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on Entrepreneurship |
| By: | Josh Lerner; Ramana Nanda |
| Abstract: | Venture capital is associated with some of the most high-growth and influential firms in the world. Academics and practitioners have effectively articulated the strengths of the venture model. At the same time, venture capital financing also has real limitations in its ability to advance substantial technological change. Three issues are particularly concerning to us: 1) the very narrow band of technological innovations that fit the requirements of institutional venture capital investors; 2) the relatively small number of venture capital investors who hold, and shape the direction of, a substantial fraction of capital that is deployed into financing radical technological change; and 3) the relaxation in recent years of the intense emphasis on corporate governance by venture capital firms. While our ability to assess the social welfare impact of venture capital remains nascent, we hope that this article will stimulate discussion of and research into these questions. |
| JEL: | G24 O31 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27492&r=all |
| By: | Joshua S. Gans; Michael Kearney; Erin L. Scott; Scott Stern |
| Abstract: | A central premise of research in the strategic management of innovation is that start-ups are able to leverage emerging technological trajectories as a source of competitive advantage. But, if the potential for a technology is given by the fundamental character of a given technological trajectory, then why does entrepreneurial strategy matter? Or, put another way, if the evolution of technology is largely shaped by the strategic choices entrepreneurs make, then why do technological trajectories exhibit systematic patterns such as the Technology S-curve? Taking a choice-based perspective, this paper illuminates the choices confronting a start-up choosing their technology by resolving the paradox of the Technology S-curve through a reformulation of the foundations of the Technology S-curve. Specifically, we reconceptualize the Technology S-curve not as a technological given but as an envelope of potential outcomes reflecting differing strategic choices by the entrepreneur in exploration versus exploitation. Taking this lens, we are able to clarify the role of technological uncertainty on start-up strategy, the impact of constraints on technological evolution, and how technology choice is shaped by the possibility of imitation. Our findings suggest that staged exploration may stall innovation as a result of the replacement effect, increasing the strategic importance of commitment. |
| JEL: | O31 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27489&r=all |
| By: | Robert W. Fairlie |
| Abstract: | Social distancing restrictions and demand shifts from COVID-19 shuttered many small businesses and entrepreneurs in the first month of widespread shelter-in-place restrictions. Fairlie (2020) finds that 22 percent of small business owners were inactive in April 2020 with disproportionate impacts on African-American, Latinx, immigrant, and female business owners. What happened in the second month of social distancing restrictions? Were there further closures or a rebound? 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 May 2020 CPS – the second month capturing effects from mandated restrictions. The number of active business owners in the United States is down by 2.2 million or 15 percent from February 2020, but up 7 percent since the low in April. The continued losses in May and partial rebound from April were felt across nearly all industries and were not sensitive to using alternative restrictions on hours worked and measures. African-American business owners continue to be the hardest hit by COVID-19 experiencing a drop of 26 percent in business activity from pre-COVID-19 levels. Latinx business owners fell by 19 percent, and Asian business owners dropped by 21 percent. Immigrant business owners experienced substantial losses of 25 percent. Simulations indicate that industry compositions partly placed black, Latinx and immigrant businesses at a higher risk of losses. All of these demographic groups, however, experienced partial rebounds in business activity from April lows. These findings of the continued early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality. |
| JEL: | J0 J15 J16 L26 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27462&r=all |
| By: | Beland, Louis-Philippe; Fakorede, Oluwatobi; Mikola, Derek |
