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on Entrepreneurship |
| By: | Joonkyu Choi; Nathan Goldschlag; John Haltiwanger; J. Daniel Kim |
| Abstract: | We show that early joiners---non-founder employees in the first year of a startup---play a critical role in explaining firm performance. We use administrative employee-employer matched data on all US startups and utilize the premature death of workers as a natural experiment exogenously separating talent from young firms. We find that losing an early joiner has a large negative effect on firm size that persists for at least ten years. When compared to that of a founder, losing an early joiner has a smaller effect on firm death but intensive margin effects on firm size are similar in magnitude. We also find that early joiners become relatively more important with the age of the firm. In contrast, losing a later joiner yields only a small and temporary decline in firm performance. We provide evidence that is consistent with the idea that organization capital, an important driver of startup success, is embodied in early joiners. |
| Keywords: | Founding teams; Premature death; Firm dynamics; Young firm growth; Organization capital |
| Date: | 2023–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2023-12&r=ent |
| By: | Rinaldi, Riccardo; Arrighetti, Alessandro; Lasagni, Andrea; Canello, Jacopo |
| Abstract: | The aim of this paper is to use a multi-country approach to assess the role played by individual characteristics and local labor market conditions in influencing migrants’ self-employment decisions. The empirical investigation exploits data from the EU Labor Force Survey for the 2005-2016 period and focuses on two countries (Italy and the UK) characterized by significantly different labor market dynamics. Our findings suggest that the impact of individual characteristics is similar across countries, whereas the role of the local economic environment changes significantly, resulting in different migrant entrepreneurship patterns. These findings appear to be consistent with the most recent strand of literature, suggesting that while individual characteristics of self-employed migrants are similar across countries, national and regional differences play a key role in determining migrants’ entrepreneurial propensity. |
| Keywords: | migrant, entrepreneurship, regional economics |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:270873&r=ent |
| By: | Fernando Leibovici; David Wiczer |
| Abstract: | This paper studies the role of credit constraints in accounting for the dynamics of firm exit during the Great Recession. We present novel firm-level evidence on the role of credit constraints on exit behavior during the Great Recession. Firms in financial distress, with tighter access to credit, are more likely to default than firms with more access to credit. This difference widened substantially in the Great Recession while, in contrast, default rates did not vary much by size, age, or productivity. We identify conditions under which standard models of firms subject to financial frictions can be consistent with these facts. |
| Keywords: | firm exit; credit constraints; financial distress; Great Recession; financial frictions |
| JEL: | E32 G01 G33 L25 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:96160&r=ent |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | The purpose of this study is to complement extant literature by examining how mobile money innovations can moderate the unfavorable incidence of female unemployment on female doing of business in 44 countries from sub-Saharan Africa for the period 2004 to 2018. The empirical evidence is based on interactive quantile regressions. The employed doing business constraints are the procedures a woman has to go through to start a business and the time for women to set up a business, while the engaged mobile money innovations are: (i) registered mobile money agents (registered mobile money agents per 1000 km2 and registered mobile money agents per 100 000 adults) and (ii) active mobile money agents (active mobile money agents per 1000 km2 and active mobile money agents per 100 000 adults). The hypothesis that mobile money innovation moderates the unfavorable incidence of female unemployment on business constraints is overwhelmingly invalid. The invalidity of the tested hypothesis is clarified, and the policy implications are discussed. |
| Keywords: | Mobile phones; financial inclusion; women; doing business; sub-Saharan Africa |
| JEL: | G20 O40 I10 I20 I32 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:aak:wpaper:23/009&r=ent |
| By: | Niclas Dombrowski; Wolfgang Drobetz; Lars Hornuf; Paul P. Momtaz |
| Abstract: | What role does the selection of an investor and the timing of financing play in initial coin offerings (ICOs)? We investigate the operating and financial performance of ventures conducting ICOs with different types of investors at different points in the ventures’ life cycle. We find that, relative to purely crowdfunded ICO ventures, institutional investor-backed ICO ventures exhibit poorer operating performance and fail earlier. However, conditional on their survival, these ventures financially outperform those that do not receive institutional investor support. The diverging effects of investor backing on financial and operating performance are consistent with our theory of certification arbitrage; i.e., institutional investors use their reputation to drive up valuations and quickly exit the venture post-ICO. Our findings further indicate that there is an inverted U-shaped relationship for fundraising success of ICO ventures over their life cycle. Another inverted U-shaped relationship exists for the short-term financial performance of ICO ventures over their life cycle. Both the fundraising success and the financial performance of an ICO venture initially increase over the life cycle and eventually decrease after the product piloting stage. |
| Keywords: | Token Offering, Initial Coin Offering (ICO), crypto funds, operating versus financial performance, entrepreneurial finance, optimal timing |
