nep-ent New Economics Papers
on Entrepreneurship
Issue of 2021‒06‒28
ten papers chosen by
Marcus Dejardin
Université de Namur

  1. The Impact of Intellectual Property Types on the Performance of Business Start-ups in the USA By Bernadette Power; Gavin C Reid
  2. Black Entrepreneurs, Job Creation, and Financial Constraints By Mee Jung Kim; Kyung Min Lee; J. David Brown; John S. Earle
  3. The COVID-19 Pandemic and Entrepreneurship in Germany: First Observations and Interpretations By Michael Fritsch; Maria Greve; Michael Wyrwich
  4. Entrepreneurship During the COVID-19 Pandemic: Evidence from the Business Formation Statistics By John C. Haltiwanger
  5. The COVID-19 Shock and Equity Shortfall: Firm-level Evidence from Italy By Carletti, Elena; Oliviero, Tommaso; Pagano, Marco; Pelizzon, Loriana; Subrahmanyam, Marti G.
  6. SME Participation in Public Purchasing: Procurement Policy Matters By Hoekman, Bernard; Tas, Bedri Kamil Onur
  7. Entrepreneurial Reluctance: Talent and Firm Creation in China By Chong-En Bai; Ruixue Jia; Hongbin Li; Xin Wang
  8. Is Lending Distance Really Changing? Distance Dynamics and Loan Composition in Small Business Lending By Robert M. Adams; Kenneth P. Brevoort; John C. Driscoll
  9. Crisis Innovation Policy from World War II to COVID-19 By Daniel P. Gross; Bhaven N. Sampat
  10. Taxation and Innovation: What Do We Know? By Akcigit, Ufuk; Stantcheva, Stefanie

  1. By: Bernadette Power; Gavin C Reid
    Abstract: Using a large, longitudinal panel (2004-2011) of USA start-ups this paper shows the extent to which IP types (e.g. trademarks, patents, copyrights, outward licensing) enhance multidimensional performance. An ordered probit analysis (with random effects), corrected for sample selection bias, estimates performance to derive the following conclusions. First, trademarks and out-licensing IP types increase a firm’s chances of being a high performer, confirming the importance of certain forms of IP protection for start-ups. Second, patenting significantly reduces the chances of being a high performer, suggesting patenting has limited performance benefits for start-ups. Third, few performance synergies exist in the joint use of IP types, suggesting that strong complementarities among IP types are limited. While out-licensing patents and out-licensing copyrights certainly increase performance, out-licensing patents and out-licensing trademarks actually diminish it. Further, registering more trademarks and outlicensing more trademarks also diminishes performance, suggesting start-up firms should keep trademarks in-house.
    Keywords: Performance, firm start-ups, intellectual property, out-licensing, complementarities
    JEL: C55 D22 L25 O34
    Date: 2021–04
  2. By: Mee Jung Kim; Kyung Min Lee; J. David Brown; John S. Earle
    Abstract: Black-owned businesses tend to operate with less finance and employ fewer workers than those owned by Whites. Motivated by a simple conceptual framework, we document these facts and show they are causally connected using large firm-level surveys linked to universal employer data from the Census Bureau. We find that the racial financing gap is most pronounced at start-up and tends to narrow with firm age. At any age, Black-owned firms are less likely to receive bank loans, more likely to refrain from applying because they expect denial, and more likely to report that lack of finance reduces their profitability. Yet the observable characteristics of Black entrepreneurs are similar in most respects to Whites, and in some ways - higher education, growth-oriented motivations, and involvement in the business - would seem to imply higher, not lower, demand for finance. Concerning employment, we find that Black-owned firms have on average about 12 percent fewer employees than those owned by Whites, but the difference drops when controlling for firm age and other characteristics. However, when the analysis holds financial variables constant, the results imply that equally well-financed Black-owned rms would be larger than White-owned by about seven percent. Exploiting the credit supply shock of changing assignment to Community Reinvestment Act treatment through a Regression Discontinuity Design in a firm-level panel regression framework, we find that expanded credit access raises employment 5-7 percentage points more at Black-owned businesses than White-owned firms in treated neighborhoods.
