nep-ent New Economics Papers
on Entrepreneurship
Issue of 2023‒09‒25
ten papers chosen by
Marcus Dejardin, Université de Namur

  1. Is Productive Entrepreneurship Getting Scarcer? A Reflection on the Contemporary Relevance of Baumol's Typology By Minniti, Maria; Naudé, Wim; Stam, Erik
  2. The Local Origins of Business Formation By Emin M. Dinlersoz; Timothy Dunne; John Haltiwanger; Veronika Penciakova
  3. Regional Incidence of High-Growth Firms By Alex Coad; Clemens Domnick; Pietro Santoleri; Stjepan Srhoj
  4. Political Turnover and Firm Innovation in China: The Moderating Role of Innovation and Entrepreneurship Environment By Xing Shi; Ya Zhang; Yanrui Wu; Huaqing Wu
  5. Complementing Business Training with Access to Finance: Evidence from SMEs in Kenya By Anik Ashraf; Elizabeth Lyons
  6. Gender Gaps in Time Use and Entrepreneurship By Pedro Bento; Lin Shao; Faisal Sohail
  7. The Impacts of COVID-19 on Racial Inequality in Business Earnings By Fairlie, Robert W.
  8. Crowdsourced data indicates broadband has a positive impact on local business creation By Yifeng Philip Chen; Edward J. Oughton; Jakub Zagdanski; Maggie Mo Jia; Peter Tyler
  9. The role of local promoters in helping microentrepreneurs engage in digital business training. The case of Expertienda By Rodríguez-Lesmes, Paul; Gutierrez, Luis H.; Urueña-Mejia, Juan Carlos; Ortiz, Andres; Medina Rojas, Ivan; Romero, Mauricio
  10. Economic Effects of R&D Supports By Huseyin Emre Sayici; Mehmet Fatih Ulu

  1. By: Minniti, Maria (SMU Cox School of Business); Naudé, Wim (RWTH Aachen University); Stam, Erik (Utrecht University)
    Abstract: We review Baumol's typology of productive, unproductive and destructive entrepreneurship. We argue that the typology is relevant for explaining the secular decline in business dynamics. To the existing explanations for this decline, we put forward the thesis that entrepreneurship has become less productive, due to the unintended effects of entrepreneurship policies adopted widely in Western economies. These have straight-jacketed, distracted and zombified entrepreneurship. Removing these constraints on productive entrepreneurship would require that the decline in level-two institutions, such as democracy and science, be halted and reversed.
    Keywords: entrepreneurship, economic growth, economic development, institutions, Baumol
    JEL: L26 L21 L53 O40
    Date: 2023–08
  2. By: Emin M. Dinlersoz; Timothy Dunne; John Haltiwanger; Veronika Penciakova
    Abstract: What locations generate more business ideas, and where are ideas more likely to turn into businesses? Using comprehensive administrative data on business applications, we analyze the spatial disparity in the creation of business ideas and the formation of new employer startups from these ideas. Startups per capita exhibit enormous variation across granular units of geography. We decompose this variation into variation in ideas per capita and in their rate of transition to startups, and we find that both components matter. Observable local demographic, economic, financial, and business conditions account for a significant fraction of the variation in startups per capita—and more so for the variation in ideas per capita than in transition rate. Income, education, age, and foreign-born share are generally strong positive correlates of both idea generation and transition. Overall, the relationship of local conditions with ideas differs from that with transition rate in magnitude and, sometimes, in sign: certain conditions (notably, the African American share of the population) are positively associated with ideas but negatively with transition rates. We also find a close correspondence between the actual rank of locations in terms of startups per capita and the predicted rank based only on observable local conditions—a result useful for characterizing locations with high startup activity.
    Keywords: entrepreneurship; firm entry; business formation; business dynamism; economic geography
    JEL: L26 R12 R23
    Date: 2023–08–02
  3. By: Alex Coad (Waseda Business School, Japan); Clemens Domnick (European Commission - JRC); Pietro Santoleri (European Commission - JRC); Stjepan Srhoj (University of Split, Croatia)
    Abstract: Policy-makers and scholars often assume that a higher incidence of high-growth firms (HGFs) is synonymous with vibrant regional economic dynamics. We test whether more developed regions, which presumably feature superior entrepreneurial ecosystems (EE), have a higher incidence of HGFs. Empirical evidence suggests that the highest shares of HGFs in Europe are found in peripheral regions, which goes against common assumptions and popular theories. The results call for i) a more nuanced interpretation of regional HGF shares, including a better understanding of their nature and drivers as well as ii) a refinement of the theoretical EE framework.
