nep-ent New Economics Papers
on Entrepreneurship
Issue of 2020‒04‒27
ten papers chosen by
Marcus Dejardin
Université de Namur

  1. Entrepreneurship and the fight against poverty in US Cities By Lee, Neil; Rodríguez-Pose, Andrés
  2. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
  3. The value of publicly available, textual and non-textual information for startup performance prediction By Kaiser, Ulrich; Kuhn, Johan M.
  4. Can government intervention make firms more investment-ready? A randomized experiment in the Western Balkans By Dautović, Ernest; Cusolito, Ana Paula; McKenzie, David
  5. Patents to Products: Product Innovation and Firm Dynamics By David Argente; Salomé Baslandze; Douglas Hanley; Sara Moreira
  6. Can Boosting Savings and Skills Support Female Business Owners in Indonesia? Evidence from A Randomized Controlled Trial By Mayra Buvinic; Hillary C. Johnson; Elizaveta Perova; Firman Witoelar
  7. R&D investment under financing constraints By Giebel, Marek; Kraft, Kornelius
  8. Exposure to Transit Migration, Public Attitudes and Entrepreneurship By Ajzenman, Nicolas; Aksoy, Cevat Giray; Guriev, Sergei
  9. Une perspective gestionnaire du risque By Yvon Pesqueux
  10. Entrepreneuriat et créativité : du détournement à la création de valeur By Jean-Luc Gaffard

  1. By: Lee, Neil; Rodríguez-Pose, Andrés
    Abstract: Entrepreneurship is sometimes portrayed as a cure-all solution for poverty reduction. Proponents argue it leads to job creation, higher incomes, and lower poverty rates in the cities in which it occurs. Others, by contrast, posit that many entrepreneurs are actually creating low-productivity firms serving local markets. Yet, despite this debate, little research has considered the impact of entrepreneurship on poverty in cities. This paper addresses this gap using a panel of US cities for the period between 2005 and 2015. We hypothesise that the impact of entrepreneurship depends on whether it occurs in tradeable sectors – and, therefore, is more likely to have positive local multiplier effects – or non-tradable sectors, which may saturate local markets. We find that entrepreneurship in tradeables reduces poverty and increases incomes for non-entrepreneurs. The result is confirmed using an instrumental variable approach, employing the inheritance of entrepreneurial traits as an instrument. In contrast, while there are some economic benefits from non-tradeable entrepreneurship, we find these are not large enough to reduce poverty.
    Keywords: entrepreneurship; Poverty; Cities; Economic development; USA
    JEL: M13 J31 J21 O18 R11
    Date: 2020–04–09
  2. By: Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
    Abstract: How do political connections affect firm dynamics, innovation, and creative destruction? To answer this question, we build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model generates a number of theoretical testable predictions and highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity. We test the predictions of our model using a brand-new dataset on Italian firms and their workers. Our dataset spans the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data, (ii) social security data on the universe of workers, (iii) patent data from the European Patent Office, (iv) the national registry of local politicians, and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: when compared to their competitors, market leaders are much more likely to be politically connected but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity—a result that we also confirm using a regression discontinuity design.
    Keywords: political connections; productivity; innovation; firm dynamics; creative destruction
    JEL: O30 O43
    Date: 2020–04–17
  3. By: Kaiser, Ulrich; Kuhn, Johan M.
    Abstract: Can publicly available, web-scraped data be used to identify promising business startups at an early stage? To answer this question, we use such textual and non-textual information about the names of Danish firms and their addresses as well as their business purpose statements (BPSs) supplemented by core accounting information along with founder and initial startup characteristics to forecast the performance of newly started enterprises over a five years' time horizon. The performance outcomes we consider are involuntary exit, above{average employment growth, a return on assets of above 20 percent, new patent applications and participation in an innovation subsidy program. Our first key finding is that our models predict startup performance with either high or very high accuracy with the exception of high returns on assets where predictive power remains poor. Our second key finding is that the data requirements for predicting performance outcomes with such accuracy are low. To forecast the two innovation-related performance outcomes well, we only need to include a set of variables derived from the BPS texts while an accurate prediction of startup survival and high employment growth needs the combination of (i) information derived from the names of the startups, (ii) data on elementary founder-related characteristics and (iii) either variables describing the initial characteristics of the startup (to predict startup survival) or business purpose statement information (to predict high employment growth). These sets of variables are easily obtainable since the underlying information is mandatory to report upon business registration. The substantial accuracy of our predictions for survival, employment growth, new patents and participation in innovation subsidy programs indicates ample scope for algorithmic scoring models as an additional pillar of funding and innovation support decisions.