    Date: 2021–05
  3. By: Michael Fritsch (Friedrich Schiller University Jena, Germany); Maria Greve (Friedrich Schiller University Jena, Germany and University of Groningen, The Netherlands); Michael Wyrwich (University of Groningen, The Netherlands and Friedrich Schiller University Jena, Germany)
    Abstract: The COVID-19 pandemic severely affected not only incumbent firms, but also the emergence of start-ups. This paper investigates and analyzes the pandemic's effect on new business formation, as well as business exits and insolvencies, in Germany. We find that the overall level of business registrations slightly decreased during the first year of the pandemic, but that the effect is specific to certain industries. Innovative manufacturing industries and technology-oriented services experienced an increase in numbers of start-ups. High subsidies and a temporary suspension of important criteria obliging firms to declare insolvency weakened market selection resulting in fewer exits in 2020. The relaxation of insolvency regulations may lead to considerable numbers of 'zombie' firms. Generally, the pandemic re-enforced ongoing structural change, but also exerted specific effects that may be temporary in nature.
    Keywords: COVID-19, entrepreneurship, new business formation, Germany
    JEL: L26 O52 I18
    Date: 2021–06–11
  4. By: John C. Haltiwanger
    Abstract: Applications for new businesses from the U.S. Census Bureau’s monthly and weekly Business Formation Statistics (BFS) fell substantially in the early stages of the pandemic but then surged in the second half of 2020. This surge has continued through May 2021. The pace of applications since mid-2020 is the highest on record (earliest data available is 2004). The large increase in applications is for both likely new employers and nonemployers. These patterns contrast sharply with those in the Great Recession when applications for likely new employer businesses and in turn actual startups of employer businesses declined sharply and persistently. The surge in new business applications has been uneven across sectors. Ten 3-digit NAICS industries account for 75% of the surge. Dominant industries include Nonstore Retail (alone accounting for 33% of the surge), Professional, Scientific and Technical Services, Truck Transportation, and Accommodation and Food Services. Given that existing small businesses in Retail Trade and Accommodation and Food Services have suffered especially large declines in the pandemic, these patterns are consistent with restructuring induced by the pandemic.
    JEL: E32 L25 L26
    Date: 2021–06
  5. By: Carletti, Elena; Oliviero, Tommaso; Pagano, Marco; Pelizzon, Loriana; Subrahmanyam, Marti G.
    Abstract: This paper estimates the drop in profits and the equity shortfall triggered by the COVID-19 shock and the subsequent lockdown, using a representative sample of 80,972 Italian firms. We find that a 3-month lockdown entails an aggregate yearly drop in profits of 170 billion euros, with an implied equity erosion of 117 billion euros for the whole sample, and 31 billion euros for firms that became distressed, i.e., ended up with negative book value after the shock. As a consequence of these losses, about 17% of the sample firms, whose employees account for 8.8% of total employment in the sample (about 800 thousand employees), become distressed. Small and medium-sized enterprises (SMEs) are affected disproportionately, with 18.1% of small firms, and 14.3% of medium-sized ones becoming distressed, against 6.4% of large firms. The equity shortfall and the extent of distress are concentrated in the Manufacturing and Wholesale Trading sectors and in the North of Italy. Since many firms predicted to become distressed due to the shock had fragile balance sheets even prior to the COVID-19 shock, restoring their equity to their pre-crisis levels may not suffice to ensure their long-term solvency.
    Keywords: COVID-19; Distress; equity; losses; Pandemics; Recapitalization
    JEL: G01 G32 G33
    Date: 2020–05
  6. By: Hoekman, Bernard; Tas, Bedri Kamil Onur
    Abstract: This paper investigates the relationship between regulatory policies governing public procurement and participation by small and medium enterprises (SMEs), using a large dataset on European procurement. We find that countries with better quality procurement regulation have greater SME participation and higher probability that SMEs win contracts. Dividing contracts into smaller lots bolsters participation by SMEs, but only increases the probability of SMEs winning contracts for small value lots (â?¬25,000 or less). Counterfactual simulations suggest if governments want to enhance participation by SMEs in public procurement the focus should be on improving the overall quality of procurement processes.
