nep-ent New Economics Papers
on Entrepreneurship
Issue of 2022‒11‒28
eleven papers chosen by
Marcus Dejardin
Université de Namur

  1. Start-up types and macroeconomic performance in Europe By De Haas, Ralph; Sterk, Vincent; Van Horen, Neeltje
  2. German financial state aid during COVID-19 pandemic: Higher impact among digitalized self-employed By Bertschek, Irene; Block, Jörn; Kritikos, Alexander; Stiel, Caroline
  3. Rediscovering the craft entrepreneur: A personality approach By Runst, Petrik; Thomä, Jörg
  4. The Unicorn Puzzle By Daria Davydova; Rüdiger Fahlenbrach; Leandro Sanz; René M. Stulz
  5. The impact of the EU General Data Protection Regulation on innovation in firms By Blind, Knut; Niebel, Crispin Miles; Rammer, Christian
  6. Which Factors Matter Most? Can Startup Valuation be Micro-Targeted? By Max Berre
  7. DUI it yourself: Innovation and activities to promote learning by doing, using, and interacting within the firm By Silje Haus-Reve; Rune Dahl Fitjar; Andres Rodriguez-Pose;
  8. Effects of syndication network on specialisation and performance of venture capital firms By Qing Yao; Shaodong Ma; Jing Liang; Kim Christensen; Wanru Jing; Ruiqi Li
  9. Mobile Phone Innovation and Doing Business in Sub-Saharan Africa By Simplice A. Asongu
  10. Recovering Missing Firm Characteristics with Attention-Based Machine Learning By Beckmeyer, Heiner; Wiedemann, Timo
  11. Arbeitslosenversicherung für Selbstständige: Wer kann sich (nicht) versichern? By Granzow, Felix; Jahn, Elke; Oberfichtner, Michael

  1. By: De Haas, Ralph (European Bank for Reconstruction and Development, CEPR and KU Leuven); Sterk, Vincent (University College London and CEPR); Van Horen, Neeltje (Bank of England)
    Abstract: Can policymakers improve macroeconomic performance by encouraging the entry of high‑performance start‑ups? To answer this question, we construct a novel and comprehensive data set on 1.3 million start‑ups in 10 European countries. We apply cluster analysis to identify distinct start‑up types and trace their development over time. Three stylised facts transpire. First, we uncover five well‑separated start‑up types that are consistently present across countries, industries, and cohorts. We label these basic, large, capital‑intensive, cash‑intensive, and high‑leverage. Second, the initial differences between these start‑up types are persistent. Third, each start‑up type displays a characteristic life cycle in terms of productivity, employment generation, and exit rates. We feed these empirical results into an agnostic firm dynamics model to quantify how much structural policy could improve macroeconomic performance by shifting the composition of start‑ups. We find that substantial gains in aggregate employment and productivity can be made through policies that benefit high‑performance start‑ups (such as large and capital‑intensive ones) while discouraging the entry of underperforming firms (such as highly leveraged ones).
    Keywords: Start‑ups; firm entry; productivity; corporate tax; entrepreneurship; cluster analysis.
    JEL: D22 D24 G32 L11 L25 L26 O47
    Date: 2022–06–17
  2. By: Bertschek, Irene; Block, Jörn; Kritikos, Alexander; Stiel, Caroline
    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
  3. By: Runst, Petrik; Thomä, Jörg
    Abstract: Personality is a key driver of self-employment decisions. For this reason, the personality traits of entrepreneurs or business owners have been repeatedly studied in previous research. This paper extends this literature by focusing on the craft entrepreneur - as a classic form of strategic entrepreneurship. Based on a large, representative German household panel data set, we show that the entrepreneurial type mediates the effect of broad (Big Five) and narrow personality traits (locus of control, risk tolerance) on the likelihood of being self-employed. Our results support the conventional distinction between craft entrepreneurs from other types of entrepreneurship. The paper concludes with implications for policy and research.
    Keywords: Entrepreneurship,Craft entrepreneur,Self-employment,Big Five,Personality
    JEL: D91 L26 M13 M21
    Date: 2022
  4. By: Daria Davydova; Rüdiger Fahlenbrach; Leandro Sanz; René M. Stulz
    Abstract: From 2010 to 2021, 639 US VC-funded firms achieved unicorn status. We investigate why there are so many unicorns and why controlling shareholders give investors privileges to obtain unicorn status. We show that unicorns rely more than other VC-funded firms on organizational capital as well as network effects and the internet. Unicorn status enables startups to access new sources of capital. With this capital, they can invest more in organizational intangible assets with less expropriation risk than if they were public. As a result, they are more likely to capture the economies of scale that make their business model valuable.
