nep-ent New Economics Papers
on Entrepreneurship
Issue of 2022‒02‒21
eighteen papers chosen by
Marcus Dejardin
Université de Namur

  1. The wee divergence: Business creation and political turmoil in Ireland before 1900 By Adams, R. J. C.; Campbell, Gareth; Coyle, Christopher; Turner, John D.
  2. Can interactive online training make high school students more entrepreneurial? Experimental evidence from Rwanda By Lafortune, Jeanne; Pugatch, Todd; Tessada, José; Ubfal, Diego
  3. Firms in (Green) Public Procurement: Financial strength indicators’ impact on contract awards and its repercussion on financial strength By Christopher F Baum; Arash Kordestani; Dorothea Schäfer; Andreas Stephan
  4. Defaulting Alone: The Geography of Sme Owner Numbers and Credit Risk in Hungary By Csaba Burger
  5. Going solo: how starting solo self-employment affects incomes and well-being By Jonathan Cribb; Xiaowei Xu
  6. An Integrative Framework for Formal and Informal Entrepreneurship Research in Africa By Richard Adu-Gyamfi; John Kuada; Simplice A. Asongu
  7. Artificial Intelligence and Reduced SMEs' Business Risks. A Dynamic Capabilities Analysis During the COVID-19 Pandemic By Drydakis, Nick
  8. Firm innovation and generalized trust as a regional resource By Bischoff, Thore Sören; Hipp, Ann; Runst, Petrik
  9. Learning to learn: Experimentation, entrepreneurial capital, and development By William F. Maloney; Andrés Zambrano
  10. Boosting social entrepreneurship and social enterprise development in Slovenia: In-depth policy review By OECD
  11. AI technologies and employment. Micro evidence from the supply side By Giacomo Damioli; Vincent Van Roy; Daniel Vertesy; Marco Vivarelli
  12. Sustainable Entrepreneurship and Innovation. Addressing the Grand Challenges through Radical Change and Open Innovation. By Chistov, Valery; Tanwar, Sunita; Yadav, C.S.
  13. Innovation and employment: a short update By Marco Vivarelli
  14. Shared Destinies? Small Banks and Small Business Consolidation By Claire Brennecke; Stefan Jacewitz; Jonathan Pogach
  15. Do firms care about peers when choosing to go circular? Peer effect among Italian firms in the introduction of circular innovation By Elisa Chioatto; Susanna Mancinelli; Francesco Nicolli
  16. Subsidies and innovation in the recent financial crisis By Giebel, Marek; Kraft, Kornelius
  17. A hidden source of innovation? Revisiting the impact of initial vocational training on technological innovation By Matthies, Eike; Thomä, Jörg; Bizer, Kilian
  18. Empleo y salarios en las micro, pequeñas y medianas empresas. Una reflexión a partir de los casos de México y la Unión Europea By Malo, Miguel A.

  1. By: Adams, R. J. C.; Campbell, Gareth; Coyle, Christopher; Turner, John D.
    Abstract: What effect does political instability in the form of a potential secession from a political union have on business formation? Using new measures of business creation and political instability in Ireland during the late nineteenth-century, we test whether increased political instability arising from the Home Rule movement resulted in reduced entrepreneurial activity and business investment. We find that increased political instability led to a significant divergence of business creation between Scotland and Ireland. Our findings suggest that the effects of political instability on entrepreneurship were most acute in the parts of Ireland that were most concerned by potential changes.
    Keywords: Ireland,Scotland,Home Rule,entrepreneurship,political risk,uncertainty
    JEL: D80 L26 N43 N93
    Date: 2022
  2. By: Lafortune, Jeanne; Pugatch, Todd; Tessada, José; Ubfal, Diego
    Abstract: We study the short-run effects of a gamified online entrepreneurship training offered to high school students in Rwanda during the COVID-19 pandemic. Using a randomized controlled trial, we estimate sizeable effects of the 6-week training on entrepreneurial activity. One month after the training, participants in schools offered the training were much more likely to own a business than participants in control schools. The training induced students to participate more actively in their school's business club, to undertake more business-oriented actions, to improve their business practices, and to interact more with other youth and family members about their business ideas. We hypothesize that the training might have motivated treated students to sustain their business activities during the COVID-19 crisis.
