nep-ent New Economics Papers
on Entrepreneurship
Issue of 2020‒03‒16
nineteen papers chosen by
Marcus Dejardin
Université de Namur

  1. When Less Is More: Why Limited Entrepreneurship Education May Result in Better Entrepreneurial Outcomes By Elert, Niklas; Sjöö, Karolin; Wennberg, Karl
  2. Do Corrupt Local Governments Inhibit Entrepreneurship? A Contextual Analysis of Start-Ups in Swedish Municipalities By Wittberg, Emanuel; Erlingsson, Gissur
  3. High-growth Firm Shares in Austrian Regions: The Role of Economic Structures By Klaus S. Friesenbichler; Werner Hölzl
  4. Enterprising Women in Southern Africa: When Does Land Ownership Matter? By Brixiova, Zuzana; Kangoye, Thierry; Tregenna, Fiona
  5. Financial Constraints and Small and Medium Enterprises: A Review By Bakhtiari, Sasan; Breunig, Robert; Magnani, Lisa; Zhang, Jacquelyn
  6. Microentrepreneurship in Developing Countries By Jayachandran, Seema
  7. Buying and Selling Entrepreneurial Assets By Kankanamge, Sumudu; Gaillard, Alexandre
  8. Marketplace Lending of SMEs By Doulas J. Cumming; Lars Hornuf
  9. Financial constraints, factor combination and Gibrat's law in Africa By Florian Leon; Samuel Monteiro
  10. The Effects of Corporate Taxes on Small Firms By Harju, Jarkko; Koivisto, Aliisa; Matikka, Tuomas
  11. The Effect of Immigration on Business Dynamics and Employment By Pia M. Orrenius; Madeline Zavodny; Alexander T. Abraham
  12. Business Environment and Dual-Track Private Sector Development : China's Experience in Two Crucial Decades By Long,Cheryl Xiaoning; Xu,L. Colin; Yang,Jin
  13. Firm Dynamics, Job Outcomes, and Productivity : South African Formal Businesses, 2010-14 By Aterido,Reyes; Hlatshwayo,Ayanda; Pieterse,Duncan; Steenkamp,Andre
  14. The elusive quest for high- growth firms in Africa: The (lack of) growth persistence in Senegal By Florian Leon
  15. State Medicaid Expansion and the Self-Employed By Lee, Jun Yeong; Winters, John V.
  16. Measuring the "doing-using-interacting mode" of innovation in SMEs - A qualitative approach By Alhusen, Harm; Bennat, Tatjana; Bizer, Kilian; Cantner, Uwe; Horstmann, Elaine; Kalthaus, Martin; Proeger, Till; Sternberg, Rolf G.; Töpfer, Stefan
  17. Micro-Equity for Microenterprises By De Mel,Suresh; Mckenzie,David J.; Woodruff,Christopher M.
  18. Incubation in India – A Multilevel Analysis By Sharma, Supriya; Vohra, Neharika
  19. Determinantes del emprendimiento en el Pais Vasco By García Riazuelo, Alvaro

  1. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Sjöö, Karolin (Technology Management and Economics); Wennberg, Karl (Institute for Analytical Sociology (IAS))
    Abstract: Entrepreneurship research suggests that entrepreneurship education and training can bridge the gender gap in entrepreneurship, but little empirical research exists assessing the validity and impact of such initiatives. We examine a large government-sponsored entrepreneurship education program aimed at university students in Sweden. While a pre-study indicates that longer university courses are associated with short-term outcomes such as increased self-efficacy and entrepreneurial intentions, results from a more comprehensive study using a pre-post design suggest little effect from these extensive courses on long-term outcomes such as new venture creation and entrepreneurial income. In contrast, we do find positive effects on these long-term outcomes from more limited but more specific training interventions, especially for women. Our study suggests that less extensive but more tailored interventions can be more beneficial than longer or more extensive interventions in promoting entrepreneurship in general, and entrepreneurship of underrepresented groups in particular. We discuss implications for theory, education, and policy.