| Abstract: | Canadian employers are largely small businesses. Their relevance for job creation and labour demand is integral for policymakers concerned with adverse labour market outcomes resulting from the COVID-19 pandemic. Using the Canadian Labour Force Survey (LFS) we document how the self-employed, which we interpret as small business owners, and employees of small businesses are being affected by COVID-19. We find large decreases in the number of small business owners, the number of employed, and in hours worked, from February to July 2020. We also find large labour market impact on small business employees. Our research confirms increasing employment, hours worked, and small business ownership as provinces began reopening their economies in May to July 2020. Still, these improvements are often below pre-March 2020 trends with some demographic groups, such as female and immigrant small business owners, having considerably worse outcomes than their respective counterparts. |
| Keywords: | COVID-19,Self-employed workers,Entrepreneurship,Employment |
| JEL: | L26 J21 J24 I18 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:650&r=all |
| By: | Christoph Albert; Andrea Caggese; Beatriz González |
| Abstract: | The aim of this paper is 1) to use empirical evidence to make predictions about the impact of the Covid-19 shock on firm entry, its composition, and its short- and long-run impact on employment; and 2) to provide guidance on which policy tool would be more effective to counteract the negative impact of the shock on this margin. The Covid-19 shock caused a large GDP contraction and our predictions suggest that this would cause a reduction in firm entry that ranges from 60% in Germany to 80% in Spain. Moreover, if this collapse of GDP is also accompanied by an even moderate increase in financial frictions, this shock also reduces the share of high-growth firms among the new startups, implying substantially larger negative long-term consequences for the employment generated by the entering cohort. Our estimates for Spain predict employment losses of the entering cohort of nearly 80,000 jobs for 2021, which increase up to almost 115,000 in 2029. Finally, using a simple partial equilibrium model calibrated to match the empirical evidence, we show that a subsidy to initial financing costs is more effective to increase aggregate employment of the entering cohort in the long run than a wage subsidy, which is more effective in the short run only. |
| Keywords: | recessions, financial crisis, entrepreneurship, firm dynamics, coronavirus, COVID-19 |
| JEL: | E20 E32 D22 J23 M13 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1200&r=all |
| By: | Ugur, Mehmet (Institute of Political Economy, Governance, Finance and Accountability, University of Greenwich); Vivarelli, Marco (UNU-MERIT, Maastricht University, Department of Economic Policy, Universita Cattolica del Sacro Cuore, and IZA, Bonn) |
| Abstract: | We review the theoretical underpinnings and the empirical findings of the literature that investigates the effects of innovation on firm survival and firm productivity, which constitute the two main channels through which innovation drives growth. We aim to contribute to the ongoing debate along three paths. First, we discuss the extent to which the theoretical perspectives that inform the empirical models allow for heterogeneity in the effects of R&D/innovation on firm survival and productivity. Secondly, we draw attention to recent modelling and estimation effort that reveals novel sources of heterogeneity, non-linearity and volatility in the gains from R&D/innovation, particularly in terms of its effects on firm survival and productivity. Our third contribution is to link our findings with those from prior reviews to demonstrate how the state of the art is evolving and with what implications for future research. |
| Keywords: | Innovation, R&D, Survival, Productivity |
| JEL: | O31 O32 O33 O40 |
| Date: | 2020–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2020038&r=all |
| By: | Ryan Niladri Banerjee; Boris Hofmann |
| Abstract: | Using firm-level data on listed non-financial companies in 14 advanced economies, we document a rise in the share of zombie firms, defined as unprofitable firms with low stock market valuation, from 4% in the late 1980s to 15% in 2017. These zombie firms are smaller, less productive, more leveraged and invest less in physical and intangible capital. Their performance deteriorates several years before zombification and remains significantly poorer than that of non-zombie firms in subsequent years. Over time, some 25% of zombie companies exited the market, while 60% exited from zombie status. However, recovered zombies underperform compared to firms that have never been zombies and they face a high probability of relapsing into zombie status. |
| Keywords: | zombie companies, firm behaviour, economic dynamism, productivity growth, bankruptcy |
| JEL: | D22 D24 E43 G33 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:882&r=all |
| By: | Djossou Gbetoton Nadege Author-Name: Jacob Novignon Author-Name: Atchade Touwédé Bénédicte Author-Name: Abdelkrim Araar |