    JEL: G24 G32 G34
    Date: 2022–10
  5. By: Blind, Knut; Niebel, Crispin Miles; Rammer, Christian
    Abstract: In May 2018, a new regulation by the European Commission on data protection came into force, the General Data Protection Regulation (GDPR). It requires many firms to update their data protection strategy. It may also complicate different types of data usage, particularly related to data on individuals. In the literature, there is little evidence and no consensus on whether this new privacy regulation is beneficial or detrimental to innovation. This study provides empirical evidence on the impact of the GDPR on innovation activities in firms. Exploiting panel data from the German innovation survey, a difference-in-difference analysis shows that the GDPR stimulated additional innovation activity while shifting the focus of innovation away from radical and towards more incremental innovation. This holds for both firms that report that the GDPR complicated their innovation efforts, and for the much smaller group of firms that report that the GDPR facilitated their innovation activities. Finally, larger and older firms experience higher increases in their turnover with incremental innovation compared to smaller and younger firms.
    Keywords: General Data Protection Regulation,Innovation,Community Innovation Survey,Difference-in-difference estimation
    JEL: O31 O38 C22 L51
    Date: 2022
  6. By: Max Berre
    Abstract: While startup valuations are influenced by revenues, risks, age, and macroeconomic conditions, specific causality is traditionally a black box. Because valuations are not disclosed, roles played by other factors (industry, geography, and intellectual property) can often only be guessed at. VC valuation research indicates the importance of establishing a factor-hierarchy to better understand startup valuations and their dynamics, suggesting the wisdom of hiring data-scientists for this purpose. Bespoke understanding can be established via construction of hierarchical prediction models based on decision trees and random forests. These have the advantage of understanding which factors matter most. In combination with OLS, the also tell us the circumstances of when specific causalities apply. This study explores the deterministic role of categorical variables on the valuation of start-ups (i.e. the joint-combination geographic, urban, and sectoral denomination-variables), in order to be able to build a generalized valuation scorecard approach. Using a dataset of 1,091 venture-capital investments, containing 1,044 unique EU and EEA, this study examines microeconomic, sectoral, and local-level impacts on startup valuation. In principle, the study relies on Fixedeffects and Joint-fixed-effects regressions as well as the analysis and exploration of divergent micropopulations and fault-lines by means of non-parametric approaches combining econometric and machinelearning techniques.
    Date: 2022–10
  7. By: Silje Haus-Reve; Rune Dahl Fitjar; Andres Rodriguez-Pose;
    Abstract: Implicitly or explicitly, much innovation policy treats investments in research and development (R&D) as the main input to innovation. A large body of literature in innovation studies has challenged this, highlighting the role of external sources of innovation and of innovation based on learning by doing, using and interacting (DUI). Nonetheless, there has been limited empirical research on how firm-internal activities to promote DUI affect innovation, and on how important such activities are relative to internal R&D and to external sources of knowledge. We also know little about how internal DUI activities interact with internal R&D and with external knowledge sourcing. We address these gaps using Norwegian Community Innovation Survey data from 2010. We find that internal DUI is an important driver of new-to-market product innovation. Further, the results show partial substitution effects between internal DUI and internal R&D, as well as between internal DUI and external DUI.
    Keywords: Innovation; Experience-based knowledge; STI; DUI; Firms
    Date: 2022–10
  8. By: Qing Yao; Shaodong Ma; Jing Liang; Kim Christensen; Wanru Jing; Ruiqi Li
    Abstract: The Chinese venture capital (VC) market is a young and rapidly expanding financial subsector. Gaining a deeper understanding of the investment behaviours of VC firms is crucial for the development of a more sustainable and healthier market and economy. Contrasting evidence supports that either specialisation or diversification helps to achieve a better investment performance. However, the impact of the syndication network is overlooked. Syndication network has a great influence on the propagation of information and trust. By exploiting an authoritative VC dataset of thirty-five-year investment information in China, we construct a joint-investment network of VC firms and analyse the effects of syndication and diversification on specialisation and investment performance. There is a clear correlation between the syndication network degree and specialisation level of VC firms, which implies that the well-connected VC firms are diversified. More connections generally bring about more information or other resources, and VC firms are more likely to enter a new stage or industry with some new co-investing VC firms when compared to a randomised null model. Moreover, autocorrelation analysis of both specialisation and success rate on the syndication network indicates that clustering of similar VC firms is roughly limited to the secondary neighbourhood. When analysing local clustering patterns, we discover that, contrary to popular beliefs, there is no apparent successful club of investors. In contrast, investors with low success rates are more likely to cluster. Our discoveries enrich the understanding of VC investment behaviours and can assist policymakers in designing better strategies to promote the development of the VC industry.
