nep-ent New Economics Papers
on Entrepreneurship
Issue of 2023‒12‒04
thirteen papers chosen by
Marcus Dejardin, Université de Namur

  1. Committing to Grow: Privatizations and Firm Dynamics in East Germany By Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
  2. Population Aging and Small Business Dynamics By XU Peng
  3. Learning from Overrated Mission-Oriented Innovation Policies: Seven Takeaways By Henrekson, Magnus; Sandström, Christian; Stenkula, Mikael
  4. The SME-suitable industry reservation policy: Economic effects and policy direction By Kim, Minho
  5. Exports and firm survival in times of COVID-19: Evidence from eight European countries By Wagner, Joachim
  6. Breaking Barriers: Investigating the Effects of 100% Foreign Ownership on Business Entry in Dubai By Rashad, Ahmed
  7. Boosting Social Entrepreneurship and Social Enterprise Development in Ireland: In-depth policy review By OECD
  8. Social push and the direction of innovation By Elias Einio; Josh Feng; Xavier Jaravel
  9. Small Business Recovery after Natural Disasters in the Fed’s Second District By Asani Sarkar
  10. Self-Employment Grows during COVID-19 Pandemic By Victoria Gregory; Elisabeth Harding; Joel Steinberg
  11. Promoting gender equality to strengthen economic growth and resilience By Christophe André; Orsetta Causa; Emilia Soldani; Douglas Sutherland; Filiz Unsal
  12. The role of environmental practices and innovation in total factor productivity convergence -Evidence from small-and medium-sized manufacturing enterprises in Vietnam By Thanh Tam Nguyen-Huu; Khac Minh Nguyen; Quoc Tran-Nam
  13. Survey on Individuals’ Preferences for Employee Entrepreneurship and Mobility (Japanese) By YOSHIDA Yukiko; HONJO Yuji

  1. 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: 2023–11–07
  2. By: XU Peng
    Abstract: This paper uses a large sample of small and medium-sized enterprise financial data (2008-2019) to empirically analyze the effect of a prefecture's population aging on successions, mergers, suspensions/closures, and bankruptcies. The higher the proportion of the population aged 65 and over, the more serious the problem of finding successors for small businesses, that is, the decline in the turnover of aged business owners occurring through succession. Compared to inherited small and medium-sized enterprises, bankrupt enterprises, closed enterprises, and acquired enterprises tend to suffer from poor performance and sales. Companies that suffer from sluggish sales or poor performance go bankrupt, close, or merge; in other words, the metabolism of small and medium-sized enterprises also slow down as the population ages, not only impeding small business metabolism, but also performance— profitability, investment and growth rates--decline with increases in the population aged 65 and older. On the other hand, cash holdings of small businesses increase with population aging, likely because of increases in precautionary liquidity demand in preparation for future business closures.
    Date: 2023–11
  3. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Sandström, Christian (Jönköping International Business School, Jönköping, Sweden); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: This paper integrates findings from several different case studies on Mission-Oriented Innovation Policies (MOIPs) and makes use of existing literature to briefly describe three other missions: The War on Cancer, homeownership in the United States, and the Swedish Million Program. Together with the analyses in the contributions in the volume Moonshots and the New Industrial Policy: Questioning the Mission Economy, seven takeaways regarding mission-oriented innovation policies are developed and described: 1) wicked problems cannot be solved through missions, 2) politicians and government agencies are not exempt from self-interest, 3) MOIPs are subject to rent-seeking and mission capture, 4) policymakers lack information to design MOIPs, 5) MOIPs distort competition, 6) government support programs distort incentives and result in moral hazard, and 7) MOIPs ignore opportunity costs. These seven takeaways are illustrated using the cases described in this essay and in other contributions in the above-mentioned volume.
    Keywords: Mission-oriented policies; Innovation policy; New industrial policy; Moonshots; Rent seeking; Public choice
    JEL: H50 L26 L52 O31 O38 P16
    Date: 2023–11–06
  4. By: Kim, Minho
    Abstract: After marking the ten-year milestone since the adoption of the SME-suitable industry reservation policy, this study investigates whether the policy has enhanced the competitiveness of SMEs by safeguarding them as intended and offers implications for its future implementation. This SME policy involves the selection of specific products to protect the business territories of SMEs and limit the entry or expansion of large enterprises; however, evidence-based discussions on its effectiveness have been limited. While the production and employment of large businesses decreased after the adoption, the business activities of SMEs did not change much. This reservation policy aimed to "ensure the competitiveness of SMEs through their protection." It successfully fulfilled its protective role by reducing the likelihood of SMEs exiting the market. However, the reservation policy had limited impact in terms of improving their performance or competitiveness. Following the designation of a set of industries (products) reserved for SMEs, the probability of exit for SMEs engaged in the production of those specific products significantly decreased. However, these SMEs did not show significant differences compared to other product producers in terms of most performance and input indicators. The industry-level analysis shows that the policy contributed little to the performance of overall industries to which the designated products belong. The disappointing outcomes of the policy's stringent measures highlight its limited effectiveness, as the restrictions on the expansion or entry of large enterprises did not lead to significant improvements in the performance of SMEs. Based on the findings, it is recommended to suspend new applications for the designation of SME-suitable industries and gradually phase out the already designated reserved industries. In any business field, when there is greater uncertainty about future market restrictions, firms are less incentivized to engage in that market and invest in domestic production facilities. A policy that restricts production activity in a specific business area solely based on firm size may inadvertently undermine the efficiency of resource allocation in the broader economy. Instead of protecting specific business areas, a win-win policy between SMEs and large firms should prioritize providing effective support for the growth of capable SMEs through appropriate regulatory measures to address anti-competitive and unfair practices.
