nep-ent New Economics Papers
on Entrepreneurship
Issue of 2020‒11‒16
eight papers chosen by
Marcus Dejardin
Université de Namur

  1. The role of gender in linking external sources of knowledge and R&D intensity By AMOROSO Sara; AUDRETSCH David
  2. Business Dynamism in the UK: New Findings Using a Novel Dataset By Silvia Lui; Russell Black; Josefa Lavandero-Mason; Mohammad Shafat
  3. Declining business dynamism: Structural and policy determinants By Flavio Calvino; Chiara Criscuolo; Rudy Verlhac
  4. Home Equity Lending, Credit Constraints and Small Business in the US By William D. Lastrapes; Ian Schmutte; Thor Watson
  5. Motherhood, Labor Market Trajectories, and the Allocation of Talent: Harmonized Evidence on 29 Countries By Inés Berniell; Lucila Berniell; Dolores de la Mata; María Edo; Yarine Fawaz; Matilde P. Machado; Mariana Marchionni
  6. Inside the regulatory sandbox: effects on fintech funding By Giulio Cornelli; Sebastian Doerr; Leonardo Gambacorta; Ouarda Merrouche
  7. Has the Paycheck Protection Program Succeeded? By Hubbard, Glenn; Strain, Michael R.
  8. Distributional Aspects of Microcredit Expansions By Christiansen, T.; Weeks, M.