    Keywords: Entrepreneurship; Entrepreneurship education; Performance
    JEL: D22 L25 L26
    Date: 2020–03–05
  2. By: Wittberg, Emanuel (Institute for Analytical Sociology); Erlingsson, Gissur (Centre for Local Government Studies)
    Abstract: Does corruption affect the incentives for potential entrepreneurs to start businesses? The traditional view holds that entrepreneurship is inhibited. However, a few recent studies indicate the contrary, supporting a ‘grease the wheels’ perspective. In a novel approach to this question, we combine a local government corruption index and individual-level register data on start-ups in a low-corruption setting: Sweden. We disaggregate the analysis to individual entrepreneurs, focus on corruption in local institutions and hypothesize that local corruption deters potential entrepreneurs. Our findings are twofold. First, rejecting the ‘grease the wheels’ hypothesis, local corruption has a strong local deterring effect on potential entrepreneurs. Second, a minority of entrepreneurs relocate their start-ups from home unicipalities to elsewhere. However, contrary to expectations, relocaters could embody ‘non-productive’ or ‘destructive’ entrepreneurship: they migrate from relatively low-corrupt to relatively high-corrupt municipalities. While migrating is uncommon, and the effect is weak, it nonetheless indicates that relocaters are attracted to conditions where rent-seeking opportunities are present.
    Keywords: Entrepreneurship; Start-ups; Corruption; Local government; Destructive entrepreneurship
    JEL: D73 L26
    Date: 2020–03–09
  3. By: Klaus S. Friesenbichler; Werner Hölzl
    Abstract: This paper explores the structural determinants of high-growth firm shares in Austrian regions. The regional level of analysis allows to uncover regularities which are not detectable in firm-level studies. We find that lower mobility barriers, firm exits and technological opportunities, measured by digitalisation intensities, and, to a lesser extent, agglomeration effects are associated with a larger share of high-growth firms. The results suggest that comparisons of shares of high-growth firms across countries and regions should consider differences in the industrial structures together with the often-emphasised differences in policies and regulations.
    Keywords: high growth firms, industrial structure, ICT, Austria, variety, NUTS-3
    Date: 2020–03–12
  4. By: Brixiova, Zuzana (University of Economics Prague); Kangoye, Thierry (African Development Bank); Tregenna, Fiona (University of Johannesburg)
    Abstract: Limited access to finance is one of the major barriers for women entrepreneurs in Africa. This paper presents a model of start-ups in which firms' sales and profits depend on their productivity and access to credit. However, due to the lack of collateral assets such as land, female entrepreneurs have more constrained access to credit than do men. Testing the model on data from the World Bank Enterprise Surveys in Eswatini, Lesotho, and Zimbabwe, we find land ownership to be important for female entrepreneurial performance in terms of sales levels. This finding suggests that the small Southern African economies would benefit from removing obstacles to women's land tenure and enabling financial institutions to lend against movable collateral. While land ownership is linked with higher sales levels, it seems less critical for sales growth and innovation where access to short term loans for working capital seems to be key.
    Keywords: entrepreneurial sales, innovation, credit, land, gender, Africa
    JEL: G21 L26 D24 O17
    Date: 2020–01
  5. By: Bakhtiari, Sasan (Department of Industry, Innovation and Science Australia); Breunig, Robert (Australian National University); Magnani, Lisa (Macquarie University, Sydney); Zhang, Jacquelyn (Australian National University)
    Abstract: We review the literature on financial constraints and the performance of small and medium enterprises (SMEs). We consider the important role that SMEs play in the economies of Australia and the Organisation for Economic Cooperation and Development. We examine the role of financial constraints in SME growth, with emphasis on business cycles and credit access. We discuss issues that SMEs face in accessing financial resources for expansion. We look at the literature that evaluates the impact of financial constraints on key outcomes: employment, productivity and wages. We review key policy debates and consider where government involvement might be appropriate.
    Keywords: small and medium enterprises (SME), firm financial constraints, government business assistance, employment, wages, productivity, innovation
    JEL: D22 L25
    Date: 2020–01
  6. By: Jayachandran, Seema (Northwestern University)
    Abstract: This article reviews the recent literature in economics on small-scale entrepreneurship ("microentrepreneurship") in low-income countries. Major themes in the literature include the determinants and consequences of joining the formal sector; the impacts of access to credit and other financial services; the impacts of business training; barriers to hiring; and the distinction between self-employment by necessity and self-employment as a calling. The article devotes special attention to unique issues that arise with female entrepreneurship.
