nep-ent New Economics Papers
on Entrepreneurship
Issue of 2020‒01‒06
fourteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Does a One-Size-Fits-All Minimum Wage Cause Financial Stress for Small Businesses? By Sudheer Chava; Alexander Oettl; Manpreet Singh
  2. Endogeneity and Entrepreneurship Research By Anderson, Brian S
  3. Entrepreneurship Prompts Institutional Change in Developing Economies By Elert, Niklas; Henrekson, Magnus
  4. The gender gap in bank credit access By Pablo de Andrés; Ricardo Gimeno; Ruth Mateos de Cabo
  5. Do Entrepreneurs Respond to Everyday Changes in Financing Cost? By Guzman, Jorge; Liu, Yupeng
  6. New Results on Entrepreneurship and Risk By Claudio A. Bonilla; Marcos Vergara; Richard Watt
  7. Hidden in Plain Sight: Venture Growth with or without Venture Capital By Christian Catalini; Jorge Guzman; Scott Stern
  8. Agglomeration of Low-productive Entrepreneurs to Large Regions: A Simple Model By Rikard FORSLID; OKUBO Toshihiro
  9. Hidden Reserves as an Alternative Channel of Firm Finance in a Major Developing Economy By Ibrahim Yarba
  10. Seeing Parochially and Acting Locally By Dutta, Sunasir
  11. Trade Costs in Services. Firm Survival, Firm Growth and Implied Changes in Employment By Elisabeth Christen; Michael Pfaffermayr; Yvonne Wolfmayr
  12. Strategic CSR for innovation in SMEs: Does diversity matter? By Rachel Bocquet; Christian Le Bas; Caroline Mothe; Nicolas Poussing
  13. Entrepreneurship in agroindustry: opportunity or last resort of young people in the DRC? By Cool, Mangole Dady; Dontsop, Paul
  14. European Small Business Finance Outlook: December 2019 By Kraemer-Eis, Helmut; Botsari, Antonia; Gvetadze, Salome; Lang, Frank; Torfs, Wouter

  1. By: Sudheer Chava; Alexander Oettl; Manpreet Singh
    Abstract: Do increases in federal minimum wage impact the financial health of small businesses? Using intertemporal variation in whether a state’s minimum wage is bound by the federal rate and credit-score data for approximately 15.2 million establishments for the period 1989–2013, we find that increases in the federal minimum wage worsen the financial health of small businesses in the affected states. Small, young, labor-intensive, minimum-wage sensitive establishments located in the states bound to the federal minimum wage and those located in competitive and low-income areas experience higher financial stress. Increases in the minimum wage also lead to lower bank credit, higher loan defaults, lower employment, a lower entry and a higher exit rate for small businesses. The results are robust to using nearest-neighbor matching and geographic regression discontinuity design. Our results document some potential costs of a one-size-fits-all nationwide minimum wage, and we highlight how it can have an adverse effect on the financial health of some small businesses.
    JEL: G33 G38 J30
    Date: 2019–12
  2. By: Anderson, Brian S (University of Missouri - Kansas City)
    Abstract: In this paper, I discuss common endogeneity problems found in entrepreneurship research. I show how entrepreneurship researchers, particularly those working with observational data, typically face several specific endogeneity threats in a given study. I then show through a series of simulated of datasets instrument variable approaches that effectively address endogeneity in a variety of research designs. I discuss best-practice recommendations for integrating instrument variables into entrepreneurship research at the study design phase, and outline potential sources for instruments.
    Date: 2018–04–10
  3. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: Entrepreneurship plays a pivotal role for institutional change and economic development in transition and developing economies. Formal and informal institutions in such countries are often sub-par, but rather than being constrained by them, entrepreneurship can often affect institutions and contribute to their evolution. We highlight three entrepreneurial responses to the institutional status quo: an abiding response, an altering response, and an evasive response. Each response can be either welfare-enhancing or welfare-reducing; more importantly, each response can affect the institutional framework of the society in which it occurs. Better knowledge of entrepreneurial responses to institutions and the context in which they occur offers a promising avenue for future research and a potential way of sustaining lasting institutional change and economic development.
