nep-ent New Economics Papers
on Entrepreneurship
Issue of 2022‒12‒05
twenty-one papers chosen by
Marcus Dejardin
Université de Namur

  1. Race and Gender in Entrepreneurial Finance By Ewens, Michael
  2. An Assessment of the U.S. Small Business Innovation Research (SBIR) Program: A Study of Project Failure By Link, Albert; Swann, Christopher; van Hasselt, Martijn
  3. An Assessment and Evaluation of the U.S. Small Business Technology Transfer (STTR) Program By Link, Albert
  4. What Drives entrepreneurial aspiration among members of Self-help group? Evidence from JEEViKA By Kumar, Naveen; Raj, Vishal; Kumar, Sonu
  5. The Role of Nonemployers in Business Dynamism and Aggregate Productivity By Pedro Bento; Diego Restuccia
  6. Is running a marathon like running a business? Identifying occupational differences in overconfidence using long-distance running data. By Hayk Amirkhanyan; Michał Krawczyk; Maciej Wilamowski
  7. Islam and Entrepreneurship: The Role of Islamic Banking By Mohammad Reza Farzanegan; Ahmed M. Badreldin
  8. Air Pollution and Entrepreneurship By Guo, Liwen; Cheng, Zhiming; Tani, Massimiliano; Cook, Sarah; Zhao, Jiaqi; Chen, Xi
  9. Cross-Border Venture Capital Valuation: Business-Cycle, Institutional Factors, and Distance By Max Berre
  10. Which Factors Matter Most? Can Startup Valuation be Micro-Targeted? By Max Berre
  11. The Economic Effects of Immigration Pardons: Evidence from Venezuelan Entrepreneurs By Dany Bahar; Bo Cowgill; Jorge Guzman
  12. Determinants and Effects of the Use of COVID-19 Business Support Programs in Japan By Honda, Tomohito; Hosono, Kaoru; Miyakawa, Daisuke; Ono, Arito; Uesugi, Iichiro
  13. Balancing Work and Parenting Duties: A Qualitative Study of Chinese Female Entrepreneurs By Lin, Catherine
  14. Small Business under the COVID-19 Crisis: Expected Short- and Medium-Run Effects of Anti-Contagion and Economic Policies By Kawaguchi, Kohei; Kodama, Naomi; Tanaka, Mari
  15. Give Me a Pass: Flexible Credit for Entrepreneurs in Colombia By Lasse Brune; Xavier Giné; Dean Karlan
  16. Online Channels Sales Premia in Times of COVID-19: First Evidence from Germany By Joachim Wagner
  17. Using Managers' Expectations for Ex-ante Policy Evaluation: Evidence from the COVID-19 Crisis By Kawaguchi, Kohei; Kodama, Naomi; Kumanomido, Hiroshi; Tanaka, Mari
  18. From in-person to online: the new shape of the VC industry By Alekseeva, Liudmila; Fontana, Silvia Dalla; Genc, Caroline; Ranjbar, Hedieh Rashidi
  19. Credit Reallocation and Technological Change By Mehmet Furkan Karaca, Mehmet Furkan Karaca; Minetti, Raoul; Murro, Pierluigi
  20. Increasing Space For Investment & Entrepreneurship Through Reducing The Footprint Of Government On The Economy In Pakistan By Raja Rafi Ullah; Usman Qadir
  21. Gründungsinteresse an der Hochschule Bonn-Rhein-Sieg: Auswertung einer Umfrage unter den Studierenden By Klaus Deimel; Alina Gerke; Berit Engel

  1. By: Ewens, Michael (California Institute of Technology)
    Abstract: Economic frictions pervade the founding, financing, growing, and exiting of high-growth entrepreneurial firms. This chapter 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 chapter 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 chapter 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.
