nep-ent New Economics Papers
on Entrepreneurship
Issue of 2021‒01‒25
fifteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Immigration and Entrepreneurship in the United States By Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
  2. Self-employment and subjective well-being By Binder, Martin; Blankenberg, Ann-Kathrin
  3. How endogenous risk preferences and sample selection affect analysis of firm survival By Cho, Insoo; Orazem, Peter F.
  4. Public subsidies and the sources of venture capital By Berger, Marius; Hottenrott, Hanna
  5. Is the German Mittelstand More Resistant to Crises? Empirical Evidence from the Great Recession By Michael Berlemann; Vera Jahn; Robert Lehmann
  6. Kirzner and Rothbard on an Austrian theory of entrepreneurship: the heirs of both Menger and Mises discuss action and the role of institutions. By Gilles Campagnolo; Christel Vivel
  7. Contextualization of entrepreneurship research: Methodologies of the trend By Paschke, Max; Müller, Anna
  8. Entrepreneurial Teams: Diversity of Skills and Early-Stage Growth By Francesco D’Acunto; Geoffrey Tate; Liu Yang
  9. The age distribution of business firms By Flavio Calvino; Daniele Giachini; Mattia Guerini
  10. A Theory of Debt Maturity and Innovation By Yuliyan Mitkov
  11. COVID-19 and SME Failures By ; Pierre-Olivier Gourinchas; Sebnem Kalemli-Ozcan; Veronika Penciakova
  12. EU start-up calculator: impact of COVID-19 on aggregate employment: Scenario analysis for Bulgaria, Croatia, Czechia, Luxemburg, Netherlands, Poland, Romania, Slovakia and Slovenia By Cristiana Benedetti Fasil; Petr Sedlacek; Vincent Sterk
  13. Harnessing Digital Technologies to Promote SMEs in the MENAP Region By Inutu Lukonga
  14. The effects of Entrepreneurship and Sectoral Outputs on three Dimensions of Sustainable Development: A Literature Review and an Empirical Assessment for Developed Countries By Daly, Saida; Garroud, Chadia
  15. High but Fragile Growth: Fostering SMEs development to improve Cambodia’s economic resilience By Sam, Vichet

  1. By: Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
    Abstract: Immigrants can expand labor supply and compete for jobs with native-born workers. But immigrants may also start new firms, expanding labor demand. This paper uses U.S. administrative data and other data sources to study the role of immigrants in entrepreneurship. We ask how often immigrants start companies, how many jobs these firms create, and how firms founded by native-born individuals compare. A simple model provides a measurement framework for addressing the dual roles of immigrants as founders and workers. The findings suggest that immigrants act more as “job creators” than “job takers” and play outsized roles in U.S. high-growth entrepreneurship.
    Date: 2020–12
  2. By: Binder, Martin; Blankenberg, Ann-Kathrin
    Abstract: Self-employment contributes to employment growth and innovativeness and many individuals want to become self-employed due to the autonomy and exibility it brings. Using "subjective well-being" as a broad summary measure that evaluates an individual's experience of being self-employed, the chapter discusses evidence and explanations why self-employment is positively associated with job satisfaction, even though the self-employed often earn less than their employed peers, work longer hours and experience more stress and higher job demands. Despite being more satisfied with their jobs, the self-employed do not necessarily enjoy higher overall life satisfaction, which is due to heterogeneity of types of self-employment, as well as motivational factors, work characteristics and institutional setups across countries.
    Keywords: self-employment,entrepreneurship,subjective well-being,job satisfaction,lifesatisfaction
    JEL: L26 J24 J28
    Date: 2021
  3. By: Cho, Insoo; Orazem, Peter F.
    Abstract: The roles of selection and endogeneity in measured risk preferences are illustrated using the correlation between risk attitudes and firm survival. Selection bias occurs when risk attitudes are elicited only from current entrepreneurs so that the risk attitudes of unsuccessful entrepreneurs are excluded from the analysis. Risk attitudes measured after agents enter entrepreneurship will endogenously reflect business success. Data on entrepreneurs from the National Longitudinal Survey of Youth 1979 and the Panel Study of Income Dynamics shows that when risk attitudes are measured subject to selection and endogeneity, mixed or even positive correlations between risk acceptance and the probability of firm exit occur. However, firm exits fall monotonically with willingness to accept risk when risk preference measures are not subject to selection or endogeneity related to business success.