    Keywords: Development; Entrepreneurship; Evasion; Innovation; Institutions; Regulation
    JEL: L50 M13 O31 P14
    Date: 2020–01–02
  4. By: Pablo de Andrés (Universidad Autónoma de Madrid and ECGI); Ricardo Gimeno (Banco de España); Ruth Mateos de Cabo (Universidad CEU San Pablo)
    Abstract: We use a sample of over 80,000 Spanish companies started by a sole entrepreneur between 2004 and 2014, and distinguish between male and female entrepreneurs demand for credit, credit approval ratio, and credit performance. We find that female entrepreneurs who start a business are less likely to ask for a loan. Of the female entrepreneurs requesting a credit, the probability of obtaining one in the founding year is significantly lower than their male peers in the same industry. This lower credit access disappears over the subsequent years, once the company has a track record of profits and losses. We also observe that women-led companies that receive a loan in the founding year are less likely to default as compared to men-led companies. This superior performance disappears for subsequent years, coinciding with the disappearance of the lower credit access. Taking all these results together, we rule out both taste-based discrimination and statistical discrimination in the credit industry, and point to the possible presence of double standards which might be a consequence of implicit (unconscious) discrimination.
    Keywords: gender discrimination, credit demand, credit access, credit performance, financing
    JEL: G32 J16 L25 M13
    Date: 2019–12
  5. By: Guzman, Jorge; Liu, Yupeng
    Abstract: We study whether U.S. entrepreneurs respond to small everyday variation in financing costs. Using a high frequency index of the quality and quantity of U.S. entrepreneurship and identification through heteroskedasticity, we estimate the impact of exogenous changes in the short-term interest rate on the aggregate level of new firm formation. We identify a positive, heterogeneous, stable, and statistically significant impact of interest rate shocks on entrepreneurship. A one percentage point increase in the interest rate is associated with a drop of 6.8% in the flow of the quantity of startups, and 3.5% in the quality-adjusted quantity, seven days later. The negative impact dissipates after six weeks, and there is no corresponding overcompensation, suggesting the loss is permanent.
    Date: 2019–11–27
  6. By: Claudio A. Bonilla; Marcos Vergara; Richard Watt (University of Canterbury)
    Abstract: In this paper we study two decisions made by an individual. First, the decision to transit from paid and secure employment into risky entrepreneurship and second, the decision about the size or scale of the venture for transitioned entrepreneurs. In doing so, we focus on the risk attitudes and characteristics of the decision makers to analyze the effects of greater risk aversion, wealth increases and stochastic dominant shifts in the distribution of results. Interesting results arise for our comparative static results, where risk aversion, the DARA property and an upper bound for absolute risk aversion coefficient play the key roles in our results.
    Keywords: Entrepreneurship, Risk Aversion, DARA
    JEL: D81 L26
    Date: 2019–12–01
  7. By: Christian Catalini; Jorge Guzman; Scott Stern
    Abstract: The majority of IPOs and acquisitions are achieved without venture capital financing, yet research has focused mostly on VC backed firms. Using founding choices and a predictive analytics approach on virtually all US registered businesses, we shed light into these “missing” growth firms. Founding choices that predict raising venture capital also strongly predict equity exits without VC. Firms with growth potential are similar to each other, irrespective of funding source. Moreover, matching firms that are born with identical observables, but only differ in whether they receive venture capital, suggests an upper bound to the returns to venture capital of 600%.
    JEL: G24 L26
    Date: 2019–12
  8. By: Rikard FORSLID; OKUBO Toshihiro
    Abstract: This paper develops a simple model of spatial sorting where the least productive entrepreneurs are drawn to the large core region. This is an unusual feature. The literature on spatial sorting typically shows how the most productive individuals and firms agglomerate to the core. However, our model is consistent with data that reveals that large agglomerations also attract unproductive entrepreneurs.
    Date: 2019–12
  9. By: Ibrahim Yarba
    Abstract: This study analyses the argument that whether Turkish non-financial firms utilize any informal source of alternative funding during economic uncertainties over the last decade. This study is the first to explore the issue and provide some insights regarding how small and medium-sized enterprises do react to the financial constraint problem in such an economic environment. Both trend analysis and dynamic panel model estimations provide supporting evidence that Turkish non-financial firms have some reserves (e.g., owners’, relatives’ and/or friends’ personal wealth) that are utilized during the times of persistent stress and tightening of macroprudential policies. Most strikingly, this is the case for only small and medium-sized enterprises but not for large firms.