    Keywords: startup,performance,prediction,text as data
    JEL: L26 C53
    Date: 2020
  4. By: Dautović, Ernest; Cusolito, Ana Paula; McKenzie, David
    Abstract: Innovative firms with good ideas may still struggle to fine-tune them to the stage where they can attract outside funding. We conduct a five-country randomized experiment that tests the impact of an investment readiness program. Firms then pitched their ideas to independent judges. The program resulted in a 0.3 standard deviation increase in the investment readiness score. Two years later, the average impacts on firm investment outcomes are positive, but small in magnitude, and not statistically significant. Larger and statistically significant impacts on receiving outside funding occur for smaller firms, and for firms with lower likelihoods of otherwise being funded. JEL Classification: L26, M2, M13, O1
    Keywords: entrepreneurship, equity investment, innovation, randomized controlled trial, start-ups
    Date: 2020–04
  5. By: David Argente; Salomé Baslandze; Douglas Hanley; Sara Moreira
    Abstract: We study the relationship between patents and actual product innovation in the market, and how this relationship varies with firms’ market share. We use textual analysis to create a new data set that links patents to products of firms in the consumer goods sector. We find that patent filings are positively associated with subsequent product innovation by firms, but at least half of product innovation and growth comes from firms that never patent. We also find that market leaders use patents differently from followers. Market leaders have lower product innovation rates, though they rely on patents more. Patents of market leaders relate to higher future sales above and beyond their effect on product innovation, and these patents are associated with declining product introduction on the part of competitors, which is consistent with the notion that market leaders use their patents to limit competition. We then use a model to analyze the firms' patenting and product innovation decisions. We show that the private value of a patent is particularly high for large firms as patents protect large market shares of existing products.
    Keywords: patent value; productivity; creative destruction; patents; product innovation; growth
    JEL: O3 O4
    Date: 2020–04–17
  6. By: Mayra Buvinic (Center for Global Development); Hillary C. Johnson (World Bank); Elizaveta Perova (World Bank); Firman Witoelar (Australian National University)
    Abstract: There is broad evidence of gender gaps in the productivity of microenterprises, which are in part linked to financial and human capital constraints. Existing literature suggests that interventions simultaneously addressing skills and capital constraints can be effective, but there is little evidence to date exploring the combination of skills and savings interventions. This study tests the relative effectiveness and cost effectiveness of providing supply-side incentives to promote agent banking savings accounts, business and financial literacy training for female entrepreneurs, and the combination of the two on women’s businesses and agency in Indonesia. The study took place in 401 villages in East Java in which agent banking products were recently introduced. Although the trial found only small positive effects on the take-up of branchless banking services, both interventions had significant positive impacts on women’s profits. The impacts of the training and mentoring intervention seem to come in part from improved business practices, greater savings, increased business assets, and increased decision-making power. Because the high incentives treatment impacted women’s profits but not any intermediate outcomes the mechanisms are less clear—potentially coming either from a more woman-friendly business environment or through using their husbands’ savings or their existing savings to support their businesses. Although the high agent incentives are more cost-effective than the training and mentoring, policy makers may still prefer the demand-side intervention, as it has more positive implications for women’s overall empowerment and stronger impacts for the poorest quintile of female entrepreneurs.
    JEL: D14 M2 O16
    Date: 2020–04–10
  7. By: Giebel, Marek; Kraft, Kornelius
    Abstract: This paper tests for the sensitivity of R&D to financing constraints conditional on restrictions in external financing. Financing constraints of firms are identified by an exogenously calculated rating index. Restrictions in external financing are determined by (i) the specific time period (crisis vs. non-crisis) and (ii) the balance sheet strength of the firm's main bank in terms of bank capital. Results of difference-in-differences estimations utilizing three time periods: 2002-2006 (pre-crisis) 2007-2009 (crisis) and 2010-2012 (post-crisis) support the theoretical prediction that financing constraints affect R&D. Moreover, we find that the effect of firm financing constraints is more intense (i) in times of stress on financial markets and (ii) when the firm faces restrictions in external financing. Additionally, our results indicate that on average the effect does not persist over time.
