nep-ent New Economics Papers
on Entrepreneurship
Issue of 2019‒12‒16
ten papers chosen by
Marcus Dejardin
Université de Namur

  1. Endogenous Hours and the Wealth of Entrepreneurs By Wellschmied, Felix; Yurdagul, Emircan
  2. Credit Guarantees and Zombie Firms By Scott Wilbur
  3. Financing Entrepreneurship through the Tax Code: Angel Investor Tax Credits By Sabrina T. Howell; Filippo Mezzanotti
  4. Self-employment and Migration By Samuele Giambra; David McKenzie
  5. Business Angel Investment, Public Innovation Funding and Firm Growth By Ali-Yrkkö, Jyrki; Pajarinen, Mika; Ylhäinen, Ilkka
  6. Work Flexibility and Firm Growth By A. Arrighetti; L. Cattani; F. Landini; A. Lasagni
  7. Birds of a feather flock together and get money from the crowd By Valeria Venturelli; Giovanni Gallo; Alessia Pedrazzoli
  8. Evaluation of the effect of the entrepreneurial leadership factors in the smallholder farming sector in South Africa By Mmbengwa, Victor Mbulaheni; Joubert, Pierre; Tustin, Deon
  10. Digital Start-Ups: Herausforderungen für Gründer*innen in der digitalen Gesundheitswirtschaft By Nell, Rasmus

