nep-ent New Economics Papers
on Entrepreneurship
Issue of 2020‒11‒09
twelve papers chosen by
Marcus Dejardin
Université de Namur

  1. Does the Timing of integrating new Skills affect Start-up Growth? By Grillitsch, Markus; Schubert, Torben
  2. Initial Conditions and Regional Performance in the Aftermath of Disruptive Shocks: The Case of East Germany after Socialism By Michael Fritsch; Michael Wyrwich
  3. Intrapreneurship: Productive, Unproductive, and Destructive By Elert, Niklas; Stenkula, Mikael
  4. Institutions, Financial Development, and Small Business Survival: Evidence from European Emerging Markets By Ichiro Iwasaki; Evžen Kocenda; Yoshisada Shida
  5. Business Exit During the COVID-19 Pandemic: Non-Traditional Measures in Historical Context By Leland Crane; Ryan Decker; Aaron Flaaen; Adrian Hamins-Puertolas; Christopher J. Kurz
  6. Sustainable Business Models: A Review By Nosratabadi, Saeed; Mosavi, Amir; Shamshirband, Shahaboddin; Zavadskas, Edmundas Kazimieras; Rakotonirainy, Andry; Chau, Kwok Wing
  7. Why are Africa's female entrepreneurs not playing the export game? Evidence from Ghana By Ackah, Charles Godfred; Görg, Holger; Hanley, Aoife; Hornok, Cecília
  8. Applying labour law to micro, small and medium-sized enterprises a comparative study of 16 countries By Vargas, Ana María.
  9. Bank Liquidity Provision across the Firm Size Distribution By Gabriel Chodorow-Reich; Olivier M. Darmouni; Stephan Luck; Matthew Plosser
  10. Growing by the Masses - Revisiting the Link between Firm Size and Market Power By Hassan Afrouzi; Andres Drenik; Ryan Kim
  11. The EIF SME Access to Finance Index - September 2020 Update By Torfs, Wouter
  12. Small and medium-sized entrepreneurship in Russia and regions in 2019–2020 By Barinova Vera; Zemtsov Tsepan; Tsareva Yulia

  1. By: Grillitsch, Markus (CIRCLE, Lund University); Schubert, Torben (CIRCLE, Lund University)
    Abstract: Growth often requires start-ups to recruit new skills not present in the founding team. We analyze if the relationship between integrating new skills and growth depends on timing. Should new skills be recruited as early as possible, or can start-ups add them as needed along the way? Using a unique panel dataset covering Sweden’s population of start-ups from 1997-2012, our analysis shows that i) start-ups grow faster if they integrate novel skills early in their life, while adding novel skills later reduces growth, and ii) corporate spin-offs profit less from recruiting novel skills than de novo start-ups. We mirror our results against existing theories and develop theoretical perspectives for future research.
    Keywords: start-ups; growth; spin-offs; time/temporal aspects; venture teams
    JEL: M13 M51
    Date: 2020–10–28
  2. By: Michael Fritsch (Friedrich Schiller University Jena and Halle Institute for Economic Research (IWH), Germany); Michael Wyrwich (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany)
    Abstract: We investigate how initial conditions that existed in East Germany at the end of the socialist regime impact regional development during the turbulent shock transition to a market economic system. Our investigation spans a period of almost 30 years. Both the self-employment rate (an indication of the existence of a pre-socialist entrepreneurial tradition) and the share of the workforce with a tertiary degree have a strong positive effect on regional development. We conclude that knowledge and a tradition of entrepreneurship have long-run positive effects on development in regions that face disruptive shocks. Entrepreneurship and knowledge play a less important role for development across West German regions, where no significant shocks occurred.
    Keywords: Entrepreneurship, knowledge, economic development, history, transformation, East Germany
    JEL: L26 R11 N93 N94
    Date: 2020–10–27
  3. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: Researchers increasingly recognize that entrepreneurial employees, intrapreneurs, play a critical role in innovation. As with regular entrepreneurship, however, the value of intrapreneurial activity depends on the firm-specific and societal reward structures that intrapreneurs face. Ideally, these rules of the game are such that they reward intrapreneurship that is beneficial for the firm and the economy. When this is not the case, intrapreneurship can be beneficial for the firm but not for society, damaging for the firm yet beneficial for society, or downright destructive. We offer a taxonomy describing how society’s rules and firm rules interact to produce different intrapreneurial outcomes.