| JEL: | G24 G32 K22 L26 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10393&r=ent |
| By: | Julian di Giovanni (FEDERAL RESERVE BANK OF NEW YORK); Manuel García-Santana (Universitat Pompeu Fabra); Priit Jeenas (Universitat Pompeu Fabra); Enrique Moral-Benitoz (Banco de España); Josep Pijoan-Mas (CEMFI) |
| Abstract: | We provide a framework to study how different public procurement allocation systems affect firm dynamics and long-run macroeconomic outcomes. We build a new panel dataset of administrative data for Spain that merges credit-register loan data, quasi-census firm-level data and public procurement project data. We find evidence consistent with the hypothesis that procurement contracts provide valuable collateral for firms, and that they do so to a greater extent than private-sector contracts. We then build a model of firm dynamics with both asset-based and earnings-based borrowing constraints and a government that buys goods and services from private-sector firms, and use it to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. We find that policies that promote the participation of small firms have sizeable macroeconomic effects, but their net impact on aggregate output is ambiguous. These policies help small firms grow and overcome financial constraints, which increases output in the long run. However, they also reduce saving incentives for large firms, decreasing output. The relative strength of these two forces and hence which of them dominates crucially depends on the type of financial frictions firms face and the specific way the policy is implemented. |
| Keywords: | government procurement, financial frictions, capital accumulation, aggregate productivity |
| JEL: | E22 E23 E62 G32 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:2233&r=ent |
| By: | DuckKi Cho; Lyungmae Choi; Jessie Jiaxu Wang |
| Abstract: | We show that the social capital embedded in employees' networks contributes to firm performance. Using novel, individual-level network data, we measure a firm's social capital derived from employees' connections with external stakeholders. Our directed network data allow for differentiating those connections that know the employee and those that the employee knows. Results show that firms with more employee social capital perform better; the positive effect stems primarily from employees being known by others. We provide causal evidence exploiting the enactment of a government regulation that imparted a negative shock to networking with specific sectors and provide evidence on the mechanisms. |
| Keywords: | Social capital; Social networks; Labor and finance |
| JEL: | G30 G41 L14 |
| Date: | 2023–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2023-20&r=ent |
| By: | Yelena Muzykina; Nurlykhan Aljanova; Shumaila Yousafzai |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:asx:nugsbd:2023-22&r=ent |
| By: | Olayinka Oyekola (Department of Economics, University of Exeter); Sofia Johan (College of Business, Florida Atlantic University); Rilwan Sakariyahu (Business School, Edinburgh Napier University); Oluwatoyin Esther Dosumu (Alliance Manchester Business School, University of Manchester); Shima Amini (Department of Finance, University of Leeds) |
| Abstract: | Worldwide, lack of access to finance has been identified by many firms as the most detrimental obstacle facing business entities. This article studies how political institutions and financial liberalisation alleviate or deepen financial constraints faced by firms. We hypothesise that a complementarity exists between political institutions and financial liberalisation in constructing barriers to firms securing bank financing. Evidence from an international sample of over 63, 000 firms in 75 countries, establishes that political institutions, proxied by democracy level in a country, and financial liberalisation, proxied by entry and participation of foreign banks, are significant factors in explaining cross-country disparities in firm-level credit accessibility. Importantly, we find a strong support for our proposition, documenting a remarkably significant and sizeable positive interaction effect between foreign bank presence and the level of democracy for access to finance. These results are robust against various forms of sensitivity checks. Overall, our study provides fresh insights into the financing effects of foreign bank activities interacted with democracy on firms. We conclude that these results may be of considerable benefit to policymakers, especially within developing, and emerging, economies, who are searching for economic growth, to re-evaluate what are the primary lending obstacles for their small and medium-sized enterprises. |
| Keywords: | financial liberalisation, foreign banks, political institutions, access to finance, credit constraints, firm-level data |
| JEL: | G21 G23 G32 O16 |
| Date: | 2023–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:2307&r=ent |
| By: | Hiroshi Inokuma; Juan M. Sanchez |
| Abstract: | Using a firm-dynamics model that has been extended to include endogenous growth, we examine how population growth influences total factor productivity (TFP) growth. The most important theoretical result is that the shape of a business's productivity life-cycle profile determines the direction of the impact of population growth on TFP growth. Following that, the model is calibrated for Japan and the United States. The main finding of examining balanced growth paths (BGPs) with various rates of population growth is that the effect on TFP growth is sizable. Japan's expected decline in population growth from 1960 to 2060, for example, implies a 0.36-0.59 percentage point reduction in TFP growth over the long term. Finally, we compute transitions between BGPs and discover that changes in TFP growth are slow in reaction to population growth changes due to two short-run counterbalancing factors. |
| Keywords: | growth; firms dynamics; demographics; productivity; total factor productivity (TFP) |
| JEL: | J11 O33 O41 |
| Date: | 2023–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:95866&r=ent |