nep-ent New Economics Papers
on Entrepreneurship
Issue of 2023‒01‒09
nineteen papers chosen by
Marcus Dejardin
Université de Namur

  1. The Role of Firm Dynamics in the Green Transition: Carbon Productivity Decomposition in Finnish Manufacturing By Kuosmanen, Natalia; Maczulskij, Terhi
  2. The Deep Historical Roots of Industrial Culture and Regional Entrepreneurship - A case study of two regions By Michael Fritsch; Maria Greve; Michael Wyrwich
  3. The Influence of Start-up Motivation on Entrepreneurial Performance By Marco Caliendo; Alexander Kritikos; Claudia Stier
  4. Industrial Clusters in the Long Run: Evidence from Million-Rouble Plants in China By Stephan Heblich; Marlon Seror; Hao Xu; Yanos Zylberberg
  5. Funding Black High-Growth Startups By Lisa D. Cook; Matt Marx; Emmanuel Yimfor
  6. Unbreakable: A beliefs-based theory of rule-breaking in the entrepreneurial context By Zhang, Senlin; O'Connor, Peter; Gardiner, Elliroma
  7. Banks, Credit Reallocation, and Creative Destruction By Christian Keuschnigg; Michael Kogler; Johannes Matt
  8. Income inequality and entrepreneurship: Lessons from the 2020 COVID-19 recession By Christoph Albert; Andrea Caggese; Beatriz González; Victor Martin-Sanchez
  9. Air Pollution and Entrepreneurship By Guo, Liwen; Cheng, Zhiming; Tani, Massimiliano; Cook, Sarah; Zhao, Jiaqi; Chen, Xi
  10. Mapping technologies to business models: An application to clean technologies and entrepreneurship By Dörr, Julian Oliver
  11. Impact of Business Analytics and Decision Support Systems on e-commerce in SMEs By Shah J Miah
  12. The relationship between firms that start operating as unregistered and firms’ innovation: the moderating effect of access to finance By Sam Njinyah; Simplice A. Asongu
  13. An Evaluation of the French Innovation Tax Credit By Simon Bunel; Benjamin Hadjibeyli
  14. Enhancing insolvency frameworks to support economic renewal By Christophe André; Lilas Demmou
  15. Financial Constraints of EU Firms A Sectoral Analysis By Pierfederico Asdrubali; Issam Hallak; Péter Harasztosi
  16. Procuring Survival By Matilde Cappelletti; Leonardo M. Giuffrida; Gabriele Rovigatti; Leonardo Maria Giuffrida
  17. Investment Grants and Firms' Productivity: How Effective Is a Grant Booster Shot? By Alexandre, Fernando; Chaves, Miguel; Portela, Miguel
  18. Effects of Innovation on Employment: An Analysis at the Firm Level in Bolivia By Foronda, Carlos; Beverinotti, Javier
  19. Business Dynamics Statistics for Single-Unit Firms By Richard Beem; Christopher Goetz; Martha Stinson; Sean Wang

  1. By: Kuosmanen, Natalia; Maczulskij, Terhi
    Abstract: Abstract This paper investigates the importance of firm dynamics, including entry and exit and the allocation of carbon emissions across firms, on the green transition. Using the 2000–2019 firm-level register data on greenhouse gas emissions matched with the Financial Statement data in the Finnish manufacturing sector, we examine the sources of carbon-productivity growth and assess the relative contributions of structural change and firm dynamics. We find that continuing firms were the main drivers of carbon productivity growth whereas the contribution of entering and exiting firms was negative. In addition, the allocation of emissions across firms seems to be inefficient; its impact on carbon productivity growth was negative over the study period. Moreover, we find that there is a positive relationship between labor-intensive firms and carbon productivity but that firms with a larger market share tend to be less productive in terms of carbon use.
    Keywords: Carbon productivity, Decomposition, Firm dynamics, Firm-level data, Manufacturing
    JEL: D24 L60 Q54
    Date: 2022–12–13
  2. By: Michael Fritsch (Friedrich Schiller University Jena, Germany); Maria Greve (Utrecht University, The Netherlands, and Friedrich Schiller University Jena, Germany); Michael Wyrwich (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany)
    Abstract: We describe and compare the development trajectories of two German regions, South Saxony and Mecklenburg, with a special focus on entrepreneurship and innovation. South Saxony has a long history of self-employment and knowledge generation that results in a persistent culture of innovative entrepreneurship. In Mecklenburg, such a culture did never emerge. Differences between the entrepreneurial ecosystems in the two regions especially pertain to the level of knowledge production and its link to new business formation in innovative and knowledge-intensive industries.