  1. By: Wellschmied, Felix (Universidad Carlos III de Madrid); Yurdagul, Emircan (Universidad Carlos III de Madrid)
    Abstract: US entrepreneurs typically work long hours in their firms and these hours form a large part of the firms' labor input. This paper studies the role of endogenous owner hours in shaping the wealth distribution among entrepreneurs. We introduce owners' endogenous labor supply into a model of entrepreneurial choice and financial frictions. The model fits well the levels and the dispersion of wealth among entrepreneurs. Long owner hours incentivize poor, highly productive individuals to be owners and help the most productive owners to accumulate large quantities of wealth. On net, owners working long hours decreases the median owner wealth and increase wealth dispersion among owners. Differently, the ability to work sufficiently short hours incentivizes owners to run low productivity firms with high wealth to income ratios. Finally, alternative calibrations ignoring the endogenous labor supply of owners lead to owners that are much richer than in the data and overstate the effect of financial frictions in the economy.
    Keywords: entrepreneurship, wealth accumulation, labor supply, firm dynamics
    JEL: E23 J22 J23 L26
    Date: 2019–11
  2. By: Scott Wilbur (Yale University [New Haven], FFJ - Fondation France-Japon de l'EHESS - EHESS - École des hautes études en sciences sociales)
    Abstract: In recent years and particularly since the global financial crisis, zombie firms—unprofitable businesses supported by financial relief—have generated widespread concern due to their purported harm to economic vitality. Economic studies hold that zombie firms impede the normal flow of capital and human resources to healthy businesses, and thereby defy creative destruction and hurt investment and employment growth. But what causes zombie firms to occur? Addressing this question from a political economy perspective, this paper investigates a novel hypothesis about the role of credit guarantees in supporting weak firms. The results of a case study of small and medium-sized enterprises (SME) in Japan in the 1990s and 2000s suggest that Japan's credit guarantee system may indeed have contributed to numerous zombies among this firm category. However, evidence also suggests that these firms tended to quickly escape from zombie status, calling into question the negative connotation of the zombie firm concept.
    Keywords: economic performance,institutional change,Japan,political economy,public policy,social policy
    Date: 2019–11
  3. By: Sabrina T. Howell; Filippo Mezzanotti
    Abstract: A central issue in public finance is the tradeoff between maintaining tax revenues and using the tax code to incentivize particular economic activities. One important dimension of this tradeoff is whether incentive policies are used in practice as policymakers intend. This paper examines one particular tax program that many U.S. states use to stimulate entrepreneurship. Specifically, angel tax credits subsidize wealthy individuals’ investments in startups. This paper finds that these programs have no measurable effect on local entrepreneurial activity or beneficiary company outcomes, despite increasing some measures of angel activity. This appears to reflect the programs failing to screen out financially unconstrained firms and often being used for tax arbitrage. Over 90 percent of beneficiary companies fall into at least one of three categories: a corporate insider received a tax credit; the company previously raised external equity; or the company is not in a high-growth sector. Notably, at least 33 percent of beneficiary companies include an investor receiving a tax credit who is an executive at the company.
    JEL: G0 G18 G24 G38 O3
    Date: 2019–11
  4. By: Samuele Giambra (Brown University); David McKenzie (World Bank)
    Abstract: There is a widespread policy view that a lack of job opportunities at home is a key reason for migration, accompanied by suggestions of the need to spend more on creating these opportunities so as to reduce migration. Self-employment is widespread in poor countries, and faced with a lack of existing jobs, providing more opportunities for people to start businesses is a key policy option. But empirical evidence to support this idea is slight, and economic theory offers several reasons why the self-employed may in fact be more likely to migrate. We put together panel surveys from eight countries to descriptively examine the relationship between migration and self-employment, finding that the self-employed are indeed less likely to migrate than either wage workers or the unemployed. We then analyze seven randomized experiments that increased self-employment, and find their causal impacts on migration are negative on average, but often small in magnitude.
    Keywords: internal migration; international migration, self-employment, migrant selection,randomized experiment
    JEL: F22 J61 O15
    Date: 2019–10
  5. By: Ali-Yrkkö, Jyrki; Pajarinen, Mika; Ylhäinen, Ilkka
    Abstract: Abstract In recent years, business angels have invested in a few hundred Finnish firms annually. The target firms are mainly young and small: 75% of them employ fewer than 10 workers and are less than 8 years old. These firms are most likely to be found in the ICT and professional service industries and manufacturing. Although many angel-funded firms have faster employment growth compared to matched nonfunded firms, the average growth rates do not significantly differ when we control for receiving public innovation funding and other firm characteristics. As many as 75% of the firms funded by business angels have also received public innovation funding in some phase, and 57% have received it before angel funding. However, no robust indication was found that combining these two sources of funds would give an extra boost to growth.
    Keywords: Business angels, Innovation subsidies, R&D, Firm growth
    JEL: D22 G24 G30 L53 O31
    Date: 2019–12–04
  6. By: A. Arrighetti; L. Cattani; F. Landini; A. Lasagni
    Abstract: In the last decades, work flexibility emerged as a key requirement firms must meet to face volatile markets and highly differentiated product demand. This paper compares two alternative approaches to strengthen work flexibility: internal flexibility, i.e. practices that focus on the employees’ ability to perform a variety of highly qualified tasks in a context of stable employment relationships; and external flexibility, i.e. practices that align employment and labour costs to demand fluctuations using a buffer of non-standard employees involved in routine tasks. We empirically verify whether both practices are able to boost sales growth using a linked employer-employee panel of manufacturing firms from the Emilia-Romagna region (Italy). While internal flexibility positively affects firm growth, external flexibility appears to hamper it. Such a negative effect, however, decreases when we limit the analysis to industries with high demand volatility and cost-based competition. The related managerial and policy implications are discussed.
    Keywords: internal flexibility; external flexibility; firm growth; industrial relations
    JEL: D22 L23 M51 M54 J41 J24
    Date: 2019
  7. By: Valeria Venturelli; Giovanni Gallo; Alessia Pedrazzoli
    Abstract: In constructing online alternative finance instruments as a new form of financial democratization and financial inclusion, this article aims at verifying the presence of similarity effect in equity crowdfunding investments. Discussion focuses on ethnic and gender similarity between the seekers and investors that sustained the project. Our analysis is based on 5,996 personal investors that have participated in 81 equity crowdfunding campaigns, on Crowdcube, a British equity crowdfunding platform from 2011 and 2016. Results show that in equity crowdfunding gender and ethnic similarities play different role based on investors’ characteristics - gender, ethnicity and the combination of two. In particular, ethnic similarity positively influence the level of amount invested by both female and male investors belonging to an ethnic minority. Even if female investors tend to prefer male company, their preference changes if a female proponent belonging to an ethnic minority runs the company. From a practical perspective, our findings shed new light on how individual characteristics can be important factor in financing situations. Results allow entrepreneurs and equity crowdfunding platforms to understand better potential investor behaviour and highlights the role of equity crowdfunding as tool for minorities’ financial inclusion and women entrepreneur empowerment.
    Keywords: equity crowdfunding, entrepreneurial finance, ethnicity, gender, similarity effect
    JEL: G02 G11 M13
    Date: 2019–12
  8. By: Mmbengwa, Victor Mbulaheni; Joubert, Pierre; Tustin, Deon
    Keywords: Agribusiness, Institutional and Behavioral Economics
    Date: 2019–09
  9. By: Febriyantoro, Mohamad Trio (Universitas Universal)
    Abstract: The problem of low students’ motivation for entrepreneurship becomes serious thought by various parties such as governments, universities and industries, and societies. Various ways, which need to be done to foster interest and motivation in entrepreneurship, are to change the mindset of students who have been only interested to become employees in some companies. This research uses qualitative descriptive method. This method does not test hypothesis. Universities play an important role in the formation of entrepreneurial mindset and entrepreneurial spirit with the application of curriculum and entrepreneurship-based learning, the development of entrepreneurial lesson that is not just theoretical but also the practice to create new business, it can increase the motivation and interest of the students to become entrepreneurs.
    Date: 2019–09–12
  10. By: Nell, Rasmus
    Abstract: * Der Wirtschaftsstandort Deutschland hinkt bei der Digitalisierung des Gesundheitswesens im internationalen Vergleich hinterher. * Start-Ups konnen mit ihren disruptiven Geschaftsideen bei der digitalen Transformation im Gesundheitswesen entscheidende Akzente setzen, stosen jedoch in der unternehmerischen Praxis auf (systemimmanente) Hurden, die den Marktzugang behindern. * Die Unternehmer*innen sind oftmals branchenfremd und verfugen daher nur eingeschrankt uber Kenntnisse bestehender regulativer Rahmenbedingungen. * Insbesondere die Umstellung der EU-Richtlinien hinsichtlich der Zulassung von Medizinprodukten verunsichern junge Entrepreneure. * Die eHealth Start-Up Szene in Deutschland ist durch ein hohes Mas an Heterogenitat gekennzeichnet, wobei das lokale Grundungsumfeld und die Forderungsstrukturen den jeweiligen Entwicklungspfad vorskizzieren.
    Date: 2019

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