    Keywords: small businesses, female entrepreneurship, self-employment, informal sector
    JEL: L26 J16 J24
    Date: 2020–01
  7. By: Kankanamge, Sumudu; Gaillard, Alexandre
    Abstract: This paper introduces a theory of entrepreneurial assets transfer consistent with empirical evidence and centered around a business for sale market that values firms based on their intangible assets. We consider the key endogenous entrepreneurial choices to purchase, found, sell or liquidate business assets and the equilibrium price designed to capture both the intertemporal and the intangible value of a firm. We distinguish earlystage and mature firms as the latter are less likely to fail, make higher profits and face less stringent financial constraints. We argue that maturity translates the intangible value of a firm. We discipline our model using U.S. surveys and a new dataset of business selling transactions. We show that the absence of the business for sale market leads to a severe drop in aggregate output. Then, decomposing the effects of maturity, we show how they shape aggregate outcomes and wealth concentration.
    Keywords: Entrepreneurship, Business transfers, Intangible Assets
    JEL: E21 E23 J24
    Date: 2020–02
  8. By: Doulas J. Cumming; Lars Hornuf
    Abstract: Peer-to-business lending refers to online platforms facilitating loans from individuals to smalland medium-sized enterprises (SMEs). We conjecture that easy-to-understand risk ratings conveyed by the platform play a pronounced role in influencing the borrowing success of SMEs and that more sophisticated financial information and adverse selection are largely absent in these markets. We introduce a dataset of 414 SME marketplace loans and 8,236 online loan days to test these propositions. The data examined provide strong support for the importance of simple platform ratings in influencing investor behavior, while the effect of more detailed financial information is less pronounced.
    Keywords: debt crowdfunding, entrepreneurial finance, digital platforms
    JEL: G21 G24 G32
    Date: 2020
  9. By: Florian Leon (FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Samuel Monteiro (I&P - Investisseurs et Partenaires)
    Abstract: This paper investigates the validity of Gibrat's law in sub-Saharan Africa using data from 22,495 firms operating in 45 African countries. Results indicate that Gibrat's law does not hold in Africa, i.e. small firms create more jobs than their larger counterparts do. We point out that the usual explanations (such as diminishing returns, the learning process, and the minimum efficient size) do not explain this finding. We present a new explanation based on firm access to capital. According to our hypothesis, employment growth among small firms in Africa is faster because small firms adopt labor-intensive and capital-saving technology to expand their business activities. SMEs have a lower capital-labor factor because in order to grow, they tend to overuse labor and underuse capital due to financial constraints., hence their greater job growth momentum. Different econometric tests provide support to our hypothesis. Specifically, we prove that the negative relationship between firm size and growth is mitigated for firms with access to credit.
    Keywords: Firm growth,Job creation,Gibrat's law,Africa,Financial constraint
    Date: 2019–12–28
  10. By: Harju, Jarkko; Koivisto, Aliisa; Matikka, Tuomas
    Abstract: We study the impact of corporate taxes on firm-level investments, total output and input usage by exploiting a 4.5 percentage-point corporate tax rate cut in Finland in 2014. We use detailed administrative data and a differences-in-differences method comparing small corporations (tax rate cut) to similar partnerships (no change in tax incentives). We find no significant investment responses. However, we observe an increase in annual sales and variable costs, suggesting that corporate tax rates have an effect on business activity. The effects are driven by entrepreneurs who actively work in their firm, suggesting that the tax cut increased entrepreneurial effort.
