nep-ent New Economics Papers
on Entrepreneurship
Issue of 2022‒01‒17
fourteen papers chosen by
Marcus Dejardin
Université de Namur

  1. From Immigrant Entrepreneurship to Plurinational Firms: Evidence from Italy By Arrighetti, Alessandro; Gnarini, Daniela; Lasagni, Andrea; Semenza, Renata
  2. The Cost of Health Insurance and Entry into Entrepreneurship By Fossen, Frank M.; Hossain, Mobarak; Mukhopadhyay, Sankar; Toth, Peter
  3. Hiring entrepreneurs for innovation By Louise Lindbjerg; Theodor Vladasel
  4. Solving the Data Sparsity Problem in Predicting the Success of the Startups with Machine Learning Methods By Dafei Yin; Jing Li; Gaosheng Wu
  5. With a little help from my website Firm survival and web presence in times of COVID-19 – Evidence from 10 European countries By Joachim Wagner
  6. Entry, Variable Markups, and Business Cycles By William L. Gamber
  7. Subsidizing Startups under Imperfect Information By Davide Melcangi; Javier Turen
  8. Effects of Policy Reforms on Firm Innovation By Murat Seker; Mehmet Fatih Ulu
  9. An Empirical Study on the Relationship of Regional Entrepreneurial Activities and Utilization of Digital Technology in Knowledge-Intensive Business Services (KIBS) By Nobuo Kobayashi; Takeshi Mori
  10. Do Chinese Infrastructure Loans Promote Entrepreneurship in African Countries? By Munemo, Jonathan
  11. SME viability in the COVID-19 recovery By McCann, Fergal; McGeever, Niall; Yao, Fang
  12. Short-Term Impacts of Targeted Cash Grants and Business Development Services: Experimental Evidence from Entrepreneurs in Burkina Faso By Grimm, Michael; Soubeiga, Sidiki; Weber, Michael
  13. 2021 Survey of Small Enterprises’ Financial Literacy: Main Results By Brindusa Anghel; Aitor Lacuesta; Federico Tagliati
  14. Collective Intelligence: a Determining Factor to Support the Dual Economic and Artistic Ambition of the Creative Entrepreneur? By Isabelle Horvath; Gaëlle Dechamp

  1. By: Arrighetti, Alessandro; Gnarini, Daniela; Lasagni, Andrea; Semenza, Renata
    Abstract: The article contributes to the current debate on the relationship between migration and entrepreneurship, highlighting the evolution of processes and practices, from the traditional monoethnic firm towards new models, we defined as “plurinational”. It refers precisely to the cases, widespread in the evolving cosmopolitan society, where both entrepreneurs and workers belong to different nationalities. The article outlines the findings of a qualitative research study, based on interviews with a series of entrepreneurs of plurinational firms in Italy. Firstly, we found that plurinational firms originate from “weak ties” (through acquaintances and previous work experiences) rather than “strong ties” (through family and co-ethnic community networks). Secondly, far for being univocal models, we found a variety of plurinational entrepreneurships which derives from different scales of priority assigned by ownership or management to plurinationalism as “opportunity” or plurinationalism as “value”.
    Keywords: immigrant entrepreneurship,plurinationalism,migration,break-out strategies,organizational diversity,Italy
    Date: 2021
  2. By: Fossen, Frank M. (University of Nevada, Reno); Hossain, Mobarak (University of Nevada, Reno); Mukhopadhyay, Sankar (University of Nevada, Reno); Toth, Peter (University of Nevada, Reno)
    Abstract: Unavailable or expensive health insurance may hinder the transition of individuals from paid employment to entrepreneurship. The literature argues that the guaranteed availability of health insurance introduced by the Affordable Care Act (ACA) of 2010 could reduce this barrier to entrepreneurship and thereby increase entrepreneurial activity. In this paper, we investigate how much the cost of health insurance when leaving paid employment—given availability of health insurance—matters for the decision to become an entrepreneur. We use individual-level data from the Current Population Survey (CPS-ASEC) combined with county-level panel data on health insurance costs in local Health Insurance Exchanges (HIX) introduced by the ACA to estimate county-treatment fixed-effects regressions. The results indicate that increasing the premium of the benchmark HIX plan by $100 per month decreases the annual probability of entry into self-employment by 0.25 percentage points, which corresponds to 18% of the average annual entry rate.