    Date: 2022
  5. By: Wagner, Joachim
    Abstract: This paper uses firm level data from the World Bank Enterprise surveys conducted in 2019 and from the COVID-19 follow-up surveys conducted in 2020 in eight European countries to investigate the link between exporting before the pandemic and firm survival until 2020. The estimated effect of exports is positive and statistically significant ceteris paribus after controlling for various firm characteristics that are known to be related to firm survival. Furthermore, the size of this estimated effect can be considered to be large on average. Exporting helped firms to survive.
    Keywords: Exports, firm survival, COVID-19, World Bank Enterprise Surveys, Robit regression
    JEL: D22 F14 L20 L25 L29
    Date: 2023
  6. By: Rashad, Ahmed
    Abstract: The regulatory and institutional environment of a nation plays a critical role in shaping the level of entrepreneurship. By creating a conducive regulatory and institutional environment, governments can encourage entrepreneurial activity, leading to job creation, innovation, and economic growth. The United Arab Emirates has recently deregulated the ownership rules for more than 1, 000 commercial and industrial activities, allowing full ownership of commercial companies in the UAE without requiring a partnership with a national sponsor. Before the introduction of these amendments, foreign ownership was not permitted to exceed 49% of the total assets of a company outside the free zones, with the majority stake being held by an Emirati partner. This study represents the first attempt to assess the short-term impact of the liberalization of business ownership rules on the number of newly registered firms in the UAE. The study collects unique data that covers all types of business activity in Dubai, using monthly data on the number of newly issued business licenses. We developed a difference-in-difference model with a treatment and a control group using panel data regression models. Our findings suggest that the liberalization of the ownership rules has led to a significant surge in the number of new business licenses in the sectors impacted by the liberalization policy. This early evidence suggests that relaxing the restrictions on business ownership may stimulate entrepreneurial activity and business creation in the Gulf region.
    Keywords: New Firms, Gulf region, regulatory reform, entrepreneurship
    JEL: G18 G38 L51 M13
    Date: 2023
  7. By: OECD
    Abstract: Ireland is home to a vibrant social enterprise community, active in essential sectors such as health, care, and education, as well as local development and cultural and creative sectors. This report provides an in-depth analysis of social entrepreneurship and social enterprises in Ireland. It identifies the country’s strengths and challenges and provides policy recommendations. An action plan with concrete and actionable measures is also provided to support Ireland in the development of its new national social enterprise policy. Following an overview of the socio-economic landscape (Chapter 1), the report describes factors underpinning social entrepreneurship, social enterprises and the social economy in the context of Ireland (Chapter 2); analyses the institutional and legal framework around social enterprises (Chapter 3); explores conditions and opportunities for access to finance and funding (Chapter 4); navigates developments in access to public and private markets for social enterprises (Chapter 5); looks at the existing state of social impact measurement and data availability on social enterprises (Chapter 6) and concludes with skills and business development for social entrepreneurship (Chapter 7).
    Keywords: local development, policy ecosystem, social economy, social enterprise, social entrepreneurship, social impact, social innovation
    JEL: L31 L33 L38 O35
    Date: 2023–11–16
  8. By: Elias Einio; Josh Feng; Xavier Jaravel
    Abstract: Innovators are intrinsically-motivated individuals who use ideas to create new goods and services. This raises the possibility that their social backgrounds may affect the direction of their innovative activity. Consistent with this "social push" channel, we document that innovators create products that are more likely to be purchased by customers similar to them along observable dimensions including gender, age, and socioeconomic status, both across and within detailed industries. Next, we provide causal evidence that social experience affects the direction of a person's innovative activity. Specifically, being exposed to peers from a lower-income group increases an entrepreneur's propensity to create necessity products, without affecting her rates of entrepreneurship and entrepreneurial income. We incorporate this channel into a general equilibrium model to assess its implications for cost-of-living inequality and long-run growth when there is unequal access to the innovation system.
    Keywords: innovators social background, social push
    Date: 2022–07–13
  9. By: Asani Sarkar
    Abstract: A previous Liberty Street Economics post found that minority-owned small businesses in the Federal Reserve’s Second District have been particularly vulnerable to natural disasters. Here we focus on the aftermath of disasters (such as hurricanes, floods, wildfires, droughts, and winter storms) and examine disparities in the ability of these firms to reopen their businesses and access disaster relief. Our results indicate that while white- and minority-owned firms remain closed for similar durations, the latter are more reliant on external funding from government and private sources to cope with disaster losses.
