nep-ent New Economics Papers
on Entrepreneurship
Issue of 2021‒05‒03
thirteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Wired in? Genetic traits and entrepreneurship around the world By Krammer, Sorin; Gören, Erkan
  2. Weathering the Storm: How Foreign Aid and Institutions Affect Entrepreneurship Following Natural Disasters By Christopher Boudreaux; Anand Jha; Monica Escaleras
  3. Social capital and small business productivity: The mediating roles of financing and customer relationships By Christopher Boudreaux; George Clarke; Anand Jha
  4. Keeping up with the Joneses: economic impacts of overconfidence in micro-entrepreneurs By Julia Seither
  5. Welfare Effects of the Allocation of Talent to Financial Trading: What Does the Grossman-Stiglitz Model Say? By Lutz G. Arnold; Sebastian Zelzner
  6. Detecting the labour-friendly nature of AI product innovation By Giacomo Damioli; Vincent Van Roy; Daniel Vertesy; Marco Vivarelli
  7. Organizing for Entrepreneurship: Field-Experimental Evidence on the Performance Effects of Autonomy in Choosing Project Teams and Ideas By Boss, Viktoria; Ihl, Christoph; Dahlander, Linus; Jayaraman, Rajshri
  8. Limited Impact of Business Development Programs on Profitability in the Presence of Ambiguity Aversion By Shapiro, Dmitry
  9. Opening up Military Innovation: Causal Effects of 'Bottom-up' Reforms to U.S. Defense Research By Howell, Sabrina T.; Rathje, Jason; Van Reenen, John; Wong, Jun
  10. Epilogue: Back to the future or total recall? By Batiz-Lazo, Bernardo
  11. Public financing with financial frictions and underground economy By Martinez, Tomás R.; Fuster Pérez, Luisa; Erosa Etchebehere, Andrés
  12. The Impact of Fintech Startups on Financial Institutions' Performance and Default Risk By Christian Haddad; Lars Hornuf
  13. Les formations à l'entrepreneuriat sont-elles un levier pour l'insertion professionnelle ? By Catherine Béduwé; Alexie Robert

  1. By: Krammer, Sorin; Gören, Erkan
    Abstract: Entrepreneurship is a cornerstone of technological innovation and economic development. We posit that the genetic make-up of countries (populations) will affect the extent of their engagement in entrepreneurial activities, in addition to the factors showcased by prior literature (e.g., institutions, culture, socio-economic, demographic, or historical). To test this conjecture we employ a country-level genetic measure that is commonly associated with novelty- and risk- seeking behaviours using the frequency of the 2- and 7-repeat allele variants of the DRD4 exon III gene. Our results confirm a systematic, positive association between genetics and entrepreneurial activities across 97 countries using a large set of controls and battery of robustness tests. These findings reconcile the “nature versus nurture” debate with respect to entrepreneurial activities around the world and provide some valuable insights on the significance of different determinants of entrepreneurship.
    Keywords: Entrepreneurship, Genetic Diversity, Novelty-Seeking, DRD4 Exon III
    JEL: D02 L26 O31
    Date: 2021–04–08
  2. By: Christopher Boudreaux; Anand Jha; Monica Escaleras
    Abstract: This study examines how foreign aid and institutions affect entrepreneurship activity following natural disasters. We use insights from the entrepreneurship, development, and institutions literature to develop a model of entrepreneurship activity in the aftermath of natural disasters. First, we hypothesize the effect of natural disasters on entrepreneurship activity depends on the amount of foreign aid received. Second, we hypothesize that natural disasters and foreign aid either encourages or discourages entrepreneurship activity depending on two important institutional conditions: the quality of government and economic freedom. The findings from our panel of 85 countries from 2006 to 2016 indicate that natural disasters are negatively associated with entrepreneurship activity, but both foreign aid and economic freedom attenuate this effect. In addition, we observe that foreign aid is positively associated with entrepreneurship activity but only in countries with high quality government. Hence, we conclude that the effect of natural disasters on entrepreneurship depends crucially on the quality of government, economic freedom, and foreign aid. Our findings provide new insights into how natural disasters and foreign aid affect entrepreneurship and highlight the important role of the institutional context.
    Date: 2021–04
  3. By: Christopher Boudreaux; George Clarke; Anand Jha
    Abstract: How does an entrepreneur's social capital improve small informal business productivity? Although studies have investigated this relationship, we still know little about the underlying theoretical mechanisms driving these findings. Using a unique Zambian Business Survey of 1,971 entrepreneurs administered by the World Bank, we find an entrepreneur's social capital facilitates small business productivity through the mediating channels of firm financing and customer relationships. Our findings identify specific mechanisms that channel social capital toward an informal business' productivity, which prior studies have overlooked.
