nep-ent New Economics Papers
on Entrepreneurship
Issue of 2021‒11‒15
thirteen papers chosen by
Marcus Dejardin
Université de Namur

  1. The Business Dynamics Statistics: Describing the Evolution of the U.S. Economy from 1978-2019 By Christopher Goetz; Martha Stinson
  2. How innovative EU firms faced the COVID-19 downturn By DI MININ Alberto; DE MASSIS Alfredo; MONCADA PATERNO' CASTELLO Pietro; MARQUES SANTOS Anabela; HAEGEMAN Karel
  3. Population Aging and Small Business Exits By XU Peng
  4. Are Business Policy Measures in Response to the COVID-19 Pandemic to Be Equally Valued? An Exploration According to SMEs Owners' Business Expectations By Charlie Tchinda; Marcus Dejardin
  5. Did the Covid-19 local lockdowns reduce business activity? Evidence from UK SMEs By Hurley, James; Walker, Daniel
  6. Financial Factors, Firm size and Firm Potential By Ferreira, M.; Haber, T.; Rörig, C.
  7. Regional and national results on entrepreneurship using GEM data By Velilla, Jorge
  8. Venture Capital-backed Firms, Unavoidable Value-destroying Trade Sales, and Fair Value Protections By Nigro, Casimiro Antonio; Stahl, Jörg R.
  9. We Are Alike: Capital Structure of Japanese SMEs Across Prefectures By Huseyin OZTURK; YASUDA Yukihiro
  10. The Death of a Regulator: Strict Supervision, Bank Lending and Business Activity By Granja, João; Leuz, Christian
  11. Are SMEs Avoiding Compliance Costs? Evidence from VAT Reforms in Japan By SUZUKI Takafumi; KAWAKUBO Takafumi
  12. Effect of Social Networks and Performance of Young Women Agribusiness Owners in a Developing Country: The Moderating Effect of Business Environment By Dossou, Smith A.R.; Aoudji, Augustin K. N.; Vissoh, Pierre; Zannou, Afio
  13. Quantitative Evaluation of Tax Compliance Cost in Japan (Japanese) By TAKAGI Shunpei; NAKAJIMA Yuka

  1. By: Christopher Goetz; Martha Stinson
    Abstract: The U.S. Census Bureau’s Business Dynamics Statistics (BDS) provide annual measures of how many businesses begin, end, or continue their operations and the associated job creation and destruction. The BDS is a valuable resource for information on the U.S. economy because of its long time series (1978-2019), its complete coverage (all private sector, non-farm U.S. businesses), and its tabulations for both individual establishments and the firms that own and control them. In this paper, we use the publicly available BDS data to describe the dynamics of the economy over the past 40 years. We highlight the increasing concentration of employment at old and large firms and describe net job creation trends in the manufacturing, retail, information, food/accommodations, and healthcare industry sectors. We show how the spatial distribution of employment has changed, first moving away from the largest cities and then back again. Finally, we show long-run trends for a group of industries we classify as high-tech and explore how the share of employment at small and young firms has changed for this part of the economy.
    Date: 2021–10
  2. By: DI MININ Alberto; DE MASSIS Alfredo; MONCADA PATERNO' CASTELLO Pietro (European Commission - JRC); MARQUES SANTOS Anabela (European Commission - JRC); HAEGEMAN Karel (European Commission - JRC)
    Abstract: The Covid-19 pandemic has triggered many challenges, but also opportunities, for businesses across Europe. We examine how the innovation and growth of firms in the EU have been affected by the Covid-19 pandemic, and how as “European Innovation Champions”, SMEs reacted to the resultant shock. We find that compared to non-innovative firms, the economic performance of innovative firms in the EU has been considerably less affected by the pandemic. We also identify five different paradoxical behaviours of ‘European Innovation Champions” during the peak of the Covid-19 pandemic. Industrial policies targeting SMEs should be flexible and allow companies to adapt their investment plans in line with the evolving conditions to preserve and succeed through the crisis. EU instruments, such as the Recovery and Resilience Facility and Horizon Europe, offer wide opportunities for firms to exit from the Covid-19 crisis and boost their future competitiveness.
    Keywords: COVID-19, innovation, growth, firms
    Date: 2021–11
  3. By: XU Peng
    Abstract: Japan has been experiencing substantial growth in the proportion of their elderly population due to historically low fertility. Aging has strong adverse impacts on economic growth, productivity, entrepreneurship, and technology adoption. In this study, we investigate the effect of population aging as well as the effect of macro factors on corporate exits of small businesses. Economically inefficient small firms are more likely to exit the market via business closures or bankruptcies, larger insolvent firms attempt to survive by filing for rehabilitation, and larger underperforming firms seek acquisitions as a flight from loss strategy to avoid a worst-case scenario such as bankruptcy or rehabilitation. All other things being equal, population aging increases acquisitions but decreases forced exits such as rehabilitation and bankruptcies. Though it is well-documented that recent voluntary exits are driven by CEO aging in small business, population aging has no significant effect on business closures of firms operated by aged CEOs. Yen appreciations trigger rehabilitation and this effect is robust. A decline in long-term interest rates especially increases bankruptcies of non-aged CEOs. As for exit routes, population aging significantly decreases the probability of force exits relative to business closures or acquisitions.
