nep-ent New Economics Papers
on Entrepreneurship
Issue of 2023‒10‒16
thirteen papers chosen by
Marcus Dejardin, Université de Namur

  1. Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology By Filippo Biondi; Sergio Inferrera; Matthias Mertens; Javier Miranda
  2. Bottom-Up Policies Trump Top-Down Missions By Henrekson, Magnus; Stenkula, Mikael
  3. Divergent Thinking and Post-Launch Entrepreneurial Outcomes: Non-Linearities and the Moderating Role of Experience By Caliendo, Marco; Rodriguez, Daniel
  4. Committing to Grow: Privatizations and Firm Dynamics in East Germany By Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
  5. Does Social Identity Constrain Rural Entrepreneurship? The Role of Financial Inclusion By Sandhya Garg; Samarth Gupta; Sushanta Mallick
  6. How is the literature on Digital Entrepreneurial Ecosystems structured? A socio-semantic network approach By Arnauld Bessagnet; Joan Crespo; Jerome Vicente
  7. Individualism, Creativity, and Innovation By Katharina Hartinger
  8. The Impacts of Covid-19 on Racial Inequality in Business Earnings By Robert Fairlie; Robert W. Fairlie
  9. The development of the Central and Eastern European venture capital market in Europe By Judit Karsai
  10. Credit Supply Shocks and Firm Dynamics: Evidence from Brazil By Samuel Bazzi; Marc-Andreas Muendler; Raquel F. Oliveira; James E. Rauch
  11. Unleashing the Power of Technology: Fueling Entrepreneurship Development Through Innovation By Hasan, Kamrul; Shaturaev, Jakhongir
  12. The Effects of Subsidies on Firm Size and Productivity By Bearzotti, Enia; Polanec, Sašo; Bartolj, Tjaša
  13. Did Research Get Attention in the COVID-19 Induced Public Policy Responses?: Case of MCSMEs and Women-led Enterprises By Khondaker Golam Moazzem; A S M Shamim Alam Shibly

  1. By: Filippo Biondi (KU Leuven and Research Foundation Flanders (FWO)); Sergio Inferrera (Queen Mary University of London); Matthias Mertens (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet)); Javier Miranda (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet))
    Abstract: We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms’ employment changes have become less responsive to productivity. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms’ productivity, market power, and technology to job reallocation and firms’ responsiveness.
    Keywords: Business dynamism, productivity, responsiveness of labor demand, market power, European cross-country data, technological change
    JEL: D24 J21 J23 J42 L11 L25
    Date: 2023–10–25
  2. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: Mission-oriented innovation policies are becoming increasingly popular among policymakers and scholars. We maintain that these policies are based on an overly mechanistic view of innovation and economic growth, suggesting that a more bottom-up approach is called for. By invoking an entrepreneurial ecosystem perspective, we point out that innovative entrepreneurship requires many other actors―besides the entrepreneur―whose skills and abilities are necessary to realize an entrepreneurial project. When mission-oriented policies play a large role in the economy, connections between actors in the ecosystem risk becoming distorted. A functioning and well-balanced entrepreneurial ecosystem requires instead an institutional framework that levels the playing field for potential entrepreneurs and encourages productive entrepreneurship. To promote this kind of system, we discuss in more detail eight key areas where appropriate horizontal or bottom-up policy measures can foster innovation and, in the end, the welfare-enhancing productive entrepreneurship policymakers and scholars strive for.
    Keywords: Collaborative innovation bloc; Entrepreneurial ecosystem; Entrepreneurship policy; Institutions; Public choice
    JEL: H50 L26 O31 P16
    Date: 2023–09–28
  3. By: Caliendo, Marco (University of Potsdam); Rodriguez, Daniel (University of Potsdam)
    Abstract: Divergent thinking is the ability to produce numerous and diverse responses to questions or tasks, and it is used as a predictor of creative achievement. It plays a significant role in the business organization's innovation process and the recognition of new business opportunities. Drawing upon the cumulative process model of creativity in entrepreneurship, we hypothesize that divergent thinking has a lasting effect on post-launch entrepreneurial outcomes related to innovation and growth, but that this relation might not always be linear. Additionally, we hypothesize that domain-specific experience has a moderating role in this relation. We test our hypotheses based on a representative longitudinal sample of 457 German business founders, which we observe up until 40 months after start-up. We find strong relative effects for innovation and growth outcomes. For survival we find conclusive evidence for non-linearities in the effects of divergent thinking. Additionally, we show that such effects are moderated by the type of domain-specific experience that entrepreneurs gathered pre-launch, as it shapes the individual's ideational abilities to fit into more sophisticated strategies regarding entrepreneurial creative achievement. Our findings have relevant policy implications in characterizing and identifying business start-ups with growth and innovation potential, allowing a more efficient allocation of public and private funds.