    Keywords: entrepreneurship, health insurance, premium, deductible, MOOP
    JEL: I13 I11 J22 J23 L26
    Date: 2021–11
  3. By: Louise Lindbjerg; Theodor Vladasel
    Abstract: Technical human capital improves firms' invention outcomes, but generating innovation revenue may require distinct skills in bringing new ideas to market. We argue that former founders are endowed with execution skills, a generalist ability to create and exploit market gaps by acquiring and mobilizing resources, so entrepreneurial human capital enhances innovation in established organizations. Combining register and Community Innovation Survey data from Denmark, we show that entrepreneur hires are associated with higher sales from new products and services. This result is driven by founder hires in middle management, a hierarchical position where broader decision rights and resource access increase execution skills' effectiveness. Founder hires are more tightly linked to innovation new to the firm or market, rather than world, consistent with our prediction that execution skills help bring incremental improvements to market, but do not necessarily generate radical innovation. Together, our findings suggest that entrepreneurial human capital may help firms appropriate a larger share of the value their knowledge generates.
    Keywords: innovation, learning by hiring, entrepreneurship, execution skills, human capital, middle management
    JEL: J24 L23 M12 M21 M51
    Date: 2021–12
  4. By: Dafei Yin; Jing Li; Gaosheng Wu
    Abstract: Predicting the success of startup companies is of great importance for both startup companies and investors. It is difficult due to the lack of available data and appropriate general methods. With data platforms like Crunchbase aggregating the information of startup companies, it is possible to predict with machine learning algorithms. Existing research suffers from the data sparsity problem as most early-stage startup companies do not have much data available to the public. We try to leverage the recent algorithms to solve this problem. We investigate several machine learning algorithms with a large dataset from Crunchbase. The results suggest that LightGBM and XGBoost perform best and achieve 53.03% and 52.96% F1 scores. We interpret the predictions from the perspective of feature contribution. We construct portfolios based on the models and achieve high success rates. These findings have substantial implications on how machine learning methods can help startup companies and investors.
    Date: 2021–12
  5. By: Joachim Wagner (Leuphana University, Lueneburg, Institute for the World Economy, Kiel, and IZA, Bonn)
    Abstract: This paper uses firm level data from the World Bank Enterprise surveys conducted in 2019 and from the COVID-19 follow-up surveys conducted in 2020 in ten European countries to investigate the link between having a website before the pandemic and firm survival until 2020 .The estimated effect of web presence is statistically highly significant ceteris paribus after controlling for various firm characteristics that are known to be related to survival. Furthermore, the size of this estimated effect can be considered to be large on average. A web site helped firms to survive.
    Keywords: Web presence, firm survival, COVID-19, World Bank Enterprise Surveys
    JEL: D22 L20 L25 L29
    Date: 2021–04
  6. By: William L. Gamber
    Abstract: The creation of new businesses declines in recessions. In this paper, I study the effects of pro-cyclical business formation on aggregate employment in a general equilibrium model of firm dynamics. The key features of the model are that the elasticity of demand faced by firms falls with their market share and that adjustment costs slow the reallocation of employment between firms. In response to a decline in entry, incumbent firms' market shares increase, their elasticity of demand falls, and they increase their markups and reduce employment. To quantify the model, I study the relationship between variable input use and revenue in panel data on large firms. Viewed through the lens of my model, my estimates imply that for large firms, the within-firm elasticity of the markup to relative sales is 25 percent. I use the calibrated model to study shocks to entry, finding that a fall in entry can lead to a significant contraction in employment. A shock to entry that replicates the decline in the number of businesses during the Great Recession generates a prolonged 2.5 percent fall in employment in the model. Finally, I show that the declining correlation between revenue and variable input use over the past 30 years implies that the effect of entry on the business cycle has become stronger over time.
    Keywords: Macroeconomics; Heterogeneous firms; Business dynamics; Variable markups
    JEL: E24 E32 J23 L20
    Date: 2021–12–02
  7. By: Davide Melcangi; Javier Turen
    Abstract: We study the early stages of firm creation under imperfect information. Because startups make error-prone decisions due to rational inattention, the model generates both inefficient entry and labor misallocation. We show that information frictions alter the effects of lump-sum transfers to startups: the total employment gain is amplified due to an unintended increase in inefficient entry, most entrants hire fewer workers, and misallocation goes up. The transfer makes low-size, previously dominated actions profitable, affecting the entire endogenous learning problem and making even productive startups lean toward more conservative hiring. We show that this novel information channel works against well-known mechanisms (for example, financial frictions) and also dampens the effects of alternative policies such as wage subsidies.
    Keywords: startups; rational inattention; firm subsidy
    JEL: D82 D83 E60 H25
    Date: 2021–12–01
  8. By: Murat Seker (Turkish Airlines Headquarter, Istanbul); Mehmet Fatih Ulu (Koc University, Istanbul)
    Abstract: The regulatory environment in a country is an important factor that affects firm performance. This study investigates the impact of a particular regulation – license requirements for certain firm activities – on the innovation performance of Indian firms in the 1990s. Using a unique firm-level panel data set, it shows that the removal of license requirements led to an eight percentage points higher innovation rate within two years following the reform. We measure innovation as the introduction of new product varieties that had not been produced by the firm before. It takes a longer time for firms to innovate in industries in which they were not producing before. The conclusions in this study are also robust to the inclusion of controls for other policy reforms that occurred during the period of licensing reform. They also persist in tests with different subgroups of firms and with the use of alternative estimation methods.
