nep-ent New Economics Papers
on Entrepreneurship
Issue of 2022‒02‒28
eight papers chosen by
Marcus Dejardin
Université de Namur

  1. The Transformation of Self Employment By Innessa Colaiacovo; Margaret G. Dalton; Sari Pekkala Kerr; William R. Kerr
  2. Why Are Returns to Private Business Wealth So Dispersed? By Corina Boar; Denis Gorea; Virgiliu Midrigan
  3. The evolving contribution of R&D, advertising and capital expenditures for US-listed firms’ growth in sales, 1979-2018. A quantile regression analysis By Joel Rabinovich
  4. Caste, Courts and Business By Chakraborty, Tanika; Mukherjee, Anirban; Saha, Sarani; Shukla, Divya
  5. Remittances and firm performance in sub-Saharan Africa : evidence from firm-level data By Kabinet Kaba; Mahamat Moustapha
  6. Share Pledging in China: Funding Listed Firms or Funding Entrepreneurship? By Zhiguo He; Bibo Liu; Feifei Zhu
  7. What drives MSME's credit choices? Business versus personal loan account utilization in Kenya By Mulindi, Hillary; Josea, Kiplangat; Tiriongo, Samuel
  8. Emprendimiento en entornos rurales: Evidencia con la Encuesta Europea sobre Condiciones Laborales By Belloc, Ignacio