    Date: 2021–11
  4. By: Charlie Tchinda (UCM - Union des Classes Moyennes, UNamur - Université de Namur [Namur]); Marcus Dejardin (UNamur - Université de Namur [Namur], UCL - Université Catholique de Louvain = Catholic University of Louvain)
    Abstract: A variety of public economic policy measures have been designed and implemented in an effort to enable SMEs to limit damages resulting from the adverse sanitary and economic shocks associated with COVID-19. The originality of our study is to propose a rating of the various economic policy measures, the rating being expressed by SMEs owners conditional to their business expectations. In so doing, our contribution is to highlight the policy measures to be implemented in order to support resilient and ambitious ventures with the most positive prospects, which are likely to contribute the most to economic recovery. We exploit an original and rich dataset derived from a survey conducted in May 2020 among a representative sample of more than 2100 Belgian (Walloon) SMEs. The Belgian experience is remarkable because the wide variety of measures it undertook echoes many of the measures taken by OECD countries. Our results suggest that the respondents have an overall positive evaluation of the various economic and social policy measures implemented by the Belgian authorities. More importantly, the rating by SME owners with the most favorable expectations are, however, significantly different than their counterpart. Measures helping firms to maintain their workforce are particularly highly rated by firms with the best prospects. It also appears that those firms prefer short-term and transitory measures.
    Keywords: SMEs,self-employed,COVID-19,economic policy
    Date: 2021
  5. By: Hurley, James (Bank of England); Walker, Daniel (Bank of England)
    Abstract: This paper analyses the local lockdown measures introduced to contain the spread of Covid-19 in the UK. We use a spatial regression discontinuity design to assess whether the fall in business activity during the lockdowns was driven by the policy measures or by other factors, such as voluntary social distancing. We conclude that the local lockdowns did causally reduce business activity but that activity would have probably fallen substantially even in the absence of the lockdowns. During the local lockdowns, the average turnover growth for SMEs in the UK was around -20%. SMEs that were up to two kilometres inside the lockdown boundaries had 8 percentage points lower turnover growth than those up to two kilometres outside. This implies that the local lockdowns accounted for two fifths of the overall drop in business activity at most. The estimates are largest for restaurants and non-food retail (eg clothes shops), which were directly targeted by the restrictions. Costs fell by much less than turnover, reducing cash flow.
    Keywords: Covid-19; small and medium-sized enterprises (SMEs); public health measures
    JEL: D22 E65 G30
    Date: 2021–10–15
  6. By: Ferreira, M.; Haber, T.; Rörig, C.
    Abstract: Using a unique dataset covering the universe of Portuguese firms and their credit situation we show that financially constrained firms are found across the entire firm size distribution, account for a larger total asset share compared to standard heterogeneous firms models, and exhibit a higher cyclical sensitivity, conditional on size. In light of these findings we reassess the importance of the firm distribution in shaping aggregate outcomes in the canonical model of heterogeneous firms with financial frictions. We augment the productivity process with ex-ante heterogeneity of firms, allowing us to match the distribution of constrained firms conditional on size. This, together with the fact that constrained firms have a higher capital elasticity, leads to up to four times larger aggregate fluctuations and capital misallocation.
    Keywords: Firm size, business cycle, financial accelerator
    JEL: E62 E22 E23
    Date: 2021–11–03
  7. By: Velilla, Jorge
    Abstract: In this paper, we use different sources of data from the GEM to show a descriptive and comparative analysis of the different dimensions of the entrepreneurial activity, in the Spanish regions, and at international level. We also study the individual determinants of the entrepreneurial activity in Spain, and Europe, using bootstrapping techniques to avoid overfitted results. The results indicate that entrepreneurial levels in Spain are below the average of European countries, and also below the levels of United States, Canada, and Australia. However, the determinants of entrepreneurship appear to be similar in all the regions studied.