    Date: 2022
  3. By: Christopher F Baum (Boston College; DIW Berlin); Arash Kordestani (Södertörn University); Dorothea Schäfer (DIW Berlin; Jönköping International Business School); Andreas Stephan (Linnaeus University; DIW Berlin)
    Abstract: We examine whether the financial strength of companies, in particular, small and medium-sized enterprises (SMEs) is causally linked to the award of a public procurement contract (PP), especially in the environmentally friendly “green” area (GPP). For this purpose, we build a combined procurement company data set from the Tenders Electronic Daily (TED) and the SME database AMADEUS, which includes ten European countries. First, we apply probit models to investigate whether the probability of winning the public tender depends on the company's financial strength. We then use the flexpanel DiD approach to investigate the question of whether the award has an impact on the future financial strength of the successful company. On the one hand, we find that a lower equity ratio and a higher short-term debt ratio increase the probability of being successful in a public tender. On the other hand, the success means that the companies can continue to work after the award with a lower equity ratio than comparable companies without an award, regardless of whether the company was successful in a traditional or a “green” public tender. We conclude from this that the success in a PP is a substitute for one's own financial strength and thus facilitates access to external financing. The estimation results differ depending on whether public procurement in general or the sub-group of sustainable public procurement is examined.
    Keywords: public procurement, green investment, public authorities, European Union
    JEL: H42 H44 C54
    Date: 2022–01–24
  4. By: Csaba Burger (Magyar Nemzeti Bank (Central Bank of Hungary))
    Abstract: The transition from the state ownership to market mechanisms in Hungary fundamentally altered the geography of domestic micro, small, and medium enterprises (SMEs). This study investigates the spatial and temporal evolution of owner numbers, using data on all Hungarian SMEs between 1991 and 2019 and across 175 regional districts. Then it explores the relationship between the number of owners and the probability of credit default by joining data from the Credit Registry (KHR) for the period between 2007 and 2019. The number of owners at an average SME sank from four in 1991 to two in 2019, with consistently higher averages in less populated regions. Meanwhile, SMEs with one owner only have up to twice as high credit default probability as SMEs with more owners over all geographies in all years. Therefore, regionally varying ownership structures mean regionally differing ownership and management practices and hence risk levels. These could be mitigated with targeted regional policy measures.
    Keywords: financial geography, ownership structures, credit risk, SMEs
    JEL: G21 G3 R3 R11 R1
    Date: 2022
  5. By: Jonathan Cribb (Institute for Fiscal Studies and Institute for Fiscal Studies); Xiaowei Xu (Institute for Fiscal Studies)
    Abstract: Using a large-scale panel data set, we trace the evolution of incomes and well-being around the entry into ‘solo self-employment’ – that is, running a business without employees. We find that solo self-employment is used to self-insure against employment shocks: employment rates fall and poverty rates rise in the run-up to entry, and many who fell out of employment report being dismissed or made redundant from their previous job. However, their average earnings do not fully recover within three years of entry. For those who move into solo self-employment directly from employee jobs, for whom this transition is more likely to have been voluntary, earnings remain lower and poverty rates higher for at least two years after entry. Despite the effect on incomes, becoming solo self-employed is associated with improvements in well-being across a number of measures. We see a large and sustained rise in job satisfaction, even among groups who are likely to be using solo self-employment to self-insure. Comparing entries into solo self-employment with entries into or moves between employee jobs, we find that well-being trajectories are remarkably similar despite significantly lower earnings in solo selfemployment. This suggests that there may be intangible benefits that compensate for lower earnings, that (on average) apply even to those who are ‘pushed’ into solo self-employment.
    Date: 2020–07–16
  6. By: Richard Adu-Gyamfi (Research Africa Network, Botswana); John Kuada (Aalborg University, Denmark); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: It is a well-established practice of many Sub-Sahara African (SSA) governments to aid entrepreneurs within both the formal and informal sectors in order to enhance their performance and growth. Unfortunately, there is no agreed method by which governments can differentiate between entrepreneurs and target them with the appropriate promotion policies. Thus, despite the good intentions, entrepreneurship policy initiatives have been incorrectly targeted, poorly implemented and without the desired results, since different entrepreneurs may require different forms of assistance. Some scholars have suggested that without a context-specific classificatory guide, policymakers are unlikely to be accurate in their assessment of the growth capabilities of prospective candidates for specific promotion initiatives and this can explain some of the policy failures. This observation has motivated the present paper. Our objective is to provide a framework that helps identify the different contextual dimensions influencing formal and informal enterprise creation processes in SSA.
    Keywords: entrepreneurship; formal; informal; Africa
    Date: 2022–01
  7. By: Drydakis, Nick
    Abstract: The study utilises the International Labor Organization's SMEs COVID-19 pandemic business risks scale to determine whether Artificial Intelligence (AI) applications are associated with reduced business risks for SMEs. A new 10-item scale was developed to capture the use of AI applications in core services such as marketing and sales, pricing and cash flow. Data were collected from 317 SMEs between April and June 2020, with follow-up data gathered between October and December 2020 in London, England. AI applications to target consumers online, offer cash flow forecasting and facilitate HR activities are associated with reduced business risks caused by the COVID-19 pandemic for both small and medium enterprises. The study indicates that AI enables SMEs to boost their dynamic capabilities by leveraging technology to meet new types of demand, move at speed to pivot business operations, boost efficiency and thus, reduce their business risks.
