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on Entrepreneurship |
| By: | J. Daniel Kim; Joonkyu Choi; Nathan Goldschlag; John Haltiwanger |
| Abstract: | Using administrative data from the U.S. Census Bureau, we introduce a new public-use database that tracks activities across firm growth distributions over time and by firm and establishment characteristics. With these new data, we uncover several key trends on high-growth firms—critical engines of innovation and economic growth. First, the share of firms that are high-growth has steadily decreased over the past four decades, driven not only by falling firm entry rates but also languishing growth among existing firms. Second, this decline is particularly pronounced among young and small firms, while the share of high-growth firms has been relatively stable among large and old firms. Third, the decline in high-growth firms is found in all sectors, but the information sector has shown a modest rebound beginning in 2010. Fourth, there is significant variation in high-growth firm activity across states, with California, Texas, and Florida having high shares of high-growth firms. We highlight several areas for future research enabled by these new data. |
| Keywords: | Firm Growth, Business Dynamism, Entrepreneurship, Business Dynamics Statistics |
| JEL: | L11 L25 L26 O30 O40 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:24-11&r=ent |
| By: | Hiroyuki Hino (Office of Global Affairs, Duke University, U.S.A. and Research Institute of Economics and Business Administration, Kobe University, JAPAN); Nobuaki Hamaguchi (Research Institute of Economics and Business Administration, Kobe University, JAPAN); Charles Piot (Cultural Anthropology and African & African American Studies, Duke University, U.S.A.); Jiahan Yin (Department of Economics, Duke University, U.S.A.) |
| Abstract: | This paper attempts to gain greater clarity about an issue which has considerable bearing on economic policy in Africa yet remains poorly diagnosed: the relation between informality and dynamism among low-income micro enterprises. We begin with the premise that micro entrepreneurs are driven by non-pecuniary motives, to varying degree, and adopt informal ways of doing business when informal motivations are strong. Building on this premise, we construct a regression model in which the dynamism of microenterprises is explained by the informality of entrepreneurs' motivations and of his/her ways of doing business as well as interactions among these two informality variables. We apply the model to microentrepreneurs in Ghana, Kenya and Nigeria, with data derived from a survey conducted for this research. The regression results show that the relation between informality and dynamism is intricate. Two of the four informal business practices tested - small business size and limited bookkeeping - negatively affect business growth while the other two have no significant influence either way. On the other hand, informal motivations - represented by a composite index of non-pecuniary motivations - have a positive effect on business growth although the effect is not directly observable. When an enterprise is operated in an informal setting by an entrepreneur with strong informal motivations, the synergy between the setting and the motivation works to increase the chance of business growth. The resilience of microenterprises too is linked positively to informality although interactions between motivation and business practice tend to reduce business growth in this case. Informal motivations and informal business practices are interwoven, an insight that could help in developing policy that could strengthen informal enterprises on the continent. |
| Keywords: | Informality; Africa; Microenterprises; Growth; Resilience |
| JEL: | O55 O17 Z13 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-14&r=ent |
| By: | Nobuaki Hamaguchi (Research Institute of Economics and Business Administration, Kobe University, JAPAN); Hiroyuki Hino (Office of Global Affairs, Duke University, U.S.A. and Research Institute of Economics and Business Administration, Kobe University, JAPAN); Charles Piot (Department of Cultural Anthropology, Duke University, U.S.A.); Jiahan Yin (Graduate School of Economics, Duke University, U.S.A.) |
| Abstract: | The informal economy in Africa has been considered both the cause and result of underdevelopment, and that dichotomous understanding of the formal-informal divide, simply based on a single criterion such as whether an enterprise is registered or not, is not satisfactory. In this paper, we propose Composite Informality Index (CII) as a continuous measure of informality enclosing multiple indicators of individual enterprise. We applied multiple correspondence analysis to quantify CII. We examined whether CII has explanatory power for firm size, sales and growth, and the degree of resiliency seen in shocks received from COVID-19 and recovery from them. We found that informality is associated with a smaller size of employment and sales, consistent with stylized facts of informality. However, CII is not directly related to sales growth, rejecting the general perception of linking informality to slower business growth. A business owner-operator mindset, rather than being more or less informal, determines business growth. The informality is associated with smaller revenue loss from COVID-19 shock, suggesting informal enterprises' higher absorptive capacity. We also found that business perspectives that appreciate the full control of their own business and the flexibility to innovate, which are also linked to higher sales growth, are associated with lower informality. Our method would be particularly useful for devising policies to boost owner-operators' motivation that would help African countries to enhance the dynamism of the microenterprise sector. |
| Keywords: | MCA; Sales growth; Resiliency |
| JEL: | O17 O55 Z13 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-13&r=ent |