    Keywords: survival, entrepreneurial performance, divergent thinking, business expansion, innovation
    JEL: L25 L26 M13 M51
    Date: 2023–09
  4. By: Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
    Abstract: This paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates. Our empirical analysis, using a novel dataset and instrumental variable approach, confirms these findings. We estimate a 22% points higher annual employment growth rate, a 14% points higher annual productivity growth, and a 3.6% points higher probability of exit for firms with binding employment targets. Our calibrated model further demonstrates that without these targets, aggregate employment would have been 15% lower after 10 years. Additionally, an alternative policy of productivity investment subsidies proved costly and less effective in the short term.
    Keywords: industrial policy, privatizations, productivity, size-dependent regulations
    JEL: D22 D24 J08 L25
    Date: 2023
  5. By: Sandhya Garg; Samarth Gupta; Sushanta Mallick (Institute of Economic Growth, Delhi)
    Abstract: This paper examines whether better financial access can mitigate the impact of social identity on entrepreneurship. Using a novel dataset of Indian villages and distance to bank branches, we find that proximity to a bank branch improves non-agricultural entrepreneurship of underprivileged caste groups in India, with a significant entry occurring in sectors which were dominated by the privileged caste groups. We find that this effect is mediated by the uptake of institutional credit by under-privileged groups. Our results show that the financial inclusion can break rigid social norms around caste and occupation in India.
    Date: 2023
  6. By: Arnauld Bessagnet; Joan Crespo; Jerome Vicente
    Abstract: The paper provides a socio-semantic analysis of a scientific field which is of a growing importance to the academic community and policy makers: the field of digital entrepreneurial ecosystems. The purpose is to understand the way in which the ideas, theories and knowledge domains that nourish the field are structured. For this, we propose a methodology that combines the analysis of the structural properties of the co-authorship network with the semantic specificities that shape the sub-communities that interact within the field. The results show that despite the sign of a scientific integration, some key scientific issues on digital entrepreneurial ecosystems remain under-explored. We conclude on the importance of the method to identify knowledge gaps to be filled and better frame private and public incentives for future collaborations.
    Keywords: Digital Entrepreneurial Ecosystems; State-of-the-art review; Socio-semantic networks, scientometrics
    Date: 2023–10
  7. By: Katharina Hartinger (Johannes Gutenberg-University Mainz, Germany)
    Abstract: Individualist societies are more innovative, but little is known about the underlying individual behaviors. I use international labor-market and patent data to show that individualism—the cultural dimension that emphasizes individual achievements over collective action—positively affects individual innovation. Comparing migrants from different cultural origins within the same destination country and using variation in individualism at the country, region, and person level, I find that more individualist migrants select into more innovative occupations—including research, creative jobs, and ambitious entrepreneurship. Individualists also engage more readily in knowledge diffusion on the job—even when accounting for occupational selection—by investing more time in active learning. Taken together, those innovation choices account for 44 percent of the individualism productivity premium. Individualism also positively affects patenting behavior as a direct innovation output measure.
    JEL: O31 D91 J24 Z13
    Date: 2023–09–27
  8. By: Robert Fairlie; Robert W. Fairlie
    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, racial inequality, business earnings, pandemic
    JEL: L26 J15
    Date: 2023
  9. By: Judit Karsai (Centre for Economic and Regional Studies)
    Abstract: The working paper examines the role and development of the Central and Eastern European venture capital sector in the five years between 2016 and 2020. This period includes both the end of the recovery after the economic crisis in 2008 and the downturn due to the coronavirus crisis in 2019. A statistical analysis of venture capital funds and investments in the CEE region confirms that, while the overall position of the region in Europe did not change over the period under review, the differences between countries in the region increased sharply. The northern part of the region rivals the most developed countries in Europe, the central part is driven by an abundance of public resources, while the venture capital sector in the south is only in its infancy. The size of the venture capital funds in the region is far below the European average, so the start-ups only have a chance to become successful if they are involved in the international flow of venture capital. The role of the government in the funds in the region is extremely high, but the selection between companies is therefore not based solely on market considerations. Rent-seeking behaviour goes against the essence of venture capital. As a result of the deterioration of the global political and economic situation, the entire Central and Eastern European region is losing its ability to attract capital.