    Keywords: R&D investment,financing constraints,credit rating,financial crisis,bank capital,external financing of innovation
    JEL: G01 G21 G24 G30 O16 O30 O31 O32
    Date: 2020
  8. By: Ajzenman, Nicolas (São Paulo School of Economics-FGV); Aksoy, Cevat Giray (European Bank for Reconstruction and Development); Guriev, Sergei (Sciences Po, Paris)
    Abstract: Does exposure to mass migration affect economic behavior, attitudes and beliefs of natives in transit countries? In order to answer this question, we use a unique locality-level panel from the 2010 and 2016 rounds of the Life in Transition Survey and data on the main land routes taken by migrants in 18 European countries during the refugee crisis in 2015. To capture the exogenous variation in natives' exposure to transit migration, we construct an instrument that is based on the distance of each locality to the optimal routes that minimize travelling time between the main origin and destination cities. We first show that the entrepreneurial activity of natives falls considerably in localities that are more exposed to mass transit migration, compared to those located further away. We then explore the mechanisms and find that our results are likely to be explained by a decrease in the willingness to take risks as well as in the confidence in institutions. We also document an increase in the anti-migrant sentiment while attitudes towards other minorities remained unchanged. We rule out the possibility of out-migration of natives or of trade-related shocks (potentially confounded with the mass-transit migration) affecting our results. Using locality-level luminosity data, we also rule out any effect driven by changes in economic activity. Finally, we find no statistically significant effects on other labor market outcomes, such as unemployment or labor force participation.
    Keywords: migrant routes, entrepreneurship, public attitudes, political instability
    JEL: F22 L26 D91 O15 O10
    Date: 2020–04
  9. By: Yvon Pesqueux (CNAM - Conservatoire National des Arts et Métiers [CNAM], LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM])
    Abstract: Ce texte est organisé de la manière suivante : un questionnement sur la société du risque ; des commentaires sur les liens « risque-société entrepreneuriale par nature » chez A. Giddens ; les fondements de la notion de risque ; une conclusion sur une socio-politique du risque ; un focus sur les stoïciens et la maitrise de soi (une éthique à l'épreuve des siècles, les présupposés physiques et métaphysique de la morale stoïcienne, la morale stoïcienne, quelques éléments de discussion), un focus sur Hans Jonas et le « principe responsabilité » comme nouvel impératif catégorique (considérations générales, un double constat : la transformation des rapports « Homme-Nature » à travers l'action de la science et la nécessité d'une nouvelle éthique, critiques et intérêts actuels) et un focus sur les apports de Jacques Ellul et de Jürgen Habermas à la notion de « technoscience ». La société du risque en question 1 De façon liminaire, on pourrait dire que le risque apparaît comme thématique majeure en dualité de la valorisation exacerbée de l'intérêt individuel à la fin du XX° siècle. C'est donc à ce titre que nos sociétés attribuent une valeur normative au risque 2 (U. Beck). A l'intérêt, d'ordre individualiste, répondrait le risque, d'ordre généraliste, dans une perspective à la fois cognitive et affective. Le risque ne peut en effet être pensé que dans le cadre d'une idéologie individualiste, car il apparaît en même temps que l'Autre (« L'enfer, c'est les autres » 3). En d'autres termes, sans l'Autre, pas de risque possible. À une anthropologie philosophique individualiste construite sur l'intérêt répondent donc une anthropologie générale et une héroïsation de celui qui prend les risques, dans le cadre de ce que l'on pourrait qualifier d'esthétique du risque.
    Date: 2020–04–09
  10. By: Jean-Luc Gaffard (Institut Universitaire de France, OFCE Sciences Po, Université Côte d’Azur, CNRS, GREDEG, Skema Business School)
    Abstract: The nature of the innovations carried out, the way in which scientific and technical knowledge are exploited, the use made of the creative spirit, depend on the entrepreneur’s ability to design an organisation capable of creating sufficiently robust information channels. This is the yardstick by which to judge entrepreneurial behaviour, the pace imposed by finance, the way human resources are allocated. The reality of creativity lies in the choice between rent-seeking and productive innovation, between impatient and patient finance, between flexibility and rigidity in labour markets. This is an organizational and institutional choice.
    Keywords: Créativité, engagement, entrepreneuriat, innovation
    JEL: D21 D23 D47 J53 L26
    Date: 2020–03

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