nep-ent New Economics Papers
on Entrepreneurship
Issue of 2023‒07‒10
eight papers chosen by
Marcus Dejardin
Université de Namur

  1. Covid-19 and Entrepreneurship By Sorgner, Alina
  2. Fighting the Odds: Understanding Small Business Mortality in Low-Income Countries By Yeboah, Samuel
  3. SME Failures Under Large Liquidity Shocks: An Application to the COVID-19 Crisis By Pierre-Olivier Gourinchas; Şebnem Kalemli-Özcan; Veronika Penciakova; Nicholas Sander
  4. Financial Constraints and Firm Size: Micro-Evidence and Aggregate Implications By Miguel H. Ferreira; Timo Haber; Christian Rörig
  5. Assessment and analysis of financial literacy campaigns from financial institutions for Small- and Medium Size Enterprises (SME's) in Colombia By Rodríguez Pasmiño, Valentina; Berrones-Flemmig, Claudia Nelly
  6. Job Creation and Job Destruction Dynamics in the U.S. Truck Transportation Industry, 1995-2019 By Miller, Jason W.; Phares, Jonathan; Burks, Stephen V.
  7. First Quarter Wages and Employment by Industry for Small Businesses Using Establishment-Based Size Classes, 2012–2021 By Tina Highfill; Richard Cao
  8. Freedom in Business. Concept and Forms of Manifestation By Manuela Nita

