nep-ent New Economics Papers
on Entrepreneurship
Issue of 2021‒09‒06
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. Young Firms, Old Capital By Song Ma; Justin Murfin; Ryan D. Pratt
  2. On the interpretation of black-box default prediction models: an Italian Small and Medium Enterprises case By Lisa Crosato; Caterina Liberati; Marco Repetto
  3. Know-how and Know-who: Effects of a Randomized Training on Network Changes Among Small Urban Entrepreneurs By Mattea Stein
  4. To see or not to see: A creativity feature to enhance business model ideation using business model development software By Daniel Szopinski
  5. Foreign entry timing, time since first entry, and internationalization speed of SMEs: when does manager domestic experience matter? By Yadav, Sandeep
  6. Home country institutional harshness and emerging market SMEs internationalization: a strategy tripod perspective By Yadav, Sandeep
  7. Social Capital, Performance of SMEs, and COVID-19 Pandemic By Rajapakshe, PSK; Gamage, SKN; Prasanna, RPIR; Jayasundara, JMSB; Ekanayake, EMS; Upulwehera, JMHM; Wijerathna, WAID; Abeyrathne, GAKNJ
  8. Analysis of policies to support SMEs in confronting the COVID-19 pandemic in Latin America By Dini, Marco; Heredia Zurita, Andrea
  9. The Impacts of the COVID-19 Pandemic on Micro, Small, and Medium Enterprises in Asia and Their Digitalization Responses By Sonobe, Tetsushi; Takeda, Asami; Yoshida, Susumu; Truong, Hoa Thi
  10. Religious Entrepreneurial Communities - Solution for or Cause of Socioeconomic Injustice? A Comment By Henrik Egbert
  11. Fintechs: Chancen für die KMU-Finanzierung? By Korus, Arthur; Löher, Jonas; Nielen, Sebastian; Pasing, Philipp

  1. By: Song Ma; Justin Murfin; Ryan D. Pratt
    Abstract: Across a broad range of equipment types and industries, we document a pattern of local capital reallocation from older firms to younger firms. Start-ups purchase a disproportionate share of old physical capital previously owned by more mature firms. The evidence is consistent with financial constraints driving differential demand for vintage capital. The local supply of used capital influences start-up entry, job creation, investment choices, and growth, particularly when capital is immobile. Conversely, incumbents accelerate capital replacement in the presence of more young firms. The evidence suggests previously undocumented benefits to co-location between old and young firms.
    JEL: G3 L2 R1 R4
    Date: 2021–08
  2. By: Lisa Crosato; Caterina Liberati; Marco Repetto
    Abstract: Academic research and the financial industry have recently paid great attention to Machine Learning algorithms due to their power to solve complex learning tasks. In the field of firms' default prediction, however, the lack of interpretability has prevented the extensive adoption of the black-box type of models. To overcome this drawback and maintain the high performances of black-boxes, this paper relies on a model-agnostic approach. Accumulated Local Effects and Shapley values are used to shape the predictors' impact on the likelihood of default and rank them according to their contribution to the model outcome. Prediction is achieved by two Machine Learning algorithms (eXtreme Gradient Boosting and FeedForward Neural Network) compared with three standard discriminant models. Results show that our analysis of the Italian Small and Medium Enterprises manufacturing industry benefits from the overall highest classification power by the eXtreme Gradient Boosting algorithm without giving up a rich interpretation framework.
    Date: 2021–08
  3. By: Mattea Stein (Università di Napoli Federico II and CSEF)
    Abstract: Micro-enterprise owners in developing country industrial clusters interact through networks of horizontal business collaboration, information-sharing, and friendship links, despite the potential for close competition inherent in this setting. This paper explores how such business links change, and specifically whether they can be endogenous to a public policy intervention that provides training to some network members but not others. Using a randomized training for micro-entrepreneurs in Kampala, Uganda, together with novel panel network data, I find a positive effect on linking likelihoods, driven by untreated entrepreneurs to whom links with treated entrepreneurs become more desirable. As predicted by a bilateral network formation framework, it is the relatively lower-status treated who attract new connections with relatively higher-status untreated. Furthermore, links within clusters of treated enterprises are strengthened, which is not due to a strategic replacement of untreated with treated partners out of a competition motive but seems to be an effect of jointly attending the training. Together, my findings show that public policy interventions can cause networks to re-wire, with important implications both for research and policy.