    Keywords: Intrapreneurship; Entrepreneurship; Entrepreneurial behavior
    JEL: D02 J24 L26 M14 O17 O31
    Date: 2020–10–26
  4. By: Ichiro Iwasaki; Evžen Kocenda; Yoshisada Shida
    Abstract: In this paper, we traced the survival status of 94,401 small businesses in 17 European emerging markets from 2007–2017 and empirically examined the determinants of their survival, focusing on institutional quality and financial development. We found that institutional quality and the level of financial development exhibit statistically significant and economically meaningful impacts on the survival probability of the SMEs being researched. The evidence holds even when we control for a set of firm-level characteristics such as ownership structure, financial performance, firm size, and age. The findings are also uniform across industries and country groups and robust beyond the difference in assumption of hazard distribution, firm size, region, and time period.
    Keywords: small business, institutions, financial development, survival analysis, European emerging markets
    JEL: C14 D02 D22 G33 M21
    Date: 2020
  5. By: Leland Crane; Ryan Decker; Aaron Flaaen; Adrian Hamins-Puertolas; Christopher J. Kurz
    Abstract: Given lags in official data releases, economists have studied "alternative data" measures of business exit resulting from the COVID-19 pandemic. Such measures are difficult to understand without historical context, so we review official data on business exit in recent decades. Business exit is common in the U.S., with about 7.5 percent of firms exiting annually in recent years, and is countercyclical (particularly recently). Both the high level and the cyclicality of exit are driven by very small firms. We explore a range of alternative measures and indicators of business exit, including novel measures based on payroll events and phone-tracking data, and find tentative evidence that exit has been elevated during 2020. Evidence is somewhat mixed, however, and exiting businesses do not appear to represent a large share of U.S. employment.
    Keywords: Business cycles; Business exit; Firm dynamics; Job destruction; Nontraditional data
    JEL: E32 C55 C81 D22
    Date: 2020–10–22
  6. By: Nosratabadi, Saeed; Mosavi, Amir; Shamshirband, Shahaboddin (University of Malaya); Zavadskas, Edmundas Kazimieras; Rakotonirainy, Andry; Chau, Kwok Wing
    Abstract: During the past two decades of e-commerce growth, the concept of a business model has become increasingly popular. More recently, the research on this realm has grown rapidly, with diverse research activity covering a wide range of application areas. Considering the sustainable development goals, the innovative business models have brought a competitive advantage to improve the sustainability performance of organizations. The concept of the sustainable business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural, or other contexts, in a sustainable way. The process of sustainable business model construction forms an innovative part of a business strategy. Different industries and businesses have utilized sustainable business models’ concept to satisfy their economic, environmental, and social goals simultaneously. However, the success, popularity, and progress of sustainable business models in different application domains are not clear. To explore this issue, this research provides a comprehensive review of sustainable business models literature in various application areas. Notable sustainable business models are identified and further classified in fourteen unique categories, and in every category, the progress -either failure or success- has been reviewed, and the research gaps are discussed. Taxonomy of the applications includes innovation, management and marketing, entrepreneurship, energy, fashion, healthcare, agri-food, supply chain management, circular economy, developing countries, engineering, construction and real estate, mobility and transportation, and hospitality. The key contribution of this study is that it provides an insight into the state of the art of sustainable business models in various application areas and future research directions. This paper concludes that popularity and the success rate of sustainable business models in all application domains have been increased along with the increasing use of advanced technologies.
    Date: 2020–10–08
  7. By: Ackah, Charles Godfred; Görg, Holger; Hanley, Aoife; Hornok, Cecília
    Abstract: We explore the export performance of Africa's underperforming female entrepreneurs, using the Ghanaian ISSER-IGC panel, a comprehensive dataset of manufacturing firms for 2011-2015. Uniquely, the data provides information about the severity of key business constraints, across both male and female entrepreneurs. We find that females are less likely to export (and optimize their exporting) than their male peers. Although reduced access to finance seriously constrains the exports of female entrepreneurs, this limitation does not explain their relative inability to leverage value from exports. Consistent with related work, we find that certain social and cultural constraints, in particular constraints linked to bribes and security concerns, are more deeply felt by female entrepreneurs. This may hint at the exclusion of Africa's females (voluntarily or involuntarily) from male-dominated networks or business practices.
    Keywords: female entrepreneurship,business constraints,productivity,exporting,Africa,Ghana
    JEL: D22 F14 J16
    Date: 2020
  8. By: Vargas, Ana María.
    Abstract: This study dentifies a general trend towards the extension of equal protection to all workers regardless of the enterprise size, including those in the informal economy and in self-employment. To achieve that, governments are relying not only on labour laws but also on other frameworks and policies. This study did not find any country that completely excluded MSMEs from the application of labour laws. Whereselective exclusions or special regimes are in place, these apply mainly to micro and small enterprises, while workers in medium-sized enterprises are often fully covered. Invoking the concept of “social control”, this study highlights a number of innovative approaches used to achieve enforcement of, and compliance with, labour laws among MSMEs – ranging from targeted inspections to wider campaigns designed to raise awareness and change social norms and perceptions.
