nep-ent New Economics Papers
on Entrepreneurship
Issue of 2022‒11‒14
ten papers chosen by
Marcus Dejardin
Université de Namur

  1. Natural Disasters and Entrepreneurship Activity: the Moderating Role of Country Governance By Boudreaux, Christopher; Jha, Anand; Escaleras, Monica
  2. The development and reconceptualization of entrepreneurial resilience By Satoshi KAWAKATSU; Tomoki SEKIGUCHI
  3. The Financial literacy of micro-entrepreneurs: evidence from Italy By Paolo Finaldi Russo; Ludovica Galotto; Cristiana Rampazzi
  4. Immigration and Entrepreneurship in Europe: cross-country evidence By Riillo, Cesare Fabio Antonio; Peroni, Chiara
  5. Corporate governance with crowd investors in innovative entrepreneurial finance: Nominee structure and coinvestment in equity crowdfunding By Coakley, Jerry; Cumming, Douglas; Lazos, Aristogenis; Vismara, Silvio
  6. German Financial State Aid during COVID-19 Pandemic: Higher Impact among Digitalized Self-Employed By Bertschek, Irene; Block, Jörn; Kritikos, Alexander S.; Stiel, Caroline
  7. Micro-entrepreneurs’ financial and digital competences during the pandemic in Italy By Alessio D'Ignazio; Paolo Finaldi Russo; Massimiliano Stacchini
  8. The EIF SME Access to Finance Index - October 2022 Update By Torfs, Wouter
  9. Improving Business Practices and the Boundary of the Entrepreneur : A Randomized Experiment Comparing Training, Consulting, Insourcing and Outsourcing By Anderson,Stephen J.; Mckenzie,David J.
  10. Bank lending to small firms: metamorphosis of a financing model By Paolo Finaldi Russo; Valentina Nigro; Sabrina Pastorelli

  1. By: Boudreaux, Christopher; Jha, Anand; Escaleras, Monica
    Abstract: The purpose of this paper is to investigate if a country’s quality of governance moderates the effect of natural disasters on start-up activity within that country. We test our hypotheses using a panel of 95 countries from 2006 to 2016. Our findings suggest that natural disasters discourage start-up activity in countries that have low-quality governance but encourage start-up activity in countries that have high-quality governance. Moreover, our estimates reveal that natural disasters’ effects on start-up activity persist for the short term (1–3 years) but not the long term. Our findings provide new insights into how natural disasters affect entrepreneurship activity and highlight the importance of country governance during these events.
    Keywords: country governance; entrepreneurship; institutions; natural disasters; start-ups
    JEL: L26 M13 O11 O43 Q54
    Date: 2022–10–22
  2. By: Satoshi KAWAKATSU; Tomoki SEKIGUCHI
    Abstract: The current entrepreneurial resilience research is a mixed bag—ranging from simply applying the construct of psychological resilience to entrepreneurs to focusing on the entrepreneur-specific aspect of resilience. This highlights three issues. First, the difference between psychological resilience and entrepreneurial resilience is not yet clear. Second, as observed in several previous studies, this ambiguity leads to the fallacy of directly correlating individual psychological resilience to business performance. Third, the extent to which entrepreneurial resilience as a trait affects firm performance remains unclear. These issues blur the essence of why resilience is important for entrepreneurial activity. To advance the literature, this article reconceptualizes entrepreneurial resilience as consisting of four elements: traits, processes, outcomes, and external factors, and argues that entrepreneurial resilience research should include and analyze all these elements. We also propose a methodology based on the reconceptualization, which paves the way for finding the significance of entrepreneurial resilience research.
    Keywords: resilience, entrepreneurial resilience, four factors of resilience, multi-level approach
    Date: 2022–07
  3. By: Paolo Finaldi Russo (Banca d'Italia); Ludovica Galotto (Banca d'Italia); Cristiana Rampazzi (Banca d'Italia)
    Abstract: Entrepreneurs, including those who run very small businesses or sole proprietorships, are often assumed to have sound financial skills as they make frequent financial decisions. This paper explores the issue by analysing the level of financial literacy (FL) of Italian micro-entrepreneurs in comparison with other countries and other Italian adults. The results, based on the 2020 Survey on the Financial Literacy of Italian Adults conducted by the Bank of Italy according to the OECD/INFE methodology, are threefold. First, Italian micro-entrepreneurs have quite low levels of FL by international standards. Second, compared with other Italians, business owners have only a slightly higher level of FL; this is mainly attributable to their higher income and more frequent use of financial services. Third, thanks to their slightly more advanced financial skills, micro-entrepreneurs are more likely to make better financial decisions than other adults. These findings suggest that strengthening the financial literacy of micro-entrepreneurs can have a positive impact on their ability to make better financial decisions and ultimately on the resilience and growth of their businesses.
