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on Entrepreneurship |
| By: | Lynda Sanderson (Productivity Commission) |
| Abstract: | Periods of recession can have long term impacts on the economy. Entry rates decline during recessions, depressing aggregate job creation in future. At the same time, conditions at entry may also affect long-run growth prospects at the firm level. This paper explores patterns of firm birth, growth, and death for cohorts of New Zealand firms born between 2002 and 2015, and examines the role of selection for explaining those patterns. Firms born in "bad times" - the years of and immediately following the Global Financial Crisis - are shown to start out, and remain, smaller than comparable firms born in more buoyant economic circumstances. Industry composition, firm type, and the characteristics of entrepreneurs are shown to vary across the economic cycle but cannot fully explain the size gap. While firm size gaps are small in absolute terms, as entering firms tend to be very small regardless of the economic conditions, when aggregated across firms these small employment gaps can lead to sizeable reductions in cohort employment. |
| Keywords: | firm dynamics, entrepreneurship, employment, age-period-cohort (APC) model, start-ups, Global Financial Crisis (GFC) |
| JEL: | D22 E32 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ayz:wpaper:24_01&r=ent |
| By: | Christian Keuschnigg (University of St.Gallen, Institute of Economics (FGN-HSG)); Michael Kogler (German Council of Economic Experts); Johannes Matt (London School of Economics (LSE); Centre for Macroeconomics (CFM)) |
| Abstract: | How do banks’ lending decisions influence firm turnover and creative destruction? We develop a dynamic general equilibrium model in which banks restructure loans with high default risk, thereby releasing funds for new lending and forcing firms with poor prospects to close down. By reducing banks’ reliance on external funds, loan restructuring lowers the equilibrium interest rate, which stimulates firm creation. We derive analytical and quantitative results from the model calibrated to German data: A lower cost of loan liquidation (e.g., improved insolvency laws) accelerates firm entry and exit, and boosts aggregate capital productivity mainly by incentivizing more active credit reallocation. Restructuring also complements policies that aim at stimulating firm creation (e.g., R&D subsidies) as it mitigates a crowding-out of entry via the interest rate. |
| Keywords: | Creative destruction, reallocation, bank credit, productivity |
| JEL: | E23 E44 G21 O4 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2404&r=ent |
| By: | Yang Ming (Central University of Finance and Economics); Heng-fu Zou (Central University of Finance and Economics) |
| Abstract: | This paper develops a theoretical model to explore the impact of the spirit of capitalism (SOC) on entrepreneurship and the allocative efficiency of talent. In the presence of financial frictions, both individual abilities and wealth play crucial roles in shaping occupational choices. Consequently, individuals with a stronger SOC are more inclined towards entrepreneurship. However, this heightened entrepreneurial activity leads to allocative inefficiencies in talent allocation, as some wealthy but less skilled individuals pursue entrepreneurial ventures. Mitigating financial frictions serves to enhance overall productivity by rectifying this inefficiency, though its influence on entrepreneurship remains uncertain. Conversely, increasing the fraction of individuals with higher SOC yields non-monotonic effects on both aggregate productivity and entrepreneurship. The calibrated model introduces a novel perspective on the decline in entrepreneurship witnessed in the U.S. and other advanced economies over recent decades. |
| Keywords: | spirit of capitalism, entrepreneurship, talent allocation, occupational choice |
| JEL: | J24 O15 O16 |
| Date: | 2024–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:618&r=ent |
| By: | Cucchiarini, Veronica; Scicchitano, Sergio; Viale, Riccardo |
| Abstract: | The study of the entrepreneurial mindset has provided valuable insights into the cognitive strategies that impact entrepreneurial activities. Researchers have identified several biases and heuristics employed by entrepreneurs, which significantly influence their decision-making processes and actions, but the empirical evidence remains fragmented. To develop a more comprehensive understanding of the cognitive and behavioral mindset of entrepreneurs, it is important to consider the role of the context in which they operate. By analyzing the strengths and weaknesses of heuristics and biases within the context of risk or uncertainty, we can gain a deeper understanding of their influence on entrepreneurial outcomes. |
| Keywords: | Entrepreneurship, biases, heuristics, risk, uncertainty, labour policies |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1390&r=ent |
| By: | Seven Ağır (Department of Economics, Middle East Technical University, Ankara, Turkey) |
| Abstract: | The small and medium-sized enterprises might play an essential role in the economy of a developing country. Yet, in developing countries, relatively fewer firms have been able to transition from micro enterprises focusing on survival to small and medium enterprises with higher capacity for innovation and job creation. This problem of the ‘missing middle’ has been identified as one of the barriers to increasing economic prosperity and therefore the ‘reasons’ underlying it have been examined in studies on various parts of the developing world. This study examines the ‘missing middle’ problem from a historical-institutional perspective by focusing on the underutilization of a novel form of business organization, i.e., PLLC in Turkey. Based upon a novel dataset of firm creation and desk research on legal changes in Turkey during 1957-1994, the study demonstrates the ‘missing’ PLLCs and discuss the potential factors underlying legal stagnation. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:met:wpaper:2305&r=ent |
| By: | Melanie Koch; Lukas Menkhoff |