    Keywords: SMEs,Business Risks,COVID-19 pandemic,Artificial Intelligence,Dynamic Capabilities
    JEL: O33 Q55 L26
    Date: 2022
  8. By: Bischoff, Thore Sören; Hipp, Ann; Runst, Petrik
    Abstract: Generalized trust within regions represents an important firm resource. We provide empirical evidence on the impact of trust among people in regions on innovation using two distinct data sets. The first one contains firm-level data and is used to analyze how trust affects firm-level innovation in small and medium sized enterprises (SMEs). The second data set is used to analyze the trust-innovation relationship within regions. It allows us to capture innovation in the form of patents and explore spatial patterns. Our observation period ranges from 2004 to 2019. We apply a multilevel approach, panel data models as well as spatial techniques. The results show that generalized trust has a positive impact on a firm's innovativeness, which is particularly strong for small and medium-sized firms and in regions with relatively low levels of trust.
    Keywords: Trust,innovation,regional innovation systems,SMEs
    JEL: D02 D83 O12 O18 O31
    Date: 2022
  9. By: William F. Maloney; Andrés Zambrano
    Abstract: This paper models an entrepreneur's choice between investing in a safe activity or experimenting with a new risky one, and how much to invest in entrepreneurial capital" that permits more effective use of arriving information on the latter- how much to learn how to learn. Optimal investment depends on the cost, the distance from the entrepreneurial frontier, and non-monotonically, on the expected return on the risky activity, leading to three learning regimes including a potential resource curse. The model is supported by historical evidence from Latin America and simulations of the relative decline of the Chilean versus US copper industries
    Keywords: Learning, Experimentation, Entrepreneurial capital, Development, Resource curse
    JEL: O31 O32 O13 D81
    Date: 2022–01–17
  10. By: OECD
    Abstract: This report provides an in-depth analysis of the policy ecosystem in place for social entrepreneurship and social enterprises in Slovenia. It identifies the country’s strengths and challenges and provides policy recommendations to support the development of a stronger policy ecosystem. After an overview of the socio-economic and political context (Chapter 1), the report describes the conceptual framework for social enterprises and the social economy (Chapter 2); and analyses institutional and legal frameworks for social enterprises (Chapter 3), access to finance for social enterprises (Chapter 4), and access to public and private markets (Chapter 5), along with social impact measurement and reporting for social enterprise development (Chapter 6).
    Keywords: local development, policy ecosystem, social economy, social enterprise, social entrepreneurship, social impact, social innovation
    JEL: L31 L33
    Date: 2022–02–08
  11. By: Giacomo Damioli (European Commission, Joint Research Centre (JRC), Ispra, Italy); Vincent Van Roy (European Commission, Joint Research Centre (JRC), Seville, Spain); Daniel Vertesy (International Telecommunication Union, Geneva, Switzerland – UNU-MERIT, Maastricht, The Netherlands); Marco Vivarelli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore – UNU-MERIT, Maastricht, The Netherlands – IZA, Bonn, Germany)
    Abstract: This study is based on a worldwide longitudinal dataset of 3,500 front-runner companies that patented AI technologies over the period 2000-2016. Our results support the labor-friendly nature of product innovation in the AI supply industries.
    Keywords: Innovation, artificial intelligence, patents, employment
    JEL: O33 O31
    Date: 2022–01
  12. By: Chistov, Valery; Tanwar, Sunita; Yadav, C.S.
    Abstract: Sustainable Entrepreneurship and Innovation are essential tools in the transition towards a more fair, healthy, and sustainable society. This chapter gives an overview of the two decades of research on the topic and discusses the current state of its application. It shows that the current literature lacks a more profound theoretical and practical investigation. Nevertheless, these gaps may be covered soon, as the number of publications in this area is growing. Additionally, the chapter explores the importance of a radical approach, open innovation strategies, and collaboration to foster sustainable entrepreneurship and innovation and tackle the Grand Challenges of modern society.
    Date: 2021–12–04
  13. By: Marco Vivarelli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore – UNU-MERIT, Maastricht, The Netherlands – IZA, Bonn, Germany)
    Abstract: This note explores the theoretical and empirical literature on the link between innovation and employment, investigated at the macro, sectoral and micro level. While economic theory cannot provide a clear answer to the question whether new technologies are labor-saving or labor-friendly, most of the empirical studies point to a positive relationship between innovation and employment. Yet, this effect turns out to be small in magnitude and limited to product innovation and high-tech sectors, while labor saving impacts can be detected in the downstream more traditional sectors and firms.