| Abstract: | Young entrepreneurship is an important lever for economic growth and employment creation in developing countries. Credit uptake, however, continues to pose significant limitations to the sustainability of small-scale enterprises. We estimated the impact of credit uptake (formal, informal, and family) on young entrepreneurship performance in Benin, using 2014-2016 panel data from a World Bank survey on enterprise formalization. To address potential endogeneity and ensure robustness of results, we employed multiple models and estimation techniques (fixed-effects and Lewbel approach). Our results showed that, while formal credit was most important for larger firms, smaller firms benefited mainly from flexible (informal or family) credit. The impact of credit uptake was generally higher for women-owned firms. There were also variations in uptake according to firm owner’s age: the impact of formal credit was relatively higher for older firm owners while younger owners benefited more from flexible credit. The findings highlight the importance of Informal and family credit sources, especially for start-ups and small firms. |
| Keywords: | Youth Entrepreneurship, Microcredit, Small-scale Enterprises, Benin |
| JEL: | D20 O12 O17 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:pmmacr:2020-16&r=all |
| By: | Nguyen, Minh-Hoang; Pham, Thanh-Hang; Huyen, Nguyen Thanh Thanh; Ho, Manh-Toan (Thanh Tay University Hanoi); Vuong, Quan-Hoang |
| Abstract: | Entrepreneurs play crucial roles in global sustainable development, but limited financial resources constrain their performance and survival rate. Entrepreneurial finance discipline is, therefore, born to explore the connection between finance and entrepreneurship. Despite the global presence of entrepreneurship, the literature of entrepreneurial finance is suspected to be Western ideologically homogenous. Thus, the objective of this study is to examine the existence of Western ideological homogeneity in entrepreneurial finance literature. Employing the mindsponge mechanism and bibliometric analyses (Y-index and social structure), we analyze 412 highly cited publications extracted from Web of Science database and find Western ideological dominance as well as weak tolerance towards heterogeneity in the set of core ideologies of entrepreneurial finance. These results are consistent across author-, institution-, and country-levels, which reveals strong evidence for the existence of Western ideological homogeneity in the field. We recommend editors, reviewers, and authors to have proactive actions to diversify research topics and enhancing knowledge exchange to avoid the shortfalls of ideological homogeneity. Moreover, the synthesis of mindsponge mechanism and bibliometric analyses are suggested as a possible way to evaluate the state of ideological diversity in other scientific disciplines. |
| Date: | 2020–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:sk3e6&r=all |
| By: | Cheng Chen; Tatsuro Senga; Chang Sun; Hongyong Zhang |
| Abstract: | Using a long-panel dataset of Japanese firms that contains firm-level sales forecasts, we provide evidence on firm-level uncertainty and imperfect information over their life cycle. We find that firms make non-negligible and positively correlated forecast errors. However, they make more precise forecasts and less correlated forecast errors when they become more experienced. We then build a model of heterogeneous firms with endogenous entry and exit where firms gradually learn about their demand by using a noisy signal. In our model, informational imperfections lead firms to enter the market without being fully informed. Moreover, young firms tend to wait long before entering or exiting the market faced with high uncertainty about their demand. The former learning effect, combined with the latter real-options effect, adversely affect firms’ entry decisions and thus resource allocation. Our quantitative exercise substantiates the importance of accumulation of experience for firms’ post-entry dynamics and aggregate productivity. |
| Keywords: | firm expectations, forecast errors, uncertainty, learning, productivity |
| JEL: | D83 D84 E22 E23 F23 L20 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8468&r=all |
| By: | Elen Riot (HEC Paris - Recherche - Hors Laboratoire - HEC Paris - Ecole des Hautes Etudes Commerciales) |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02883094&r=all |
| By: | Blimpo, Moussa P.; Pugatch, Todd |
| Abstract: | We assess, via an experiment across 207 secondary schools, how a comprehensive teacher training program affects the delivery of a major entrepreneurship curriculum reform in Rwanda. The reform introduced interactive pedagogy and a focus on business skills in the country’s required upper secondary entrepreneurship course. In addition to the government’s standard training, a random sample of schools received intensive training organized by an NGO for two years. The training consisted of (i) six training sessions during school breaks, ii) exchange visits each term where teachers provided feedback to their peers, and (iii) outreach and support from NGO staff at least twice per year. The program increased teachers’ use of active instruction, consistent with the reform’s features. These effects on pedagogy did not translate into improvements in student academic outcomes or skills. Treated students increased their participation in businesses by 5 percentage points, or 17% of the control mean, with a commensurate decrease in wage employment, and no effect on overall income. These results suggest substitution between entrepreneurship and employment among students in treated schools. |