    Keywords: workers rights, labour law, small enterprise, microenterprise, self employed
    Date: 2020
  9. By: Gabriel Chodorow-Reich; Olivier M. Darmouni; Stephan Luck; Matthew Plosser
    Abstract: Using loan-level data covering two-thirds of all corporate loans from U.S. banks, we document that SMEs (i) obtain much shorter maturity credit lines than large firms; (ii) have less active maturity management and therefore frequently have expiring credit; (iii) post more collateral on both credit lines and term loans; (iv) have higher utilization rates in normal times; and (v) pay higher spreads, even conditional on other firm characteristics. We present a theory of loan terms that rationalizes these facts as the equilibrium outcome of a trade-off between commitment and discretion. We test the model’s prediction that small firms may be unable to access liquidity when large shocks arrive using data on drawdowns in the COVID recession. Consistent with the theory, the increase in bank credit in 2020:Q1 and 2020:Q2 came almost entirely from drawdowns by large firms on pre-committed lines of credit. Differences in demand for liquidity cannot fully explain the differences in drawdown rates by firm size, as we show that large firms also exhibited much higher sensitivity of drawdowns to industry-level measures of exposure to the COVID recession. Finally, we match the bank data to a list of participants in the Paycheck Protection Program (PPP) and show that SME recipients of PPP loans reduced their non-PPP bank borrowing in 2020:Q2 by between 53 and 125 percent of the amount of their PPP funds, suggesting that government-sponsored liquidity can overcome private credit constraints.
    Keywords: liquidity provision; macro-finance; credit; financial constraints; loan terms; banking; credit lines; COVID-19
    JEL: G00 G20 G30
    Date: 2020–10–01
  10. By: Hassan Afrouzi; Andres Drenik; Ryan Kim
    Abstract: How are a firm’s size and market power related to one another? Combining micro-data about producers and consumers, we document that while firms mainly grow by selling to more customers, their markups are only associated with their average sales per customer. To study the macroeconomic implications of these facts, we develop a model of firm dynamics with endogenous customer acquisition and variable markups. Relative to a model without customer acquisition, our model generates higher concentration at the top, but a lower aggregate markup. Our quantitative analysis reveals large welfare and efficiency losses due to (mis)allocation of customers across firms. By increasing market concentration among the most productive firms, the efficient allocation achieves 11% higher aggregate productivity and 15% higher output.
    Keywords: customer acquisition, misallocation, concentration, markups
    JEL: D24 D42 D61 E22
    Date: 2020
  11. By: Torfs, Wouter
    Abstract: This working paper elaborates on the most recent update of the EIF SME Access to Finance (ESAF) Index, a composite indicator used to monitor the state of SME external financing markets in the 27 EU countries and the UK. The current update, using the latest available data, constitutes the seventh iteration of this exercise. The paper is used to provide some background information underlying the aggregate ESAF results. The latest available data at the time of writing refer to the year 2019, and therefore do not incorporate the impact of the COVID-19 crisis on EU SME financing markets.
    Date: 2020
  12. By: Barinova Vera (Gaidar Institute for Economic Policy); Zemtsov Tsepan (Gaidar Institute for Economic Policy); Tsareva Yulia (Gaidar Institute for Economic Policy)
    Abstract: Government funding of the respective activities of small and medium-sized enterprises (SME) under the national project “Small and medium-sized entrepreneurship and support of entrepreneurial initiatives†increased in 2018-2020. However, in 2019, the number of SMEs subjects decreased by 118 thousand compared to 2018, and the number of people employed in the sector fell to 18.8 million, i.e. decreased by almost half a million people (the goal of the national project for 2024 is 25 million people). The share of the SME sector in GDP decreased to 20 percent in 2018 (the goal of the national project for 2024 is 32.5 percent). Generally, negative trends in the development of the sector, associated with an increase in the VAT rate, the introduction of online cash registers and almost zero growth in household incomes were observed in Russia in 2019. In 2020, near-zero economic growth and the coronavirus pandemic, which has already led to a significant drop in demand, especially in the restaurant business, tourism and entertainment, will negatively affect the development of the SME sector. A more significant reduction in performance of the sector’s activity is expected compared to 2019. However, the conditions for the development of entrepreneurship and, accordingly, the indicated trends vary significantly across Russia’s regions.
    Keywords: Russian economy, small businesses, medium-sized enterprises
    JEL: C53 E37 L21 L52
    Date: 2020

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