    Keywords: financial literacy, financial behaviour, micro-entrepreneurs, SMEs
    JEL: G53 L26 J24
    Date: 2022–10
  4. By: Riillo, Cesare Fabio Antonio; Peroni, Chiara
    Abstract: This paper investigates the empirical link between migrations and entrepreneurship in European countries, for the first time drawing from a large sample of individuals sourced from the cross-country GEM survey. Specifically, the paper studies the impact of individuals' immigration status on entrepreneurial outcomes at all stages of the entrepreneurial process: interest in starting a new business, effectively starting, running a new business and managing an established company. The analysis uses a sequential probit model with sample selection to capture the dependence between entrepreneurial stages. It also distinguishes between different typologies of entrepreneurs (necessity and opportunity-driven, European and non-European; recent and long-standing immigrants). Additionally, it implements heteroscedasticity based instruments to address potential endogeneity issues. The study finds evidence that immigration has a positive effect on entrepreneurship. Immigrants are more willing to engage in entrepreneurship. Among those who started a new business, however, immigrants have lower chances than natives to succeed in the following stages of entrepreneurship.
    Keywords: Entrepreneurship; Immigration; Sequential Logit; Probit; sample selection; GEM.
    JEL: C25 D0 F22 J15 J6 J61 O15
    Date: 2022–09–12
  5. By: Coakley, Jerry; Cumming, Douglas; Lazos, Aristogenis; Vismara, Silvio
    Abstract: In innovative entrepreneurial finance markets, ventures raising funds target a set of heterogeneous “digital” investors using distinct governance mechanisms. We focus on the micro-functioning of equity crowdfunding (ECF) markets by investigating the differences in terms of agency issues and potential principal-principal conflicts arising from the coinvestment of angels or venture capitalists alongside crowd investors. The nominee governance structure, by allocating the same ownership and voting rights to all investors and aggregating them into a special purpose vehicle with the nominee company as sole legal owner, can reconcile such conflicts by mitigating agency and coordination problems. This structure enables angels and venture capital funds to exploit the wisdom of the crowd and crowd investors to free ride on the former’s due diligence and monitoring. Using a platform governance lens, this paper evaluates the performance of nominee versus direct ownership structure. Based a large sample of 1,103 successful and unsuccessful initial campaigns on the three largest equity crowdfunding platforms in the UK (namely Seedrs, Crowdcube, and SyndicateRoom), we document that nominee firms exhibit better short run and long run performance. Our results hold inter-platform between crowdfunding platforms as well as intra-platform, as confirmed by a quasi-natural experiment when the nominee approach became an option for startups raising capital on the Crowdcube platform. Our findings offer valuable insights to platforms and policymakers who could channel tax incentives via nominee schemes.
    Keywords: Crowdfunding; Platforms; Digital finance; Innovative entrepreneurial finance
    Date: 2022–10–19
  6. By: Bertschek, Irene (ZEW Mannheim); Block, Jörn (University of Trier); Kritikos, Alexander S. (DIW Berlin); Stiel, Caroline (DIW Berlin)
    Abstract: In response to strong revenue and income losses that a large share of the self-employed faced during the COVID-19 pandemic, the German federal government introduced a €50bn emergency aid program. Based on real-time online-survey data comprising more than 20,000 observations, we analyze the impact of this program on the subjective survival probability. In particular, we investigate how the digitalization level of the self-employed influences the program's effectiveness. Employing propensity score matching, we find that the emergency aid program had only moderately positive effects on the confidence of the self-employed to survive the crisis. However, the self-employed whose businesses were highly digitalized, benefitted much more from the state aid compared to those whose businesses were less digitalized. This holds true only for those self-employed in advanced digitalization stages, who started the digitalization processes already before the crisis. Moreover, taking a regional perspective, we find suggestive evidence that the quality of the regional broadband infrastructure matters in the sense that it increases the effectiveness of the emergency aid program. Our findings show the interplay between governmental support programs, the digitalization levels of entrepreneurs, and the regional digital infrastructure. The study helps public policy to increase the impact of crisis-related policy instruments.