    Date: 2020–01–04
  4. By: Berger, Marius; Hottenrott, Hanna
    Abstract: Research suggests that public subsidies for newly founded firms have a positive effect on follow-on financing, in particular, Venture Capital (VC). This study differentiates between Government VC, Independent VC, Corporate VC, and Business Angels and shows that public subsidies are not relevant for all of these sources. When accounting for firm characteristics that drive both selection into public subsidies as well as into VC financing through econometric matching techniques, we find that subsidies are only linked to Government VC and Business Angel financing.
    Keywords: Start-up Subsidies,Entrepreneurship Policy,Entrepreneurial Finance,Venture Capital,Business Angels
    JEL: G24 L26 O25 O31
    Date: 2020
  5. By: Michael Berlemann; Vera Jahn; Robert Lehmann
    Abstract: Germany’s comparatively good economic performance throughout the Great Recession of the years 2008/2009 is often attributed to the business model of the German Mittelstand firm. Somewhat surprisingly, this claim has never been backed by empirical evidence. In this paper we use micro panel data from the ifo Business Survey to study the comparative performance of Mittelstand enterprises, defined as owner-managed SMEs. We present supporting evidence for the hypothesis that Mittelstand firms performed more stable throughout the Great Recession than non-Mittelstand firms. We also show that owner-managed SMEs performed significantly better than SMEs and owner-managed large enterprises. Thus, it is rather the combination of firm-size and owner-management that leads to more crisis resistance.
    Keywords: Mittelstand firms, Great Recession, crisis resistance
    JEL: E31 G12
    Date: 2020
  6. By: Gilles Campagnolo (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.); Christel Vivel (Esdes Business School of the Catholic University of Lyon, France.)
    Abstract: This paper is the last part of a trilogy on the theory and history of entrepreneurship in Austrian school of economics. The triptych ends with contemporary members by comparing Israel Kirzner and Murray Rothbard. The migration of the Austrian school induced a new assessment of Austrian traits in a new setting. While we do not focus on the history of the Austrian school in America as such, we will stress how Kirzner focused his view of entrepreneurship on the concepts of alertness, discovery by opportunity and the equilibrating action of the entrepreneur – while Rothbard’s contribution was more ideologically engaged.
    Keywords: Austrian School of Economics, entrepreneurship, institutions, Kirzner (Israel), methodology, Rothbard (Murray)
    Date: 2021–01
  7. By: Paschke, Max; Müller, Anna
    Abstract: In the last decade, contextualization has matured into an important topic of entrepreneurship research and continues to attract great interest. However, from a methodological point of view, contextualization still seems to pose significant challenges. In order to reflect the current trends and challenges of methods used in entrepreneurship context research, we analyze articles published in leading scientific journals of the field against the background of context methodologies of Welter and Baker (who, where, when). We deductively coded our final sample (131 articles) regarding type of method, used Data, unit of analysis and context typologies of Welter and Baker. Our results show the following 4 most important findings: 1. Case studies in particular show methodological strengths with regard to the depth of contextual observation. 2. The contextualization show clear differences in the methods required and used regarding the different typologies. 3. Methodological processing of contextualization depends on aspects such as data availability, data type and generalizability. 4. Individuality and depth represent the greatest challenges for a qualitatively appropriate contextualization of entrepreneurship research.
    Keywords: Context,Research Method,Entrepreneurship Research
    JEL: I23 M21
    Date: 2020
  8. By: Francesco D’Acunto; Geoffrey Tate; Liu Yang
    Abstract: We use employer-employee linked data to track the employment histories of team members prior to startup formation for a full cohort of new firms in the U.S. Using pre-startup industry experience to measure skillsets, we find that startups that have founding teams with more diverse collective skillsets grow faster than peer firms in the same industries and local economies. A one standard deviation increase in teams’ skill diversity is associated with an increase in five-year employment (sales) growth of 16% (10%) from the mean. The effects are stronger among startups in innovative industries and among startups facing greater ex-ante uncertainty. Moreover, the results are robust to a variety of approaches to address the endogeneity of team composition. Overall, our results suggest that teams with more diverse collective skillsets adapt their strategies more successfully in the uncertain environments faced by (innovative) startup firms.