| Keywords: | entrepreneurship education,teacher training,secondary school,pedagogy,randomized control trials,Rwanda |
| JEL: | I25 I26 I28 J24 O12 O15 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:642&r=all |
| By: | Han, Bing; Han, Lu; Zhou, Zhengyi |
| Abstract: | Using a unique survey data of Chinese households, we study the impact of house price growth and house price risk on entrepreneurship. House price risk, measured as the sensitivity of house price growth to local GDP growth, negatively impacts the entrepreneurship of homeowners relative to renters. This finding is concentrated only among sophisticated households and is consistent with the portfolio effect when housing and occupational choices are integral parts of the household portfolio. Moreover, a high past house price growth reduces the entrepreneurship of homeowners relative to renters. This holds for both sophisticated and unsophisticated households. We propose a new economic channel based on extrapolative belief and provide further supportive evidence. |
| Keywords: | Entrepreneurship; Housing market; Extrapolative belief |
| JEL: | D10 G11 L26 R21 R31 |
| Date: | 2020–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102597&r=all |
| By: | Paras Kharel Author-Name: Kshitiz Dahal Author-Name: Jorge Davalos |
| Abstract: | We estimated the impact of remittances from international migration on the labor supply of left-behind household members to non-farm self-employment and on the performance of the non-farm enterprises they operated. We used data from a nationally representative household survey from Nepal that included an enterprise module. We accounted for both the truncated nature of observed hours worked and the endogeneity of remittances when assessing the impact on labor supply, and, in estimating the effects on firm performance, we addressed selection into operating a non-farm enterprise as well as the endogeneity of remittances. Remittances were found to encourage women to reduce their labor supply in non-farm self-employment, whereas there was no significant effect on men. We found evidence that the disincentive effect was strong enough to exert a negative influence on the revenues of non-farm enterprises operated by the left-behind labor force. |
| Keywords: | Remittances, Migration, Labour supply, Microenterprises, Entrepreneurship |
| JEL: | J22 F22 L20 O20 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:pmmacr:2020-06&r=all |
| By: | Ivana Marinovic Matovic (Addiko Bank AD Belgrade, Belgrade, Serbia) |
| Abstract: | A business plan is made with the aim of analyzing the position, the possibility of improving the existing product range, or introducing a new product, assessing the profitability of a completely new production program, and in recent years mostly to obtain funding from banks, funds, investors or business partners. Today's business plan is not a set of formal documents, but the first step in planning, part of a process that includes regular review. The great social responsibility of a modern organization in terms of sustainable development, preservation and protection of the environment, requires proper and strategic planning and development of business idea. The best framework for formulating such an idea is in a sustainable business plan. This paper aims to analyze the content of a sustainable business plan, its strategic approach, and confirm its importance for the quality support of sustainable business organization. |
| Keywords: | business plan, organization, sustainable business plan, entrepreneurship, small business |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:smo:spaper:008im&r=all |
| By: | Oleg Muratov |
| Abstract: | I consider an environment in which the entrepreneur generates information about the quality of the projects prior to contracting with the investor. The investor faces a moral hazard problem, since the entrepreneur may divert the funding for private consumption. When the investor bargains with the entrepreneur, I nd that the ecient amount of information is generated if and only if the bargaining power of the entrepreneur is high enough. I interpret this result in terms of investors' concentration, competitiveness, and generosity measures. I show that the investor prefers a non-absolute bargaining power when the project costs are high enough. |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp2014&r=all |