    Keywords: Keywords: venture capital; private equity; acquisition; entrepreneurship; startup; innovation
    JEL: G23 G24 G28 L26 M13
    Date: 2023–08
  10. By: Samuel Bazzi; Marc-Andreas Muendler; Raquel F. Oliveira; James E. Rauch
    Abstract: We explore how financial constraints distort the entry decisions among otherwise productive entrepreneurs and limit growth of promising young firms. A model of liquidity-constrained entrepreneurs suggests that the easing of credit constraints can induce more entry of firms with greater long-run growth potential than the easing of conventional entry barriers would bring about. We explore this growth mechanism using a large-scale program to expand the supply of credit to small and medium enterprises in Brazil. Local credit supply shocks generate greater firm entry but also greater exit with no effect on short-run employment growth in the formal sector. However, credit expansions increase average capability among entering firms, which enter at larger size, survive longer, and grow faster. These firm dynamics are more pronounced in areas with weaker credit markets ex ante and consistent with local bank branches using cheap targeted credit lines to expand lending more broadly. Our findings provide new evidence on the general equilibrium effects of credit supply expansions.
    JEL: D21 D22 D92 L25 L26 M13 O12
    Date: 2023–09
  11. By: Hasan, Kamrul; Shaturaev, Jakhongir
    Abstract: This research paper examines the role of technology innovation in the development of entrepreneurship. With the rapid advancement of technology, entrepreneurs have access to innovative tools and platforms that have transformed the way businesses operate and create value. This paper explores the impact of technology innovation on various aspects of entrepreneurship, including idea generation, market analysis, resource utilization, product development, and marketing. It also analyzes the challenges and opportunities that arise from the integration of technology in entrepreneurial ventures. The findings suggest that technology innovation plays a vital role in promoting entrepreneurship by facilitating business growth, enhancing competitiveness, and fostering innovative solutions to societal challenges.
    Keywords: Technology innovation, entrepreneurship development, idea generation, market analysis, resource utilization, product development, marketing, challenges, opportunities.
    JEL: A2 I2 M2 P0
    Date: 2022–01–07
  12. By: Bearzotti, Enia; Polanec, Sašo; Bartolj, Tjaša
    Abstract: This paper evaluates the impact of varying subsidy sizes and distinct program objectives on firm size and performance. The magnitude of treatment effects increases with subsidy size, although the marginal effects tend to decrease. We also find that treatment effects differ across subsidy programs due to their distinct objectives. Among these, labor-support measures are most effective at supporting employment, capital, and output while being most harmful to productivity. Contrary to theory, subsidies providing incentives for investments have no impact on capital or productivity. The treatment effects tend to decrease over time and are thus temporary. As recipient firms are more likely to receive additional support in the future, the effects of subsidies accumulate giving rise to permanent differences between subsidized and non-subsidized firms. However, the lack of productivity improvements in such firms questions the benefits of repeated supporting measures.
    Keywords: Subsidies, Firm Growth, Firm Performance, Industrial Policy
    JEL: H25 L25 L52
    Date: 2023–09–06
  13. By: Khondaker Golam Moazzem; A S M Shamim Alam Shibly
    Abstract: This study focuses on the relationship between public policies and research during the Covid pandemic period in addressing the challenges of the marginalised businesses, particularly for SMEs and women-led enterprises, in getting access to financial support (i.e., stimulus loan packages). Theoretically, a knowledge-based policy formulation process generates a policy space where actors and institutions, politics and interests, narratives and evidence intersect altogether. Incorporating these three factors in the context of a developing country is challenging, particularly for the marginalised businesses, since their participation in the policy space is minimal.
    Keywords: COVID-19, Public Policy, SMEs, MCSMEs, women-led enterprises, Bangladesh
    Date: 2022–05

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.