    Keywords: network formation, network change, social networks, firms, micro-enterprises
    Date: 2021–09–02
  4. By: Daniel Szopinski (Paderborn University)
    Abstract: Successful business model innovation is dependent upon the generation of new ideas that can challenge traditional mechanisms of value creation, delivery, and capture. However, during the cognitive process of idea generation, individuals tend to overlook the majority of potentially valuable business model ideas, and there is currently hardly any software available to facilitate the ideation process. Drawing on cognitive psychology, creativity, and information systems research, I address this issue by proposing a creativity feature for a software-based business model development tool, as well as a randomized controlled experiment to evaluate its effectiveness. This innovative creativity feature is intended to enhance business model development tools, both quantitatively and qualitatively, by guiding individuals through their exploration of the solution space for business model ideas. Measuring business model idea quality was not possible because the experts consulted for this experiment did not reach a sufficient consensus. The findings on business model idea quantity indicate that the creativity feature was not able to enhance the creativity of business model ideas significantly. I additionally discuss implications for future experimental research on features of business model development tools. In the long run, I hope that other researchers will benefit from the experiences and that prescriptive knowledge can be derived that will benefit both academics and practitioners interested in the development of software-based tools for business model innovation.
    Keywords: business model innovation, business model development tool, creativity support system, idea generation, experiment, search for ideas in associative memory, chance configuration theory
    JEL: O3 L86 M15 D83 C91 C88
    Date: 2021–08
  5. By: Yadav, Sandeep
    Abstract: This study explores the interrelatedness between the various temporal concept of internationalization. Using organizational learning perspective, this study explores the impact of foreign entry timing, time since first foreign entry on the speed of internationalization. The author tests the proposed hypotheses on a sample of 11291 Small and medium-sized enterprises (SMEs) from 118 countries based on World Bank Enterprise Survey (WBES) data. The results show that foreign entry timing reduces the speed of internationalization while time since first foreign entry increases the speed of internationalization. Further, the author finds that manager prior domestic industry experience reduce disadvantages associated with the late start of internationalization and increase speed of internationalization. In contrast, the author finds support for the negative moderating effect of manager domestic industry experience on the time since first foreign entry and internationalization speed relationship.
    Keywords: foreign entry timing; time since first foreign entry; time in internationalization; speed of internationalization; SMEs; organizational learning; manager experience; temporality; absorptive capacity
    JEL: F23 M12
    Date: 2021–07
  6. By: Yadav, Sandeep
    Abstract: Purpose - What is the role of the home country institutional environment in emerging market small and medium firms (SMEs) internationalization? Drawing from strategy tripod perspective, this study tests the proposed theoretical model on the impact of institutional harshness on SMEs internationalization. This study also demonstrates the moderating role of firm resources and industry informal competition on the relationship between home country institutional harshness and SMEs internationalization. Design/methodology/approach – This study tests the proposed theoretical model on a survey sample of 5129 Indian and Chinese SMEs from World Bank Enterprise Surveys (WBES). This study uses the Tobit regression model and Logit regression model as estimation techniques. Findings - Based on the institution-based view, the author finds that institutional harshness in the home country increases SMEs internationalization as escape to home country institutional challenges. The findings show that SMEs international quality certificate possession and informal industry competition strengthen the institutional harshness and internationalization relationship. The findings also support the negative moderating effect of SMEs global linkages on institutional harshness and internationalization relationship. Originality/value – This study contributes to institutional theory and international business literature by showing emerging market SMEs international expansion as a response to owner/manager perception of high institutional harshness. The study extends the boundaries of the home country institution escape-based internationalization argument by examining the heterogeneous impact of institutional harshness on SMEs internationalization based on firm resources and industry context.
    Keywords: Emerging market, Internationalization, Institutional harshness, SMEs, Exporting, Institutional theory, Industry context, Firm resources
    JEL: F2 L1
    Date: 2021–03
  7. By: Rajapakshe, PSK; Gamage, SKN; Prasanna, RPIR; Jayasundara, JMSB; Ekanayake, EMS; Upulwehera, JMHM; Wijerathna, WAID; Abeyrathne, GAKNJ
    Abstract: The aim of this working paper is to explore the relationship between social capital and the performance of SMEs and articulate the ways of using the social capital as an instrument to address the performance of the SMEs in context of Covid-19 pandemic. Further, this review identifies the unexplored areas related to concepts ‒ social capital, SME performance, and Covid‒19 pandemic which will pave the way for further research in area focused. . The review and discussion on existing state of knowledge disclosed the key areas which create link between social capital and SME performance. First, the investigation of the impact of externalities on SMEs performance, especially the impact of COVID-19 pandemic, and how the social capital could assists to minimize the effect were divulged. Then, the way of allocating social capital to intensify the success of SMEs in the internationalization process was revealed. Accordingly, with the growing significance of the banking institutions during the pandemic period, investigating the banking relationship as an external social capital with the SMEs performance was recognized as one of the critical areas in the pandemic situation. Lastly, during the era of treating customers like the kings of the market, interaction among innovation, marketing capabilities, and social capital to facilitate the competitive performance of SMEs have been substantially addressed. Findings suggested that investigating the dynamic environmental changes of SMEs and social capital influence are vital to stimulate the sustainable competitive advantage of SME sector in the intensified economic competition.