  1. By: AMOROSO Sara (European Commission - JRC); AUDRETSCH David
    Abstract: Scholars examining the effect of knowledge spillovers on R&D and innovation all agree on one thing—there is a strong relationship between the firm’s R&D effort and knowledge spillovers. The sign of this relationship depends, however, on many things, such as the type of spillovers (horizontal, vertical, or from other sources), the level of appropriability, the type of firm (e.g., age and sector), and the measurement of the spillover itself. A missing piece of evidence to this literature is the role of gender in the founding team of the firm. Our contribution is to fill this gap by explicitly analysing the role played by gender in the founding team. Given that the relationship between a firm’s R&D intensity and external knowledge spillovers is ultimately context-specific, we analyse the differences between male-owned and female-owned young entrepreneurial firms with respect to the influence that knowledge spillovers have on their R&D intensity.
    Keywords: Women entrepreneurs, absorptive capacity, knowledge intensive enterprise, spillovers, Europe
    Date: 2020–10
  2. By: Silvia Lui; Russell Black; Josefa Lavandero-Mason; Mohammad Shafat
    Abstract: We use a novel firm-level dataset to measure employment dynamics of UK businesses from 1999 to 2019, building on microdata from the Inter-Departmental Business Register (IDBR) and administrative data on employment from PAYE records at HMRC. We construct a new quarterly dataset by using consecutive snapshots of the IDBR to deduce signs of activity of firms. We present detailed descriptive analysis showing the quarterly averages for job creation and destruction by size, sector, transition status and age. In addition, we compute the marginal effects of age and size on growth using the Davis, Halitwanger and Schuh (DHS) approach. Our results show that business dynamism has slowed down since the 2008-2009 financial crisis on two levels: firstly, a decline in job destruction and secondly, a decline in job creation due to entry. Age has an important role in UK’s business dynamism – young firms are the most dynamic group of enterprises, independently of size.
    Keywords: business dynamism, employment, administrative data
    JEL: C81 D22 L25
    Date: 2020–10
  3. By: Flavio Calvino (OECD); Chiara Criscuolo (OECD); Rudy Verlhac (OECD)
    Abstract: This paper analyses trends in business dynamism across 18 countries and 22 industries over the last two decades, using highly representative comparable data. It finds that declines in business dynamism, pervasive in many countries, are driven by dynamics occurring at a disaggregated sectoral level, rather than reallocation across sectors. Average trends within sectors point to steady declines in each country over the last two decades, even after accounting for the role of the business cycle, with market structure and firm heterogeneity emerging as prominent determinants. Investments in intangibles and digital technologies, globalisation, and changes in demographics also contribute to these trends. Policy can, however, help boost business dynamism by reducing barriers to entry and to knowledge diffusion, favouring experimentation and creative destruction, and increasing absorptive capacity and firms’ potential to benefit from technological change.
    Keywords: Business dynamism, Employment dynamics, Firm demography, Job reallocation
    Date: 2020–11–10
  4. By: William D. Lastrapes; Ian Schmutte; Thor Watson
    Abstract: We use Texas's constitutional amendment in 1997 that expanded the scope of home equity loans as a source of exogenous variation to estimate the effects of relaxing credit constraints on small businesses. We find, using standard panel data methods and restricted-use microdata from the US Census Bureau, that the Texas amendment increased the use of home equity finance by small businesses, increased new business and job creation and reduced establishment exit and job loss. The effects are larger and significant for businesses with fewer than ten employees.
    Keywords: natural experiment, Texas, entrepreneur, difference-in-differences
    JEL: M2 M13 R0 E0
    Date: 2020–10
  5. By: Inés Berniell (CEDLAS-IIE-FCE-UNLP); Lucila Berniell (CAF); Dolores de la Mata (CAF); María Edo (Universidad de San Andrés); Yarine Fawaz (CEMFI); Matilde P. Machado (Universidad Carlos III de Madrid); Mariana Marchionni (CEDLAS-IIE-FCE-UNLP and CONICET)
    Abstract: In this paper we assess whether changes in labor market decisions upon motherhood lead to potential inefficient allocations of talent. Using an event study approach with retrospective data drawn from SHARE for 29 European countries we show that motherhood effects go beyond the well studied effects of labor market participation decisions: the arrival of the first child substantially affects the uptaking of alternative modes of employment, such as part-time and self-employment, that are characterized by flexible or reduced work schedules but also lower pay on average. We also show that the size of labor market responses to motherhood are larger in societies with more conservative social-norms or with weak policies regarding work-life balance. To assess the effects of motherhood over the allocation of talent, we explore how labor market responses to parenthood vary by alternative measures of talent or ability. We find that all women, even those with the highest level of ability and abler than their husbands face large motherhood effects, while men show virtually no changes in the labor market when becoming fathers. We also find that mothers who become self-employed after the birth of the first child are those that are less entrepreneurial-able according to cognitive ability and personality traits shown to impair business survival. Overall, our results suggest relevant changes in the allocation of talent caused by gender differences in nonmarket responsibilities that can have sizable impacts on aggregate market productivity.
    JEL: J13 J16 J24
    Date: 2020–11
  6. By: Giulio Cornelli; Sebastian Doerr; Leonardo Gambacorta; Ouarda Merrouche
    Abstract: Policymakers around the world are adopting regulatory sandboxes as a tool for spurring innovation in the financial sector while keeping alert to emerging risks. Using unique data for the UK, this paper provides initial evidence on the effectiveness of the world's first sandbox in improving fintechs' access to finance. Firms entering the sandbox see a significant increase of 15% in capital raised post-entry, relative to firms that did not enter; and their probability of raising capital increases by 50%. Our results furthermore suggest that the sandbox facilitates access to capital through two channels: reduced asymmetric information and reduced regulatory costs or uncertainty. Our results are confirmed when we exploit the staggered introduction of the sandbox and compare firms in earlier to those in later sandbox cohorts, and when we compare participating firms to a matched set of firms that never enters the sandbox.
    Keywords: fintech, regulatory sandbox, startups, venture capital.
    JEL: G32 G38 M13 O3
    Date: 2020–11
  7. By: Hubbard, Glenn (Columbia University); Strain, Michael R. (American Enterprise Institute for Public Policy Research)
    Abstract: Enacted March 27, 2020, the Paycheck Protection Program (PPP) was the most ambitious and creative fiscal policy response to the Pandemic Recession in the United States. PPP offers forgivable loans — essentially grants — to businesses with 500 or fewer employees that meet certain requirements. In this paper, we present evidence that PPP has substantially increased the employment, financial health, and survival of small businesses, using data from the Dun & Bradstreet Corporation. We use event studies and standard difference-in-difference models to estimate the effect of a small business applying for larger PPP loans and of a small business being eligible for PPP based on size. While our findings are informative, we believe it is too early to issue conclusive judgment on PPP's success. We offer lessons for the future from the PPP experience thus far.
    Keywords: Paycheck Protection Program, PPP, Pandemic Recession, CARES Act, COVID-19
    JEL: H20 H25 H32 J01 J08 J23
    Date: 2020–10
  8. By: Christiansen, T.; Weeks, M.
    Abstract: Various poverty reduction strategies are being implemented in the pursuit of eliminating extreme poverty. One such strategy is increased access to microcredit in poor areas around the world. Microcredit, typically defined as the supply of small loans to underserved entrepreneurs that originally aimed at displacing expensive local money-lenders, has been both praised and criticized as a development tool Banerjee et al. (2015c). This paper presents an analysis of heterogeneous impacts from increased access to microcredit using data from three randomised trials. In the spirit of recognising that in general the impact of a policy intervention varies conditional on an unknown set of factors, particular, we investigate whether heterogeneity presents itself as groups of winners and losers, and whether such subgroups share characteristics across RCTs. We find no evidence of impacts, neither average nor distributional, from increased access to microcredit on consumption levels. In contrast, the lack of average effects on profits seems to mask heterogeneous impacts. The findings are, however, not robust to the specific machine learning algorithm applied. Switching from the better performing Elastic Net to the worse performing Random Forest leads to a sharp increase in the variance of the estimates. In this context, methods to evaluate the relative performing machine learning algorithm developed by Chernozhukov et al. (2019) provide a disciplined way for the analyst to counter the uncertainty as to which algorithm to deploy.
    Keywords: Machine learning methods, microcredit, development policy, treatment effects, random forest, elastic net
    JEL: D14 G21 I38 O12 O16 P36
    Date: 2020–11–03

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