    Keywords: Innovation, research and development, regulatory environment, regulations, industrial policy, India.
    JEL: L11 L52 O14 O31 O3
    Date: 2022–01
  9. By: Nobuo Kobayashi (School of Economics, Kwansei Gakuin University); Takeshi Mori (Nomura Research Institute)
    Abstract: This paper presents an analysis of factors that promote and suppress the regional start-up activities of knowledge-intensive business services (KIBS) in Japan, based on the Digital Capability Index (DCI). The results showed that rapid progress in the digitization of public services and local residents f high ICT skills were factors that promoted KIBS start-ups. In addition, the results revealed that the establishment of a high-speed information and communication environment in the region has promoted T-KIBS startups, which utilize the Internet. Regarding factors not included in the DCI, the results showed a positive effect of the concentration of human resources and business establishments in metropolitan areas, which was in line with the findings of previous studies. In contrast, the start-up rates of T-KIBS were high in areas where the ratios of day and night populations were low. This finding suggests that although the main customers of T-KIBS are companies in metropolitan areas, such as Tokyo and Osaka, they locate their offices in the suburbs, where commercial rents are lower than in urban areas.
    Keywords: Knowledge Intensive Business Services (KIBS), Digital Capability Index (DCI), start-up activity
    JEL: L26 L84 L86 R30
    Date: 2022–01
  10. By: Munemo, Jonathan
    Abstract: As Chinese loans to Africa have been on an upward trajectory for more than a decade, there are questions about the economic consequences that large scale borrowing from China has on African economies. Jonathan Munemo investigates the impact these rising loans have on entrepreneurship and finds that African countries with a higher percentage of economic infrastructure loans have greater entrepreneurship in the form of new business startups.
    Date: 2021
  11. By: McCann, Fergal (Central Bank of Ireland); McGeever, Niall (Central Bank of Ireland); Yao, Fang (Central Bank of Ireland)
    Abstract: Using survey data from a representative sample of Irish Small and Medium Enterprises (SMEs), we study how firms are likely to recover under macroeconomic forecasts of the pandemic recovery. The rate of financial distress among firms is expected to fall under baseline forecasts from a peak of 12 per cent in 2020 to 7 per cent by 2024. We find that those firms that struggle to recover by the end of our scenario window were mostly unprofitable or distressed prior to the pandemic. Beyond our baseline case, we further model three alternative recovery scenarios to study the effect of fiscal support tapering, a partial recovery due to structural change in sectoral demand, and a financing gap driven by credit risk retrenchment by lenders. Our findings highlight the continued importance of “bridging” liquidity finance provision to ensure the long term solvency of viable firms.
    Date: 2021–12
  12. By: Grimm, Michael (University of Passau); Soubeiga, Sidiki (University of Passau); Weber, Michael (World Bank)
    Abstract: Most support programs targeted at small firms in low- and middle-income countries fail to generate transformative effects at a large scale due to bad targeting, too little flexibility, and the limited size of the support, among others. This paper assesses the short-term effects of a randomized targeted Government support program to small and medium-size firms that have been selected based on a business plan competition. One group received large cash grants of up to US$8,000, with flexible conditions of use. A second group received grants of an equally important size but earmarked to business development services and thus less flexible and with a required own contribution of 20 percent. A third group serves as a control group. All firms operate in agribusiness or related activities in a semi-urban area. An assessment of the short-term impacts shows that beneficiaries of cash grants engage in better business practices, such as formalization and bookkeeping. They also invest more. Yet, this does not translate into higher profits and employment. There is no effect on investment and business practices among beneficiaries of grants for business development services. Yet, both treatment groups show a higher ability to innovate relative to the control group. The results also show that cash grants cushioned the adverse effects of the COVID-19 pandemic. A further round of data collection will soon allow to assess the longer-term effects of both interventions which may differ from the short-term effects analyzed here as both interventions may need time to unfold their full effects.