    Keywords: corporate taxation, investments, business activity, small firms, Social security, taxation and inequality, Business regulation and international economics, G31, G38, H21, H25,
    Date: 2020
  11. By: Pia M. Orrenius; Madeline Zavodny; Alexander T. Abraham
    Abstract: Immigration, like any positive labor supply shock, should increase the return to capital and spur business investment. These changes should have a positive impact on business creation and expansion, particularly in areas that receive large immigrant inflows. Despite this clear prediction, there is sparse empirical evidence on the effect of immigration on business dynamics. One reason may be data unavailability since public-access firm-level data are rare. This study examines the impact of immigration on business dynamics and employment by combining U.S. data on immigrant inflows from the Current Population Survey with data on business formation and survival and job creation and destruction from the National Establishment Time Series (NETS) database for the period 1997 to 2013. The results indicate that immigration increases the business growth rate by boosting business survival and raises employment by reducing job destruction. The effects are largely driven by less-educated immigrants.
    Keywords: immigration; business dynamics; firm entry; firm exit; job creation; job destruction
    JEL: J15 J61 L25
    Date: 2020–02–28
  12. By: Long,Cheryl Xiaoning; Xu,L. Colin; Yang,Jin
    Abstract: A void in the literature on the business environment is how it evolves over time. Focusing on China during its crucial two decades of transition (from the early 1990s to the early 2010s), this paper documents how the country's business environment and the characteristics of entrepreneurs evolved, along with the role played by local governments. Relying on multiple comprehensive data sets, the paper shows that many aspects of local business environments improved: infrastructure, development of the court system, and access to external finance. Meanwhile, the share of politically connected private firms remained large, and their advantage in accessing key resources increased. Under this dual-track private sector development, private firms became larger and more innovative and adopted more formal corporate governance mechanisms. Entrepreneurs became much better educated, with more diverse sectoral experience. Market competition increased over time, especially after China's World Trade Organization entry. The paper offers suggestive evidence that this dual track development had negative consequences, such as a lower tendency to innovate by politically connected firms.
    Date: 2020–02–25
  13. By: Aterido,Reyes; Hlatshwayo,Ayanda; Pieterse,Duncan; Steenkamp,Andre
    Abstract: The formal private sector has a key role to play in fostering growth and reducing unemployment in South Africa?strengthening its performance is therefore critical. This paper looks at firm behaviour, firm entry and exit, job outcomes, and productivity dynamics using firm-level administrative data for South Africa. It is the first paper to benchmark employment and productivity dynamics against various comparator countries for which similar analysis has been undertaken. The paper finds that South Africa has an aged private sector with low firm dynamism and characterized by large firms that hold a large share of employment and revenue, although they are not as productive as micro firms and pay lower wages on average. The paper also finds that job creation is concentrated predominantly in incumbent firms, which are old and large, and job creation from entry and exit is negligible. The static and dynamic productivity decompositions raise a concern that although productive efficiency is gained, it is at least in part at the expense of labor. Large firms are not exploiting economies of scale, and particularly unproductive large firms may drive the weak performance of the private sector. Relatively high wages in South Africa could be partly explained by the inefficient use of labor and negative correlation between productivity and size. Likewise, these larger firms could be responsible for the negative direct impact on jobs of firms raising productivity.
    Date: 2019–03–21
  14. By: Florian Leon (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)
    Abstract: The purpose of this paper is to study the persistence of firm growth in Africa using data of formal firms in Senegal from 2006 to 2015, dedicating special attention to high-growth firms. This interest in identifying high-growth firms belongs to the idea that these firms will continue to outperform in the future and create jobs. We document, however, that growth rates are negatively correlated across time, especially for high-growth firms. A top performer is more likely to become a bad performer in the next period than sustain its previous performance. Our analysis also reveals that other indicators of performance (as profitability and productivity in the first period) are unrelated to the persistence of growth. This finding challenges the possibility for policymakers and investors to select persistent high-growth firms by scrutinizing their previous performances.
    Keywords: Firms,growth paths,Africa,Senegal,High-growth firms
    Date: 2019–12–25
  15. By: Lee, Jun Yeong (Iowa State University); Winters, John V. (Iowa State University)
    Abstract: This paper examines effects of state Medicaid Expansion via the Affordable Care Act on the self-employed. We first examine impacts on the probability of self-employment and find no significant effect. We then examine the probability of having health insurance and the type of coverage for self-employed persons. Medicaid expansion increased overall health insurance coverage rates, with especially large impacts for the unincorporated self-employed. Medicaid expansion also increased the probability of Medicaid coverage as expected, but there is evidence of crowd out of other types of coverage. Impacts on health insurance rates of the self-employed also strengthened over time.
