nep-ent New Economics Papers
on Entrepreneurship
Issue of 2021‒07‒19
nine papers chosen by
Marcus Dejardin
Université de Namur

  1. Entrepreneurial Taxation with Endogenous Firm Entry and Unemployment By Holmberg, Johan
  2. Give It Another Shot: Startup Experience and the Mobilization of Human Resources in New Ventures By Rocha, Vera; Pozzoli, Dario
  3. Startups in the United States during the pandemic reflect some dynamism amid job losses By Simeon Djankov; Eva (Yiwen) Zhang
  4. Entry and Exit of Informal Firms and Development By Brian McCaig; Nina Pavcnik
  5. Broadband speed and firm entry in digitally intensive sectors: The case of Croatia By Drilo, Boris; Stojcic, Nebojsa; Vizek, Maruska
  6. The Entrepreneurial Returns to Incumbents’ Digital Transformation By Jacques Bughin; Nicolas van Zeebroeck
  7. Impact of Deadweight Effect on the Performance of Supported Firms By Simona Bratkova; Miroslav Sipikal; Valeria Nemethova
  8. Individual Determinants of Self-employment Entry in Social and Conventional Entrepreneurship: Are co-operatives different? By Adil Outla; Moustapha Hamzaoui
  9. Does Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) Impact on Youth Entrepreneurship Development in sub-Saharan Africa? Evidence from Nigeria By Elda N. Okolo-Obasi; Joseph I. Uduji

  1. By: Holmberg, Johan (Department of Economics, Umeå University)
    Abstract: This paper deals with optimal nonlinear taxation of labor and entrepreneurial income and extends the recent study of Scheuer (2014) to accommodate equilib- rium unemployment. We find that even if employment is endogenous, the govern- ment can achieve redistribution of income through taxation without distorting production efficiency. This is possible if the government taxes entrepreneurial and labor income separately. The results also show that including involuntary unem- ployment creates an incentive to tax entrepreneurial income at lower marginal rates and labor income at higher marginal rates than otherwise.
    Keywords: Optimal Taxation; Entrepreneurship; Occupational choice; Unemployment
    JEL: H21 H25 J24 J65 L26
    Date: 2021–06–30
  2. By: Rocha, Vera (Copenhagen Business School); Pozzoli, Dario (Copenhagen Business School)
    Abstract: Human resources can provide a competitive advantage to firms, but we still know little about how newly-founded ventures start mobilizing these resources. Given the central role of entrepreneurs' background in designing the strategy of new firms, we investigate whether and how startup experience, namely past performance as entrepreneurs, influences employee mobilization strategies in new ventures. Integrating behavioral theories of the firm with regulatory focus theory, we postulate that serial entrepreneurs who failed in the past are more likely to be prevention oriented and change their employee mobilization strategies towards a more targeted hiring approach in subsequent ventures. Using Danish register data, we compare the employee sourcing practices of serial entrepreneurs with their former practices as novice entrepreneurs, as well as with a control group of first-time entrepreneurs who engage in serial venturing later on. We find that entrepreneurs who have already failed (i.e. discontinued a former business) select their employees from fewer sources in the labor market. Our tests lend support for learning as a key mechanism driving these differences. Alternative mechanisms such as selection effects, stigma of failure, and demand-side constraints are not empirically supported.
    Keywords: failure, hiring, new ventures, startup experience, human capital
    JEL: J24 L26 C01
    Date: 2021–06
  3. By: Simeon Djankov (Peterson Institute for International Economics); Eva (Yiwen) Zhang (Peterson Institute for International Economics)
    Abstract: New business applications have surged in the United States since the start of the COVID-19 pandemic. The growth is driven largely by startups in online retail, transportation, and personal services. Many of these new entrepreneurs are self-employed and were likely laid off and forced into entrepreneurship by necessity. No official data are available yet on the number of businesses destroyed in 2020, because business data for firms that close without entering bankruptcy are lagging. But the authors calculate that firm births may have surpassed firm deaths during the pandemic. While this boom in business entry is a tribute to the adaptability and potential innovative spirit in US capitalism, one should not be overly optimistic about jobs created in this wave of startups. As many of these new startups are by people forced to strike out on their own, the number of jobs created per new firm is even smaller than it was during previous US recessions. And like online businesses started around the last recession (e.g., Uber, Airbnb, and Venmo), some of these new firms may turn out to be major contenders in their sectors, displacing workers employed by their traditional rivals.
