nep-ent New Economics Papers
on Entrepreneurship
Issue of 2020‒07‒20
thirteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Innovative Entrepreneurship as a Collaborative Effort: An Institutional Framework By Elert, Niklas; Henrekson, Magnus
  2. Enabling Entrepreneurial Choice By Ajay K. Agrawal; Joshua S. Gans; Scott Stern
  3. Supporting innovative entrepreneurship: an evaluation of the Italian "Start-up Act" By Francesco Manaresi; Carlo Menon; Pietro Santoleri
  4. The Impact of COVID-19 on Small Business Owners: Evidence of Early-Stage Losses from the April 2020 Current Population Survey By Fairlie, Robert W.
  5. In the Eye of the Storm: Firms, Putty-Clay and Capital Destruction By Martino Pelli; Jeanne Tschopp; Natalia Bezmaternykh; Kodjovi M Eklou
  6. Towards Entrepreneurial Ecosystem Indicators : Speed and Acceleration By Th\'eophile Carniel; Jean-Michel Dalle
  7. EIDES 2020: The European Index of Digital Entrepreneurship Systems By Erkko Autio; Laszlo Szerb; Eva Komlosi; Monika Tiszberger
  8. Macroeconomic implications of insolvency regimes By Benjamin Hemingway
  9. Firm and Technology Dynamics in the Short- and Long-Run: A Macroeconomic Model for Research and Innovation Policy Evaluation By BENEDETTI FASIL Cristiana; IMPULLITTI Giammario; LICANDRO Omar; SEDLACEK Petr
  10. Selection and Absolute Advantage in Farming and Entrepreneurship By Alvarez-Cuadrado, Francisco; Amodio, Francesco; Poschke, Markus
  11. ESG considerations in venture capital and business angel investment decisions: Evidence from two pan-European surveys By Botsari, Antonia; Lang, Frank
  12. Productivity Dynamics in Japan and the Negative Exit Effect By Ikeuchi, Kenta; Kim, YoungGak; Kwon, Hyeog Ug; Fukao, Kyoji
  13. Von der Idee bis zum Gewinn - eine empirische Analyse der Entwicklungsprozesse von Neugründungen By Bijedić, Teita; Löher, Jonas; Nielen, Sebastian; Schlömer-Laufen, Nadine; Herrmann, Andrea; Zimmermann, Maximilian

  1. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: We demonstrate how successful entrepreneurship depends on a collaborative innovation bloc (CIB), a system of innovation that evolves spontaneously and within which activity takes place through time. A CIB consists of six pools of economic skills from which people are drawn or recruited to form part of a collaborative team, which is necessary for innovation-based venturing to flourish. The six pools include entrepreneurs, inventors, early- and later-stage financiers, key personnel, and customers. We show how the application of the CIB perspective can help make institutional and evolutionary economics more concrete, relevant, and persuasive, especially regarding institutional prescriptions. Generally, we envision an institutional framework that improves the antifragility of CIBs and the economic system as a whole, thus enabling individual CIBs and the broader economic system to thrive when faced with adversity.
    Keywords: Institutional economics; Evolutionary economics; Antifragility; Entrepreneurship; Innovation; Institutions
    JEL: D20 G32 L23 L26 O33
    Date: 2020–06–24
  2. By: Ajay K. Agrawal; Joshua S. Gans; Scott Stern
    Abstract: Entrepreneurs must choose between alternative strategies for bringing their idea to market. They face uncertainty regarding both the quality of their idea as well as the efficacy of each strategy. While entrepreneurs can reduce this uncertainty by conducting tests, any single test conflates the signal of the efficacy of the particular strategy and the quality of the idea. Resolving this conflation requires exploring multiple strategies. Consequently, entrepreneurial choice is enhanced by finding ways to lower the cost of testing multiple strategies, receiving guidance as to the types of tests likely to reduce signal conflation, and optimally sequencing tests based on prior beliefs. This creates a role for judgment that may be provided by third parties such as mentors and investors. We hypothesize that institutions that lower the cost of transmitting and aggregating judgment spur entrepreneurial success.
    JEL: D83 O3
    Date: 2020–06
  3. By: Francesco Manaresi (Directorate General for Economics, Statistics and Research, Bank of Italy); Carlo Menon (Laterite); Pietro Santoleri (Institute of Economics and EMbeDS, Sant'Anna School of Advanced Studies)
    Abstract: The role of innovative start-ups in contributing to aggregate economic dynamism has attracted increased attention in recent years. While this has translated into several public policies explicitly targeting them, there is little evidence on their e ectiveness. This paper provides a comprehensive evaluation of the "Start-up Act", a policy intervention aimed at supporting innovative start-ups in Italy. We construct a unique database encompassing detailed information on firm balance-sheets, employment, firm demographics, patents and bank-firm relationships for all Italian start-ups. We use conditional difference-in-differences and instrumental variable strategies to evaluate the impact of the "Start-up Act" on firm performance. Results show that the policy induces a significant increase in several firm outcomes whereas no effect is detected in patenting propensity and survival chances. We also document that the policy alleviates nancial frictions characterizing innovative start-ups through the provision of tax credits for equity and a public guarantee scheme which, respectively, trigger an increase in the probability of receiving VC and accessing bank credit.