  1. By: Innessa Colaiacovo; Margaret G. Dalton; Sari Pekkala Kerr; William R. Kerr
    Abstract: Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in "hometown" local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-to-scale among large businesses, or a worsening of financing conditions and debt levels.
    JEL: D24 G51 J11 J24 J62 L26 M13 R11 R13
    Date: 2022–02
  2. By: Corina Boar; Denis Gorea; Virgiliu Midrigan
    Abstract: We use micro data from Orbis on firm level balance sheets and income statements to document that accounting returns for privately held businesses are dispersed, persistent, and negatively correlated with firm equity. We also show that firms experience large, fat-tailed, and partly transitory changes in output that are not fully accompanied by changes in their capital stock and wage bill. This implies that capital and labor choices are risky, as fluctuations in output are accompanied by large changes in firm profits. We interpret this evidence using a model of entrepreneurial dynamics in which return heterogeneity can arise from both limited span of control, as well as from financial frictions which generate differences in financial returns to saving. The model matches the evidence on accounting returns and predicts that financial returns to saving are half as large and dispersed as accounting returns. Financial returns mostly reflect risk, as opposed to collateral constraints which play a negligible role due to firms' unwillingness to expand and take on more risk.
    JEL: E2 E44 G32
    Date: 2022–01
  3. By: Joel Rabinovich (City University London)
    Abstract: This article presents new insights on the evolving contribution of different types of investments to the growth in sales of US nonfinancial listed firms during the 1979-2018 period. By means of quantile regressions it is observed an increasing contribution over time of intangible investment vis-à-vis a decline in capital expenditure both for high-growth and slow-growth firms. However, the impact of different types of intangible investment differs depending on the kind of firm. Whereas research and development (R&D) has a positive contribution for high-growth firms, only advertising has a positive effect for their slow-growth peers.
    Keywords: Firm growth,Fast-growth firms,Quantile Regression,Intangibles
    Date: 2022–01–21
  4. By: Chakraborty, Tanika (Indian Institute of Management); Mukherjee, Anirban (University of Calcutta); Saha, Sarani (Indian Institute of Technology Kanpur); Shukla, Divya (Indian Institute of Technology Kanpur)
    Abstract: We study the role of formal institutions of contract enforcement in facilitating investments in small and medium firms(MSME). In a framework where established entrepreneurs can enforce contracts informally using their network ties and hierarchical advantage, we argue that an efficient formal judiciary helps entrepreneurs without any ties to informal business networks, disproportionately more. We test our theoretical prediction using a novel administrative panel-data from Indian courts and the nationally representative MSME survey data. Empirically, we treat entrepreneurs from disadvantaged castes (SC-ST) as those without traditional business-network ties. We find that improvement in court quality has a disproportionately larger impact on the investment decisions of SC-ST entrepreneurs. On average, if the time taken for a court to clear all existing cases reduces by 1 year, the initial gap in the probability of investing, between SC-ST and other entrepreneurs, gets reduced by 0.6-0.7 percentage points.
    Keywords: judiciary, Duration Index, MSME, entrepreneurship
    JEL: K12 L26 O17
    Date: 2022–01
  5. By: Kabinet Kaba (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Mahamat Moustapha (Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres, LEDa - Laboratoire d'Economie de Dauphine - CNRS - Centre National de la Recherche Scientifique - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres)
    Abstract: Sub-Saharan African firms face enormous obstacles to their development. The main constraints to business performance identified are poor access to finance and a weak domestic market. In this paper, we examine how international remittances affect firms' performance. Specifically, we investigate the role of remittances on capital accumulation, sales, and employment in 34,010 firms operating in 42 Sub-Saharan African countries between 2006 and 2020. Using a fixed-effect instrumental variable approach to control for the endogeneity of remittances, we find that international remittances positively affect the share of capital held by nationals in manufacturing firms. Moreover, international remittances positively affect sales in non-manufacturing firms, while a negative effect on the sales of manufacturing firms is observed. Regarding the effect of remittances on employment, we find a positive impact on both manufacturing and non-manufacturing firms. Heterogeneity tests suggest that the effect of remittances on firms' performance is larger in less financially developed and non-resource-rich countries. As for the negative impact of remittances on sales in manufacturing firms, the results show that it is entirely due to small firms. Finally, using remittances per capita instead of remittances relative to GDP, similar result are found.
    Keywords: Remittances,Firm Performance,Entrepreneurship,Saving and Capital Investment,Firm Employment,Africa
    Date: 2021
  6. By: Zhiguo He; Bibo Liu; Feifei Zhu
    Abstract: This paper studies the connection between share pledging and entrepreneurial activities in China, challenging the common wisdom that share pledging funds circle back to the listed firms. Share pledging funds are at the discretion of the shareholders who pledge their publicly traded shares, and survey evidence shows that a majority of the largest shareholders (67.3%) used pledging funds outside the listed firms. By linking firm registration data with share pledging data, we show a positive relation between shareholders’ pledging transactions and entrepreneurial activities. Utilizing the launch of the exchange market in 2013 as a quasi-natural experiment that favors share pledging by natural person shareholders against that by legal entity shareholders, our difference-in-differences (DiD) analysis shows natural person shareholders increased their entrepreneurial activities significantly in response to the policy shock, relative to legal entity shareholders. In addition to various robustness checks, we also show that shareholders with better access to share pledging invest more heavily in industries with above-median growth potential.
    JEL: G15 G23 O16 O53
    Date: 2022–02
  7. By: Mulindi, Hillary; Josea, Kiplangat; Tiriongo, Samuel
    Abstract: With most economies seeking to tap on MSMEs to navigate beyond the devastating impact of Covid-19, this paper seeks to create an understanding of the MSMEs demand-side credit perspectives. Using 279 MSMEs from the KBA Inuka Enterprise program, we anchor our analysis on a three-step probit model with sample selection to examine the choices on the utilization of business versus personal accounts among MSMEs. The results reveals that the level of MSMEs turnover affect the choice to borrow, who to borrow from and the type of loan to pursue (between personal and business loan). However, the tendency of MSMEs with turnovers of over Ksh 500,000 leaning more towards the utilization of personal over business accounts remains a puzzle. Further, the age of enterprise is important for the decision to take a bank loan or other loans, with the implication that MSMEs need to have a long-term view over their businesses to be attractive to long-term funders (banks). Heterogeneity across the industry is evident and it influences MSMEs credit choices. The gender of MSME owner influences the use of a business or personal account for loans, as the results indicate men use their business accounts more than women. Lastly, registration status of MSMEs matters in accessing business loans. From the policy perspective, discussions around lessening the credit accessibility constraints imposed by turnover levels, the age of enterprise, industry of operation, gender and registration status of enterprises are key.
    Date: 2022
  8. By: Belloc, Ignacio
    Abstract: This paper analyses the differences between earnings and market work time between the self-employed (entrepreneurs) and employed workers in 35 European countries. In addition, we analyse the determinants of the decision to become a self-employed. We develop an empirical analysis of the determinants of earnings, working hours and self-employment, paying special attention to the effect of the geographical environment of workers’ residence. To do this, we use the 2015 European Working Conditions Survey (2015 EWCS) and collect information for all workers aged between 16 and 65, in order to perform a descriptive and econometric analysis. In the econometric analysis, we ran three models and found that workers living in rural settings are more likely to be self-employees and that engaging in self-employment in rural settings is associated with significantly lower monthly incomes. Our results also show that the self-employed devote more time to the labour market, although this is not reflected in higher end-of-month earnings.
    Keywords: Earnings, European Working Conditions Survey, rural areas, self-employment, work hours.
    JEL: J14 L26 M21 O57
    Date: 2022–01–18

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