nep-ent New Economics Papers
on Entrepreneurship
Issue of 2021‒12‒13
thirteen papers chosen by
Marcus Dejardin
Université de Namur

  1. Did US Business Dynamism Recover in the 2010s? By Asier Aguilera-Bravo; Miguel Casares; Hashmat Khan
  2. Innovation Performance and the Signal Effect: Evidence from a European Program By Aurélien Quignon; Nadine Levratto
  3. Young Firms and Monetary Policy Transmission By Thomas McGregor
  4. Growth, Concentration and Inequality in a Unified Schumpeter Mark I + II model By Patrick Mellacher
  5. The Impact of Founders on Information Asymmetry vis-à-vis Outside Investors: Evidence from Caribbean Offshore Tax Havens By Hearn, Bruce; Oxelheim, Lars; Randøy, Trond
  6. Optimal capital structure, model uncertainty, and European SMEs By Iván Arribas; Emili Tortosa-Ausina; TingTing Zhu
  7. Enfranchising the crowd: Nominee account equity crowdfunding By Coakley, Jerry; Cumming, Douglas J.; Lazos, Aristogenis; Vismara, Silvio
  8. Support for Paid Family Leave among Small Employers Increases during the COVID-19 Pandemic By Ann P. Bartel; Maya Rossin-Slater; Christopher J. Ruhm; Meredith Slopen; Jane Waldfogel
  9. Access to Finance and Rural Youth Entrepreneurship in Benin: Is There a Gender Gap? By Senou, Melain Modeste; Manda, Julius
  10. Financial Inclusion and Small Enterprise Growth in Africa: Emerging Perspectives and Research Agenda By John Kuada
  11. European Small Business Finance Outlook 2021 By Kraemer-Eis, Helmut; Botsari, Antonia; Gvetadze, Salome; Lang, Frank; Torfs, Wouter
  12. The EIF SME Access to Finance Index - October 2021 update By Torfs, Wouter

  1. By: Asier Aguilera-Bravo (Department of Business, Universidad de Navarra); Miguel Casares (Departamento de Economía, Universidad P´ublica de Navarra); Hashmat Khan (Department of Economics, Carleton University)
    Abstract: We provide evidence showing that the US business entry rates have been either rising or remained flat over the past decade ending their secular decline observed over previous decades. Although the number of startups relative to incumbents has been increasing, their job-size (intensive margin) has decreased substantially. Controlling for these opposite trends reveals that the size-adjusted entry rates have remained flat after 2010 at historically minimum values. The vigorous business dynamism reflected in actual entry rates, therefore, masks the weakness of employment creation in new businesses. The average number of hirings per new establishment has fallen from around 6 jobs in the 1990s to nearly 3 jobs in recent observations.
    Keywords: Business entry rates; Business dynamism; Size-adjusted entry rates; BED; BDS
    JEL: E22 E32
    Date: 2021–04–26
  2. By: Aurélien Quignon; Nadine Levratto
    Abstract: This paper seeks to estimate the effect of a European policy that subsidizes innovation investments. By carefully selecting observables, we compare recipients of the program with non-recipient firms to overcome the endogeneity of R&D grants. We conduct a difference-in-differences design on the universe of a unique firm-level dataset of European SMEs between 2008 and 2017. We find a significant effect of proof of concept grants, which implies an increase in the number of patentapplications and the probability of patenting. There are positive impacts on credit financing, which suggest a signal effect to investors about the project quality of young firms.
    Keywords: R&D subsidies, Innovation, Patent, Financing constraints, H2020
    JEL: G28 G32 O30 O38
    Date: 2021
  3. By: Thomas McGregor
    Abstract: We investigate the role of business dynamism in the transmission of monetary policy by exploitingthe variation in firm demographics across U.S. states. Using local projections, we find that a larger fraction of young firms significantly mutes the effects of monetary policy on the labor market and personal income over the medium term. The firm entry rate and the employment share of young firms are key factors underpinning these results, which are robust to a battery of robustness tests. We develop a heterogeneous-firm model with age-dependent financial frictions that rationalizes the empirical evidence.
