nep-ent New Economics Papers
on Entrepreneurship
Issue of 2022‒03‒14
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. The Transformation of Self Employment By Innessa Colaiacovo; Margaret Dalton; Sari Pekkala Kerr; William R. Kerr
  2. Estimating conditional treatment effects of EIB lending to SMEs in Europe By Alessandro Barbera; Áron Gereben; Marcin Wolski
  3. Government procurement and access to credit: firm dynamics and aggregate implications By Julian di Giovanni; Manuel García-Santana; Priit Jeenas; Enrique Moral-Benito; Josep Pijoan-Mas
  4. Artificial Intelligence and Reduced SMEs' Business Risks. A Dynamic Capabilities Analysis during the COVID-19 Pandemic By Drydakis, Nick
  5. Credit constrained firms and government subsidies: evidence from a European Union program By Eszter Balogh; Adám Banai; Tirupam Goel; Péter Lang; Martin Stancsics; Előd Takáts; Álmos Telegdy
  6. Market Power in Small Business Lending: A Two-Dimensional Bunching Approach By Natalie Cox; Ernest Liu; Daniel Morrison
  7. The Role of Regulation and Bank Competition in Small Firm Financing: Evidence from the Community Reinvestment Act By Panagiotis Avramidis; George Pennacchi; Konstantinos Serfes; Kejia Wu
  8. The real effects of FinTech lending on SMEs: evidence from loan applications By Ferreira, Miguel A.; Eça, Afonso; Prado, Melissa Porras; Rizzo, A. Emanuele
  9. Sustainable Development Goals (SDGs) Contribution to Entrepreneurial Intention: The Need for Innovative Reflexions By Rabiaa Romdhane; Islem Khefacha; Haykel Haj
  10. Impact of ethical practices on small and medium enterprises’ performance in Saudi Arabia: An Partial Least Squares-Structural Equation Modeling analysis By Turki Abalala; Md. Mazharul Islam; Md. Mahmudul Alam
  11. The Level of Entrepreneurship in India By sahoo, satyabrata

  1. By: Innessa Colaiacovo; Margaret 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.
    Keywords: Self-employment, small business, entrepreneurship, startup investment, occupational choice, financing.
    JEL: L26 D24 G51 J11 J24 J62 M13 R11 R13
    Date: 2022–02
  2. By: Alessandro Barbera; Áron Gereben; Marcin Wolski
    Abstract: We estimate heterogeneous treatment effects of the EIB fnancial support on European firms between 2008 and 2015. The relevant control groups are created with propensity score matching and the effects are estimated in a difference-in-differences framework, controlling for firm-level and country-sector-year fixed effects. We find that the positive effects of EIB-supported lending on job creation and investments were larger for smaller and younger firms. Moreover, we find evidence that longer maturities and more advantageous loan pricing are associated with larger employment and investment effects, while no larger impact is observed for larger loan volumes. Overall, the results suggest that benefits of the EIB support are rather observed on an intensive, rather than on an extensive, margin.
    Keywords: SMEs, EIB, intermediated loans, impact assessment, conditional treatment effects, difference-in- differences.
    JEL: G38 G21 G23
    Date: 2022–02
  3. By: Julian di Giovanni; Manuel García-Santana; Priit Jeenas; Enrique Moral-Benito; Josep Pijoan-Mas
    Abstract: We provide a framework to study how different allocation systems of public procurement contracts affect firm dynamics and long-run macroeconomic outcomes. We start by using a newly created panel dataset of administrative data that merges Spanish credit register loan data, quasicensus firm-level data, and public procurement projects to study firm selection into procurement and the effects of procurement on credit growth and firm growth. We show evidence consistent with the hypotheses that there is selection of large firms into procurement, that procurement contracts provide useful collateral for firms -more so than sales to the private sector- and that procurement contracts facilitate firm growth beyond the contract duration. We next build a model of firm dynamics with both asset-based and earnings-based borrowing constraints and a government that buys goods and services from private sector firms. We use the calibrated model to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. We find that granting procurement contracts to small firms, either by directly targeting them or by slicing large contracts into smaller ones, helps these firms grow and overcome financial constraints in the long run. However, we also find that reducing the average size of contracts -or making it less likely for large firms to access them- removes saving incentives for large firms, whose negative effects on capital accumulation can overcome the expansionary consequences for small firms and hence generate a drop in aggregate output.
    Keywords: Government procurement, financial frictions, capital accumulation, aggregate productivity
    JEL: E22 E23 E62 G32
    Date: 2022–02
  4. By: Drydakis, Nick (Anglia Ruskin University)
    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, artificial intelligence, dynamic capabilities
    JEL: O33 Q55 L26
    Date: 2022–02
  5. By: Eszter Balogh; Adám Banai; Tirupam Goel; Péter Lang; Martin Stancsics; Előd Takáts; Álmos Telegdy
    Abstract: We assess the effects of non-repayable subsidies on financially constrained and unconstrained Hungarian SMEs. Using rejected subsidy applicants as control group and bank queries to the credit-registry to identify firms that applied for but did not receive a loan, we show that subsidies generate a sizeable incremental impact on asset growth of constrained firms relative to unconstrained businesses. This effect, however, is transitory and does not translate into higher sales, profitability or productivity. Financing, therefore, may not be the primary hurdle for these SMEs, and credit constraints may reflect other shortcomings, such as lack of good management or viable projects.