    Date: 2022–07–25
  2. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics); Swann, Christopher (University of North Carolina at Greensboro, Department of Economics); van Hasselt, Martijn (University of North Carolina at Greensboro, Department of Economics)
    Abstract: In 2000 and again in 2012, the U.S. Congress charged the National Research Council (NRC) within the U.S. National Academies of Sciences, Engineering, and Medicine to study how the Small Business Innovation Research (SBIR) program has stimulated technological innovation and used small businesses to meet Federal research and development needs, and to make recommendations for improvements in the SBIR program. Using project data collected by the NRC, we assert that an important assessment metric not previously considered by the NRC in its reports to Congress relates to the failure rate of funded Phase II research projects. Our paper identifies a number of covariates associated with project failure, and we make a recommendation that program managers might decrease the likelihood of project failure if funded firms can be given relevant information about how to contact angel investors, venture capitalists, and private investors, and how to present to them a proposal to obtain additional research investment dollars.
    Keywords: Small Business Innovation Research (SBIR); project failure; R&D; program assessment;
    JEL: O22 O31 O32 O38
    Date: 2022–08–24
  3. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: This paper describes the U.S. Small Business Technology Transfer (STTR) program. The legislative history of the program is presented as is a descriptive analysis of the program based on data collected by the National Research Council (NRC) within the National Academies of Sciences, Engineering, and Medicine (the National Academies). The descriptive analysis presented herein is designed to characterize dimensions of an assessment and evaluation of the program. Under the expectation that Congress will request that the NRC conduct an in-depth study of the STTR program in the coming years, a number of suggestions are offered for improvements in the data collected and how they could be analyzed in an effort to ensure that a more complete assessment and evaluation of the program is possible.
    Keywords: Small Business Technology Transfer (STTR) program; program assessment; program evaluation; program management; small firms; entrepreneurship;
    JEL: G28 H11 L26 M48
    Date: 2022–10–28
  4. By: Kumar, Naveen; Raj, Vishal; Kumar, Sonu
    Abstract: This study explores determinants of entrepreneurship aspirations among members of women’s self-help groups. Data were collected using semi-structured interview schedule from 180 members of self-help groups in three districts of Bihar. Considering personality traits entrepreneurial aspirations of women members were measured under seven dimensions using likert scale. Using ANCOVA, results reflect that age of self-help group, family size, frequency of loan and loan amount positively influence the entrepreneurial aspiration of members. In addition to this, members belong to scheduled caste, members with productive assets, primary education, and working experience in the service industry have higher entrepreneurial aspiration. Finding suggests for more impetus of members access of productive assets, skill-based capacity building to members and leaders, and intact membership with self-help group for long will enable and strengthen women workforce as potential entrepreneurs
    Date: 2022–07–11
  5. By: Pedro Bento; Diego Restuccia
    Abstract: The well-documented decline in business dynamism, measured by the net entry rate of employer firms, has been proposed as an explanation for the productivity growth slowdown in the United States. We assess the role of nonemployers, firms without paid employees, in business dynamism and aggregate productivity. Including nonemployers, the total number of firms has instead increased since the early 1980s, which in the context of a standard model of firm dynamics implies an annualized growth of measured aggregate productivity of 0.22%, one-quarter of the productivity growth in the data. Further accounting for time changes in the share of nonemployer firms and in the distribution of employment across firms, we find that productivity growth is even higher (0.47% per year). The productivity growth slowdown is not due to changes in net firm entry.
    Keywords: nonemployers, employer firms, business dynamism, productivity, TFP.