    Keywords: climate; racial disparities; Second District
    JEL: Q54 R10
    Date: 2023–11–16
  10. By: Victoria Gregory; Elisabeth Harding; Joel Steinberg
    Abstract: After declining then remaining fairly constant over the previous decade, the share of U.S. workers who are self-employed has grown in the aftermath of the COVID-19 recession.
    Keywords: COVID-19; self-employment
    Date: 2022–07–05
  11. By: Christophe André; Orsetta Causa; Emilia Soldani; Douglas Sutherland; Filiz Unsal
    Abstract: Women’s employment rates and wages are still lagging those of men across OECD countries, with average employment and wage gaps now around 15% and 12% respectively. Gaps narrowed at a relatively modest pace over the past decade, calling for further policy action. A lack of affordable high-quality childcare is often an obstacle to women’s participation in the labour market and notably to working full time. A very unequal sharing of parental leave between parents and challenges upon return to work further hampers women’s careers. Biases in the tax system may discourage women from working in some countries. Women face disadvantage in accessing management positions and entrepreneurship. A range of policies can help reduce gender gaps, including better childcare provision, incentivising parents to better share parental leave, re-skilling and upskilling on return from parental leave, encouraging gender equality within firms, integration programmes for foreign-born women, promoting women entrepreneurship and financial inclusion, and levelling taxation for second earners. Moreover, the multiple dimensions and root causes of gender inequality call for mainstreaming gender across policy domains.
    Keywords: Childcare, Economics of Gender, Education, Entrepreneurship, Financial inclusion, Gender equality, Immigration, Inequality, Labour discrimination, Parental leave, Taxation, Training
    JEL: D63 H24 I24 J13 J15 J16 J71 J78 L26 M53
    Date: 2023–11–20
  12. By: Thanh Tam Nguyen-Huu (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie); Khac Minh Nguyen; Quoc Tran-Nam
    Abstract: This research investigates the nexus between environmental compliance, innovation, and Total Factor Productivity convergence. We use two measures of environmental practices: the firm environmental standard certification and environmental treatment. As for innovation, it has three increasing-levels: no innovation, product or process innovation, and both types of innovation. Using a sample of Vietnamese small-and medium-sized manufacturing enterprises from 2007 to 2015, the environmental practices are not correlated with total factor productivity. By contrast, there is a strong correlation between innovation and environmental treatment. Factors contributing to the firm productivity growth rate, and consequently the speed of convergence, are innovation, firm size, and legal form.
    Abstract: Cette recherche examine le lien entre la conformité environnementale, l'innovation et la convergence de la productivité totale des facteurs. Nous utilisons deux mesures de pratiques environnementales : la norme de certification environnementale et le traitment environnemental. Quant à l'innovation, il s'agit d'une variable qualitative ayant trois modalités croissantes : aucune innovation, innovation de produit ou de procédé et deux types d'innovation. En utilisant une base de données des petites et moyennes entreprises manufacturières vietnamiennes entre 2007 et 2015, les pratiques environnementales ne sont pas corrélées avec la productivité totale des facteurs. En revanche, il existe une forte corrélation entre l'innovation et le traitement environnemental. Les facteurs qui contribuent au taux de croissance de la productivité des entreprises, et par conséquent à la vitesse de convergence, sont l'innovation, la taille de l'entreprise et la forme juridique.
    Keywords: Innovation TFP growth rate β-convergence Environmental practices, Innovation, TFP growth rate, β-convergence, Environmental practices
    Date: 2022–06–28
  13. By: YOSHIDA Yukiko; HONJO Yuji
    Abstract: This paper investigates the actual situation of employee entrepreneurship and mobility in Japan. The Government of Japan positioned 2022 as the first year of startup creation and formulated the “Startup Development Five-year Plan†at the end of 2022. Using a questionnaire survey entitled “Survey on Employee Entrepreneurship and Mobility, †we examine how individuals’ attributes, experiences, abilities, and thinking characteristics affect their intention for entrepreneurship and job switching. The following points became clear from the survey results. (1) Young generations are more likely to have an intention for entrepreneurship and job switching. Males are more likely to start a business than females. (2) Individuals with a large amount of financial assets are more likely to have an intention for entrepreneurship. (3) Individuals with large family sizes are more likely to have an intention for entrepreneurship, while those with small family sizes are more likely to have the intention of job switching. (4) Dissatisfaction with the current job environment increases individuals’ intention for entrepreneurship and job switching. (5) A longer working period reduces individuals’ intention for entrepreneurship and job switching. (6) Experience in working overseas and with foreign-affiliated firms, as well as transactions with and investment in startups, is positively associated with individuals’ intention for entrepreneurship and job switching. (7) Experience in filing patents and utility models is positively associated with individuals’ intention for entrepreneurship and job switching. (8) Experience in receiving commendations or awards based on professional competence is positively associated with individuals’ intention for entrepreneurship and job switching. (9) Parents’ experience in entrepreneurship is positively associated with individuals’ intention for entrepreneurship. (10) Individuals who take concrete steps to start a business tend to have high extraversion and low agreeableness in terms of the Big Five personality traits.
    Date: 2023–11

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