    Keywords: Entrepreneurship, entrepreneurial ecosystems, economic history, culture, regional development
    JEL: L26 M13 O1 O3 R11
    Date: 2022–12–20
  3. By: Marco Caliendo (University of Potsdam, CEPA, IZA, BSE, DIW, IAB); Alexander Kritikos (DIW Berlin, University of Potsdam, CEPA, IZA, IAB); Claudia Stier (University of Potsdam)
    Abstract: Predicting entrepreneurial development based on individual and business-related characteristics is a key objective of entrepreneurship research. In this context, we investigate whether the motives of becoming an entrepreneur influence the subsequent entrepreneurial development. In our analysis, we examine a broad range of business outcomes including survival and income, as well as job creation, expansion and innovation activities for up to 40 months after business formation. Using self-determination theory as conceptual background, we aggregate the start-up motives into a continuous motivational index. We show – based on a unique dataset of German start-ups from unemployment and non-unemployment – that the later business performance is better, the higher they score on this index. Effects are particularly strong for growth oriented outcomes like innovation and expansion activities. In a next step, we examine three underlying motivational categories that we term opportunity, career ambition, and necessity. We show that individuals driven by opportunity motives perform better in terms of innovation and business expansion activities, while career ambition is positively associated with survival, income, and the probability of hiring employees. All effects are robust to the inclusion of a large battery of covariates that are proven to be important determinants of entrepreneurial performance.
    Keywords: Entrepreneurship, Push and Pull Theories, Start-up Motivation, Survival, Job Creation, Firm Growth, Innovation
    JEL: L26 C14
    Date: 2022–12
  4. By: Stephan Heblich; Marlon Seror; Hao Xu; Yanos Zylberberg
    Abstract: We identify negative spillovers exerted by large, successful manufacturing plants on other local production facilities in China. A short-lived alliance between the U.S.S.R. and China led to the construction of 150 "Million-Rouble plants" in the 1950s. Our identification strategy exploits the ephemeral geopolitical context and the relative position of allied and enemy airbases to isolate exogenous variation in plant location decisions. We find a boom-and-bust pattern in hosting counties: treated counties are twice as productive as control counties in 1982, but 30% less productive in 2010. The average other establishment in treated counties is unproductive, does not innovate, and charges high markups. We find that (over)specialization limits technological spillovers. This prevents the emergence of new industrial clusters and leads to a flight of entrepreneurs.
    JEL: J24 N95 R11 R50
    Date: 2022–12
  5. By: Lisa D. Cook; Matt Marx; Emmanuel Yimfor
    Abstract: We analyze determinants of access to venture capital for Black founders of high-growth startups. We combine image- and name-processing algorithms with clerical review to identify race for over 100,000 startup founders “at risk” for venture funding. Black founders raise roughly one-third as much venture capital in the five years after founding vs. other startups formed in the same year, industry, and state. What explains the gap? We attribute about a third of the gap to four factors: Black startups have smaller founding teams; Black founders are less likely to have worked at the same companies or attended the same schools as investors who fund startups in the same industry and geography; Black startups are less likely to be located in geographies with plentiful venture capital, and Black startups are less likely to have a patent. We then bound our estimates of the funding gap and show that, to explain the gap, omitted variables would have to be nearly four times as important as the variables we fix. The funding gap is not statistically different from zero in later funding stages (post Series B), suggesting that some investors initially hold—but later amend—incorrect beliefs about Black-founded startups. We also exploit the hiring of Black partners and show that they are more likely to fund successful Black startups, consistent with segmented networks.
    JEL: G24 M13
    Date: 2022–11
  6. By: Zhang, Senlin; O'Connor, Peter; Gardiner, Elliroma
    Abstract: ABSTRACT Academic research largely supports the popular notion that successful entrepreneurs are rule-breakers; that is, individuals who do not follow society's rules and often create their own. However, despite an abundance of research on “rule-breakers”, little is known about the nature of rule-breaking in the entrepreneurial context. What, for example, is rule-breaking in the entrepreneurial context, what causes it, and how does it benefit entrepreneurs? Drawing heavily from theories in cognitive and moral psychology, we develop a conceptual model of rule-breaking in the entrepreneurial context that centres around a novel psychological cognitive construct that we term constructive rule beliefs. We argue that individuals high in constructive rule beliefs are more open than those low in constructive rule beliefs to breaking rules in the presence of various contextual rule-breaking triggers. We also argue that rule-breaking can benefit entrepreneurs and suggest that entrepreneurs with a paradox mindset (i.e., the tendency to accept and embrace competing demands) will reliably benefit from rule-breaking. We discuss the necessity for rule-breaking in the entrepreneurial context and outline several implications of our model for entrepreneurs and policymakers.