    Date: 2021–04
  4. By: Julia Seither
    Abstract: This paper investigates the effects of incorrect beliefs over relative firm performance on micro-firm outputs through a randomized field experiment in Mozambique. At baseline, 76% of firm owners in the bottom of the distribution are overconfident about their firm’s performance. The estimates reveal that correcting these beliefs through a simple, easily scalable information experiment closes the performance gap between treated firms in the bottom of the distribution at baseline and average and top firms by almost 43%. Moreover, the treatment increases the time a firm owner allocates to her business, improves strategic cooperation with the most important business partners, and affects the pricing strategy of treated firm owners. My results suggest that incorrect beliefs about relative performance are a binding constraint to firm growth that have large implications for managerial behavior and firm outcomes.
    JEL: D22 D91 O12
    Date: 2021
  5. By: Lutz G. Arnold; Sebastian Zelzner
    Abstract: This paper investigates the implications of the Grossman-Stiglitz (1980) model on the informational eficiency of financial markets for the optimality of the allocation of talent to financial trading versus entrepreneurship. Informed traders make the financial market more informationally eficient, entrepreneurs create output and jobs. The model indicates that financial trading attracts too much, rather than too little, talent.
    Keywords: : market eficiency, asymmetric information, allocation of talent, occupational choice
    JEL: G14 J24
    Date: 2020–02
  6. By: Giacomo Damioli (European Commission, Joint Research Centre, Ispra, Italy); Vincent Van Roy (European Commission, Joint Research Centre, Seville, Spain); Daniel Vertesy (International Telecommunication Union, Geneva, Switzerland – UNU-MERIT, Maastricht, The Netherlands); Marco Vivarelli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore – UNU-MERIT, Maastricht, The Netherlands – IZA, Bonn, Germany)
    Abstract: This study investigates the possible job-creation impact of AI technologies, focusing on the supply side, namely the providers of the new knowledge base. The empirical analysis is based on a worldwide longitudinal dataset of 3,500 front-runner companies that patented the relevant technologies over the period 2000-2016. Obtained from GMM-SYS estimates, our results show a positive and significant impact of AI patent families on employment, supporting the labour-friendly nature of product innovation in the AI supply industries. However, this effect is small in magnitude and limited to service sectors and younger firms, which are the leading actors of the AI revolution. Finally, some evidence of increasing returns seems to emerge; indeed, the innovative companies which are more focused on AI technologies are those obtaining the larger impacts in terms of job creation.
    Keywords: Innovation, technological change, patents, employment, job-creation
    JEL: O33
    Date: 2021–04
  7. By: Boss, Viktoria (TUHH); Ihl, Christoph (TUHH); Dahlander, Linus (ESMT Berlin); Jayaraman, Rajshri (ESMT Berlin and University of Toronto)
    Abstract: Organizations constantly strive to unleash their entrepreneurial potential to keep up with market and technology changes. To this end, they engage employees in practices like corporate crowdsourcing, incubators, accelerators or hackathons. These organizational practices emulate independent “green-field” entrepreneurship by relinquishing hierarchical control and granting employees autonomy in the choices of how to conduct work. We aim to shed light on two such choices that are fundamental in differentiating hierarchical from entrepreneurial modes of organizing work: (1) choosing projects ideas to work on and (2) choosing project teams to work with. Both of these choices are typically pre-determined in hierarchies and self-determined in entrepreneurship. We run a field experiment in an entrepreneurship course carefully designed to disentangle the separate and joint effects of granting autonomy in both choosing teams and choosing ideas compared to a pre-determined base case. Our results show that high autonomy in choosing implies a trade-off between personal satisfaction and objective performance. Self-determined choices along both dimensions promote subjective well-being in a complementary way, but their joint performance impact is diminishing. After ruling out alternative explanations related to differing project qualities and homophilic team choices, the detrimental performance impact of too much choice seems to be related to the implied cognitive burden and overconfidence.
    Keywords: teams; ideation; entrepreneurial performance; field experiment;
    JEL: L23 L26 M5
    Date: 2019–11–29
  8. By: Shapiro, Dmitry (Seoul National University)
    Abstract: This paper develops a theoretical framework to explain the limited effect of business development programs (BDPs) on entrepreneurs’ profits. We argue that a mismatch between a BDP’s narrow focus on business-promoting strategies and the wider context in which microentrepreneurs operate can limit the impact of business training. In our framework, entrepreneurs are ambiguity averse and have multiple sources of income (e.g., business and wage incomes). We show that for a sufficiently ambiguity-averse entrepreneur with multiple income sources, efficient training can result in a decline in expected profit. Notably, when the wider context (multiple income sources, ambiguity aversion) is considered, the business training impact is limited and can result in a posttraining expected profit decline. This limited impact is caused by the diversifying role that the business income plays in household finances.