    Keywords: firm demographics; business dynamism; monetary policy; local projections; U.S. states.; U.S. states; monetary policy shock; entry rate; population demographics; policy function; startup firm; exit rate; firm productivity; growth rate; Employment; Wages; Personal income; Credit ratings; Global
    Date: 2021–03–05
  4. By: Patrick Mellacher
    Abstract: I develop a simple Schumpeterian agent-based model where industries are born and evolve endogenously and use it to study the interrelation between technological change, economic growth, market concentration and inequality. This theoretical model combines features of the Schumpeter Mark I (centering around the entrepreneur) and Mark II model (emphasizing the innovative capacities of firms), and is capable of reproducing a large set of stylized facts concerning growth, market concentration, inequality and productivity. In particular, the model can reproduce the industry life-cycle, a Kuznets curve, a Piketty-style increase of inequality in "mature" economies, as well as recent stylized facts on "declining business dynamism". I conduct an extensive policy analysis to identify the parameters that produce these stylized facts in the model. Notably, the empirically-grounded assumption that the difficulty to imitate a firm depends on its technological distance to the imitator can explain prominent stylized facts of economic development since the 1980s. However, growth in the number of industries triggered by the exploitation of new technological opportunities can prove to be a counteracting force to these tendencies in the short run. Thus, the model suggests a wave-like evolution of growth, inequality and market concentration centered around advances in basic research. Extensive sensitivity analysis suggest that policies aimed at increasing the innovative capacities of firms increase the rate of growth of output and real wages (dynamic efficiency) at the expense of increasing market concentration (static inefficiency) and inequality.
    Date: 2021–11
  5. By: Hearn, Bruce (University of Bradford, Bradford, United Kingdom); Oxelheim, Lars (Research Institute of Industrial Economics (IFN)); Randøy, Trond (Copenhagen Business School, Copenhagen, Denmark and)
    Abstract: Ceding ownership to outside investors provides a control dilemma for founders. In less developed capital markets with weaker formal institutions, we argue that retained founder director ownership can lower the transaction costs of external capital. Our argument rests on incomplete contracting and institutional theory, particularly highlighting the elevated status of the founding entrepreneur. Based on a longitudinal study of 179 listed Caribbean firms, we find that retained founder ownership reduces information asymmetry vis-à-vis outside minority investors. The reduced information asymmetry is even stronger for firms with a related party/subsidiary within a tax haven, and for firms with strong shareholder rights.
    Keywords: Founders; Ownership; Bid Ask Spreads; Institutions; Caribbean
    JEL: D53 F23 G12 G15 G32 G34
    Date: 2021–11–23
  6. By: Iván Arribas (IVIE, ERI-CES and Department of Economic Analysis, Universitat de València, Spain); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain); TingTing Zhu (Leicester Castle Business School, DeMontfort University, UK)
    Abstract: We revisit the determinants of capital structure for European SMEs. Our work differs from previous contributions in the field by considering several measures of leverage (short-term debt, long-term debt, and total debt) and employing panel Bayesian model averaging, in an effort to address regression model uncertainty. Examining a rich set of firm-specific, country-specific, and institutional determinants of capital structure in 15 European Union countries over the period 2002–2019, we find that the effects of the different variables considered on leverage are intricate. First, only certain variables are important in explaining capital structure, based on their high posterior inclusion probabilities (above 0.5). Second, the effect of some variables differs depending on the measure of leverage considered. Under Bayesian model averaging, results are based on all possible models, rather than a particular one, and give a much greater depth of information. Therefore, our methods help to provide some additional guidance on the existing competing theories (trade-off, pecking-order, agency), which seems appropriate as empirical studies to date have not been conclusive. Our findings are especially pertinent in the European context where the predominance of SMEs, which are vulnerable to economic downturns, makes it particularly relevant to understand what determines their capital structure.
