and policy makers interpret formality as a binary choice and formalization as an irreversible process. Yet, formalization has many facets and shades on the business and labor fronts, and firms may not be able or willing to formalize all at once. This paper explores the joint process of business and labor formalization, using a unique panel data set of Peruvian micro enterprises. The paper finds that business formality does not imply labor formality, and vice versa. Further, there is significant churning in and out of different dimensions of formality within a relatively short period. Using an instrumental variable approach, the paper infers that business formalization affects labor formalization but not the other way around, and that enforcement is a key driver of formalization. Overall, the analysis shows that formalization is a gradual and reversible process, with small entrepreneurs weighing their possibilities in each pathway to business (often) or labor (less often) formalization, but rarely both at the same time.
    Keywords: informality, business formalization, labor formalization, small enterprises
    JEL: O17 O12 D21 L26
    Date: 2018–08
  4. By: Erkko Autio (Imperial College London); Laszlo Szerb (University of Pecs); Eva Komlosi (University of Pecs); Monika Tiszberger (University of Pecs)
    Abstract: During the last decade digitisation has transformed the character of entrepreneurial activities as for both the entrepreneurial opportunities and the practices to pursue them. In this context, to ensure that the new productivity potential is fully deployed to the benefits of economic growth and societal welfare, policymakers need adequate metrics to monitor digital entrepreneurship. The measurement challenge of the digital entrepreneurship lays in the pervasive nature of the phenomenon itself that cannot be captured by count-based measures of individual-level entrepreneurial action. Therefore it becomes important to monitor the conditions which set the business context of entrepreneurs in the different EU countries. The European Index of Digital Entrepreneurship Systems (EIDES) addresses the measurement challenge by appraising the framework and systemic conditions for 1. stand-up, 2. start-up, and 3. scale-up activities in the EU28 countries. Furthermore, the EIDES also attempts to disentangle the digital component of the just-mentioned entrepreneurial conditions and stages of development.
    Keywords: entrepreneurial ecosystem, digital entrepreneurship, startups, innovation, high-growth companies, policy support to innovation
    Date: 2018–09
  5. By: In Hwan Jo (National University of Singapore); Tatsuro Senga (Queen Mary University of London)
    Abstract: Access to external finance is a major obstacle for small and young firms; thus, providing subsidized credit to small and young firms is a widely-used policy option across countries. We study the impact of such targeted policies on aggregate output and productivity and highlight indirect general equilibrium effects. To do so, we build a model of heterogeneous firms with endogenous entry and exit, wherein each firm may be subject to forward-looking collateral constraints for their external borrowing. Subsidized credit alleviates credit constraints small and young firms face, which helps them to achieve the efficient and larger scale of production. This direct effect is, however, either reinforced or offset by indirect general equilibrium effects. Factor prices increase as subsidized firm demand more capital and labor. As a result, higher production costs induce more unproductive incumbents to exit, while replacing them selectively with productive entrants. This cleansing effect reinforces the direct effect by enhancing the aggregate productivity. However, the number of firms in operation decreases in equilibrium, and this, in turn, depresses the aggregate productivity.
    Keywords: Firm dynamics, Misallocation, Financial frictions, Firm size and age
    JEL: E22 G32 O16
    Date: 2016–12–22
  6. By: Li, Yajuan; Palma, Marco A.; Towne, Samuel
    Keywords: Consumer/Household Economics, Health Economics and Policy, Institutional and Behavioral Economics
    Date: 2017–07–03
  7. By: Carlo Menon; Timothy DeStefano; Francesco Manaresi; Giovanni Soggia; Pietro Santoleri
    Abstract: The report provides an independent and comprehensive evaluation of the economic and social impact of the Italian policy framework for innovative start-ups, also known as the “Start-up Act”, first introduced by the Decree-law 179 in 2012. The policy aims at creating a more favourable environment for small innovative start-ups through a number of complementary instruments, including “fast-track” and zero cost incorporation, simplified insolvency procedures, tax incentives for equity investments, and a public guarantee scheme for bank credit. While the report focuses only on Italy, the “Start-up Act” can be seen as a very useful “laboratory” to inform policies for innovative entrepreneurship across OECD member countries. The evaluation highlights that the impact of the policy on beneficiary firms has been positive overall, but that complementary policy actions in other areas are required in order to further realise the full potential of Italian innovative start-ups.
    Date: 2018–09–26
  8. By: Pedro Bento; Diego Restuccia
    Abstract: We construct a new dataset for the average employment size of establishments across sectors and countries from hundreds of sources. Establishments are larger in manufacturing than in services, and in each sector they are larger in richer countries. The cross-country income elasticity of establishment size is remarkably similar across sectors, about 0.3. We discuss these facts in light of several prominent theories of development such as entry costs and misallocation. We then quantify the sectoral and aggregate impact of entry costs and misallocation in an otherwise standard two-sector model of structural transformation with endogenous firm entry and firm-level productivity. We find that observed measures of misallocation account for the entire range of establishment-size differences across sectors and countries and almost 50 percent of the difference in non-agricultural GDP per capita between rich and poor countries.