    Keywords: Entrepreneurship; GEM data; Spain
    JEL: L26
    Date: 2021–10
  8. By: Nigro, Casimiro Antonio; Stahl, Jörg R.
    Abstract: This paper investigates the implications of the fair value protections contemplated by the standard corporate contract (i.e., the standard contract form for which corporate law provides) for the entrepreneur-venture capitalist relationship, focusing, in particular, on unavoidable value-destroying trade sales. First, it demonstrates that the typical entrepreneur-venture capitalist contract does institutionalize the venture capitalist's liquidity needs, allowing, under some circumstances, for counterintuitive instances of contractually-compliant value destruction. Unavoidable value-destroying trade sales are the most tangible example. Next, it argues that fair value protections can prevent the entrepreneur and venture capitalist from allocating the value that these transactions generate as they would want. Then, it shows that the reality of venture capital-backed firms calls for a process of adaptation of the standard corporate contract that has one major step in the deactivation or re-shaping of fair value protections. Finally, it argues that a standard corporate contract aiming to promote social welfare through venture capital should feature flexible fair value protections
    Keywords: Private equity,Venture capital,Start-ups,Entrepreneurship,Innovation,Corporate governance,Private ordering,Drag-along rights,Trade sales,Corporate law,Fair value,Appraisal rights,Law and economics,Law and finance
    JEL: K22 M13
    Date: 2020
  9. By: Huseyin OZTURK; YASUDA Yukihiro
    Abstract: We empirically investigate the capital structure of small- and medium-sized enterprises (SMEs) in Japan to identify whether the firm-specific determinants of leverage exhibit locational differences. Examining this theme in the context of Japanese geography is important because the country has considerable difference, especially in terms of its demography, capital intensity, and industrial structure. Akin to previous studies that have examined the impacts of firm-specific determinants on the capital structure of firms between geographies, our results indicate differences between Japanese prefectures. However, when we conduct an in-depth test of prefecture pairs, we interestingly find that the impact of the firm-specific determinants of leverage does not greatly differ between prefecture pairs in terms of both sign and magnitude. We briefly discuss why this might be an important finding for policy-making, given the recent policy responses to the COVID 19 pandemic.
    Date: 2021–11
  10. By: Granja, João; Leuz, Christian
    Abstract: An important question in banking is how strict supervision affects bank lending and in turn local business activity. Supervisors forcing banks to recognize losses could choke off lending and amplify local economic woes. But stricter supervision could also change how banks assess and manage loans. Estimating such effects is challenging. We exploit the extinction of the thrift regulator (OTS) to analyze economic links between strict supervision, bank lending and business activity. We first show that the OTS replacement indeed resulted in stricter supervision of former OTS banks. Next, we analyze the ensuing lending effects. We show that former OTS banks increase small business lending by roughly 10 percent. This increase is concentrated in well-capitalized banks, those more affected by the new regime, and cannot be fully explained by a reallocation from mortgage to small business lending after the crisis. These findings suggest that stricter supervision operates not only through capital but can also correct deficiencies in bank management and lending practices, leading to more lending and a reallocation of loans.
    Keywords: Bank regulation,Enforcement,Loan losses,Aggregate outcomes,Prudential oversight,Business lending,Entry and exit
    JEL: E44 E51 G21 G28 G31 G38 K22 K23 L51 M41 M48
    Date: 2020
  11. By: SUZUKI Takafumi; KAWAKUBO Takafumi
    Abstract: This study disentangles the motives behind enterprises' responses to size-dependent tax regulations by exploiting value-added tax (VAT) reforms in Japan. Tax threshold and tax rate in Japan have changed over the past three decades since the introduction of VAT. We build on the model of Harju et al. (2019) to incorporate various tax reforms and conducted bunching estimation. By using a novel panel of the Japanese Census of Manufacture covering the periods of VAT introduction and reforms, we find from the local estimates that the observed output response of enterprises is mainly caused by compliance costs rather than tax rates for small enterprises in Japan. The results suggest that the authorities would be better served by easing compliance costs while enhancing tax revenue to improve the efficiency of tax design.
    Date: 2021–11
  12. By: Dossou, Smith A.R.; Aoudji, Augustin K. N.; Vissoh, Pierre; Zannou, Afio
    Keywords: Agribusiness, Labor and Human Capital
    Date: 2021–08
  13. By: TAKAGI Shunpei; NAKAJIMA Yuka
    Abstract: When considering the impact of taxation on business activities, it is important to consider not only the economic burden of taxation, but also the burden associated with tax procedures such as tax filing. However, the actual conditions of such burdens have not always been sufficiently investigated in Japan. Therefore, with the aim of providing reference material for the design of future tax systems, this paper summarizes the basic facts about the actual situation of the burden of tax procedures (hereinafter referred to as "tax compliance costs") on companies, by utilizing a questionnaire survey of companies. The main results are as follows. (1) Tax compliance costs tend to increase with the size of the company. (2) Despite the higher costs for larger companies, the tax compliance cost as a percentage of sales is larger for smaller companies. As a policy implication, it can be pointed out that the impact of tax procedures on business management is relatively larger for small and medium-sized enterprises (SMEs), and therefore, it is important to consider the practical burden on SMEs when designing the tax reform system.
    Date: 2021–11

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