    Keywords: Internationalization, Innovations, SMEs, Social capital, Sustainable competitive advantage
    JEL: L00
    Date: 2020–08–30
  8. By: Dini, Marco; Heredia Zurita, Andrea
    Abstract: The institutions that support micro-, small and medium-sized enterprises (MSMEs) in Latin America have demonstrated their capacity to react to the challenges posed by the coronavirus disease (COVID-19) pandemic, making unprecedented efforts to adapt support instruments and adjust their management modalities to new needs. This document summarizes the experiences of nine countries in the region (Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Panama and Uruguay), highlighting good practices and methodological lessons learned that can be leveraged to improve the performance of the development system once the pandemic is over. There are three areas of particular importance for economic recovery: support for the incorporation of digital technologies, incentives for formalizing companies and biosafety protocols. There are also signs of a shift in the way policies are formulated, towards adaptive management models that focus on accountability and the strengthening of public institutions, the deepening of partnerships with the business sector and the consolidation of decentralization dynamics that provide space for participation by local and regional actors.
    Date: 2021–08–04
  9. By: Sonobe, Tetsushi (Asian Development Bank Institute); Takeda, Asami (Asian Development Bank Institute); Yoshida, Susumu (Asian Development Bank Institute); Truong, Hoa Thi (Asian Development Bank Institute)
    Abstract: Soon after the outbreak of the COVID-19 pandemic, many governments began extending financial and other forms of support to micro, small, and medium-sized enterprises (MSMEs) and their workers because smaller firms are more vulnerable to negative shocks to their supply chain, labor supply, and final demand for goods and services than larger firms. Since MSMEs are diverse, however, the severity of the pandemic’s impact on them varies considerably depending on their characteristics. Using online survey data of MSMEs from eight developing economies in South, Southeast, and Northeast Asia, we attempt to deepen our understanding of the impact of the pandemic on MSMEs, especially their employment, sales revenue, and cash flow. We characterize those firms that began participating in online commerce and try to determine how their use of online commerce and their employment are related in this difficult time. We also examine the government support that MSMEs have received and the extent to which it has satisfied their support needs.
    Keywords: COVID-19; micro; small; and medium enterprises (MSMEs); layoffs; cash shortage; digitalization
    JEL: D22 J63 L25 O53
    Date: 2021–03–26
  10. By: Henrik Egbert (Anhalt University of Applied Sciences, Bernburg, Germany)
    Abstract: Certain religious entrepreneurial minded communities are highly successful. It is tempting to assume that the underlying social mechanism of business success can be used as a blueprint for the development of larger social entities. Recently, Javaid, Shamsi and Hyder (2020) have argued that inefficiencies of markets and bureaucracies may be avoided if religious entrepreneurial communities are considered an alternative for membersÕ business investment, capital- and expertise-support to businesses, and the redistribution of wealth in favor of economically vulnerable community members. Consequently, the title of their paper is ÒReligious entrepreneurial communities as a solution for socioeconomic injusticeÓ. I address this problematic position by an extended comment and point out inefficiencies induced by such an approach. I apply the concepts of networks and clubs to tackle problems of religious entrepreneurial communities as sub-groups of larger social entities. Individual beliefs, individual preferences, and norms of cooperative behavior can occur among members of any community, with or without common religious beliefs. Consequently, a shift from the areligious, market-oriented form of economic organization towards specific sets of religious beliefs will not, by itself, endanger business success. These issues require considerable attention before a transfer of behavioral pattern prevalent in small communities can be applied to larger groups. I emphasize the danger of generalizations from small case study results of specific entrepreneurial communities to larger social entities, such as societies.
    Keywords: entrepreneurial communities, socioeconomic justice, community-based entrepreneurship, entrepreneurship-based policy, clubs, networks
    JEL: D71 D85 P42 Z12
    Date: 2021–08
  11. By: Korus, Arthur; Löher, Jonas; Nielen, Sebastian; Pasing, Philipp
    Abstract: Die Studie untersucht die Potenziale von Fintechs für kleine und mittlere Unternehmen (KMU). Fintechs bringen Kapitalangebot und -nachfrage oftmals effizienter zusammen als Banken. Ihre Lösungen können in Einzelfällen Finanzierungsgeschwindigkeiten beschleunigen, Kreditkonditionen verbessern und Finanzierungen ermöglichen. Darüber hinaus erhöhen Fintechs den Innovationsdruck auf etablierte Banken, ihre Prozesse und Dienstleistungen zu optimieren. Zunehmend kooperieren beide Seiten hierzu miteinander, wodurch Banken vermehrt als Plattformen agieren. Insbesondere etablierte KMU können demzufolge sowohl innerhalb als auch außerhalb der bestehenden Hausbankbeziehung von den verbesserten Angeboten profitieren.
    Keywords: Unternehmensfinanzierung,KMU-Finanzierung,Mittelstandsfinanzierung,Fintechs,digitale Finanzierung,Corporate Financing,SME Financing,Fintech,Digital Finance
    JEL: G20 G23 G30 O16
    Date: 2021

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