    Keywords: international good practice; lot size; public procurement; regulation; SME participation
    Date: 2020–05
  7. By: Chong-En Bai; Ruixue Jia; Hongbin Li; Xin Wang
    Abstract: The theoretical literature has long noted that talent can be used in both the entrepreneurial and non-entrepreneurial sectors, and its allocation depends on the reward structure. We test these hypotheses by linking administrative college admissions data for 1.8 million individuals with the universe of firm registration records in China. Within a college, we find that individuals with higher college entrance exam scores – the most important measure of talent in this context – are less likely to create firms, but, when they do, their firms are more successful than those of their lower-score counterparts. Additional survey data suggest that higher-score individuals enjoy higher wages and are more likely to join the state sector. Moreover, the score-to-firm creation relationship varies greatly across industry, according to the size of the state sector. These findings suggest that the score is positively associated with both entrepreneurial ability and wage-job ability but higher-score individuals are attracted away by wage jobs, particularly those of the state sector.
    JEL: H11 J24 O12 O15
    Date: 2021–05
  8. By: Robert M. Adams; Kenneth P. Brevoort; John C. Driscoll
    Abstract: Has information technology improved small businesses' access to credit by hardening the information used in loan underwriting and reducing the importance of proximity to lenders? Previous research, pointing to increasing average lending distances, suggests that it has. But this conclusion can obscure differences across loans and lenders. Using over 20 years of Community Reinvestment Act data on small business lending, we find that while average distances have increased substantially, distances at individual banks remain unchanged. Instead, average distance has increased because a small group of lenders specializing in high-volume, small-loan lending nationwide have increased their share of small business lending by 10 percentage points. Our findings imply that small businesses continue to depend on local banks.
    Keywords: Banks; Credit Card; Small Business Lending
    JEL: R21 G21 G38 L25
    Date: 2021–02–16
  9. By: Daniel P. Gross; Bhaven N. Sampat
    Abstract: Innovation policy can be a crucial component of governments' responses to crises. Because speed is a paramount objective, crisis innovation may also require different policy tools than innovation policy in non-crisis times, raising distinct questions and tradeoffs. In this paper, we survey the U.S. policy response to two crises where innovation was crucial to a resolution: World War II and the COVID-19 pandemic. After providing an overview of the main elements of each of these efforts, we discuss how they compare, and to what degree their differences reflect the nature of the central innovation policy problems and the maturity of the U.S. innovation system. We then explore four key tradeoffs for crisis innovation policy---top-down vs. bottom-up priority setting, concentrated vs. distributed funding, patent policy, and managing disruptions to the innovation system---and provide a logic for policy choices. Finally, we describe the longer-run impacts of the World War II effort and use these lessons to speculate on the potential long-run effects of the COVID-19 crisis on innovation policy and the innovation system.
    JEL: H12 H56 I18 N42 N72 O31 O32 O38
    Date: 2021–06
  10. By: Akcigit, Ufuk; Stantcheva, Stefanie
    Abstract: Tax policies are a wide array of tools, commonly used by governments to influence the economy. In this paper, we review the many margins through which tax policies can affect innovation, the main driver of economic growth in the long-run. These margins include the impact of tax policy on i) the quantity and quality of innovation; ii) the geographic mobility of innovation and inventors across U.S. states and countries; iii) the declining business dynamism in the U.S., firm entry, and productivity; iv) the quality composition of firms, inventors, and teams; and v) the direction of research effort, e.g., toward applied versus basic research, or toward dirty versus clean technologies. We give ideas drawn from research on how the design of policy can allow policy makers to foster the most productive firms without wasting public funds on less productive ones.
    Keywords: entrepreneurship; growth; Innovation; inventors; patents; productivity; R&D; taxation
    JEL: H20 O30 O38 O43
    Date: 2020–05

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