    JEL: O4 O51 E1
    Date: 2022–10–28
  6. By: Hayk Amirkhanyan (University of Warsaw, Faculty of Economic Sciences); Michał Krawczyk (University of Warsaw, Faculty of Economic Sciences); Maciej Wilamowski (University of Warsaw, Faculty of Economic Sciences)
    Abstract: It is often claimed that certain career choices, notably running a business, are associated with excessive confidence in own capabilities. Such a link could partly explain e.g., the surprisingly high number of unsuccessful start-ups. We verify these claims in a sample of marathon runners. We take starting too fast and then slowing down in a marathon race as a proxy for overconfidence. In a sample of over 50 thousand runners, we match marathon pacing data with job titles that are partly reported by the runners themselves and partly identified by us (using runners’ names, years of birth, and places of residence to find their personal web sites, social media profiles etc., whenever possible). We observe that job categories have a significant impact on slowing down (as a proxy for overconfidence), also when we control for observable demographic factors (such as age, gender, place of residence). In particular, entrepreneurs tend to be more overconfident than the general population.
    Keywords: overconfidence, slowdown, occupational differences, gender differences, selection into professions
    JEL: D01 L26 J24 J16
    Date: 2022
  7. By: Mohammad Reza Farzanegan (Marburg University); Ahmed M. Badreldin (Marburg University)
    Abstract: Studies on the relationship between religion and Entrepreneurship suggest that Islam discourages entrepreneurship. This is sometimes used to explain the excessively high unemployment figures for Muslim majority countries. However, we argue that studies that support this claim have missed a critical moderating factor, namely the presence of Shariah-compliant financing through Islamic banks. Using a multivariate regression analysis of 69 countries, our research shows empirically that the negative effect of Islam on entrepreneurship only applies in the absence of Shariah-compliant access to finance. This negative effect disappears in the presence of Islamic banks, thus disproving the generalized claim that Islam discourages entrepreneurship and showing that Muslim majority countries with high unemployment would do well to encourage the establishment of Shariah-complaint modes of financing to allow inclusion of religious entrepreneurs who would otherwise be excluded from the economy.
    Keywords: Islam, Entrepreneurship, Islamic Finance, Islamic Banking, Financial development, New Business Formation, Shariah
    Date: 2022
  8. By: Guo, Liwen; Cheng, Zhiming; Tani, Massimiliano; Cook, Sarah; Zhao, Jiaqi; Chen, Xi
    Abstract: We examine the causal effect of air pollution on an individual's propensity for entrepreneurship in China. Our preferred model, which employs an instrumental variable approach to address endogeneity arising from sorting into entrepreneurship and locational choices, suggests that exposure to higher intensity of air pollution lowers one's proclivity for entrepreneurship. We also find that industrial activity and self-efficacy mediate the relationship between air pollution and entrepreneurship. In addition, education and gender further moderate the relationship between air pollution and self-efficacy. In particular, air pollution negatively affects self-efficacy among the less-educated and females.
    Keywords: Air pollution,Entrepreneurship,China
    JEL: J24 L26 Q53
    Date: 2022
  9. By: Max Berre (Audencia Business School)
    Abstract: Venture capital investment is a key topic-of-interest in trade-investment ecosystems. While several studies explore the venture capital and start-up ecosystem examining valuations, relatively-few studies delve deeper into the role of macro-level economic factors in influencing start-up deals and valuations. Using a dataset of 1,089 venture-capital investments, containing 1,042 unique EU and EEA, this study examines macroeconomic, macro-sectoral, and macro-level institutional influences on the venture capital market landscape in European markets, finding that while local venture-capital market-size drives start-up valuations, as do growth and business cycle conditions, valuation-impacts show evidence of cross-border yield-chasing. Institutional factors meanwhile, impact valuations via both investors' home markets and acquisition-target markets, with investor-country taxes having the stronger valuation impact, whereas selfdealing regulation and non-tariff barriers can also impact startup-valuations. Valuation and venture capital markets driven by investor characteristics, by differences between investor and start-up, and by macro-level differences between the investor's market and the start-up's market.