    Date: 2022–12–09
  7. By: Christian Keuschnigg; Michael Kogler; Johannes Matt
    Abstract: How do banks facilitate creative destruction and shape firm turnover? We develop a dynamic general equilibrium model of bank credit reallocation with endogenous firm entry and exit that allows for both theoretical and quantitative analysis. By restructuring loans to firms with poor prospects and high default risk, banks not only accelerate the exit of unproductive firms but also redirect existing credit to more productive entrants. This reduces banks’ dependence on household deposits that are often supplied inelastically, thereby relaxing the economy’s resource constraint. A more efficient loan restructuring process thus fosters firm creation and improves aggregate productivity. It also complements policies that stimulate firm entry (e.g., R&D subsidies) and renders them more effective by avoiding a crowding-out via a higher interest rate.
    Keywords: creative destruction, reallocation, bank credit, productivity
    JEL: E23 E44 G21 O40
    Date: 2022
  8. By: Christoph Albert; Andrea Caggese; Beatriz González; Victor Martin-Sanchez
    Abstract: We study entry into entrepreneurship during the COVID-19 recession of 2020 using new data from an extensive survey of more than 24, 000 Spanish households, conducted between June and November 2020. We find that while the overall decline in the startup rate in 2020 was large, and of a similar magnitude as that during the Great Recession, the differential impact depending on ex ante income was starkly different. During 2020, the drop in firm entry was entirely concentrated among low -and medium- income households. We show that the entrepreneurship gap between these households and their high-income counterparts is not directly explained by social distancing, since it is mostly driven by the sectors not directly affected by lockdown measures, and it is larger among households that did not suffer a negative income shock during the pandemic. We instead find evidence indicating that high-income households performed relatively better during the COVID-19 recession because they had the means to exploit new business opportunities, thanks to their larger wealth and better access to external finance.
    Keywords: Recessions, financial crisis, entrepreneurship, firm dynamics, coronavirus, COVID-19
    JEL: E20 E32 D22 J23 M13
    Date: 2022–10
  9. 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. A one standard deviation increase in air pollution leads to a 21.2% decrease in the propensity for entrepreneurship. We also find that self-efficacy is a channel in the relationship between air pollution and entrepreneurship. In addition, education moderates the relationship between air pollution and self-efficacy.
    Keywords: Air pollution,Entrepreneurship,China
    JEL: J24 L26 Q53
    Date: 2022
  10. By: Dörr, Julian Oliver
    Abstract: Theory suggests that new market entrants play a special role for the creation of new technological pathways required for the development and diffusion of more sustainable forms of production, consumption, mobility and housing. Unconstrained by past technological investments, entrants can introduce more radical environmental innovations than incumbent firms whose past R&D decisions make them locked into path-dependent trajectories of outdated technologies. Yet, little research exists which provides empirical evidence on new ventures' role in the technological transition towards decarbonization and dematerialization. This is mainly because patenting is rare among start-ups and also no historical track record about their R&D investments exists, both data sources commonly used to determine a company's technological footprint. To enable the identification of clean technology-oriented market entrants and to better understand their role as adopters and innovators for sustainable market solutions, this paper presents framework that systematically maps new ventures' business models to a set of well-defined clean technologies. For this purpose, the framework leverages textual descriptions of new entrants' business summaries that are typically available upon business registration and allow for a good indication of their technological orientation. Furthermore, the framework uses textual information from patenting activities of established innovators to model semantic representations of technologies. Mapping company and technology descriptions into a common vector space enables the derivation of a fine-granular measureof entrants' technological orientation. Applying the framework to a survey of German start-up firms suggests that clean technology-oriented market entrants act as accelerators of technical change: both by virtue of their existing products and services and through a high propensity to introduce additional environmental innovations.
    Keywords: Clean technologies,technological orientation,environmental innovation,sustainable entrepreneurship,text modeling,natural language processing
    JEL: C38 O13 Q55
    Date: 2022
  11. By: Shah J Miah
    Abstract: With the advancement in the marketing channel, the use of e-commerce has increased tremendously therefore the basic objective of this study is to analyze the impact of business analytics and decision support systems on e-commerce in small and medium enterprises. Small and medium enterprises are becoming a priority for economies as by implementing some policies and regulations these businesses could encourage gain development on an international level. The objective of this study is to analyze the impact of business analytics and decision support systems on e-commerce in small and medium enterprises that investigate the relationship between business analytics and decision support systems in e-commerce businesses. To evaluate the impact of both on e-commerce the, descriptive analysis approach is adopted that reviews the research of different scholars who adopted different plans and strategies to predict the relationship between e-commerce and business analytics. The study contributes to the literature by examining the impact of business analytics in SMEs and provides a comprehensive understanding of its relationship with the decision support system. After analyzing the impact of business analytics and decision support system in SMEs, the research also highlights some limitations and provide future recommendations that are helpful to overcome these limitations.