    Keywords: Bayesian model averaging, capital structure, European Union, SMEs
    JEL: G32 G33 D21 D22
    Date: 2021
  7. By: Coakley, Jerry; Cumming, Douglas J.; Lazos, Aristogenis; Vismara, Silvio
    Abstract: The nominee approach to equity crowdfunding pools all crowd investors into one (nominee) account where typically the platform acts as the legal owner but the crowd retains beneficial ownership. The platform plays an active digital corporate governance role that simultaneously enfranchises crowd investors with voting and ownership rights but removes the administrative burden on startups of having to deal with several hundred shareholders. Through an inter-platform and intra-platform analysis of a large sample of 1,018 initial equity crowdfunding campaigns, this paper assesses both the short-term and the long-term impact of nominee versus direct ownership. It finds that nominee initial campaigns are on average more successful than direct ownership campaigns in that they are more likely to succeed, raise more funds, attract overfunding and enjoy greater long run success in terms of successful seasoned equity crowdfunded offerings, numbers of such offerings, and probability of survival. These results hold inter-platform between the two main UK equity crowdfunding platforms (Seedrs and Crowdcube) as well as intra-platform, using the post-2015 quasi-natural experiment when the nominee approach became an option for startups raising capital on Crowdcube.
    Keywords: Entrepreneurial finance,corporate governance,nominee account
    JEL: G24 M13
    Date: 2021
  8. By: Ann P. Bartel; Maya Rossin-Slater; Christopher J. Ruhm; Meredith Slopen; Jane Waldfogel
    Abstract: The United States is one of the few countries that does not guarantee paid family leave (PFL) to workers. Proposals for PFL legislation are often met with opposition from employer organizations, who fear disruptions to business, especially among small employers. But there has been limited data on employers' views. We surveyed firms with 10-99 employees in New York and New Jersey on their attitudes towards PFL programs before and during the COVID-19 pandemic. We found high support for state PFL programs in 2019 that rose substantially over the course of the pandemic: by the fall of 2020, almost 70% of firms were supportive. Increases in support were larger among firms that had an employee use PFL, suggesting that experience with PFL led to employers becoming more supportive. Thus, concerns about negative impacts on small employers should not impede efforts to expand PFL at the state or federal levels.
    JEL: H50 I18 I38 J38
    Date: 2021–11
  9. By: Senou, Melain Modeste; Manda, Julius
    Keywords: Agricultural Finance, Labor and Human Capital
    Date: 2021–08
  10. By: John Kuada (Aalborg, Denmark)
    Abstract: Purpose – The purposes of this paper are to review the streams of studies that link financial inclusion to small enterprise growth in Sub-Sahara Africa (SSA), to identify the research gaps they provide, and to prepare an agenda for future research in the field. Design/methodology/approach – The study employs systematic literature search method to identify relevant literature from journals. It then adopts a narrative approach for the review, highlighting the findings from the prior studies and gaps requiring research attention. Findings – The discussions reveal that there is a need for future studies that can unpack small enterprise growth determinants, identify growth-enabling entrepreneurial characteristics and examine the contextual variabilities that shape their effectiveness. Originality/value – There is currently no comprehensive/integrated review exploring the link between financial inclusion and small enterprise growth in SSA. This review therefore provides insights that contribute to the development of this stream of research.
    Keywords: Financial inclusion, entrepreneurship, small businesses, enterprise growth, Africa
    Date: 2021–01
  11. By: Kraemer-Eis, Helmut; Botsari, Antonia; Gvetadze, Salome; Lang, Frank; Torfs, Wouter
    Abstract: This working paper provides you with an overview of the main markets relevant to the EIF. It starts by discussing the general market environment, then looks at the markets for SME equity and debt products. In addition, it focusses on a number of thematic policy areas of interest to the EIF, such as Inclusive Finance, Fintech and Green finance & investment.
    Date: 2021
  12. By: Torfs, Wouter
    Abstract: This working paper elaborates on the most recent update of the EIF SME Access to Finance (ESAF) Index, a composite indicator used to monitor the state of SME external financing markets in the 27 EU countries. The current update, using the latest available data, constitutes the eight iteration of this exercise. The paper provides some background information underlying the ESAF results for 2020, which are the latest available data at the time of writing. The results capture the initial impact of COVID-19 crisis and the subsequent policy response.
    Date: 2021
  13. By: Gérard Desmaison (ISEOR - Institut de Socio-économie des Entreprises et des ORganisations - Institut de socio-économie des entreprises et des organisations)
    Date: 2021–06–21

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