    JEL: E02 E1 O1 O4
    Date: 2018–08
  9. By: Iwasaki, Ichiro; Kim, Byung-Yeon
    Abstract: In this paper, we trace the survival status of more than 110,000 Russian firms in the years of 2007–2015 and examine the determinants of firm survival across periods of economic crisis and growth. Applying the Cox proportional hazards model, we find that the effects of some variables regarded as key determinants of firm survival are not always robust across business cycles. Among the variables that constantly affect firm survival across business cycles and industries, concentration of ownership, the number of board directors and auditors, firm age, and business network are included. By contrast, the effects of some ownership-related variables on firm survival vary depending on the nature of economic recessions such as a global crisis and a local one. There is also evidence that an international audit firm increases the probability of firm survival; however, gaps in the quality between international audit firms and those from Russia decrease over time. These findings suggest that one should not make hasty generalizations regarding the determinants of firm survival by looking at a specific economic period or industry.
    Keywords: Firm failure, Economic crises and growth, Cox proportional hazards model, Russia
    JEL: D22 G01 G33 G34 P34
    Date: 2018–06
  10. By: Don Schlagenhauf (Federal Reserve Bank of St Louis)
    Abstract: A dynamic stochastic occupational choice model with heterogeneous agents is developed to evaluate the impact of a corporate income tax reduction on employment. In this framework, the key margin is the endogenous entrepreneurial choice of legal form of organization. A reduction in the corporate income tax burden encourages adoption of the C corporporation legal form, which reduces capital constraints on firms. Improved capital re-allocation increases overall productive efficiency in the economy and therefore expands the labor market. Relative to the benchmark economy, a corporate income tax cut can reduce the non-employment rate by up to 7 percent.
    Date: 2018
  11. By: Faisal Buyinza; Anthony Tibaingana; John Mutenyo
    Abstract: This article investigates the factors affecting access to formal credit by micro and small enterprises in Uganda using the Gender Enterprise Survey that was funded by the IDRC. The study employed a probit model. The findings show that firm sales, owner's education level, belonging to a business association, belonging to business group, use of internet, owning a personal and business bank account, and gender of the owner are positively associated with access to formal credit. We also find that experienced firms are less likely to apply for credit hence reduce the probability to receive formal bank credit. Our results provide insights on the existing gaps in designing supportive policies for micro and small enterprise to enable them increase their access to credit especially from the formal financial institutions.
    Keywords: Credit constraint, micro and small enterprises, sample selection, Uganda
    Date: 2018–08
  12. By: Aram Grigoryan; Mattias Polborn
    Abstract: We analyze a theoretical model in which entrepreneurs’ property rights are threatened by “raiders” who can challenge them to a contest for control of their firms. Entrepreneurs have heterogeneous productivity, and decide how much capital to invest before raiders decide whom to attack. In equilibrium, low productivity entrepreneurs are unaffected by the existence of raiders, while mid- and high-productivity entrepreneurs suffer. However, while raiders essentially act like a tax for the highest productivity entrepreneurs, the investment behavior of mid-productivity entrepreneurs who try to avoid an attack is more drastically affected. Our model provides a novel theoretical explanation for the “missing middle” observed in many countries with insecure property rights.
    Keywords: property rights, rent-seeking, corruption, missing middle
    Date: 2018
  13. By: CHANITA PANMANEE (Faculty of Economics, Maejo University); KASEM KUNASRI (Faculty of Management science, Chiang Mai Rajabhat University)
    Abstract: This research aims to evaluate the entrepreneurial competencies of longan processing entrepreneurs and analyze the impacts of entrepreneurial competencies on new product development decision. The 165 samples of longan processing entrepreneurs are selected by a purposive sampling method. The results of entrepreneurial competencies show that risk taking orientation and competitiveness orientation are the two lowest score competencies in which the longan processing entrepreneurs should be interested in. Moreover, the age of the entrepreneur and pro-activeness orientation of the entrepreneur have some negative impacts on the decision making probability of the new product development. The entrepreneurial competencies on risk taking, innovativeness and competitiveness have positive influences on new product development decision. The findings lead to a discussion about whether the longan processing entrepreneurs are ready to develop the new product, or not.
    Keywords: longan processing, entrepreneurial competencies, product development, composite index, logit model
    JEL: C25 M21 Q13
    Date: 2018–06
  14. By: Messaoud Zouikri; Mounir Amdaoud
    Abstract: This paper addresses an hypothesis on the contribution of the external capabilities to the birth of the innovation activity within the firm. The econometric analysis conducted on a sample of Algerian manufacturing entreprises, allowed to highlight four robust results which remain significant and stable after adjustment by various indicators. The main result is that the development of different firm capabilities was not exclusively originated from an edogenous effort, but also induced by an exogenous shock resulting from participating to the upgraded firms' program financially supported by the Algerian government and the European Union. Furthermore, the improvement of human resources competencies, the use of ICT and the compliance to performance criteria explain significantly firm engagement differences in the product innovation activity. The R&D and firm size as traditional factors seem not to be significant predictors of innovation capacity in the present case.
    Keywords: external capabilities, innovation capacity, human capital, Algerian manufacturing industry, recursive equation system
    JEL: O32 D22 C34
    Date: 2018

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