    Date: 2022–11
  9. By: Simplice A. Asongu (Yaounde, Cameroon)
    Abstract: This study assesses how knowledge diffusion modulates the effect of the mobile phone on entrepreneurship or doing business in Sub-Saharan Africa. The empirical evidence is based on Generalised Method of Moments in which mobile phones are interacted with three knowledge diffusion variables, namely: education, internet penetration and scientific output. Ten variables of entrepreneurship are used. The following three main findings are established. First, the net effects from interacting mobile phones with the internet and scientific publications are negative whereas the corresponding net impact from the interaction between mobile phones and education is positive on the cost of doing business. Second, the mobile phone interacts with education (the internet) to have a positive (negative) net effect on the time needed to construct a warehouse whereas, the corresponding interaction with the internet yields a net negative effect on the time to enforce a contract. Third, there is a positive net effect from the interaction of mobile phones with education on the time to start a business. Given the construction of the education variable, the positive net effects from education are consistent with corresponding negative net effects from the other knowledge diffusion variables.
    Keywords: Entrepreneurship; the Mobile Phone; Knowledge Diffusion; Sub-Saharan Africa
    JEL: L59 L98 O10 O30 O55
    Date: 2022–01
  10. By: Beckmeyer, Heiner; Wiedemann, Timo
    JEL: G10
    Date: 2022
  11. By: Granzow, Felix (IAB); Jahn, Elke (Institute for Employment Research (IAB), Nuremberg, Germany ; Univ. Bayreuth); Oberfichtner, Michael (Institute for Employment Research (IAB), Nuremberg, Germany)
    Abstract: "The German voluntary unemployment insurance for self-employed persons offers business founders the opportunity to protect themselves against a loss of income. However, the option is used by very few people: In the past years, less than 4,000 insurance contracts per year have been concluded – while, at the same time, there were more than 200,000 full-time company foundations per year. Reasons for this could be the lack of demand for the insurance as well as the barriers to entry. Founders wanting to insure need prior insurance times in the unemployment insurance: Either by being insured for at least 12 months during the base period of 30 months before founding the company or by receiving unemployment benefits directly before founding, which also requires prior insurance. In this report, panel data are used to analyze whether the low usage rate could be a result of these eligibility requirements. The report shows that around half of business founders could enter the insurance. 23 percent of founders do not have access to the insurance. For the remaining 27 percent, the access cannot be determined clearly on an individual basis. However, this group is, for a large part, constituted by people that are already self-employed and found a new company. These founders could be insured in their previous self-employment. Assuming that these self-employed insure with the same probability as the self-employed overall, the share of founders without the option to insure themselves is close to 40 percent. Currently, there are around 230.000 business foundations per year. This would mean that 95.000 persons have no option to safeguard themselves with voluntary insurance. This is most often true for student founders and former self-employed persons who have not signed up for the voluntary insurance previously. Persons with low education levels also lack access more often than the average. A reduction of necessary prior insurance months or a prolongation of the base period could offer more people the option to insure themselves. The effects are limited, though. Even a large reform would leave more than a quarter of all founders without the insurance option. Among founders who have access to the insurance, more than 90 percent make no use of it. The reasons for this cannot be established here. Previous surveys of founders indicate that many of them feel that the insurance does not pay off or that they won’t need it. Others do not manage to insure themselves in the first three months after business establishment like the law requires. At the same time, the attractiveness of the insurance seems to be a problem, too, as evidenced by the low usage rate among people with access. Other European countries, e.g. Sweden, have managed to reach far higher usage rates. However, the insurance, for self-employed persons as well as for other workers, is heavily subsidized out of the general tax revenues there." (Author's abstract, IAB-Doku) ((en))
    Keywords: IAB-Open-Access-Publikation
    Date: 2022–11–03

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