    Keywords: firm support programs, cash grants, finance, matching grants, business development services, agribusiness, randomized controlled trial
    JEL: D22 O12 Q13
    Date: 2021–11
  13. By: Brindusa Anghel (Banco de España); Aitor Lacuesta (Banco de España); Federico Tagliati (Banco de España)
    Abstract: This paper analyses the financial literacy of Spanish enterprises with fewer than 50 employees (small enterprises) based on a survey conducted by the Banco de España between March and May 2021 as part of a project launched by the Organisation for Economic Co-operation and Development’s International Network on Financial Education. The survey includes a series of questions aimed at measuring firms’ financial literacy (financial knowledge, attitudes and behaviour) and the financial instruments held by them, the impact of the COVID-19 crisis on their activity and their level of digitalisation. The business owners should answer these questions as long as they are involved in taking financial decisions for the business. The main results of the survey suggest that, in Spain, owners of enterprises with fewer than 20 employees have little financial knowledge compared with those of enterprises with 20 to 49 employees. The same is true of firms in the accommodation and food service activities, construction and real estate activities, and other personal services sectors (the latter being a mixed group of sectors which would include firms in education, repairs, laundry services, etc.) compared with firms in other sectors. In terms of financial attitudes, business owners with ten or more employees have a greater tendency to set long-term financial goals than owners of firms with fewer than ten employees. Some financial behaviours (such as having strategies to cope with theft or considering different options for their financial product and service providers) are less widespread among smaller firms, especially those with fewer than five employees. Lastly, the percentage of Spanish small enterprises, regardless of size, whose owners have thought about how they will fund their own retirement is remarkably low. The use of capital instruments and other more recent types of financing (such as sustainable bonds, business angels or crowdfunding) is marginal in small Spanish enterprises. Likewise, the use of property and, particularly, business interruption insurance is limited among these firms. There are no discernible, significant differences in financial knowledge, attitudes or behaviours in terms of the gender of the business owner. Also, in general, the average financial literacy of small enterprises improves with the level of educational attainment only if the owner has specific training in business, economics or finance. Other characteristics positively associated with financial competencies, irrespective of educational attainment, are having more than ten years’ experience as a business owner or having a business owner for a parent. The impact of the COVID-19 crisis on the level of turnover, profit and debt was quite similar for firms with different degrees of financial literacy. However, the negative impact on employment and liquidity was somewhat lower for the higher quartiles of owners’ financial literacy. Additionally, higher financial knowledge was associated with being more likely to apply for and obtain a new loan or benefit from a public guarantee. Firms with less financial knowledge did make greater use of income transfers and rental moratoria. Lastly, there is a positive correlation between financial literacy and a higher pre-pandemic level of digitalisation in the firm. However, there is no such correlation between financial literacy and digital activities following COVID-19.
    Keywords: financial literacy, small enterprises, online survey, COVID-19, digitalisation
    JEL: C81 D25
    Date: 2021–11
  14. By: Isabelle Horvath (CREGO - Centre de Recherche en Gestion des Organisations [Dijon] - UBFC - Université Bourgogne Franche-Comté [COMUE] - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UB - Université de Bourgogne - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE]); Gaëlle Dechamp (COACTIS - COACTIS - UJM - Université Jean Monnet [Saint-Étienne] - UL2 - Université Lumière - Lyon 2)
    Abstract: The historical duality between artistic ambition and economic ambition has long been the subject of discussion among researchers. It is expressed in the creative and cultural sector where actors are forced to solve this complex equation between creative and commercial objectives. We propose in this article to understand how the creative entrepreneur manages to manage this paradoxical tension through the development of a collective intelligence located for a mutual and collective learning. The management of paradoxes and temporality allows us to discuss our results by proposing another paradoxical couple of organizations: creative ambition / economic ambition.
    Abstract: La dualidad histórica entre la ambición artística y la ambición económica ha sido objeto de investigaciones desde hace mucho tiempo. Se expresa en el sector creativo y cultural donde los actores se ven obligados a resolver esta compleja ecuación entre los objetivos creativos y los objetivos comerciales. En este artículo proponemos comprender cómo el empresario creativo logra manejar esta tensión paradójica a través del desarrollo de una inteligencia colectiva ubicada, que permite un aprendizaje mutuo y colectivo. La gestión de las paradojas y la temporalidad nos permiten discutir nuestros resultados al proponer otra pareja paradójica de las organizaciones: ambición creativa / ambición económica.
    Abstract: La dualité historique entre l'ambition artistique et l'ambition économique, est l'objet de discussions de chercheurs depuis longtemps. Elle s'exprime dans le secteur créatif et culturel où les acteurs sont contraints à résoudre cette équation complexe entre objectifs de création et objectifs commerciaux. Nous nous proposons dans cet article de comprendre comment l'entrepreneur créatif arrive à gérer cette tension paradoxale grâce au développement d'une Intelligence Collective située permettant un apprentissage mutuel et collectif. Le management des paradoxes et la temporalité nous permettent alors de discuter nos résultats en proposant un autre couple paradoxal des organisations : ambition créative/ambition économique.
    Keywords: Creative entrepreneurship,Collective intelligence,Learning,Paradoxes,Emprendimiento creativo,Inteligencia colectiva,Aprendizage,Paradojas,Entrepreneuriat créatif,Intelligence collective,Apprentissage
    Date: 2020

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