    Keywords: Start-ups; Entrepreneurship policy; Policy Evaluation; Firm performance
    JEL: M13 L25 L53 D04
    Date: 2020–07
  4. By: Fairlie, Robert W. (University of California, Santa Cruz)
    Abstract: Social distancing restrictions and demand shifts from COVID-19 are expected to shutter many small businesses, but there is very little early evidence on impacts. This paper provides the first analysis of impacts of the pandemic on the number of active small businesses in the United States using nationally representative data from the April 2020 CPS – the first month fully capturing early effects from the pandemic. The number of active business owners in the United States plummeted by 3.3 million or 22 percent over the crucial two-month window from February to April 2020. The drop in business owners was the largest on record, and losses were felt across nearly all industries and even for incorporated businesses. African-American businesses were hit especially hard experiencing a 41 percent drop. Latinx business owners fell by 32 percent, and Asian business owners dropped by 26 percent. Simulations indicate that industry compositions partly placed these groups at a higher risk of losses. Immigrant business owners experienced substantial losses of 36 percent. Female-owned businesses were also disproportionately hit by 25 percent. These findings of early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality.
    Keywords: small business, entrepreneurship, self-employment, COVID-19, coronavirus, shelter in place, social distancing
    JEL: J15 J16 L26
    Date: 2020–05
  5. By: Martino Pelli; Jeanne Tschopp; Natalia Bezmaternykh; Kodjovi M Eklou
    Abstract: In this paper we provide a new identification strategy to test for the presence of putty-clay capital, i.e. capital that once installed cannot be re-invested. Using a panel of Indian manufacturing firms between 1995 and 2006, we quantify the response of firm sales within and across industries to an exogenous negative shock to the firm capital stock and find effects akin to Schumpeterian creative destruction, where surviving firms build back better. We show that within an industry, the sales of less productive firms decrease disproportionately more, while across industries capital destruction leads to a shift in sales towards more performing industries; which is consistent with a putty-clay technology. As a source of shock, we use a novel measure of firm exposure to storms based on the maximum wind speed exerted by each storm on each of the postal codes where the headquarters and the establishments of a firm are located. We establish that, depending on their strength, storms destroy up to 75.3% of the fixed assets of the median firm (in terms of its productivity and industry performance) and cause a decrease in its sales that can reach 99%.
    Keywords: firms, putty-clay capital, creative destruction, storms
    JEL: D22 D24 Q54
    Date: 2020–06
  6. By: Th\'eophile Carniel; Jean-Michel Dalle
    Abstract: We suggest the use of indicators to analyze entrepreneurial ecosystems, in a way similar to ecological indicators: simple, measurable, and actionable characteristics, used to convey relevant information to stakeholders and policymakers. We define 3 possible such indicators: Fundraising Speed, Acceleration and nth-year speed, all related to the ability of startups to develop more or less rapidly in a given ecosystem. Results based on these 3 indicators for 6 prominent ecosystems (Berlin, Israel, London, New York, Paris, Silicon Valley) exhibit markedly different situations and trajectories. Altogether, they contribute to confirm that such indicators can help shed new and interesting light on entrepreneurial ecosystems, to the benefit of potentially more grounded policy decisions, and all the more so in otherwise blurred and somewhat cacophonic environments.
    Date: 2020–06
  7. By: Erkko Autio (Imperial College London Business School); Laszlo Szerb (University of Pécs); Eva Komlosi (University of Pécs); Monika Tiszberger (University of Pécs)
    Abstract: Digitalisation is shaping and even transforming both the location and nature of entrepreneurial opportunities in the economy and the practices to pursue them. In order to help maximise the productivity potential of the digitally enhanced entrepreneurial dynamic in countries, policymakers need to understand the state of their countries' digital framework conditions for entrepreneurship. The European Index of Digital Entrepreneurship Systems (EIDES) addresses this gap by monitoring digital framework and systemic conditions for entrepreneurial stand-up, start-up, and scale-up in the EU27 countries and the United King-dom. This is the third edition of the EIDES. It provides an assessment of framework conditions for digital start-ups and scale-ups in European countries in 2020 and analyses their evolution in the period between 2018 and 2020.
    Keywords: Digital Economy, Entrepreneurship, Start-up, Scale-up, framework conditions
    Date: 2020–06
  8. By: Benjamin Hemingway (Bank of Lithuania & Vilnius University)
    Abstract: The impact of creditor and debtor rights following firm insolvency are studied in a firm dynamics model where defaulting firms choose between restructuring or exit. The model accounts for differing effects of productivity shocks across economies that differ in the credit/debtor rights. Following a negative shock labour productivity falls sharply in a creditor-friendly regime such as the UK while in a debtor-friendly regime such as the US, there is a larger employment response. This paper suggests a possible explanation for the different employment and labour productivity response in the UK and US since the financial crisis.
