nep-ent New Economics Papers
on Entrepreneurship
Issue of 2019‒10‒14
nine papers chosen by
Marcus Dejardin
Université de Namur

  1. Entrepreneurship over the Life Cycle: Where are the Young Entrepreneurs? By Andres Hincapie
  2. Can Microfinance Unlock a Poverty Trap for Some Entrepreneurs? By Abhijit Banerjee; Emily Breza; Esther Duflo; Cynthia Kinnan
  3. Skill Shortages as a Barrier to Women’s Start Ups: A Model with Evidence from Eswatini By Zuzana Brixiová; Thierry Kangoye
  4. Facts on Business Dynamism in Turkey By Akcigit, Ufuk; Akgunduz, Yusuf Emre; Cilasun, Seyit Mumin; Ozcan Tok, Elif; Yilmaz, Fatih
  5. Tax law and the transfer of start-up losses: A European overview and categorization By Bührle, Anna Theresa; Spengel, Christoph
  6. Efficient design of set-aside auctions for small businesses: an empirical analysis By Andrey Tkachenko; Paola Valbonesi; Elena Shadrina; Gegam Shagbazian
  7. Essays on corporate ownership and human capital By Hébert, Camille
  8. SME Financial Inclusion for Sustained Growth in the Middle East and Central Asia By Mishel Ghassibe; Maximiliano Appendino; Samir Elsadek Mahmoudi
  9. The Deregulation of the Private Equity Markets and the Decline in IPOs By Michael Ewens; Joan Farre-Mensa