    Keywords: Economic Growth, Startups, Teams, Diversity, Innovation, Personnel Economics
    JEL: L25 L26 J24 M51
    Date: 2020–12
  9. By: Flavio Calvino (OCDE - Organisation de Coopération et de Développement Economiques); Daniele Giachini (Institute of Economics of Sant'Anna [Pisa] - SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa]); Mattia Guerini (COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019), GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, Institute of Economics of Sant'Anna [Pisa] - SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa])
    Abstract: We investigate upon the shape and the determinants of the age distribution of business firms. By employing a novel dataset covering the population of French businesses, we highlight that a geometric law provides a reasonable approximation for the age distribution. However, relevant systematic deviations and sectoral heterogeneity appear. We develop a stochastic model of firm dynamics to explain the mechanisms behind this evidence and relate them to business dynamism. Results reveal a long-term decline in entry rates and lower survival probabilities of young firms. Our findings bear important implications for aggregate outcomes, notably employment growth.
    Keywords: Firm demographics,age distribution,business dynamism
    Date: 2020–12–04
  10. By: Yuliyan Mitkov (University of Bonn)
    Abstract: I propose a theory of debt maturity as an incentive device to motivate innovation when contracts are fundamentally incomplete and shaped by ex-post renegotiation. The financing of innovative firms must balance two goals. On the one hand, since innovation is inherently risky, the entrepreneur must receive adequate protection after failure. Simultaneously, the firm must be liquidated when its assets can be redeployed more efficiently elsewhere. Meeting these two goals can be especially challenging when contracts are incomplete. I show how an appropriate choice of debt maturity, together with ex-post contract renegotiation, embeds a "put option" into the firm's capital structure. The put is exercised when liquidation is efficient, and it partially insures the entrepreneur against failure and thus motivates innovation. The theory has novel empirical implications for the financing patterns of innovative firms.
    Keywords: Innovation, Debt maturity, Incomplete contracts, Renegotiation
    JEL: C78 D82 D86 G32 G33 O31
    Date: 2020–12
  11. By: ; Pierre-Olivier Gourinchas; Sebnem Kalemli-Ozcan; Veronika Penciakova
    Abstract: We estimate the impact of the COVID-19 crisis on business failures among small and medium-size enterprises (SMEs) in seventeen countries using a large representative firm-level database. We use a simple model of firm cost minimization and measure each firm’s liquidity shortfall during and after COVID-19. Our framework allows for a rich combination of sectoral and aggregate supply, productivity, and demand shocks. Accommodation and food services; arts, entertainment, and recreation; education; and other services are among the sectors most affected. The SME jobs at risk due to business failures related to COVID-19 represent 3.1 percent of private sector employment. Despite the large impact on business failures and employment, we estimate only moderate effects on the financial sector: the share of nonperforming loans on bank balance sheets would increase by up to 11 percentage points, representing 0.3 percent of banks’ assets, and would result in a 0.75 percentage point decline in the common equity tier 1 capital ratio. We also evaluate the cost and effectiveness of various policy interventions. The fiscal cost of an intervention that narrowly targets at-risk firms can be modest (0.54 percent of gross domestic product). However, at a similar level of effectiveness, nontargeted subsidies can be substantially more expensive (1.82 percent of gross domestic product). Our results have important implications for the severity of the COVID-19 recession, the design of policies, and the speed of the recovery.
    Keywords: COVID-19; business failures; liquidity; small business
    JEL: D2 E65 G33
    Date: 2020–12–03
  12. By: Cristiana Benedetti Fasil (European Commission – JRC); Petr Sedlacek (University of Oxford, UK, CFM-LSE & CEPR); Vincent Sterk (University College London, UK, CFM-UCL & CEPR)
    Abstract: Early data show that the COVID-19 pandemic has affected particularly strongly start-up business activity. This may have dramatic and lasting effects on aggregate employment which persist as the cohort of new firms age. To assess such an impact, we developed the EU start-up calculator. A first application targeted to Austria, Belgium, Germany, Hungary, Italy and Spain is discussed in Benedetti Fasil, SedláÄ ek and Sterk (2020a) and a second focusing Denmark, Estonia, Finland, France, Latvia, Lithuania, Portugal and Sweden is presented in Benedetti Fasil, SedláÄ ek and Sterk (2020b). The EU start-up calculator is an empirical tool that allows to conduct scenario analysis to compute the impact that the disruption of start-up activity has on aggregate employment on EU Member States and their economic sectors. In this paper, we simulate the effects of a strong (i.e. of magnitude equivalent to the Great Recession of 2008 and 2009) but short-lived (i.e. lasting one-year) crisis in Bulgaria, Croatia, Czechia, Luxemburg, the Netherlands, Poland, Romania, Slovakia and Slovenia. This shock generates important and persistent job losses in all the countries ranging between 0.25 (Luxemburg) and 6.9% (Slovakia) of negative deviation from the employment trend in 2020 and results in a computed potential cumulative loss of jobs for the period 2020-2030 ranging from 5,600 (Luxemburg) to 2179,000 (Poland). The potential negative impact is particularly high in Bulgaria, Croatia, Poland, Romania and Slovakia as well as in the service sector, which are characterized by a high firm turnover and a reliance on start-ups and young firms for job creation. We also find that in most countries the deterioration of the survival rate of young firms plays an important role in driving employment, seconded by the number of new entrants. As a consequence, policies aimed at supporting young firms and incentivizing the creation of new ones may significantly mitigate the medium-term effect of the pandemic. In fact, when we simulate bounce-back scenarios where the number of firms entering the economy rapidly increases in 2021, in every country the outlook is significantly improved, the recovery is faster and the aggregate job loss is lower.