    Keywords: ambiguity aversion; business development programs; microentrepreneurship
    JEL: D10 O12 O16
    Date: 2020–04–22
  9. By: Howell, Sabrina T. (New York University); Rathje, Jason (U.S. Air Force Academy); Van Reenen, John (MIT Sloan School of Management); Wong, Jun (NYU Stern)
    Abstract: When investing in research and development (R&D), institutions must decide whether to take a top-down approach – soliciting a particular technology – or a bottom-up approach in which innovators suggest ideas. This paper examines a reform to the U.S. Air Force Small Business Innovation Research (SBIR) program that transitioned from "Conventional topics," which solicit specific technologies, to "Open topics," which invite firms to suggest any new technology that may be useful to the Air Force. The reform seeks to address challenges facing military R&D, in particular a less innovative defense industrial base. We show that the Open program attracts new entrants, defined as younger firms and those without previous defense SBIR awards. In a regression discontinuity design that offers the first causal evaluation of a defense R&D program, we show that winning an Open award increases future venture capital investment, non-SBIR defense contracting, and patenting. Conventional awards have no effect on these outcomes but do increase the chances of future defense SBIR contracts, fostering incumbency. The bottom-up approach appears to be a mechanism behind Open's success. For example, winning has a positive effect on innovation even in less specific Conventional topics. The results suggest that government (and perhaps private sector) innovation could benefit from more bottom-up, decentralized approaches that reduce barriers to entry, minimize lock-in advantages for incumbents, and attract a wider range of new entrants.
    Keywords: innovation, defense, R&D, procurement
    JEL: O31 O32 O38 H56 H57
    Date: 2021–04
  10. By: Batiz-Lazo, Bernardo
    Abstract: This paper discusses the current state of historical research into entrepreneurship in Mexico
    Keywords: entrepreneur, Mexico, business history
    JEL: M13 N8 N80
    Date: 2021
  11. By: Martinez, Tomás R.; Fuster Pérez, Luisa; Erosa Etchebehere, Andrés
    Abstract: What are the aggregate effects of informality in a financially constrained economy? We develop and calibrate an entrepreneurship model to data on matched employer-employee from both formal and informal sectors in Brazil. The model distinguishes between informality on the business side (extensive margin) and the informal hiring by formal firms (intensive margin). We find that when informality is eliminated along both margins, aggregate output increases 9.3%, capital 14.7%, TFP 5.4%, and tax revenue37%. The output and TFP increases would be much larger if informality were only eliminated on the extensive margin, a result that supports the view that the informal economy can play a positive role in an economy with financial frictions. Finally, we find that the output cost of financing social security in our baseline model is about twice as large as the one in an economy with no frictions.
    Keywords: Tax Revenue; Social Security; Financial Frictions; Informality; Occupational Choice
    JEL: O16 L26 H55 H20 E26 E22
    Date: 2021–04–27
  12. By: Christian Haddad; Lars Hornuf
    Abstract: We study the impact fintech startups have on the performance and the default risk of traditional financial institutions. We find a positive relationship between fintech startup formations and incumbent institutions’ performance for the period from 2005 to 2018 and a large sample of financial institutions from 87 countries. We further analyze the link between fintech startup formations and the default risk of traditional financial institutions. Fintech startup formations decreases stock return volatility of incumbent institutions and decreases the systemic risk exposure of financial institutions. Our findings indicate that the development of fintech startups should be monitored very closely by legislators and financial supervisory authorities, because fintechs not only have a positive effect on the financial sector’s performance, but can also improve financial stability relative to the status quo.
    Keywords: fintech, bank performance, default risk, financial stability
    JEL: K00 L26 O30
    Date: 2021
  13. By: Catherine Béduwé (TSM - Toulouse School of Management Research - UT1 - Université Toulouse 1 Capitole - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT1 - Université Toulouse 1 Capitole); Alexie Robert (CEREQ - Centre d'études et de recherches sur les qualifications - ministère de l'Emploi, cohésion sociale et logement - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche)
    Abstract: Les formations à l'entrepreneuriat se développent rapidement au sein des universités. Elles ont pour objectif de promouvoir l'esprit d'entreprendre des étudiants, afin de renforcer leurs aptitudes à créer et gérer des projets innovants. Pour les décideurs, ces formations constitueraient un atout pour l'insertion professionnelle, au point de vouloir les généraliser au sein de l'enseignement supérieur. Les données des enquêtes Génération montrent que les étudiants ayant suivi ces formations deviennent plus souvent indépendants et ont des conditions d'insertion en tant que salariés un peu plus favorables que les autres. Mais ces effets positifs sur les conditions d'emploi semblent davantage liés au profil des participants qu'aux effets propres de ces formations.
    Keywords: Enquête Génération,Enseignement supérieur,Insertion professionnelle,Création d'entreprise
    Date: 2021

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