nep-ent New Economics Papers
on Entrepreneurship
Issue of 2022‒10‒10
nine papers chosen by
Marcus Dejardin
Université de Namur

  1. Persistence of Regional Entrepreneurship Patterns: Quantity and Quality of Regional Business Opportunity Perception By Jessica Birkholz
  2. Which entrepreneurs are financially constrained? By Miguel A. Ferreira; Marta C. Lopes; Francisco Queiro; Hugo Reis
  3. Windfall gains and entrepreneurial activity: Evidence from the Spanish Christmas lottery By Vicente J. Bermejo; Miguel A. Ferreira; Daniel Wolfenzon; Rafael Zambrana
  4. Discovering pre-entry knowledge complexity with patent topic modeling and the post-entry growth of Italian firms By Marco Guerzoni; Massimiliano Nuccio; Federico Tamagni
  5. Race and Gender in Entrepreneurial Finance By Michael Ewens
  6. Transforming Regional Knowledge Bases: A Network and Machine Learning Approach to Link Entrepreneurial Experimentation and Regional Absorptive Capacity By Jessica Birkholz
  7. Improving MSMEs’ access to start-up financing in ASEAN countries By Maran, Raluca
  8. Exploration or Exploitation: Innovation Behavior of SMEs and Large Firms during the COVID-19 Crisis By Jessica Birkholz; Jarina Kühn; Mariia Shkolnykova
  9. Information Frictions and Employee Sorting Between Startups By Kevin A. Bryan; Mitchell Hoffman; Amir Sariri