    Date: 2022–06–10
  10. By: Max Berre (Audencia Business School)
    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: 2022–07–07
  11. By: Dany Bahar; Bo Cowgill; Jorge Guzman
    Abstract: This paper shows that providing undocumented immigrants with an immigration pardon, or amnesty, increases their economic activity in the form of higher entrepreneurship. Using administrative census data linked to the complete formal business registry, we study a 2018 policy shift in Colombia that made nearly half a million Venezuelan undocumented migrants eligible for a pardon. Our identification uses quasi-random variation in the amount of time available to get the pardon, introducing a novel regression discontinuity approach to study this policy. Receiving the pardon has small initial effects but raises formal firm formation to close to parity with native Colombians by 2022. This impact is concentrated on individuals active in the labor force, and on sole proprietorships rather than sociedades (limited liability entities). The new firms created include both employer and non-employer firms and are relatively low on assets. In panel data specifications, the effect of the pardon on firm formation is twice the effect of migration. Our heterogeneous effects suggest a mechanism whereby legalization induces greater investments of time in developing new firms.
    JEL: J26 K37 L26
    Date: 2022–11
  12. By: Honda, Tomohito; Hosono, Kaoru; Miyakawa, Daisuke; Ono, Arito; Uesugi, Iichiro
    Abstract: Using a survey of and financial data for Japanese small- and medium-enterprises (SMEs), this paper examines the determinants of firms’ use of the business support programs provided by the Japanese government during the COVID-19 pandemic and their effect. With respect to the determinants, we obtain the following three findings: First, firms were more likely to have obtained subsidized loans, grants, or subsidies the more their sales had fallen during the pandemic, suggesting that funds flowed to firms that were adversely affected by the pandemic. Second, the likelihood that firms obtained funds was higher if their credit scores were lower or if they were classified as “zombies” and/or “low-return borrowers” before the pandemic, suggesting that the government programs also helped firms that had been under-performing before the pandemic. Third, firms were more likely to receive funds if they had a stronger relationship with their main bank before, suggesting that bank relationships play an important role in firms’ access to government programs. Regarding the causal effects, we obtain the following three findings: First, except for the subsidies for employment adjustment, the support programs increased the cash holdings of user firms. Second, subsidized loans from private financial institutions lowered exit rates, while none of the programs had a significantly positive effect on employment relative to non-users (or in absolute terms). Third, the credit scores and profit-to-sales ratio of firms that used the support programs decreased and the likelihood of such firms being a zombie and/or a low-return borrower increased. Overall, our findings provide a cautionary tale in that the business support programs produced mixed results in that they may have prevented business failures but have also helped to prop up firms that are not viable in the long run.
    Keywords: COVID-19 business support programs, zombie firms, low-return borrowers, cash holdings
    JEL: D22 D25 L52
    Date: 2022–11
  13. By: Lin, Catherine
    Abstract: In China, more and more women nowadays have received higher education and a significant proportion of these women are running their own business. This study seeks to examine the challenges that female entrepreneurs face when they try to balance their work and parenting duties as well as their coping strategies. This study is based on semi-structured interviews with seven female entrepreneurs who have parenting duties. All interviews were conducted during the spring period of 2022. Our results showed that female entrepreneurs faced significant physical and mental challenges while finding a balance between running their own business and their parenting duties. Many of them do not receive adequate social and family support. Our study also found that female entrepreneurs developed their own coping strategies such as blending parenting with work to meet the challenges. Findings from this study call for a more gender-equal society and more policies to support working mothers.
    Date: 2022–06–01
  14. By: Kawaguchi, Kohei; Kodama, Naomi; Tanaka, Mari
    Abstract: This study makes a causal inference on the effects of anti-contagion and economic policies on small business by conducting a survey on Japanese small business managers’ expectations about the pandemic, policies, and firm performance. We first find the business suspension request decreased targeted firms’ sales by 10 percentage points on top of the baseline 9 percentage points decline due to COVID-19, even though the Japanese anti-contagion policy was in a form of the government’s request that is not legally enforceable. Second, using a discontinuity in the eligibility criteria, we find lump-sum and prompt subsidies improved firms’ prospects of survival by 19 percentage points. Third, the medium-run recovery of firms’ performance is expected to depend crucially on when infections would end, indicating that the anti-contagion policies could complement longer-run economic goals.
