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on Entrepreneurship |
| By: | Joonkyu Choi; Nathan Goldschlag; John Haltiwanger; J. Daniel Kim |
| Abstract: | We explore the role of founding teams in accounting for the post-entry dynamics of startups. While the entrepreneurship literature has largely focused on business founders, we broaden this view by considering founding teams, which include both the founders and the initial employees in the first year of operations. We investigate the idea that the success of a startup may derive from the organizational capital that is created at firm formation and is inalienable from the founding team itself. To test this hypothesis, we exploit premature deaths to identify the causal impact of losing a founding team member on startup performance. We find that the exogenous separation of a founding team member due to premature death has a persistently large, negative, and statistically significant impact on post-entry size, survival, and productivity of startups. While we find that the loss of a key founding team member (e.g. founders) has an especially large adverse effect, the loss of a non-key founding team member still has a significant adverse effect, lending support to our inclusive definition of founding teams. Furthermore, we find that the effects are particularly strong for small founding teams but are not driven by activity in small business-intensive or High Tech industries. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:19-32&r=all |
| By: | Phelan, Tom (Federal Reserve Bank of Cleveland) |
| Abstract: | How should a utilitarian government balance redistributive concerns with the need to provide incentives for business creation and investment? Should they tax business profits, the (risk-free) savings of owners, or some combination of both? To address this question, this paper presents a model in which the desirability of differential asset taxation emerges endogenously from the presence of agency frictions. I consider an environment in which entrepreneurs hire workers and rent capital to produce output subject to privately observed shocks and have the ability to both divert capital to private consumption and abscond with a fraction of assets. To provide incentives to invest, the wealth of an agent must depend on the performance of his/her firm, leading to ex-post inequality in all efficient allocations. I show that the efficient stationary distribution of wealth exhibits a thick right (Pareto) tail, with the degree of inequality monotonically increasing in the number of workers per entrepreneur. The efficient allocation is then implemented in a general equilibrium model using history-independent linear taxes on risk-free savings and (reported) business profits. The tax on entrepreneurs’ savings may be positive or negative, while the tax on business profits depends solely upon the degree of private information and is independent of all technological and preference parameters. |
| Keywords: | Optimal taxation; moral hazard; optimal contracting; entrepreneurship; |
| JEL: | D61 D63 E62 |
| Date: | 2019–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:191700&r=all |
| By: | Audretsch, David (Indiana University); Link, Albert (University of North Carolina at Greensboro, Department of Economics); van Hasselt, Martijn (University of North Carolina at Greensboro, Department of Economics) |
| Abstract: | Scientific papers submitted for publication from U.S. Small Business Innovation Research (SBIR)-funded research projects are an innovative output that has yet to be studied systematically. Using a knowledge production framework, we identify empirically covariates with the number of scientific papers resulting from SBIR projects over the period 1992 through 2001. We find empirically that when the firm involves a university in its funded project, more scientific papers result. When the form of university involvement is taken into account, we find the greatest impact on the output of scientific papers comes from the inclusion of an individual from the university who originally developed the technology being pursued by the firm in its SBIR project. In other words, the project-specific technical human capital knowledge from the university that spills over to the firm's projects begets (i.e., brings about) additional knowledge in the form of scientific papers submitted for publication. |
| Keywords: | innovative; technology; scientific publications; R&D; university knowledge spillovers; Small Business Innovation Research (SBIR) program; patents; |
| JEL: | J24 O31 O33 O38 |
| Date: | 2019–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:uncgec:2019_012&r=all |
| By: | Ivlevs, Artjoms; Nikolova, Milena; Popova, Olga |
| Abstract: | After the collapse of Communism in Central and Eastern Europe, former party members were particularly likely to start businesses and become entrepreneurs. However, it remains unclear whether this entrepreneurial activity was driven by the resources, information and opportunities provided by former party membership or because people with specific individual attributes were more likely to become party members (self-selection). This study is the first to separate the causal effect of former Communist party membership from self-selection. Using individual-level Life in Transition–III survey and instrumental variables analysis, we find that, in Central and Eastern European countries, membership of former Communist party has facilitated business set-up but not business longevity. Our results also suggest evidence of negative self-selection, meaning that people who joined the former ruling party tended have fewer of the traits associated with entrepreneurship such as motivation, risk tolerance, and entrepreneurial spirit. We show that former Communist party membership still matters for business practices, business ethics, and the nature of doing business in transition economies. |
| Keywords: | communism,communist party,elite networks,entrepreneurship,post-socialist countries |
| JEL: | L26 P20 P31 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:423&r=all |
| By: | Marco Caliendo (University of Potsdam, IZA Bonn, DIW Berlin, IAB Nuremberg); Frank M. Fossen (University of Nevada, IZA Bonn); Alexander S. Kritikos (German Institute for Economic Research (DIW Berlin), University of Potsdam, IZA Bonn, IAB Nuremberg) |
| Abstract: | As the policy debate on entrepreneurship increasingly centers on firm growth in terms of job creation, it is important to better understand which variables influence the first hiring decision and which ones influence the subsequent survival as an employer. Using the German Socio-economic Panel (SOEP), we analyze what role individual characteristics of entrepreneurs play in sustainable job creation. While human and social capital variables positively influence the hiring decision and the survival as an employer in the same direction, we show that none of the personality traits affect the two outcomes in the same way. Some traits are only relevant for survival as an employer but do not influence the hiring decision, other traits even unfold a revolving door effect, in the sense that employers tend to fail due to the same characteristics that positively influenced their hiring decision. |