  1. By: Andres Hincapie (University of North Carolina at Chapel H)
    Abstract: Most individuals do not start a business and, if they do, they start well into their thirties. I study multiple mechanisms explaining these stylized facts. Using the Panel Study of Income Dynamics, I estimate a dynamic Roy model with accumulation of experience, risk aversion, and imperfect information about ability. Risk aversion reduces entrepreneurship by up to 40% and providing full information about ability increases it by 35%. The gap in first entry ages between paid employment and entrepreneurship results mainly from entry costs and information frictions. I study counterfactual policies (subsidies and education) that target these barriers to young entrepreneurship, thereby closing the gap, and show that fostering young entrepreneurship can yield higher returns than fostering entrepreneurship later in individuals' careers because the gains from early information are larger.
    Date: 2019
  2. By: Abhijit Banerjee; Emily Breza; Esther Duflo; Cynthia Kinnan
    Abstract: Can microcredit help unlock a poverty trap for some people by putting their businesses on a different trajectory? Could the small microcredit treatment effects often found for the average household mask important heterogeneity? In Hyderabad, India, we find that “gung ho entrepreneurs” (GEs), households who were already running a business before microfinance entered, show persistent benefits that increase over time. Six years later, the treated GEs own businesses that have 35% more assets and generate double the revenues as those in control neighborhoods. We find almost no effects on non-GE households. A model of technology choice in which talented entrepreneurs can access either a diminishing-returns technology, or a more productive technology with a fixed cost, generates dynamics matching the data. These results show that heterogeneity in entrepreneurial ability is important and persistent. For talented but low-wealth entrepreneurs, short-term access to credit can indeed facilitate escape from a poverty trap.
    JEL: O1 O14 O16
    Date: 2019–10
  3. By: Zuzana Brixiová; Thierry Kangoye
    Abstract: The shortages of entrepreneurial skills, both perceived and actual, have lowered the rate of opportunity-driven women’s entrepreneurship. This paper contributes to the literature on entrepreneurship, gender and development with a theoretical and empirical analysis linking gender differences in entrepreneurial outcomes to skills and business training. The role of skills, including self-confidence, and training for the entrepreneurial performance is tested on a survey of urban entrepreneurs in Swaziland. The results help explain why narrow business training programs for female entrepreneurs have often limited success in improving performance of women-run firms. Training programs for women entrepreneurs encompassing advanced business and technical (e.g. hard) skills as well as networking and confidence building (e.g. soft skills) could be more effective.
    Keywords: women’s entrepreneurship, firm performance, hard and soft skills, model, micro data
    JEL: L53 O12 J4
    Date: 2018–12
  4. By: Akcigit, Ufuk; Akgunduz, Yusuf Emre; Cilasun, Seyit Mumin; Ozcan Tok, Elif; Yilmaz, Fatih
    Abstract: In this paper, we investigate various trends on competition and business dynamism in the Turkish manufacturing sector. More specifically, using micro level administrative data sets of firm balance sheets, credit registry and social security records, we focus on moments such as firm entry, exit, profitability, worker reallocation, labor share, labor productivity and credit distributions, among several others. Our results indicate that business dynamism in the Turkish manufacturing sector was relatively stable and even improving until 2012 but has been declining since then. We find that market concentration and exit rates have started to rise, yet new business creation, labor share of output and economic activities of young firms have declined. Using a model with endogenous market competition, we show that a adverse shock to cost of R&D investment can explain these empirical trends. We identify increases in financing costs after 2012 of followers as a potential mechanism for our findings in Turkey. We next perform a policy analysis with our model which suggests that providing support (e.g., R&D subsidy) to immediate followers can undo the adverse effects of the negative shock to financing costs and therefore foster competition and faster growth.
    Keywords: business dynamism; Competition; Market concentration; Turkish economy
    JEL: E22 E25 L12 O31 O33 O34
    Date: 2019–09
  5. By: Bührle, Anna Theresa; Spengel, Christoph
    Abstract: Most of the European Member States employ anti-loss trafficking rules. They aim to prevent the acquisition of mere corporate shells with high tax loss carryforwards for the tax asset to be utilized in profitable companies. However, other corporations can unintentionally be affected by the anti-abuse regulations if there is a change in ownership or activity. The transfer restrictions have been argued to impair start-up financing, as investors are faced with the risk of losing accumulated loss carryforwards in the corporation upon the entering of new or the capital increase of existing investors. This study provides an overview over the design and development of loss transfer restrictions in the EU28 over a time period of 19 years (2000-2018). Different aspects of the regulations are analyzed against the background of their impact on start-ups. Finally, the rules are categorized with respect to their strictness. Over time, more countries introduced restrictions. At the same time, the regulations became more lenient, offering start-ups more opportunities to maintain their loss carryforwards and, therefore, decreasing the risk for investors.
    Keywords: tax loss carryforward,loss trafficking,loss transfer,entrepreneurship,start-ups
    JEL: M13 H25 H32 L52
    Date: 2019
  6. By: Andrey Tkachenko (National Research University Higher School of Economics, Russian Federation and Bocconi University); Paola Valbonesi (Department of Economics and Management, University of Padova and National Research University Higher School of Economics, Russian Federation); Elena Shadrina (National Research University Higher School of Economics, Russian Federation); Gegam Shagbazian (Department of Economics and Management, University of Padova)
    Abstract: Government support to small business enterprises (SBEs) through set-aside (SA) public procurement auctions is a common practice. The effect of the SA mechanism is, however, ambiguous. On the one hand, SA auctions can attract more SBEs to compete; on the other hand, SA auctions restrict the entry of—possibly—more cost-efficient large firms. We investigate SA auctions’ effect by exploiting an original Russian database on public procurement e-auctions for granulated sugar (a largely homogeneous good) in the period 2011-2013. To identify the causal effect of SA auctions, we overcome two endogeneity issues: procurers’ choice of SA format and firms’ decision to bid. In an empirical setting where confounding elements are minimized, we found that SA auctions’ effect largely depends on both the reserve price value and the level of competition. We found that there exists an optimal interval for the reserve price where SA auctions record lower procurement prices, as compared to non-SA auctions.
    Keywords: affirmative action, preferential treatment, public procurement, set-aside auctions, e-auctions, small businesses enterprises (SBEs), small and medium-sized enterprises (SMEs)
    JEL: D44 H11 H57
    Date: 2019–10
  7. By: Hébert, Camille (Tilburg University, School of Economics and Management)
    Abstract: This thesis consists of three chapters and studies the firm's organizational structure at a different stage of its life cycle: early-stage, growth, business group. The first chapter investigates the underlying reasons for the gender funding gap in the venture capital industry. It highlights a significant role for investors' stereotypes that ultimately impedes minority-founded startups' growth. The second chapter identifies conditions under which firms choose to grow by buying an incumbent company as opposed to building on their pre-existing human capital resources. The third chapter focuses on large business groups. It provides evidence that investors are not always aware of the boundaries of the firm and miss predictive information released at another level of the group.
    Date: 2019
  8. By: Mishel Ghassibe; Maximiliano Appendino; Samir Elsadek Mahmoudi
    Abstract: This paper offers empirical evidence that greater financial inclusion of small and medium enterprises (SMEs) can promote higher economic growth and employment, especially in the Middle East and Central Asia regions. First, we show that countries with higher SME financial inclusion exhibit more effective monetary policy transmission and tax collection. Second, we find substantial employment and labor productivity growth gains at the firm level from access to credit, gains that are higher for SMEs. We also obtain evidence of a substantial positive impact on SME employment and labor productivity growth from improved credit bureau coverage and insolvency regimes. Finally, cross-country aggregate evidence confirms the employment and growth gains from SME financial inclusion, which appear larger in the Middle East and Central Asia than in other regions.
    Date: 2019–09–27
  9. By: Michael Ewens; Joan Farre-Mensa
    Abstract: The deregulation of securities laws—in particular the National Securities Markets Improvement Act (NSMIA) of 1996—has increased the supply of private capital to late-stage private startups, which are now able to grow to a size that few private firms used to reach. NSMIA is one of a number of factors that have changed the going-public versus staying-private trade-off, helping bring about a new equilibrium where fewer startups go public, and those that do are older. This new equilibrium does not reflect an IPO market failure. Rather, founders are using their increased bargaining power vis-a-vis investors to stay private longer.
    JEL: G24 G28 G32
    Date: 2019–09

This nep-ent issue is ©2019 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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