    Keywords: self-employment, emergency aid, treatment effects, COVID-19, entrepreneurship, digitalization, resilience
    JEL: C14 H43 L25 L26 J68 O33
    Date: 2022–09
  7. By: Alessio D'Ignazio (Bank of Italy); Paolo Finaldi Russo (Bank of Italy); Massimiliano Stacchini (Bank of Italy)
    Abstract: We analyse new survey data from a representative sample of about 2,000 Italian micro-entrepreneurs to assess their level of financial and digital competences and to investigate whether these skills help them cope with unexpected shocks. We find that the financial literacy and digital skills of Italian micro-entrepreneurs are quite limited, especially for one-person businesses and owners with a lower level of education. By controlling for several business characteristics, we also find that financial literacy is significantly correlated with the transition to more digitalized business models and with greater resilience to external shocks: financially savvy entrepreneurs were better able to build liquidity buffers prior to the COVID-19 crisis and access government aid during the pandemic. As for the role of digital skills in supporting businesses during the crisis, empirical evidence is less clear-cut.
    Keywords: financial literacy, digitalization, micro-firms, Covid 19
    JEL: G53
    Date: 2022–10
  8. By: Torfs, Wouter
    Abstract: This working paper elaborates on the most recent update of the EIF SME Access to Finance (ESAF) Index, a composite indicator used to monitor the state of SME external financing markets in the EU. The current update, using data for 2021, constitutes the nineth iteration of this exercise, resulting in a 9-year long time series for each of the 27 EU countries. The latest data captures the impact of the COVID-pandemic and the subsequent policy response on SME access to finance. For an extensive overview of the current state of SME financing markets the reader is referred to the EIF's European Small Business Finance Outlook (Kraemer-Eis et al., 2022). The EIF Working Papers are designed to make available to a wider readership selected topics and studies in relation to EIF's business. The Working Papers are edited by EIF's Research & Market Analysis and are typically authored or co-authored by EIF staff or are written in cooperation with EIF.
    Date: 2022
  9. By: Anderson,Stephen J.; Mckenzie,David J.
    Abstract: Many small firms lack the finance and marketing skills needed for firm growth. The standard approach in many business support programs is to attempt to train the entrepreneur to develop these skills, through classroom-based training or personalized consulting. However, rather than requiring the entrepreneur to be a jack-of-all-trades, an alternative is to move beyond the boundary of the entrepreneur and link firms to these skills in a marketplace through insourcing workers with functional expertise or outsourcing tasks to professional specialists. A randomized experiment in Nigeria tests the relative effectiveness of these four different approaches to improving business practices. Insourcing and outsourcing both dominate business training; and do at least as well as business consulting at one-half of the cost. Moving beyond the entrepreneurial boundary enables firms to use higher quality digital marketing practices, innovate more, and achieve greater sales and profits growth over a two-year horizon.
    Keywords: Financial Sector Policy,ICT Applications,Information Technology,Financial Sector and Social Assistance
    Date: 2020–12–17
  10. By: Paolo Finaldi Russo (Bank of Italy); Valentina Nigro (Bank of Italy); Sabrina Pastorelli (Bank of Italy)
    Abstract: This paper identifies idiosyncratic credit supply shocks across firm size before and after the 2008-2013 double-dip recession in Italy. Based on a fixed effects model, the empirical framework includes both single- and multiple-lender firms and relaxes the standard assumption of homogeneous credit supply across borrowers from the same bank. Results highlight that following the crisis banks notably tightened their corporate lending policies except towards large companies. A significant difference in credit supply arose between micro-firms and the others. The divide is wider for larger banks and for those with weaker balance sheets. This may reflect the greater difficulties on the part of these financial intermediaries in disbursing loans to firms with a significant degree of informational opacity and with high fixed costs compared with the low unit volume of operations. According to these findings, the shocks that hit the banking system during the crisis translated into a persistent change in credit standards, with an important shift in the supply of new loans from smaller to larger firms.
    Keywords: bank lending channel, credit constraints, SME financing, bank risk-taking
    JEL: G21 G32 G3
    Date: 2022–10

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