    Date: 2021–05–10
  15. By: Lasse Brune; Xavier Giné; Dean Karlan
    Abstract: Microcredit promised business growth for small firms lacking access to banking loans. Yet while reaching millions, recent randomized evaluations suggest limited average business impacts. Critics often blame contract rigidity, specifically the fixed and frequent installments, for the lack of productive risk-taking. But such rigidity may instill borrower discipline. We partnered with a Colombian lender that offered first-time borrowers a flexible loan that permitted delaying up to three monthly repayments. We find null effects for revenue and profits but increases in loan defaults. The evidence thus aligns with established microlender practice of offering rigid contracts to first-time borrowers.
    JEL: G21 O21
    Date: 2022–11
  16. By: Joachim Wagner (Leuphana University Lüneburg and Kiel, Institute for the Word Economy)
    Abstract: Presence on the web tends to be important for firms. Empirical studies show that firms with a better performance along various dimensions, and firms that are more internationally active, tend to have a website. Furthermore, a website helped firms to survive in times of the COVID-19 pandemic. An open question that is not discussed in this literature is how the use of online channels for sales is related to various dimensions of firm performance. This note contributes to the literature by using a unique recently released set of firm level data from Germany to investigate for the first time the links between online channels sales and firm characteristics.
    Keywords: Online channels sales; firm performance; COVID-19; Germany 2021, Enterprise Survey Data Set
    JEL: D22 L25
    Date: 2022–11
  17. By: Kawaguchi, Kohei; Kodama, Naomi; Kumanomido, Hiroshi; Tanaka, Mari
    Abstract: Evaluation of the impacts of government policies during an economic crisis is often delayed until the outcomes are realized. Policies can be better guided if they can be evaluated amid a crisis, before the realization of outcomes. This study examines whether survey data on the expectations of small business managers can help evaluate two high-stake subsidies for firms amid the COVID-19 crisis in Japan, namely, Subsidy Program for Sustaining Businesses (SPSB) and Employment Adjustment Subsidy (EAS). We evaluate the accuracy of managers’ expectations, estimate the impact of subsidies on the expected firm survival, and compare it with the estimated impact on realized survival. We find that the managers’ expectations on their future sales, survival rate, and the possibility of receiving these subsidies predict the realized outcomes, although they were highly pessimistic about their survival rates. We find that the estimated impacts of the SPSB on the expected survival rates have the same sign as the estimated impact on the realized survival rates, but the size is more than twice because of the pessimism on survival. The estimated impacts of the EAS are both insignificant. Therefore, although its impact may be overestimated, managers’ expectations are useful for selecting an effective policy.
    Date: 2022–07–07
  18. By: Alekseeva, Liudmila; Fontana, Silvia Dalla; Genc, Caroline; Ranjbar, Hedieh Rashidi
    Abstract: Geographical clustering is an essential feature of the venture capital (VC) industry as proximity helps VCs to acquire soft information about early-stage companies and to conduct post-investment activities. However, whether the VC investment model based on in-person interactions is still justified in the age of online communication technologies remains an open question. In this paper, we address this question by using an unexpected interruption in face-to-face meetings during the recent pandemic. We document that VCs respond to this change by breaking their traditional norm: they invest in more distant startups. We find that this evolution goes along with selection criteria and syndication process changes despite some persisting behaviors. Thus, our study helps to understand how VCs revisit their investment model and sheds light on the value of in-person interactions for the VC industry.