    Keywords: Innovation, technological change, employment, job-creation,job-destruction, technological unemployment
    JEL: O33
    Date: 2022–01
  14. By: Claire Brennecke; Stefan Jacewitz; Jonathan Pogach
    Abstract: We identify a new source of bank consolidation in the United States. For decades, both the financial and real sides of the economy have experienced considerable consolidation. We show that banking-sector consolidation is, in part, a consequence of real-sector consolidation; because small banks are a disproportionate source of small-business credit, they are disproportionately exposed to shocks to small-business growth. Using a Bartik instrument based on national small-business trends and county-level industry exposure, we show that changes to the real-side demand for small-business credit is partially responsible for the relative decline in small banks’ deposits, income, and loan growth.
    Keywords: Consolidation; Banks and banking; Community banking; Relationship lending; Bartik instrument
    JEL: G21 G34 L25 R12
    Date: 2022–01–14
  15. By: Elisa Chioatto (University of Ferrara – Department of Economics and Management (Ferrara, Italy); SEEDS); Susanna Mancinelli (University of Ferrara – Department of Economics and Management (Ferrara, Italy); SEEDS); Francesco Nicolli (University of Ferrara – Department of Economics and Management (Ferrara, Italy); SEEDS)
    Abstract: The challenges posed by the achievement of the circular economy require the adoption of new innovative practices that are not simply green but specifically related to closing, narrowing, and extending resources cycles (Bocken et al., 2016). Understanding the relationship between eco-innovation and circular innovation and what factors favour their implementation is, therefore, pivotal. This paper offers new pieces of evidence on the role of social norms in increasing firms' propensity to adopt circular innovation. Drawing upon the literature corpus confirming the influence of the social context on firms' decision to innovate and enriching this analysis with recent evidence on the effect of peers in firm decision-making, the present study relies on survey data on 3270 Italian Small and Medium Enterprises with the extent to investigate the effect of peers behaviour in firms decision to adopt circular innovation. The empirical analysis shows a positive relationship between increased investment in circular innovation by peers and the decision of firms to innovate in the same realm. These results, therefore, offer a relevant starting point for the design of policy guidelines and organisational strategies in favour of the circular economy. Social norm information and comparison can be indeed complementary tools to the traditional market and regulatory levers for circular innovation adoption.
    Keywords: Circular innovation, Circular Economy, Eco-Innovation, Social Norm, Peer Effect
    Date: 2022–01
  16. By: Giebel, Marek; Kraft, Kornelius
    Abstract: We analyze the impact of subsidies on R&D expenditures in the financial crisis and beyond. The financial crisis has led to considerable turmoil in financing and, as a result, to restrictions of firms' access to external financing. Utilizing this fact, we identify and analyze financing constraints in two ways. First, firm financing constraints are determined via their credit rating and second, restrictions from the supply side are identified via the firm's main banks capital reserves. The results of our empirical test imply that R&D investments of non-subsidized firms decrease during the crisis. This effect is particularly pronounced for firms that are affected by financing constraints on the firm or bank side. Finally, our results imply that subsidies can at least partially compensate for these negative effects.
    Keywords: R&D investment,financing constraints,financial crisis,R&D subsidies
    JEL: G01 G21 G24 G30 O16 O30 O31 O32
    Date: 2021
  17. By: Matthies, Eike; Thomä, Jörg; Bizer, Kilian
    Abstract: While an increasing number of studies postulate that vocational education and training (VET) activities have a positive impact on the innovative capacity of training companies, empirical evidence on the subject remains contradictory. This study exploits establishment data from a representative survey of German companies to estimate the correlations between firms' participation in initial VET and their innovation outcomes. The results based on linear probability models show that the impact of VET activity on innovation is indeed ambiguous. Overall, as expected, participation in initial VET has virtually no effect on radical product innovation. However, a positive impact of training apprentices is observed in case of incremental product innovation and process innovation activities. According to our estimates, this finding primarily applies to the case of microenterprises with fewer than ten employees. We conclude from this that active participation in the VET system primarily promotes the innovation activities of very small firms by stimulating knowledge diffusion in regional innovation systems and developing absorptive capacities at the company level. As a result, small-sized training firms should be more likely to succeed in overcoming - at least in part - some of their disadvantages in innovation.
    Keywords: Technological innovation,Vocational education and training (VET),Apprenticeships,SMEs
    JEL: I20 J24 O31
    Date: 2022
  18. By: Malo, Miguel A.
    Abstract: In this research, a reflection on the importance of micro-, small and medium enterprises in terms of employment and wages is built from the cases of Mexico and the European Union. The conceptual framework of global value chains is used to understand the potential differences of this type of enterprises and their role in the local economy. Based on the review carried out, a series of reflections are developed about the importance of these companies in the Mexican economy and their perspectives, taking into account the great trends of globalization and digitalization, as well as the possible impacts of the Covid-19 pandemic
    Keywords: small firms; employment; wages; development; global value chains
    JEL: F66 J0 M13
    Date: 2022–01–28

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