  1. By: Sorgner, Alina
    Abstract: This chapter presents the results of a systematic review of literature (SLR) on impacts of Covid-19 on entrepreneurship published in the first three years since the outbreak of the Covid-19 pandemic, covering the period between January 2020 and January 2023. Main developments in the literature over time, space and themes are identified. The literature body has been growing constantly over time, with most studies included in this SLR published in 2022 that remained unconsidered in previous SLRs. In terms of spatial distribution of published research, a significant number of studies focus on North American and European countries, while low-income countries and countries in Latin American, Sub-Saharan and South Asian regions are underrepresented. Six main themes (and multiple sub-themes) were identified in the literature: entrepreneurial process, resilience and opportunity, entrepreneurial finance, policy responses to the Covid-19 crisis, gender, and well-being. Research on the impact the pandemic has had on entrepreneurial process, sources of financing, resilience of start-up firms, and opportunities emerging from the crisis has been dominating the literature since the early days of the pandemic and has been growing since then. Emerging themes include policy responses to the Covid-19 crisis and their (unintended) consequences for entrepreneurship, as well as differential impact of Covid-19 on female and male entrepreneurs. Studies on well-being of entrepreneurs, including their physical and mental health, represent a relatively low share of the literature on Covid-19 and entrepreneurship. Implications of the results for entrepreneurship research and practice are discussed.
    Keywords: Entrepreneurship, Covid-19, Systematic literature review
    JEL: L26
    Date: 2023
  2. By: Yeboah, Samuel
    Abstract: This systematic review examines the factors influencing small business mortality in low-income countries. Small businesses play a vital role in economic development, job creation, and poverty reduction. However, they often face significant challenges that lead to high mortality rates. This review analyses the internal and external factors contributing to small business failure, including poor management, lack of entrepreneurial skills, economic downturns, market competition, regulatory burdens, and technological advancements. The implications of small business mortality, such as job losses, reduced economic output, and personal distress, are also explored. Additionally, the review highlights policy implications, including the importance of strengthening entrepreneurial skills, improving access to finance, streamlining regulatory processes, and facilitating market linkages. Future research directions, such as longitudinal studies and the impact of technology adoption, are identified to further deepen understanding in this area. By addressing the challenges faced by small businesses in low-income countries, policymakers can foster their sustainability and contribute to inclusive economic development.
    Keywords: Small business mortality, low-income countries, factors, implications, policy, entrepreneurship
    JEL: L26 M13 O12
    Date: 2022–06–12
  3. By: Pierre-Olivier Gourinchas; Şebnem Kalemli-Özcan; Veronika Penciakova; Nicholas Sander
    Abstract: We study the effects of financial frictions on firm exit when firms face large liquidity shocks. We develop a simple model of firm cost-minimization that introduces a financial friction that limits firms’ borrowing capacity to smooth temporary shocks to liquidity. In this framework, firm exit arises from the interaction between this financial friction and fluctuations in cash flow due to aggregate and sectoral changes in demand conditions, as well as more traditional shocks to productivity. To evaluate the implications of our model, we use firm-level data on small and medium-sized enterprises (SMEs) in 11 European countries. We confirm that our framework is consistent with official failure rates in 2017–2019, a period characterized by standard business cycle fluctuations in demand. To capture a large liquidity shock, we apply our framework to the COVID-19 crisis. We find that, in the absence of government support, SME failure rates would have increased by 6.01 percentage points, putting 3.1 percent of employment at risk. Our results are consistent with the premise that financial frictions lead to inefficient exit as, without government support, the firms failing due to COVID-19 have similar productivity and past growth to firms that survive the COVID-19 crisis.
    Keywords: Firm dynamics; International topics; Coronavirus disease (COVID-19)
    JEL: D22 E65 H81
    Date: 2023–06
  4. By: Miguel H. Ferreira (QMUL and CEPR); Timo Haber (De Nederlandsche Bank); Christian Rörig (QuantCo)
    Abstract: Using a unique dataset covering the universe of Portuguese firms and their credit situation we show that financially constrained firms are found across the entire firm size distribution, even in the top 1%. Incorporating a richer, empirically supported, productivity process into a standard heterogeneous firms model generates a joint distribution of size and credit constraints in line with the data. The presence of large constrained firms in the economy, together with their elevated capital share, explains about 66% of the response of output to a financial shock. We conclude by providing micro-evidence in support of the model mechanism.
    Keywords: Firm size, business cycle, financial accelerator
    JEL: E62 E22 E23
    Date: 2023–06–14
  5. By: Rodríguez Pasmiño, Valentina; Berrones-Flemmig, Claudia Nelly
    Abstract: The lack of financial literacy in SMEs is one of the main obstacles to SMEs finance (Zavatta, 2008). This problem is even greater in developing countries where the informal economy, the low levels of education and the low bancarization rates are known to be high in this region. One of the relevant trends in SME Finance are innovative financial instruments in "capacity building" mainly financial literacy campaigns (or financial education offerings) from financial institutions (Imanbaeva et al., 2017). The main research question of the present study is: Do financial literacy campaigns (or financial educational offerings) provide an adequate level of financial education for SMEs in Colombia? This research project was carried out applying a qualitative methodology. The primary data has been obtained through different types of 11 indepth interviews from the perspective of the financial institutions and also from Chambers of Commerce that provide the trainings. From the assessment and analysis of the financial literacy campaigns, the main results show that the programs that are designed for rural areas of the country do not have all the necessary components that the OECD recommends for a person to be considered financially educated. The financial education offerings carried out in the big cities (offered by the Banco de Bogota, the Chamber of Commerce of Bogota and Cali) provide SMEs with key mechanisms in financial education of great value, according with the components that the OECD recommends. Other important aspects from the results show that the financial education trainings are very short, so that it is not possible to cover all the required topics from the OECD to consider someone financial educated. Furthermore, several participants of the financial trainings are not able to finish due to her/his responsibilities as entrepreneur. Besides, for most of the offerings, there is not an impact evaluation (post-evaluation) about the effect of the trainings regarding the application of the knowledge in financial matters.
    Keywords: SME Finance, financial literacy campaigns, financial education, financial inclusion
    JEL: M O
    Date: 2023
  6. By: Miller, Jason W. (Michigan State University); Phares, Jonathan (Ivy College of Business); Burks, Stephen V. (University of Minnesota, Morris)
    Abstract: Every year, approximately 27% of all jobs in the U.S. truck transportation sector (NAICS 484) are reshuffled across motor carriers as existing carriers grow or shrink, new entrants begin operations, and existing firms exit. Studying how these dynamics unfold, especially for young carriers, is critical to further our understanding of employment dynamics in the U.S. trucking industry. This manuscript takes a first look at job creation and job destruction dynamics in truck transportation, with a special emphasis on the roles of carrier age and on job creation and destruction dynamics in the manufacturing sector, the source of demand for most trucking ton-miles. In doing so, we draw on and extend theory in both supply chain management and economics. We test our predictions using archival data from the U.S. Census Bureau's Business Dynamics Statistics program that tracks the universe of truck transportation firms with employee establishments from 1995 through 2019, focusing on firms that are ten years old or younger. Results from fitting a series of linear mixed effects models provide strong evidence that job creation and job destruction dynamics at trucking firms decline rapidly as carriers age. We further find these age-related dynamics are moderated by employment dynamics in the manufacturing sector. We discuss implications of these findings for theory and practice.
    Keywords: job creation, job destruction, motor carrier, U.S. trucking industry, business dynamics statistics
    JEL: J21 J63 L92
    Date: 2023–05
  7. By: Tina Highfill; Richard Cao (Bureau of Economic Analysis)
    Abstract: Quarterly Census of Employment and Wages data from the Bureau of Labor Statistics, disaggregated by number of employees in an establishment, are used to estimate first quarter wages and employment by industry for small, medium, and large businesses between 2012 and 2021. This is the first set of size class estimates from the Bureau of Economic Analysis that are based on the number of employees at an establishment, or individual business location, as opposed to the total number of employees in a company or enterprise. The distributions of wages and employment by establishment size class tell a different story about the composition and scope of small businesses in the U.S. compared to enterprise-based small business statistics. Establishment-based size classes show almost half (48.6 percent) of 2017q1 wages were generated by businesses with less than 100 employees, but enterprise-based size classes put this share at only 28.4 percent. Additionally, the establishment classification shows only 16.4 percent of wages were attributable to businesses with 500 or more employees, while the enterprise classification shows 52.1 percent, corresponding to the strong influence multi-establishment companies have in many industries. These differences underscore the importance of considering classification when interpreting small business statistics.
    JEL: E01 O51
    Date: 2022–10
  8. By: Manuela Nita (Valahia University in TârgoviÅŸte, Romania)
    Abstract: Liberty is generally regarded as the right of any individual to act according to his own will. This freedom is also transposed in business as the freedom of initiative in which the entrepreneur manifests his legal will according to his interests. The present analysis starts from the role of the principle of freedom in business within the branch of law, in order to identify the normative benchmarks that give it substance and the components of this freedom from an economic and legal perspective, with references to practical elements. The study also addresses the correlation between the values of this freedom and the existence of standard, framework and adhesion contracts that do not exclude the manifestation of the will of the parties in giving content to the business, being protected from any attempt at discrimination or abuse by the authorities. Freedom in business and freedom of contract is analyzed with reference to Romanian and European legislation, but also to specific norms of international trade law, especially regarding the freedom to choose the applicable law.
    Keywords: undertake, legal will, competition, usury clause, consensualism
    Date: 2022–10

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