    Keywords: SMEs, subsidies, credit constraints, emerging market economies, difference-in-differences, credit registry micro-data
    JEL: G38 G21 E58
    Date: 2021–11
  6. By: Natalie Cox (Princeton University); Ernest Liu (Princeton University); Daniel Morrison (Princeton University)
    Abstract: Do government-funded guarantees and interest rate caps primarily benefit borrowers or lenders under imperfect competition? We study how bank concentration impacts the effectiveness of these policy interventions in the small business loan market. Using data from the Small Business Administration's (SBA) Express Loan Program, we estimate a tractable model of bank competition with endogenous interest rates, loan size, and take-up. We introduce a novel methodology that exploits loan "bunching" in the two dimensional contract space of loan size and interest rates, utilizing a discontinuity in the SBA's interest rate cap. In concentrated markets, we find that a modest decrease in the cap would increase borrower surplus by up to 1.5%, despite the rationing of some loans. In concentrated markets with a 50% loan guarantee, each government dollar spent raises borrower surplus by $0.64, boosts lender surplus by $0.34, and generates $0.02 of deadweight loss.
    Keywords: government, small business, loans, interest rates
    JEL: H81 E43
    Date: 2021–08
  7. By: Panagiotis Avramidis; George Pennacchi; Konstantinos Serfes; Kejia Wu
    Abstract: This paper analyzes how bank regulation that promotes greater access to credit impacts the financing of targeted small firms. It develops a model where banks compete with trade creditors to fund small firms and applies it to study the effects of the Community Reinvestment Act (CRA). The empirical tests reveal that a CRA-induced increase in bank loans reduces small firms’ use of relatively expensive trade credit. The effect is more profound in low- and medium-income areas where financial constraints are tighter due to low bank competition. The effect is also larger for small firms that operate in trade credit-dependent industries.
    Keywords: Competition; Regulation; Trade credit; Small business loans
    JEL: G14 G21 L13 L50 L49
    Date: 2022–02–17
  8. By: Ferreira, Miguel A.; Eça, Afonso; Prado, Melissa Porras; Rizzo, A. Emanuele
    Abstract: We show that FinTech lending affects credit markets and real economic activity using a unique data set of a Peer-to-Business platform for which we have the universe of loan applications. We find that FinTech serves high quality and creditworthy small businesses who already have access to bank credit. Firms use FinTech to obtain long-term unsecured loans and reduce their exposure to banks with less liquid assets, stable funds, and capital. We find that access to FinTech spurs firm growth, employment and investment relative to firms that get their loan application rejected. In addition, firms with access to FinTech increase leverage and substitute long-term bank debt with FinTech debt. Our findings suggest that FinTech allows firms to preserve financial flexibility, reduce their bank dependence and exposure to banking shocks. JEL Classification: G21, G23, O33
    Keywords: bank relationships, debt structure, FinTech, firm growth, small business lending
    Date: 2022–02
  9. By: Rabiaa Romdhane (ISG BIZERTE); Islem Khefacha (LAREMFIQ - Laboratory Research for Economy, Management and Quantitative Finance - Institut des Hautes Etudes Commerciales (Université de Sousse), FSEG Mahdia - Faculté des Sciences Économiques et de Gestion de Mahdia [Univ Monastir] - UM - Université de Monastir - University of Monastir); Haykel Haj (IHEC Sousse - IHEC)
    Keywords: OECD countries,GMM,SDGs,Sustainability
    Date: 2021–12–20
  10. By: Turki Abalala (King Abdulaziz University); Md. Mazharul Islam (King Abdulaziz University); Md. Mahmudul Alam (UUM - Universiti Utara Malaysia)
    Abstract: Purpose: The real challenge of establishing and maintaining business ethics in small and medium enterprises (SMEs) has become a global issue. We investigated the driving forces of ethical practices (EP) and its contribution to the overall performance in businesses. Design/methodology/approach: This study collected primary data from 117 small and medium enterprises (SMEs) in Saudi Arabia by using a well-designed questionnaire survey amongst SMEs and draw inferences using the structural equation modelling (SEM) analysis. Findings/results: Findings suggested that top management's characters and ethical commitment, ethical policy and culture of the organisation and external pressure positively influence the ethical practice in the organisation, which leads to a significant positive impact on both financial and non-financial performances of SMEs. But the level of fraud and corruption and the level of monitoring show a mixed moderating effect on the relationships between ethical practice in the organisation and business performance. Practical implications: The findings of this research will help SMEs' administrators and managers, as well as the companies to instil workplace ethics, which manages the level of business performance. The policymakers and other relevant authorities can also utilise the outcomes of this study to develop ethical policy guidelines and frameworks to improve SMEs' competitiveness and sustain their companies in the long run. Originality/value: The unique feature of this research is that both the causes and effects of EP are considered in one integrated model. This gives a more vivid picture of the ethical issue in a business organisation.
    Keywords: Business Ethics,Business Performance,Ethical Practices,Ethical Policy and Culture,Ethical Commitment,Small and Medium Enterprises (SME)
    Date: 2021–08–25
  11. By: sahoo, satyabrata (Shree Guru Gobind Singh Tricentenary University: Gurgaon, Haryana, IN)
    Abstract: Entrepreneurship plays a paramount role in the magnification and development of the economy of any country. Entrepreneurship acts as a vaccine for a nation's economic prosperity, leading to the generation of employment opportunities, national income, rural development, technological development, industrialization, export promotion, etc. Many institutes and companies are involved in entrepreneurship development activities, and some join these programs as a stepping stone to becoming an entrepreneur. Entrepreneurs convert conceptions into economic opportunities through innovations considered a significant source of competitiveness in an increasingly globalizing world economy. Ergo, most regimes strive to augment the supply of competent and ecumenically competitive entrepreneurs in their respective countries. The primary purport of this research is to understand the paramountcy of entrepreneurship in India. Numerous factors need to be considered while expertise the significance of entrepreneurship. Entrepreneurs experience several opportunities and challenges inside the direction of pursuance in their goals and targets.
    Date: 2021–12–08

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