    Keywords: Bankruptcy, Insolvency, Firm Financing
    JEL: D21 E22 G33
    Date: 2020–06–18
  9. By: BENEDETTI FASIL Cristiana (European Commission - JRC); IMPULLITTI Giammario; LICANDRO Omar; SEDLACEK Petr
    Abstract: We develop a dynamic stochastic general equilibrium model with firm and technology dynamics to assess the impact of a rich set of innovation policies. We explore the aggregate and cross-sectional effects of an R&D tax credit, corporate taxes, and policies affecting firms’ access to credit. Two main results emerge. First, the aggregate impact of these policies is driven by general equilibrium effects operating via the government budget, the labor market and via equilibrium entry of firms. In contrast, their stimulating effect on innovation and productivity growth has a negligible impact on aggregate income and employment. Second, we find that uniform policies have heterogeneous effects on firms and their size distribution which generate rich feedbacks to the aggregate economy.
    Keywords: Firm dynamics, innovation policy, endogenous growth, business cycles
    Date: 2020–06
  10. By: Alvarez-Cuadrado, Francisco; Amodio, Francesco; Poschke, Markus
    Abstract: Output per worker is lower in poor countries than in rich countries, and relatively more so in the agricultural sector. Sorting of heterogeneous workers can contribute to explain this fact if comparative and absolute advantage are aligned in agriculture, implying that average productivity in agriculture increases as the agricultural employment share decreases. We empirically investigate the correlation between comparative and absolute advantage using representative household-level panel data from four Sub-Saharan African countries. Around one third of households engage in both agriculture and non-farming entrepreneurship. We find that more productive farming households are more likely to also engage in non-farm entrepreneurship, allocate more hours to it if they do, and are more likely to enter it if not yet active. All three pieces of evidence imply that comparative and absolute advantage are negatively correlated -- misaligned -- in agriculture, casting doubt on the importance of selection as a root cause of the agricultural productivity gap.
    Keywords: Africa; agricultural productivity gap; entrepreneurship; selection
    JEL: J24 J31 J43 L26 O11 O13 O40
    Date: 2020–01
  11. By: Botsari, Antonia; Lang, Frank
    Abstract: This working paper provides testimony on the integration of ESG considerations and impact investing in the areas of venture capital (VC) and business angel (BA) investing. The results are survey-based and are derived from the respective questions in the EIF VC Survey 2019 and the EIF Business Angels (BA) Survey 2019. The paper discusses the combined findings from both surveys in relation to the respondents' ESG considerations, and clusters the ESG-related results around six main themes: - What is the level of ESG engagement in VC and BA investing? - What motivates VCs' and BAs' ESG engagement (and what deters them from doing so)? - What are the most common ESG investment strategies? - How do VC firms implement ESG criteria in terms of policies and procedures? - How do VCs and BAs perceive the relation between ESG considerations and investment returns? - What lies ahead for ESG investing? 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: 2020
  12. By: Ikeuchi, Kenta; Kim, YoungGak; Kwon, Hyeog Ug; Fukao, Kyoji
    Abstract: We conducted an analysis of productivity dynamics using the microdata of the Credit Risk Database (CRD), the Establishment and Enterprise Census and the Economic Census. We found that the negative exit effect in Japan is driven by the exit of some highly productive firms. This finding suggests that to reduce the negative exit effect policies to support SMEs should not be based on their size but by focusing on SMEs with high TFP that are actively investing.
    Keywords: Productivity dynamics, TFP, Labor Productivity
    JEL: O47 O53
    Date: 2020–04
  13. By: Bijedić, Teita; Löher, Jonas; Nielen, Sebastian; Schlömer-Laufen, Nadine; Herrmann, Andrea; Zimmermann, Maximilian
    Abstract: Die Studie analysiert den Gründungsprozess sowie die hierfür benötigte Zeit von Neugründungen in den zwei Branchen alternative Energien und Informationstechnologie. Es zeigt sich, dass Gründungen keinem einheitlichen Prozess folgen. So konnten insgesamt vier verschiedene Gründungsverlaufstypen identifiziert werden. Die Gründungsverläufe unterscheiden sich insbesondere dahingehend, ob und wann ein Businessplan erstellt wurde. Die Geschwindigkeit der einzelnen Prozessschritte wird dagegen vor allem durch den Innovationsgrad des Geschäftsmodells bestimmt. Gründungen, die etwa auf radikalen Innovationen beruhen, brauchen fast 16 Monate länger, bis ein tragfähiges Geschäftsmodell entsteht als Gründungen, die imitativ sind. Im Vergleich zur USA sind die Gründungsprozesse in Deutschland signifikant kürzer.
    Keywords: Gründungen,Gründungsprozesse,Businessplan,Venture creation processes,Start-ups,Business plan
    JEL: L26 M13
    Date: 2020

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