  1. By: Jessica Birkholz
    Abstract: The recognition of regional business opportunities is the crucial starting point of the entrepreneurial process that governs the persistence of regional entrepreneurship patterns. This persistence depends on the quantity of perceived opportunities and the quality of opportunities perceived by regional inhabitants. However, it is unclear which region-individual interactions relate to the quantity regional business opportunity perception and how long-standing regional entrepreneurship patterns are reflected in conceptions of entrepreneurship that govern the quality of perceived opportunities. A primary data collection in German regions with distinct long-standing entrepreneurship patterns assessed two main aspects. First, the regional embeddedness of respondents on four levels - actor, network, environmental, and cultural - is set in relation to the likelihood of opportunity perception. Second, an implicit measurement of mental representations of entrepreneurship is examined. The mental representations of entrepreneurship, reflecting the conceptions of entrepreneurship, are investigated to identify differences between the conceptions of entrepreneurship that come along with the long-standing regional entrepreneurship patterns and to detect differences between opportunity-perceivers and non-perceivers. The results suggest that regions reinforce long-standing entrepreneurship patterns with distinct individual-region relations that impact the quantity of perceived regional opportunities and distinct conceptualizations of entrepreneurship that shape the quality of perceived opportunities. Differences are observed for the perception of opportunities that are characterized by innovativeness versus those that are general in nature, showing that innovative opportunity perception is less dependent on the regional context than general opportunity perception.
    Keywords: Entrepreneurship; Opportunity Perception; Regional innovation system
    JEL: D91 L26 O33 R11
    Date: 2022–04
  2. By: Miguel A. Ferreira; Marta C. Lopes; Francisco Queiro; Hugo Reis
    Abstract: We study what type of entrepreneurs are a ected by financial constraints by exploiting age-based discontinuities in the amount of funding available through a public program for unemployed workers. Our sample links administrative data on 2.1 million eligible workers to the firms they create, spanning a wide range of skills, sectors and outcomes. We find that access to funding increases the rate of entrepreneurship and that the e ect is stronger for entrepreneurs who incorporate their business, especially for those who were in the top decile of the wage distribution before unemployment. Among incorporated entrepreneurs, the effect is strongest in the information and communication sector, followed by manufacturing. In terms of ex-post outcomes, we find that the effect is more pronounced for businesses in the upper half of the size, growth and profitability distributions. Our findings suggest that financial constraints hamper growth-oriented entrepreneurship.
    Keywords: Entrepreneurship, Unemployment insurance, Financial constraints, Incorporated firms
    JEL: G38 H74 J65 J68 L26
    Date: 2022
  3. By: Vicente J. Bermejo; Miguel A. Ferreira; Daniel Wolfenzon; Rafael Zambrana
    Abstract: We estimate the effect of cash windfalls arising from the Spanish Christmas Lottery on entrepreneurship. This lottery provides a unique setting as prizes are geographically concentrated and distributed among thousands of households. We find that lottery prizes lead to higher firm creation, startup job creation, and self-employment. The entrepreneurial response is more pronounced in regions with poorer access to finance. Firms created in winning provinces are larger, more profitable, and more likely to survive longer. Incumbent firms in winning provinces do not benefit but increase wages, suggesting a local labor market tightening. Our results suggests that regional cash windfalls can have long-lasting effects on business activity.
    Keywords: Entrepreneurship, Firm creation, Job creation, Cash windfall, Economic conditions, Disposable income, Aggregate effects, Financial constraints
    JEL: D14 G30 L26
    Date: 2022
  4. By: Marco Guerzoni; Massimiliano Nuccio; Federico Tamagni
    Abstract: Innovation studies have largely recognized the role of knowledge in fostering innovation and growth of entrants. Previous literature has focused on entrepreneurial and managerial capabilities and education and knowledge incorporated in material and immaterial resources. We assume that new firms need to possess different pieces of knowledge, but beyond diversity, business performance relies also on knowledge distinctiveness. In other words, the complexity of a knowledge base is not simply the recombination of homogeneous pieces of knowledge but it also depends on the specific nature of each of them. This paper develops a new complexity indicator able to capture the complexity of the knowledge base by applying a topic modeling approach to the analysis of patent text. We explore the empirical relation between pre-entry complexity of knowledge, as measured by our complexity index, and post-entry growth performance of a sample of Italian firms entering the market in 2009-2011, which we then follow over the period 2012-2021. Baseline results show a significant and positive association between knowledge complexity and growth, even after controlling for firm characteristics and year, sector and region fixed-effects. Robustness analysis reveal this positive effect is stronger in the medium-long run while relatively weaker for innovative SMEs.
    Keywords: pre-entry knowledge base; complexity; text analysis; patents; firm growth; post-entry performance.
    Date: 2022–09–21
  5. By: Michael Ewens
    Abstract: Economic frictions pervade the founding, financing, growing, and exiting of high-growth entrepreneurial firms. This article considers one friction that currently affects a small, but important, set of entrepreneurs: racial and gender discrimination. I first collect facts from a large empirical literature that show clear gender and race gaps in participation and financing of startups. Female founders manage 16-25% of all startups, while Black entrepreneurs rarely exceed 3% of the startup population. Conditioning on startups that successfully raise external finance has little impact on these gaps. The complexity of the entrepreneurial process presents several opportunities for discrimination to manifest itself and produce this gap. The article details the major discrimination theories and the empirical methods used to test for their presence. It then provides an extensive review of a growing empirical literature in entrepreneurial finance that tests these models. The pattern of evidence reveals a nuanced and incomplete story about bias, information asymmetry, and differential treatment of underrepresented founders. The article ends with an extensive set of research ideas motivated by the gaps in the entrepreneurship literature and recent developments in theory and measurement of discrimination.
    JEL: G24 J7 L26
    Date: 2022–09
  6. By: Jessica Birkholz
    Abstract: This study explores the regional innovation system characteristics that build the basis for the regional absorptive capacity of entrepreneurial knowledge. Regionalized patent data is combined with firm level and regional information for German regions over the period 1995 until 2015. Network analysis is applied to identify regional innovation system characteristics on three different layers: 1) cooperation between incumbent firms, 2) learning regimes, and 3) the technological knowledge base. Random forest analyses on basis of conditional inference classification trees are used to identify the most important characteristics for the regional absorption of entrepreneurial knowledge in general and on different efficiency levels. It is shown that characteristics on all three layers impact the regional absorption of entrepreneurial knowledge. Further, the direction and magnitude of the effect regional innovation system characteristics have on the regional knowledge absorption vary across different levels of absorption rates. It is concluded that for a successful implementation of policies to increase the impact of entrepreneurial knowledge on regional development, the regional innovation system needs to be monitored and adapted continuously.
    Keywords: Entrepreneurship, Regional absorptive capacity, Smart specialization
    JEL: L26 O33 D85
    Date: 2022–04
  7. By: Maran, Raluca
    Abstract: Lack of access to finance constitutes a major setback to the development of the MSME sector in ASEAN countries. MSMEs are confronted with stringent funding constraints in traditional lending and capital markets, in particular at the early stages of their activity. Demand and supply of capital to MSMEs thus entails more complex issues compared to the larger firms. This paper presents a number of policy actions that have the potential to mitigate the financing challenges faced by MSMEs in ASEAN at the start-up stage by enhancing the potential of alternative funding sources such as business angel investment, crowdfunding, venture capital investment and SME stock markets.
    Keywords: MSMEs; ASEAN; start-up financing; business angels; crowdfunding; venture capital; MSME stock markets; loans and guarantees
    JEL: G32
    Date: 2022–09–02
  8. By: Jessica Birkholz; Jarina Kühn; Mariia Shkolnykova
    Abstract: This paper contributes to the discussion on exploration and exploitation by analyzing the innovation behavior of SMEs and large firms during the first year of the COVID-19 pandemic in Germany. It provides a novel way to measure the type of firm innovation behavior in a dynamically changing environment. After collecting news articles about innovation activities conducted by firms, we applied text mining techniques to identify the positioning of each firm on the continuum from exploitation to exploration. The results of our analyses indicate three main dynamics: 1) all studied firms tend to conduct more explorative innovation activities during the COVID-19 crisis, 2) large and "technology-intensive" firms are more prone to perform explorative innovation activities than SMEs and firms that are not "technology-intensive", and 3) technology intensity is associated with explorative innovation behavior during the crisis. Our results suggest that considering technology intensity and the size of firms is important for designing effective policies during crises.
    Keywords: COVID-19, Crisis, Innovation, SME, Text Mining, News Data, Exploration, Exploitation
    JEL: O31 O33 L25
    Date: 2022–04
  9. By: Kevin A. Bryan; Mitchell Hoffman; Amir Sariri
    Abstract: Would workers apply to better firms if they were more informed about firm quality? Collaborating with 26 science-based startups, we create a custom job board and invite business school alumni to apply. The job board randomizes across applicants to show coarse expert ratings of all startups' science and/or business model quality. Making this information visible strongly reallocates applications toward better firms. This reallocation holds even when restricting to high-quality workers. The treatments operate in part by shifting worker beliefs about firms' right-tail outcomes. Despite these benefits, workers make post-treatment bets indicating highly overoptimistic beliefs about startup success, suggesting a problem of broader informational deficits.
    JEL: M50 M51
    Date: 2022–09

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