    Keywords: high-growth firms, regional policy, regional economic development
    JEL: R11 L26
    Date: 2023–07
  4. By: Xing Shi (School of Economics, Hefei University of Technology, Hefei, China); Ya Zhang (School of Economics, Hefei University of Technology, Hefei, China); Yanrui Wu (Business School, The University of Western Australia); Huaqing Wu (School of Economics, Hefei University of Technology, Hefei, China)
    Abstract: The empirical work in this paper is based on an analysis of the data of China's listed companies, the innovation and entrepreneurship index, and local official turnover data at the city level. It shows that policy uncertainty caused by local political turnover in local governments significantly reduces firm innovation. However, improvement in local innovation and entrepreneurship environment can lessen this negative impact. This moderating effect is especially relevant among non-high-tech or financially constrained firms. The robustness of these findings is checked through a series of alternative analyses such as dealing with endogeneity, optional measures of the dependent variable and subsamples.
    Keywords: Political turnover, Policy uncertainty, Innovation and entrepreneurship environment, Firm innovation, China
    JEL: L25 O31
    Date: 2023
  5. By: Anik Ashraf; Elizabeth Lyons
    Abstract: This paper investigates the complementarity between business training and access to financial capital for small and medium enterprises (SMEs) in Kenya. All participants in a business training program are offered training. One-third of participants are offered loans immediately after training (Concurrent Loan group), one-third are offered loans six weeks after training (Delayed Loan group), and the remaining third are offered loans after another four weeks (Control group). While a long time lag may reduce knowledge retention and application by SMEs, concurrent access to loans and associated business spending may crowd out the entrepreneurs’ attention from improving business practices. We find evidence for the latter in both intention-to-treat and treatment-on-the-treated estimates. While SMEs in both Control and Delayed Loan groups improve their business practices, SMEs in the Concurrent Loan group who take loans do not improve their practices at all. Moreover, entrepreneurs who take loans spend less time on their businesses and their business revenue falls. Our evidence is consistent with the entrepreneurs in our study using loans to substitute for their income.
    Keywords: business training, access to finance
    JEL: O12 L26 M53
    Date: 2023
  6. By: Pedro Bento (Texas A&M University, Department of Economics); Lin Shao (Bank of Canada); Faisal Sohail (University of Melbourne, Department of Economics)
    Abstract: The prevalence of entrepreneurs, particularly low-productivity non-employers, declines as economies develop. This decline is more pronounced for women. Relative to men, they are more likely to be entrepreneurs in poor economies but less likely in rich economies. We investigate whether gender gaps in time dedicated to non-market activities, which narrow with development, can account for this pattern. We develop a quantitative framework in which selection into occupations depends on one's ability and time, and features gender-specific distortions and social norms around market work. When calibrated to match cross-country data, we find that differences in social norms are almost entirely responsible for the patterns of gender gaps in both time use and entrepreneurship. Through these channels, social norms account for a substantial part of cross-country differences in output per worker and firm size, and have significant welfare implications for women.
    Keywords: entrepreneurship, time use, gender, development, firm size.
    JEL: J2 L2 O1
    Date: 2023–09–01
  7. By: Fairlie, Robert W. (University of California, Los Angeles)
    Abstract: Many small businesses closed in the pandemic, but were economic losses disproportionately felt by businesses owned by people of color? This paper provides the first study of the impacts of COVID-19 on racial inequality in business earnings. Pandemic-induced losses to business earnings in 2020 were 16-19 percent for all business owners. Racial inequality increased in the pandemic: Black business owners experienced larger negative impacts on business earnings of 12-14 percent relative to white business owners. Regression estimates for Latinx and Asian business owners reveal negative point estimates but the estimates are not statistically significant. Using Blinder-Oaxaca decompositions and a new pandemic-focused decomposition technique, I find that the industry concentrations of Black, Latinx, and Asian business owners placed each of these groups at a higher risk of experiencing disproportionate business earnings losses in the pandemic. Higher education levels among Asian business owners helped insulate them from larger losses from COVID-19. In the following year of economic recovery, 2021, business earnings rebounded strongly for all groups except for Asian business owners who experienced large relative losses (which were partly due to industry concentrations). State-level variation in policies and disease spread does not explain racial differences in business earnings losses or rebounds.
