nep-ent New Economics Papers
on Entrepreneurship
Issue of 2020‒09‒21
seven papers chosen by
Marcus Dejardin
Université de Namur

  1. Supporting Firm Innovation and R&D: What is the Optimal Policy Mix? By İrem Güçeri; Marko Köthenbürger; Martin Simmler
  2. Public research and the quality of inventions: the role and impact of entrepreneurial universities and regional network embeddedness By Holger Graf; Matthias Menter
  3. Credit Market Imperfection, Lack of Entrepreneurs and Capital Outflow from a Developing Economy By Sugata Marjit; Suryaprakash Mishra
  4. Investor Tax Credits and Entrepreneurship: Evidence from U.S. States By Matthew R. Denes; Sabrina T. Howell; Filippo Mezzanotti; Xinxin Wang; Ting Xu
  5. The role of innovation in industrial dynamics and productivity growth: a survey of the literature By Ugur, Mehment; Vivarelli, Marco
  6. In Times of Trouble: Innovative Drivers of External Competitiveness for Small Businesses during the Great Recession By Brancati, Emanuele; Brancati, Raffaele; Guarascio, Dario; Zanfei, Antonello
  7. Canadian Small Businesses’ Employees and Owners during COVID-19 By Louis-Philippe Beland; Oluwatobi Fakorede; Derek Mikola

  1. By: İrem Güçeri; Marko Köthenbürger; Martin Simmler
    Abstract: This policy report provides an overview of firm R&D support policies used by European countries, reviews the empirical evidence on the effectiveness of these policies, and discusses implications for policy. Existing literature suggests that firm R&D support policies stimulate private R&D within a country and that in most cases, the positive impact of government support is stronger on smaller firms. Recent evidence also indicates that some of the policy instruments, such as patent box policies, are tools that multinationals use to lower their total tax bill through profit shifting. Despite the data issues that limit the ability to quantify the impact of tax incentives on global R&D, these recent findings together suggest that R&D support policies indeed promote national R&D activities. But governments also use some of these tax instruments to compete for R&D and mobile tax bases, which makes them less cost-effective in stimulating aggregate private sector R&D.
    Date: 2020
  2. By: Holger Graf (Friedrich Schiller University Jena, Faculty of Economics and Business Administration); Matthias Menter (Friedrich Schiller University Jena, Faculty of Economics and Business Administration)
    Abstract: The positive effect of public research on industrial innovations is beyond controversy: public research institutions produce knowledge that is subsequently transferred into product and process innovations by private businesses. Besides this rather passive role in commercializing inventions, public research institutions may also proactively exploit new knowledge through public sector entrepreneurship activities. Especially entrepreneurial universities are perceived as a conduit of knowledge spillovers, as they serve as central actors of innovation networks and stimulate network activities. Whereas the linkages between network embeddedness and innovation activities have been largely explored, the impact on patent quality in terms of radicalness, originality and generality remains rather unclear. Considering Germany’s diverse public research infrastructure (universities, polytechnics, and non-university research institutes), our findings reveal that the type of institution and the corresponding scientific orientation (basic vs. applied research) matter for the quality of inventions. Centrality of respective institutions within innovation networks thereby reinforces the radicalness of inventions. However, we do not find support for the general assumption that an entrepreneurial orientation of public sector entities augments the quality of inventions. We conclude the paper with policy recommendations as well as with future avenues of research.
    Keywords: patent quality, radical innovation, entrepreneurial university, network embeddedness, centrality
    JEL: O31 O32 O34
    Date: 2020–07–19
  3. By: Sugata Marjit; Suryaprakash Mishra
    Abstract: This paper explores the impact of credit market on the entrepreneurs and demand for credit in a credit constrained economy and the resultant impact on the capital flows. In standard trade models the capital flows across countries are explained as a result of the rate of return differentials due to presence/absence of capital among the countries whereby capital flows from the capital rich countries to capital poor countries. We show that the rate of return differentials could arise due to presence/absence of entrepreneurs, i.e., low price of capital in autarky may reflect lack of demand for credit due to scarcity of entrepreneurs and not capital abundance and eventually may lead to capital outflow from a capital scarce country. This is a different way of echoing the sentiment of the well-known “Lucas Paradox” which suggests that capital might flow from the poor to the rich countries. We also show the possibility of trade and capital flow being complements and not substitutes, as is usual in standard models.
    Keywords: credit market imperfection, credit rationing, redistribution, entrepreneurs, capital flows
    JEL: F21 F36 D63 G21
    Date: 2020
  4. By: Matthew R. Denes; Sabrina T. Howell; Filippo Mezzanotti; Xinxin Wang; Ting Xu
    Abstract: Angel investor tax credits are used globally to spur high-growth entrepreneurship. Exploiting the staggered implementation of these tax credits in 31 U.S. states, we find that while they increase angel investment, they have no significant effect on entrepreneurial activity. Tax credits induce entry by inexperienced, local investors and are often used by insiders. A survey of 1,411 angel investors suggests that a “home run” investing approach alongside coordination and information frictions explain low take-up among experienced investors. The results contrast with evidence that direct subsidies to firms have large positive effects, raising concerns about using investor subsidies to promote entrepreneurship.
    JEL: G0 G14 G28 H0 H25 O3
    Date: 2020–08
  5. By: Ugur, Mehment; Vivarelli, Marco
    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 modeling 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: O30 O33
    Date: 2020
  6. By: Brancati, Emanuele; Brancati, Raffaele; Guarascio, Dario; Zanfei, Antonello
    Abstract: This paper analyzes the main drivers of external competitiveness in times of crisis for small and medium enterprises (SMEs). We focus on the Italian experience in the midst of the financial and sovereign-debt crisis, and present robust evidence based on a comprehensive survey of Italian companies in the manufacturing and production service sectors (the MET dataset). Overall, our results confirm the high degree of heterogeneity of the Italian system and the differences between internationalized and domestic companies in terms of performance as well as structural and behavioral dimensions. In particular, data highlight not only the strict correlation between internationalization and innovative activities but also a positive change of attitude of Italian firms towards these strategies. Our analysis shows that, whilst structural factors play a key role for external competitiveness, other critical firm-level aspects trigger superior performances, especially strategic profiles, technological capabilities, and proactive behaviors such as innovativeness and R&D investment. Importantly, we document disproportionate effects of innovation for smaller and less productive companies. This points at dynamic strategies as a potential tool to fill the gap between larger/more productive companies and the set of less structured firms, a segment representing an ideal target for policy measures.
    Keywords: SME,external competitiveness,Great Recession
    JEL: M20 L23 L25
    Date: 2020
  7. By: Louis-Philippe Beland (Department of Economics, Carleton University); Oluwatobi Fakorede (Department of Economics, Carleton University); Derek Mikola (Department of Economics, Carleton University)
    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: 2020–08

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.