    Date: 2022–11
  12. By: Sam Njinyah (Manchester Metropolitan University, UK); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The purpose of this paper is to examine the relationship between a firm starting operation informally and its future innovation and whether this relation is moderated by institutional support (having access to finance from financial institutions to run their business). Data from the World Bank Enterprise Survey on 30 Eastern European and South-East Asian countries were analysed using probit regression analysis. The findings show that there is a positive significant relationship between firms that start operations informally and the firms’ innovation and that such effect persists over time. We found that this relationship is stronger if the firms can gain access to finance to expand their business activities. Finally, our result shows that such a relationship is based on the type of innovation being pursued by the firm. By examining the moderation effect of access to finance on starting a business informally, we provide an alternative explanation to policymakers on how to deal with informal firms to benefit from their contribution to growth.
    Keywords: Informality/unregistered firms, Innovation, Institutions, and Eastern European and South East Asia
    Date: 2022–01
  13. By: Simon Bunel; Benjamin Hadjibeyli
    Abstract: The Innovation tax credit (crédit d’impôt innovation, CII) is an extension of the Research tax credit (crédit d’impôt recherche, CIR) intended to boost the incentive effect of the latter on SMEs to encourage them to engage in the creation of new products via the development of prototypes or pilot plants. Introduced in 2013, it amounted to €120 million of tax credit in 2014 for some 5,300 recipients. This article seeks to measure the impact of the introduction of this scheme on its beneficiaries over the period from 2013 to 2016. Using a difference-in-differences method following propensity score matching, we find a greater increase in employment in the short term for firms benefiting from the scheme, along with a more pronounced increase in their sales turnover in the medium term. A greater increase in the number of new products produced by the beneficiaries is also observed. Finally, the introduction of the CII went along with a reduction in the research expenditure reported under the CIR.
    Keywords: Innovation, Tax credit, Evaluation, Products
    JEL: C21 D22 H32 L25 O31
    Date: 2022
  14. By: Christophe André; Lilas Demmou
    Abstract: This paper updates of the OECD Insolvency framework indicator, which summarises the main features of insolvency systems, with respect to their ability to prevent the failure of viable firms, allow a timely exit of non-viable companies, facilitate corporate restructuring and promote entrepreneurship by offering a second chance to honest failed entrepreneurs. The indicator covers 45 countries, including all OECD and European Union members. Since the indicator’s previous vintage (2016), most countries have enhanced their insolvency frameworks, notably early warning systems and pre-insolvency procedures. There is still room for improvement, particularly on simplified frameworks for small businesses, which are still often lacking. However, many countries report future insolvency reform plans. The paper also highlights the importance of efficient insolvency procedures as pressure on businesses arises from the gradual withdrawal of COVID-related policy support, the rise in energy costs and interest rates, along with the restructuring needs induced by the green and digital transitions.
    Keywords: capital misallocation, firm exit, personal and corporate insolvency, productivity, zombie firms
    JEL: D24 K35 O40 O43 O47
    Date: 2022–12–14
  15. By: Pierfederico Asdrubali; Issam Hallak; Péter Harasztosi
    Abstract: In this paper we provide estimates of financial constraints in all EU sectors. Our empirical strategy consists in using the Orbis firm-level dataset to construct financial constraint measures for each of the firms in our sample, and then aggregate the results either by NACE code, or by business similarity. We use two main – somewhat complementary – financial constraint indices proposed by Ferrando et al (2015), and then submit them to a battery of robustness tests, including the alternative financial constraints estimators developed by Kaplan and Zingales (1997), Whited and Wu (2006), and Hadlock and Pierce (2010). We also establish correlations between a sector’s degree of financial constraints and other sectoral characteristics, such as firm size, TFP, capital intensity, and innovativeness. Among the 10 Target Sub-sectors identified as vulnerable a priori to financial constraints, smaller firms in Marine Fishing and larger firms in Urban Regeneration and Agricultural SMEs stand out as financially constrained by one of our measures. Larger firms in Urban Regeneration even appear in the top ten financially constrained 2-digit NACE sectors (Divisions). When ranking the 88 Target Sectors, NACE Divisions in mining, sports, transports and media and cultural services stand out as particularly financially constrained. A possible explanation is that activities like mining and sports do not belong to public goods typically supported by public grants – or at least not enough in proportion to the massive investments required. As for media and cultural services, these activities suffer from the “curse of intangibles” – the limited access to finance due to the difficulty of valuing the activities and the underlying assets. More generally, tighter sectoral financial constraints tend to be associated with a lower firm size, a capital intensity much higher than average, and a total factor productivity lower than average. Another policyrelevant finding is that different factors for financial constraints apply to different industries: servicesdriven industries are affected by different financially constraining factors than manufacturing or resource extraction related industries. Finally, an unweighted averaging of our measures across countries brings up partially different results than the standard weighted averaging, thus showing that smaller countries may suffer from financial constraints drivers different from larger countries.