    Keywords: entrepreneurship, COVID-19, racial inequality, business earnings, pandemic
    JEL: L26 J15
    Date: 2023–08
  8. By: Yifeng Philip Chen; Edward J. Oughton; Jakub Zagdanski; Maggie Mo Jia; Peter Tyler
    Abstract: Broadband connectivity is regarded as generally having a positive macroeconomic effect, but we lack evidence as to how it affects key economic activity metrics, such as firm creation, at a very local level. This analysis models the impact of broadband Next Generation Access (NGA) on new business creation at the local level over the 2011-2015 period in England, United Kingdom, using high-resolution panel data. After controlling for a range of factors, we find that faster broadband speeds brought by NGA technologies have a positive effect on the rate of business growth. We find that in England between 2011-2015, on average a one percentage increase in download speeds is associated with a 0.0574 percentage point increase in the annual growth rate of business establishments. The primary hypothesised mechanism behind the estimated relationship is the enabling effect that faster broadband speeds have on innovative business models based on new digital technologies and services. Entrepreneurs either sought appropriate locations that offer high quality broadband infrastructure (contributing to new business establishment growth), or potentially enjoyed a competitive advantage (resulting in a higher survival rate). The findings of this study suggest that aspiring to reach universal high capacity broadband connectivity is economically desirable, especially as the costs of delivering such service decline.
    Date: 2023–08
  9. By: Rodríguez-Lesmes, Paul (Facultad de Economía Universidad del Rosario); Gutierrez, Luis H. (Facultad de Economía Universidad del Rosario); Urueña-Mejia, Juan Carlos (Facultad de Economía Universidad del Rosario; Corporacion Universitaria Minuto de Dios); Ortiz, Andres (Corporacion Universitaria Minuto de Dios, and Universidad de La Salle); Medina Rojas, Ivan (Corporacion Universitaria Minuto de Dios); Romero, Mauricio (Fundacion Capital)
    Abstract: The challenge for policymakers is providing good quality business training services that can reach vast numbers of firms while not expensive. This paper examines the marginal impact of implementing a free smartphone-based business training called Expertienda for Colombian microentrepreneurs. Using teams of local university students and a randomised control trial design, we invited microentrepreneurs to install the application in 2021 and follow up with them at least three times. The sample consisted of 1, 013 microentrepreneurs in 10 Colombian cities, for whom we collected administrative records on the application usage and observational and survey data one year after the implementation. We show that for every 100 incentivized businesses, 4 installed and used the app. Moreover, there is no evidence of spillovers at the local level regarding take-up. Regarding business performance, results show no evidence that the course affected financial inclusion, formalisation, or business practices indexes.
    Keywords: Financial inclusion; business practices; Formality; Digital training; Microbusiness
    JEL: C93 D22 O10 O17
    Date: 2023–09–11
  10. By: Huseyin Emre Sayici (Fisher College of Business, Ohio State University); Mehmet Fatih Ulu (College of Administrative Sciences and Economics, Koç University)
    Abstract: This study examines the economic effects of research and development (R&D) supports in the context of a program implemented in Türkiye between 2006-2019. Firms receiving the support differ positively from other firms in key economic indicators. Results indicate a 6% rise in patent registrations, 9% growth in value-added, 26% surge in total wages, 17% increase in per capita wages, 9% expansion in employment, 10% boost in productivity, 11% rise in exported product diversity, and 4% uptick in sales due to the support. Nonetheless, the effects on productivity and sales are statistically weaker than other impacts. The average impact of patents is also modest. Large-scale firms exhibit significant benefits, with a 33% rise in patent numbers and a 13% growth in sales. These firms effectively leverage support to commercialize R&D investments and innovations. Small-sized firms experience stronger productivity effects. Productivity gains grow with scale among SMEs, but large firms do not see positive productivity effects.
    Keywords: R&D supports, TEYDEB, innovation, matching.
    JEL: O31 O32 O38
    Date: 2023–09

This nep-ent issue is ©2023 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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