    Date: 2021–05
  4. By: Brian McCaig; Nina Pavcnik
    Abstract: Non-farm informal businesses comprise the majority of the firm distribution in developing countries. We document novel stylized facts about entry and exit of informal, non-farm firms using nationally representative panel data over 15 years and across regions with varying levels of local economic development in Vietnam. First, we find that informal businesses exhibit rates of entry and exit around 14-18% annually. Entry and exit rates are similar and highly correlated at a point in time, within industries, and within regions. They both decline over time and across space with economic development. Second, although market selection influences which firms survive, entry and exit has little net effect on aggregate (revenue) productivity or hiring of workers outside the household. This owes to overlapping labor productivity of entering and exiting firms and low subsequent productivity growth and hiring among the surviving entrants. Nonetheless, entry and exit are associated with large changes in individual income. Third, the large overlap in revenue of entering and exiting informal businesses and the high correlation between entry and exit rates are related to the education of owners and their economic activities before and after operating an informal business. Informal business owners are less educated on average than wage workers in the formal sector, but more educated than agricultural workers. The transitions in and out of operating an informal business reflect the underlying structure of economic activities of the working age population, with education gaps also playing a role. The most common transition into non-farm businesses is to and from self-employment in agriculture. The likelihood of this transition declines with economic development, highlighting the role of net entry from agriculture into informal non-farm businesses in structural change.
    JEL: J46 L2 O17 O53
    Date: 2021–07
  5. By: Drilo, Boris; Stojcic, Nebojsa; Vizek, Maruska
    Abstract: We explore how improvements in digital infrastructure contribute to digital transformation of the Croatian economy. More specifically, we investigate under what conditions improvements in broadband speed are conductive for firm entry in digitally intensive sectors at the local level (cities and municipalities; LGUs) during the period 2014–2017. The results of the benchmark random effects panel data model suggest a 10 percent increase in broadband speed increases the number of new digitally intensive firms by 0.68. Two-way interactions between explanatory variables suggest improvements in broadband infrastructure yield the greatest number of new firm entries in densely populated LGUs, and in LGUs with a higher quality of human capital and greater public investment in physical infrastructure. Using the spatial Durbin panel method, we find improvements in broadband infrastructure exhibit positive firm entry effects both within and between cities and municipalities.
    Keywords: firm entry; digitally intensive sectors; broadband speed; digital transformation; Croatia; spatial spillovers
    JEL: D22 L26 M13 O33
    Date: 2021–07
  6. By: Jacques Bughin; Nicolas van Zeebroeck
    Abstract: Returns on investing into digital technologies by incumbents may be low as result of them facing adjustment costs. We derive benchmarks of returns to digital investments while demonstrating that returns are enhanced by strategic renewal at sufficient turbulence levels. We also demonstrate the relative contribution of four organizational drivers (risk-appetite, threat sensing, new capabilities, and leadership involvement) in shaping those returns, through their joint effects on both strategic renewal propensity and incumbent organizations’ commitment to large digital investment programmes. Entrepreneurial leadership is a core component of successful digitization programmes both directly through top management involvement in digital projects, as well as indirectly though leadership building awareness of value at risk and by engaging in complementary digital capabilities.