    Keywords: health insurance, self-employed, Affordable Care Act, state Medicaid expansion
    JEL: H51 I13 L26
    Date: 2020–02
  16. By: Alhusen, Harm; Bennat, Tatjana; Bizer, Kilian; Cantner, Uwe; Horstmann, Elaine; Kalthaus, Martin; Proeger, Till; Sternberg, Rolf G.; Töpfer, Stefan
    Abstract: The 'doing-using-interacting mode' of innovation (DUI) is considered an important component of innovative activity. It describes informal innovative activities and thus complements the 'science-technology-innovation mode' (STI) based on research and development. While empirical measurement of the STI mode is well established, proxies for measuring DUI activities are still underdeveloped and no consensus has emerged concerning which intra- and extra-firm processes primarily constitute the DUI mode and how they should be measured. Based upon 81 in-depth interviews with German SMEs and regional innovation consultants, we propose a comprehensive set of 47 indicators comprising both established and new DUI processes for future empirical measurement. We argue that this measurement approach can lead to a more holistic understanding and ultimately quantifiable measurement of DUI innovativeness, which can guide further research and policymaking.
    Keywords: DUI,Innovation indicators,learning processes,modes of innovation,STI
    JEL: O3 O30 O31 R10
    Date: 2019
  17. By: De Mel,Suresh; Mckenzie,David J.; Woodruff,Christopher M.
    Abstract: Many microenterprises in developing countries have high returns to capital, but also face risky revenue streams. In principle, equity offers several advantages over debt when financing investments of this nature, but the use of equity in practice has been largely limited to investments in much larger firms. The authors develop a model contract to make self-liquidating, quasi-equity investments in microenterprises. This contract has three key parameters that can be used to shift risk between the entrepreneur and the investor, resulting in a continuum of contracts ranging from a debt-like contract that shifts little risk from the entrepreneur to a pure revenue-sharing contract in which the investor absorbs much more of the risk. The paper discusses implementation choices, and then provides lessons from a proof-of-concept carried out by an investment partner, KGC Equity, which made nine investments averaging $3,800 in Sri Lankan microenterprises. This pilot demonstrates that this new contract structure can work in practice, but also highlights the difficulties of micro-equity investments in an environment with weak contract enforcement.
    Keywords: Rural Microfinance and SMEs,Microfinance,Private Sector Economics,Private Sector Development Law,Marketing,International Trade and Trade Rules,Labor Markets,Transport Services
    Date: 2019–04–01
  18. By: Sharma, Supriya; Vohra, Neharika
    Abstract: This chapter undertakes a multi-level analysis of incubation in India with an objective to assess the landscape of incubation, the role and impact of incubators on startups, and understand challenges faced both by incubators and incubatees. Secondary data from 284 incubators across India and four largest incubator support schemes, survey of 22 incubation centres funded by a support scheme, and in-depth interviews of incubated entrepreneurs were collected and analysed. The purpose, objectives, processes and success metrics of incubators specific to Indian context are discussed. Contributions from this chapter will be useful to researchers, policy makers and incubation champions. The chapter may be of particular relevance to countries that are developing strong startup and incubation ecosystems.
    Date: 2020–03–05
  19. By: García Riazuelo, Alvaro
    Abstract: In this document, the Global Entrepreneur Monitor database is used to carry out a descriptive and comparative analysis of the different determinants of entrepreneurship for the Autonomous Community of the Basque Country. To analyze these determinants we will use econometric analysis, trying to find the relationship of the entrepreneurship and a number of variables. The results obtained show that the rate of entrepreneurship in the Basque Country is significantly lower tan the Spanish average, while the differences between men and women do not appear significant. Finally, a set of recommendations will be made with the aim of trying to improve the rate of entrepreneurship and therefore the economic growth of the region.
    Keywords: Emprendimiento, GEM data, País Vasco.
    JEL: L26 R10
    Date: 2020–03–04

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.