    JEL: G32
    Date: 2022–10
  16. By: Matilde Cappelletti; Leonardo M. Giuffrida; Gabriele Rovigatti; Leonardo Maria Giuffrida
    Abstract: We investigate the impact of public procurement spending on business survival. Using Italy as a laboratory, we construct a large-scale dataset on firms—covering balance-sheet, income-statement, and administrative records—and match it with public contract data. Employing a regression discontinuity design for close-call procurement auctions, we find that winners are more likely to stay in the market than marginal losers after the award and that the boost in survival chances lasts longer than the contract duration. We document that this effect is associated with earnings substitution rather than increased business scale. Regardless of size, contracts that are long-lasting and awarded by decentralized buyers are more impactful for survival prospects. Survivors experience no productivity premium but rather an improvement in their credit position.
    Keywords: firm survival, firm dynamics, public demand, public procurement, demand shocks, productivity, credit, auctions, regression discontinuity design
    JEL: D25 D44 H32 H57
    Date: 2022
  17. By: Alexandre, Fernando (University of Minho); Chaves, Miguel (University of Minho); Portela, Miguel (University of Minho)
    Abstract: This paper investigates the effect of awarding a second investment grant to the same firm. We implement a Regression Discontinuity Design strategy using a very rich firm-level administrative database, which allows us to link applications to grants and their scores to firms' performance. Overall, our results show a positive and significant impact of an investment grant booster shot on firms' labour productivity. This effect is significantly larger than the effect of a single grant. A more granular analysis shows a strong impact of awarding a second grant to small-sized firms. However, we found no effect on micro, medium and large-sized firms. Our results suggest that the characteristics of the targeted firms, namely firm size, matter for the effectiveness of awarding a second grant to the same firm.
    Keywords: industrial policy, investment grants, multiple treatments, productivity
    JEL: D22 H25 L25 L52
    Date: 2022–12
  18. By: Foronda, Carlos; Beverinotti, Javier
    Abstract: This study quantifies the impact of process and product innovation on employment growth in Bolivia by using microdata from a survey on innovation conducted in Bolivia in 2016. Following the model of Harrison, Jaumandreu, Mairesse, and Peters (2008) and the adaptations for Latin America of Crespi and Tacsir (2013) and Elejalde, Giuliodori, and Stucchi (2015), we demonstrate that employment growth is explained by product innovation. On the other hand, we find no evidence of a displacement effect due to process innovation. With respect to innovation and work composition, we observe that the reation of qualified employment is slightly favored over that of unqualified employment.
    JEL: D02 O12 O14 O31 O33 O40
    Date: 2021–09
  19. By: Richard Beem; Christopher Goetz; Martha Stinson; Sean Wang
    Abstract: The Business Dynamics Statistics of Single Unit Firms (BDS-SU) is an experimental data product that provides information on employment and payroll dynamics for each quarter of the year at businesses that operate in one physical location. This paper describes the creation of the data tables and the value they add to the existing Business Dynamics Statistics (BDS) product. We then present some analysis of the published statistics to provide context for the numbers and demonstrate how they can be used to understand both national and local business conditions, with a particular focus on 2020 and the recession induced by the COVID-19 pandemic. We next examine how firms fared in this recession compared to the Great Recession that began in the fourth quarter of 2007. We also consider the heterogenous impact of the pandemic on various industries and areas of the country, showing which types of businesses in which locations were particularly hard hit. We examine business exit rates in some detail and consider why different metro areas experienced the pandemic in different ways. We also consider entry rates and look for evidence of a surge in new businesses as seen in other data sources. We finish by providing a preview of on-going research to match the BDS to worker demographics and show statistics on the relationship between the characteristics of the firm’s workers and outcomes such as firm exit and net job creation.
    Date: 2022–12

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