    Date: 2022–08–22
  19. By: Mehmet Furkan Karaca, Mehmet Furkan Karaca (Michigan State University); Minetti, Raoul (Michigan State University, Department of Economics); Murro, Pierluigi (Luiss University)
    Abstract: This paper studies the dynamic process of credit reallocation and its interaction with aggregate innovative activity. To draw out theoretical predictions, we build a discrete time model to investigate the consequences of lenders’ decision on reallocating credit and borrowers’ choice on innovating. We show that an escalation in credit reallocation disrupts innovative activities. Using a novel dataset on bank balance sheets and the aggregate number of patents for Italy, we examine the effect of credit reallocation on innovation. We construct measures of credit reallocation and collect data on the aggregate number of patents as a measure of innovative activity across Italian provinces. We find that an increase in credit reallocation reduces innovative activity while aggregate credit growth helps to expand it.
    Keywords: Credit Market; Credit Reallocation; Technological Change; Innovation
    JEL: E44 G21 O30
    Date: 2022–10–19
  20. By: Raja Rafi Ullah (Pakistan Institute of Development Economics, Islamabad.); Usman Qadir (Pakistan Institute of Development Economics, Islamabad.)
    Abstract: One of the main reasons behind Pakistan’s long term downward growth trajectory is the chronically low level of private investment in the economy which is one of the lowest in the region. Successive governments have tried to spur economic growth by encouraging private investment in economy with little success. One fundamental reason behind low private investment is the fact that owing to its large footprint on the economy, the government in Pakistan crowds out private investment. Using an innovative methodology, we have illustrated that the total footprint of government on the economy in Pakistan amounts to at least 67 percent of Pakistan’s GDP, which is substantially higher than what Pakistan government’s general yearly expenditure as a percentage of GDP (22 percent) might suggest. In addition to general government expenditure, the government exerts significant control over the economy through an extensive regulatory framework, control of state owned entities, direct market interventions and ownership of land & capital. With the imminent need to reduce the government footprint to attract private investment and involvement of private sector, three main policy approaches need to be adopted i.e deregulation, privatization and public private partnerships (PPPs). Deregulation alone, if executed properly can reduce the footprint of the government; increase the GDP by approximately 24 percent. Privatization of state owned entities (SOEs) is another useful policy instrument but is often hard to implement due to a range of factors. Nonetheless, we estimate that there is indeed scope for a reduction in government’s footprint through privatization, which can potentially be reduced by a further 6 percent using this particular policy strategy. Public private partnerships (PPPs) can also be utilized to spur private sector investment in areas where it might be difficult for the government to fully divest its share to the private sector. Public private partnerships (PPPs) can particularly be utilized to make government owned land and capital more economically productive. Such assets can be leased out to private sector for development and value addition. This will not only increase their economic productivity but can also serve as a potentially significant source of revenue generation for a government that often struggles to balance its books.
    Date: 2021
  21. By: Klaus Deimel; Alina Gerke; Berit Engel
    Abstract: In Deutschland im Allgemeinen sowie in der Region Bonn-Rhein-Sieg im Konkreten ist ein Startup-Trend sichtbar, der sich insbesondere auf den digitalen Bereich erstreckt. Dies äußert sich z.B. durch die Realisierung verschiedener Digital Hubs, unter anderem auch dem Digital Hub Bonn, sowie diversen Netzwerken und Communities, die sich mit dem Thema Unternehmensgründung befassen. Die Studierenden der Hochschule Bonn-Rhein-Sieg (H-BRS) stellen dabei potenzielle Unternehmensgründer dar. Das Centrum für Entrepreneurship, Innovation und Mittelstand (CENTIM) hat als Hochschulinstitut zur Aufgabe unter anderem den Bereich Entrepreneurship zu vertreten. Um die Studierenden in ihren Gründungsaktivitäten besser unterstützen zu können, soll ein Überblick über das Gründungsverhalten sowie das Gründungsinteresse der Studierenden erstellt werden. Dabei sollen ebenfalls mögliche Optimierungsfelder der Lehr- und Beratungsangebote identifiziert werden.
    JEL: M13
    Date: 2021–03–31

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