| Abstract: | Entrepreneurs tend to be risk tolerant but is more risk tolerance always better? In a sample of about 2, 100 small businesses, we find an inverted U-shaped relation between risk tolerance and profitability. This relationship holds in a simple bilateral regression and also when we control for a large set of individual and business characteristics. Apparently, one major transmission goes from risk tolerance via investments to profits. This is quite robust as it applies for past investments as well as planned investments. Considering business survival, we show, first, that less profitable businesses leave the market while moderately risk tolerant entrepreneurs survive more often. Second, the high risk-low profit part of the U-shaped relation seems to disappear among businesses being four years and older, indicating that such inferior risk-profit combinations disappear over time. These findings are important for the concept of business readiness trainings as the motivation (and ability) to take risks should potentially be accompanied by some warning that too much risk taking can be detrimental to long-term business success. |
| Keywords: | risk tolerance; entrepreneurs; profits; investments |
| JEL: | D22 D81 L26 M21 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp2067&r=ent |
| By: | HONJO, Yuji; IWAKI, Yunosuke; KATO, Masatoshi |
| Abstract: | This study explores the impact of initial debt financing on the survival of start-up firms by identifying three types of exit routes: bankruptcy, voluntary liquidation, and merger. Using a discrete-time duration model for Japanese start-up firms, we examine how debt financing affects the time from founding to exit. We find that firms that initially rely on debt financing from outside creditors are more likely to go bankrupt and that long-term debt, rather than short-term debt, is positively associated with the time to exit due to bankruptcy. In contrast, such firms are less likely to liquidate voluntarily, and long-term debt is negatively associated with the time to voluntary liquidation. Moreover, they are less likely to exit via merger, and long-term debt is negatively associated with the time to exit via merger. Furthermore, unlike voluntary liquidation and merger, macroeconomic conditions influence the likelihood of bankruptcy. |
| Keywords: | Bankruptcy, Debt financing, Long-term debt, Merger, Outside creditors, Start-up, Voluntary liquidation |
| JEL: | G33 G34 M13 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:hit:tdbcdp:e-2023-02&r=ent |
| By: | Babina, Tania (Columbia University); Bahaj, Saleem (Bank of England); Buchak, Greg (Stanford University); De Marco, Filippo (Bocconi University); Foulis, Angus (Bank of England); Gornall, Will (University of British Columbia); Mazzola, Francesco (ESCP Business School); Yu, Tong (Imperial College London and Financial Conduct Authority) |
| Abstract: | Open banking (OB) empowers bank customers to share transaction data with fintechs and other banks. 49 countries have adopted OB policies. Consumer trust in fintechs predicts OB policy adoption and adoption spurs investment in fintechs. UK microdata shows that OB enables: i) consumers to access both financial advice and credit; and ii) small and medium‑sized enterprises to establish new fintech lending relationships. In a calibrated model, OB universally improves welfare through entry and product improvements when used for advice. When used for credit, OB promotes entry and competition by reducing adverse selection, but higher prices for costlier or privacy-conscious consumers partially offset these benefits |
| Keywords: | Open banking; entrepreneurship; fintech; financial innovation; data access; data rights; data portability; Big Data; financial regulation; financial sector; banks |
| JEL: | G21 G28 |
| Date: | 2024–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:1059&r=ent |
| By: | Mnahel Babgi (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon) |
| Abstract: | Digitalization and internationalization have an important role in the growth of enterprises, especially small and medium-sized enterprises (SMEs). In recent years, Borndigital SMEs have increased and internationalized faster than brick-and-mortar companies across the world. Notably, the Kingdom of Saudi Arabia (KSA), the largest economy in the Middle East and North Africa region, recognizes the significance of digitalization in SMEs development, as these firms are contributing greatly to the country's GDP. Despite the increasing influx, there is a paucity of research that examines the factors affecting the digitization and internationalization processes of born-digital SMEs. Therefore, this doctoral research aims to develop a deeper understanding of this phenomenon to provide useful insights to the practitioners and policymakers. This research flows in three stages. In the first stage, a bibliometric analysis is conducted on 246 research papers in International Business and a subsequent front analysis is conducted to supplement the findings. To surge further, a quantitative survey is developed to investigate internationalization strategies and the role of digitalized value chain activities with the data collected from born digital SMEs. Finally, a case study analysis will be developed on the successful SMEs to examine the interplay of digitization and internationalization among SMEs in Saudi Arabia to enhance SMEs' global competitiveness and bridge the knowledge gap to contribute to the body of literature in this research area. |
| Keywords: | Digitalization Internationalization Born-digital companies, digitalized value chain, SMEs, Digitalization, Internationalization, Born-digital companies |
| Date: | 2023–05–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04401322&r=ent |
| By: | Michelle W. Bowman |
| Date: | 2024–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgsq:97732&r=ent |
| By: | Phu Nguyen-Van; Tuyen Tiet; Quoc Tran-Nam |
| Abstract: | Although numerous studies examine the impacts of environmental compliance and innovation on a firm's economic performance, the role of export activities in this nexus has remained unanswered. In this study, we revisit the Porter hypothesis by investigating synergy strategies of dierent environmental and economic practices (i.e., environmental compliance, product innovation, process innovation and having export activities) on total factor productivity (TFP) of Vietnamese manufacturing SMEs. Our results suggest that while encouraging either product or process innovation is also essential in the environment-promoting policy, joint implementation of these two practices should be carefully considered by managers. Moreover, entering export markets positively impacts rms' productivity; complying with the domestic/local environmental standards could signicantly increase the chances for SMEs to enter the export markets |
| Keywords: | Environmental compliance; Export; Product innovation; Process innovation; Productivity; SMEs |
| JEL: | L25 M11 O12 Q55 Q56 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2024-1&r=ent |