    Keywords: Digitalization, Digital transformation, strategic renewal, adjustment costs, entrepreneurial leadership
    Date: 2021–07
  7. By: Simona Bratkova (University of Economics in Bratislava); Miroslav Sipikal (University of Economics in Bratislava); Valeria Nemethova (University of Economics in Bratislava)
    Abstract: Public support can flow to different areas of the economy and can have several dimensions. Frequent recipients of subsidies are firms, whose support can have specific effects. Such an undesirable effect occurs if these projects are supported that would be carried out without this subsidy. In this case, we are talking about the so-called deadweight effect, which has been discussed and investigated in several studies in the scientific literature. The present article tries to shift knowledge about this effect through a study of supported companies in Slovakia. The aim of the research is to find out whether deadweight effect had an impact on the short-term or long-term results of investigated companies by analysing economic results of the supported firms. Changes in several firm indicators were monitored as profit, sales and value added for individual years (2010, 2013, 2018). Results present changes in size categories of firms according to the number of employees. Firm groups were distinguished based on the extent of deadweight effect. The results showed that in cases when deadweight effect occurred, the profitability of supported firms increased, which ultimately means inessentiality of subsidy that spilled over into the profits of surveyed companies.
    Keywords: Entrepreneurship, structural funds, deadweight effect, firm support evaluation
    Date: 2021–03
  8. By: Adil Outla (Economy,finance and development LAB,Abdelmalek Essadi University of Tangier); Moustapha Hamzaoui (Economy,finance and development LAB,Abdelmalek Essadi University of Tangier)
    Abstract: The paper provides theoretical and empirical analysis on the choice problem of individuals' self-employment entry. With more focus on social entrepreneurship, the authors attempt to answer the question of how self-employment entry is different for social and conventional entrepreneurship. Drawing on the national employment survey, the empirical analysis and methodology approach allows the employment status preferences between cooperatives self-employment, independent self-employment, and employer self-employment. For the comparative analysis purpose, the probability of choosing paid job employment is also addressed. The empirical results indicate that the main positive determinants of social entrepreneurship entry are the risk tolerance, basic education, secondary education, and the attractiveness of rural areas. The results reveal also evidences of weak entrepreneurial culture in the Moroccan context. By comparison to conventional entrepreneurship, the empirical section contains additional information. The paper moves policymakers close to individuals' determinants and contributes to the socioeconomic incentive for social entrepreneurship.
    Keywords: Social-Entrepreneurship,Business-entrepreneurship,Co-operatives
    Date: 2021–06–26
  9. By: Elda N. Okolo-Obasi (University of Nigeria, Nsukka, Nigeria); Joseph I. Uduji (University of Nigeria, Nsukka, Nigeria)
    Abstract: Purpose – The purpose of this paper is to critically examine the agri-business/small and medium investment schemes (AGSMEIS) in Nigeria. Its special focus is to investigate the impact of the AGSMEIS on youth entrepreneurship development in Nigeria. Design/methodology/approach – This paper adopts a survey research technique, aimed at gathering information from a representative sample of the population, as it is essentially cross-sectional, describing and interpreting the current situation. A total of 1,200 respondents were sampled across the six geopolitical zones of Nigeria. Findings – The results from the use of a combined propensity score matching (PSM) and logit model indicate that AGSMEIS initiative generates significance gains in empowering youths in enterprise development, and if enhanced will help many young people become entrepreneurs. Practical implications – This suggests that AGSMEIS initiative can facilitate youth’s access to credit and help them become owners of small and medium enterprises. Social implications – It implies that investing in young people for small and medium enterprises could bring Nigeria into the modern economy and lift sub-Saharan Africa out of poverty. Originality/value – This research adds to the literature on youth entrepreneurship development’s debate in developing countries. It concludes that targeting the young people in AGSMEIS should form the foundation of public policy for entrepreneurship, poverty alleviation, and economic development.
    Keywords: Agri-business/small and medium investment schemes (AGSMEIS), youth entrepreneurship development, sub-Saharan Africa
    Date: 2021–01

This nep-ent issue is ©2021 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.