    Keywords: COVID-19, start-ups, employment
    Date: 2020–12
  13. By: Inutu Lukonga
    Abstract: Policy makers in the MENAP region have been formulating policies and designing programs to develop small and medium sized enterprises (SMEs) with a view to create jobs and achieve inclusive growth. But while the programs have helped increase the number of enterprises, growth of SMEs continues to face barriers to growth. As a result, microenterprises predominate and SMEs contribution to employment remains below potential. Partial implementation of reforms explain some of the underperformance, but frictions in strategy design also played an important role. Sustaining current reforms is, therefore, not sufficient to achieve inclusive growth. Digital technologies have potential to boost SMEs productivity and growth and economies are rapidly digitalizing, thus SMEs need to embrace digital solutions to compete and survive. Therefore, for SMEs to be effective engines of inclusive growth, a rethinking of the SME development strategy is needed that makes SMEs’ digital transformation a priority.
    Keywords: Technology;Small and medium enterprises;Employment;Business environment;Digitalization;WP,SME growth,MENAP country,financing SMEs,SME sector,SME support policy,SMEs in MENAP
    Date: 2020–07–24
  14. By: Daly, Saida; Garroud, Chadia
    Abstract: Sustainable development is the normative objective to follow a development trajectory viable in the long-term by balancing economic, environmental and social needs. There is a shared consensus that entrepreneurship and sectorial outputs are considered as a principal canal to create sustainable products and services and implement new projects that address many environmental and social concerns. Therefore, this paper examines what entrepreneurship and sectoral outputs contribute with regard to sustainability. More precisely, the specific focus of this paper is to examine the influence of entrepreneurship and sectoral outputs on different dimensions of sustainable development. As for the empirical data, they were gathered from a panel of 21 development countries covering the 2001-2016 period. In fact, using the FMOLS technique, the empirical evidence indicates that entrepreneurship and sectoral outputs have a significant positive impact on the economic, ecological and social sustainable development dimensions.
    Keywords: Sustainable development dimensions; entrepreneurship; sectorial outputs; development countries.
    JEL: L26 O1 O44 Q01
    Date: 2020–08–25
  15. By: Sam, Vichet
    Abstract: Cambodia has recorded an impressive growth over the last two decades at around 8% per annum, but this progress remains fragile due to its export-led growth strategy with a narrow economic base, making the country highly expose to external shocks as seen during the global financial crisis in 2008-2009 and recent Covid-19 shock. This fragility can be costly for a sustainable development that requires a discussion of how to boost the resilience of the economy. Using data from various sources, this paper presents Cambodia’s economic achievements since 1999, why the kingdom is highly exposed to external risks, and suggests the development of SMEs as a key element to improve the economic resilience because a strong SME sector would stimulate domestic demand through job creation, attract FDI in higher value-added sectors and assure equitable income distribution. Conditional correlation analysis has proven, among ASEAN countries, a significant negative correlation between SME sectoral development and economic volatility, while a positive correlation with economic growth is also found, suggesting that SMEs development can promote a strong and resilient growth. To boost SMEs development, Cambodia has to put more efforts, among other factors, in the formalization of SMEs, skills development for youth, infrastructure development, digital transformation process, and promotion of national savings and riel usage, as discussed and demonstrated in this paper.
    Keywords: Economic development model, economic growth, economic volatility and resilience, SME development, correlation analysis.
    JEL: O10 O40
    Date: 2020–12–28

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