    Keywords: Hidden reserves, Alternative firm financing channels, SME, Macroprudential policy, Uncertainty, Persistence of uncertainty
    JEL: C23 D21 D81 G18 G32
    Date: 2019
  10. By: Dutta, Sunasir
    Abstract: Why some communities have greater rates of social entrepreneurship in similar domains is a question of importance to scholars and practitioners alike. Much of the literature in social entrepreneurship begins with a social problem that has been identified, and then analyzes the antecedents of the entrepreneurial process that lead to organizational solutions emerging for those problems. However, why some problems gain traction as being worthy of time and effort in solving, has garnered little attention. I argue that particular problems are more or less salient triggers of action by prospective social entrepreneurs based on the distribution of such problems in the local social environment, rather than aggregate levels of need. Yet, even problems widely experienced as shared, salient, and generally worthy of action might lack the emergence of solutions in fragmented communities, such as those with high levels of residential segregation by race and income. We study this in the context of founding of advocacy and support organizations in the domain of healthcare, and find support for our predictions. We also conducted additional tests to better characterize the findings and test robustness to alternative sources of influence, such as the local pool of potential social entrepreneurs, the role of local ecology, and geographic spillovers from neighboring areas.
    Date: 2019–11–13
  11. By: Elisabeth Christen; Michael Pfaffermayr; Yvonne Wolfmayr
    Abstract: This paper provides new insight into the firm-level employment impacts of trade cost changes at the industry level in the Austrian services sector. We apply a two-part model of firm survival (exit) and firm growth. Separate regressions for firm entry rates at the industry-region level complete the picture of total trade-induced net job creation. We implement the trade cost measure introduced by Chen and Novy (2011) and base it on own estimates of industry specific substitution elasticities. Falling trade costs in the Austrian services sector over the period 2000 to 2014 resulted in net job creation of about 19,000 jobs accounting for 9.5 percent of overall job flows in the sector. The smallest and least productive firms contract while large and productive firms expand as predicted by theory. Most adjustments occur at the extensive margin due to changes in the probability of firm survival.
    Keywords: Services trade, Trade costs, Elasticity of substitution, Firm-level evidence, Heterogenous firms, Gravity model, Job flows, Trade and employment
    Date: 2019–12–18
  12. By: Rachel Bocquet (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Christian Le Bas (ESDES - École de management de Lyon - Université Catholique de Lyon); Caroline Mothe (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Nicolas Poussing (LISER - Luxembourg Institute of Socio-Economic Research - Luxembourg Institute of Socio-Economic Research)
    Abstract: Both corporate social responsibility and diversity influence firms' innovation, yet their relationship and links to innovation remain uncertain, especially among small to medium-sized enterprises. Relying on strategic and institutional CSR perspectives and a value-in-diversity approach, this study examines the mediating roles of gender and nationality diversity on the CSR–innovation link at the organizational level. With a sample of 1,348 SMEs from Luxembourg, the results show that strategic CSR can promote both types of diversity, but only nationality diversity triggers technological innovation. Nationality diversity emerges as a partial mediator of the relationship between CSR and SMEs' technological innovation. Thus, strategic CSR, through the genuine pursuit of such diversity, can help SMEs attain positive returns on their product or process innovation. These results have important theoretical and managerial implications.
    Keywords: strategic CSR,diversity,gender,innovation,nationality,responsive CSR
    Date: 2019
  13. By: Cool, Mangole Dady; Dontsop, Paul
    Keywords: Labor and Human Capital
    Date: 2019–09
  14. By: Kraemer-Eis, Helmut; Botsari, Antonia; Gvetadze, Salome; Lang, Frank; Torfs, Wouter
    Abstract: This working paper provides an overview of the main markets relevant to the EIF. It starts by discussing the general market environment, then looks at the main aspects of equity finance and the markets for SME debt products, and, finally, it highlights important aspects of microfinance in Europe. A chapter on Fintech complements the analysis. Many thanks to the colleagues who reviewed the sections relevant to their area. The EIF Working Papers are designed to make available to a wider readership selected topics and studies in relation to EIF's business. The Working Papers are edited by EIF's Research & Market Analysis and are typically authored or co-authored by EIF staff or are written in cooperation with EIF.
    Date: 2019

This nep-ent issue is ©2020 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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