| Keywords: | employer, entrepreneurship, business venturing, recruitment, firm growth, employment growth, personality |
| JEL: | J22 J23 L26 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:13&r=all |
| By: | Bednar, Steven (Elon University); Gicheva, Dora (University of North Carolina at Greensboro, Department of Economics); Link, Albert (University of North Carolina at Greensboro, Department of Economics) |
| Abstract: | We explore the innovative performance of firms resulting from their Phase II Small Business Innovation Research (SBIR) research-funded projects in terms of the gender dynamics of the firms. Using commercialization as the relevant performance metric, we find that Phase II projects led by a female principal investigator (PI) have greater probability of being commercialized in female-owned firms than in male-owned firms. This result is consistent with the findings from other settings that females tend to perform better when working under a female supervisor. |
| Keywords: | innovation; SBIR program; gender gap; principle investigator; |
| JEL: | J16 O31 O38 |
| Date: | 2019–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:ris:uncgec:2019_011&r=all |
| By: | Marco Taboga (Bank of Italy) |
| Abstract: | We analyze the potential determinants of the size of venture capital financing rounds. We employ stacked generalization and boosted trees, two of the most powerful machine learning tools in terms of predictive power, to examine a large dataset on start-ups, venture capital funds and financing transactions. We find that the size of financing rounds is mainly associated with the characteristics of the firms being financed and with the features of the countries in which the firms are headquartered. Cross-country differences in the degree of development of the venture capital industry, while highly correlated with the size of funding rounds, are not significant once we control for other country-level characteristics. We discuss how our findings contribute to the debate about policy interventions aimed at stimulating start-up financing. |
| Keywords: | venture capital, financial institutions, country characteristics, machine learning |
| JEL: | G24 F0 C19 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1243_19&r=all |
| By: | Dalton, Patricio (Tilburg University, Center For Economic Research); Pamuk, H. (Tilburg University, Center For Economic Research); Ramrattan, R.; van Soest, Daan (Tilburg University, Center For Economic Research); Uras, Burak (Tilburg University, Center For Economic Research) |
| Abstract: | Electronic payment instruments have the potential to spur the transparency of business transactions and thereby reduce information frictions. We design a field experiment to understand whether e-payments facilitate the financial inclusion of SMEs in developing world and to study adoption barriers. We encourage a random sample of Kenyan merchants to adopt a new mobile-money payment instrument and find that the decision to adopt is hampered by the combination of information, know-how and seemingly small transaction costs barriers. In addition, we nd that business owners who are more averse to transparency are more reluctant to adopt. Sixteen months after the intervention, we observe that treated firms have better access to finance in the form of mobile loans. The impact on financial access is more pronounced for smaller establishments, which also experience a considerable reduction in sales volatility. We conclude that e-payments can help un-collateralized firms become transparent and get financially integrated. |
| Keywords: | SME Finance; Transparency; payment technologies; Lipa Na M-Pesa |
| JEL: | D22 G00 G21 O33 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:98cf0741-8e78-4bba-a270-4b1ee857cd39&r=all |
| By: | Back, Paula Regina |
| Abstract: | This paper aims to show that the strategic incorporation of socially responsible actions, in small and medium enterprises contribute to improving the competitiveness of those organizations. The analysis is from a multi-stakeholder perspective. It investigates the link among firms’ relationship with key stakeholders with the objective to find out if there is a competitive advantage in applying Corporate Social Responsibilities practices. Besides the direct influence of Corporate Social Responsibility practices on competitive performance, the mediating connection of relationship improvements has been analyzed. By using their influence, stakeholders hold the key to the environment in which the organization operates and its subsequent financial performance. The empirical analysis was constructed on survey data through structural equation modeling (SEM). To accomplish this assignment data were collected from a sample of Brazilian SMEs. Participants were firms from the Southern region of Brazil mainly from the State of Rio Grande do Sul, Santa Catarina, and Parana. The outcome shows that there is a strong connection between the development of Social Responsibilities practices and relational improvements. In addition, the significant relationship in developing Social Responsibilities Practices positively translates, with a high accuracy outcome into competitive performances. |
| Date: | 2019–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:osf:thesis:bdumw&r=all |
| By: | BELLEFLAMME Paul, (Université catholique de Louvain); LAMBERT Thomas, (Rotterdam School of Management); SCHWIENBACHER Armin, (Université Côte d’Azur, Euralille) |
| Abstract: | Various forms of social learning and network effects are at work on crowdfunding platforms, giving rise to informational and payoff externalities. We use novel entrepreneur-backer data to study how these externalities shape funding dynamics, within and across projects. We find that backers decide to back a particular project based on past contributions not only to that project - as documented by prior work - but also to other contemporaneous projects - a novel result. Our difference-in-differences estimates indicate that such ‘cross-project funding dynamics’ account for 4-5% in the increase of contributions that projects generate on a daily basis. We show that recurrent backers are the main transmission channel of cross-project funding dynamics: by initiating social learning about project existence and quality, recurrent backers encourage future funding by other backers. Our results demonstrate that even though contemporaneous projects compete for funding, they jointly benefit from their common presence on the platform. We finally show that these crowdfunding dynamics stir platform growth, with important consequences for competition among platforms. |
| Keywords: | crowdfunding, digital platforms, FinTech, network effects, social learning |
| JEL: | D43 G23 L14 L26 L86 |
| Date: | 2019–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2019014&r=all |