| By: | Hiroyuki Hino (Office of Global Affairs, Duke University, U.S.A. and Research Institute of Economics and Business Administration, Kobe University, JAPAN); Charles Piot (Department of Cultural Anthropology, Duke University, U.S.A.); Nobuaki Hamaguchi (Research Institute of Economics and Business Administration, Kobe University, JAPAN); Lilly Brouwer (Department of Cultural Anthropology, Duke University, U.S.A.); Jiahan Yin (Department of Economics, Duke University, U.S.A.) |
| Abstract: | This paper presents findings of a large-scale survey of low-income microentrepreneurs in Ghana, Kenya and Nigeria, conducted in order to understand the informality of the microenterprise sector. The findings reveal three key outcomes. First, contrary to common belief in the literature on informality, a significant portion of low-income entrepreneurs boast high educational credentials, and their businesses exhibit substantial sales revenues, in each case surpassing national averages. Surprisingly, nearly all low-income microenterprises pay some form of tax and maintain official registration with some government agencies. Second, again contrary to assumptions often made, microenterprises do not exist in a homogeneous realm of informality. Broadly defining informality envelops almost all microenterprises, yet a more nuanced definition uncovers rich heterogeneity in the nature and depth of informality. Third, far from stagnating, many microbusinesses are vibrant, dynamic and resilient. This finding is particularly important because development economics has traditionally judged informal enterprises as low in productivity and inferior to their formal counterparts, and this has had a profoundly negative impact on government policy. Thus, conventional approaches to the study of informality demand critical reassessment and a paradigm shift in conceptualizing informality and a reinvigorated perspective on the dynamics of low-income microenterprises in Africa. |
| Keywords: | Informality; Africa; Microenterprises; Dynamism |
| JEL: | O55 O17 Z13 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-12&r=ent |
| By: | Nicola Comincioli; Paolo M. Panteghini; Sergio Vergalli; Paolo Panteghini |
| Abstract: | In this article we study start-up investments in developing countries. Using a representative firm, we wonder how relevant are the effects of taxation and risk on new business activities. It is worth noting that developing countries are usually characterized by three main characteristics. Firstly, a firm’s Earnings Before Interest and Taxes (EBIT) is likely to be more volatile than in developed jurisdictions. Secondly, firms in developing countries can be affected by a higher risk of expropriation. In particular, this may happen when early-stage businesses are supported by multinational companies. Thirdly, financial market show higher inefficiencies, compared to countries. Using a real-option approach, we study start-up investment decisions. We find that, although tax rates are usually higher than the developed countries’ ones, taxation has an almost negligible effect. If however a policy-maker aims at boosting new business activities it must decrease both EBIT volatility and the expropriation risk, as well as improving financial market efficiency. |
| Keywords: | real options, business taxation, default risk, developing countries, numerical simulations |
| JEL: | H25 G33 G38 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11014&r=ent |
| By: | Emin Dinlersoz; Can Dogan; Nikolas Zolas |
| Abstract: | Using comprehensive administrative data on business applications over the period 2004-2023, we study emerging business ideas for developing AI technologies or producing goods or services that use, integrate, or rely on AI. The annual number of new AI business applications is stable between 2004 and 2012 but begins to rise after 2012, and increases faster from 2016 onward into the pandemic, with a large, discrete jump in 2023. The distribution of AI business applications is highly uneven across states and sectors. AI business applications have a higher likelihood of becoming employer startups and higher expected initial employment compared to other business applications. Moreover, controlling for application characteristics, employer businesses originating from AI business applications exhibit higher employment, revenue, payroll, average pay per employee, and labor share, but have similar labor productivity and lower survival rate, compared to those originating from other business applications. While these early patterns may change as the diffusion of AI progresses, the rapid rise in AI business applications, combined with their generally higher rate of transition to employers and better performance in some post-transition outcomes, suggests a small but growing contribution from these applications to business dynamism. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:24-09&r=ent |
| By: | Davide Melcangi; Silvia Sarpietro |
| Abstract: | This paper presents empirical evidence on the nature of idiosyncratic shocks to firms and discusses its role for firm behavior and aggregate fluctuations. We document that firm-level sales and productivity are hit by heavy-tailed shocks and follow a nonlinear stochastic process, thus departing from the canonical linear. We estimate a state-of-the-art model to flexibly capture the rich dynamics uncovered in the data and characterize the drivers of nonlinear persistence and non-Gaussian shocks. We show that these features are crucial to get empirically plausible volatility and persistence of micro-originated (granular) aggregate fluctuations. |
| Keywords: | firm dynamics; productivity; nonlinearities; non-Gaussian shocks; granular fluctuations |
| JEL: | D22 E23 E32 |
| Date: | 2024–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:97929&r=ent |
| By: | Mella-Barral, P.; Sabourian, H. |
| Abstract: | Firms can voluntarily create independent firms to implement their technologically distant innovations and capture their value through capital markets. We argue that when firms repeatedly compete to make innovations, there is inefficient external implementation of innovations and “excessive†creation of such firms. This inefficiency is most exacerbated in the early stages of an industry, when the number of firms is still limited. |
| Keywords: | Repeated Innovations, Spin-Offs, Voluntary Firm Creation |
| JEL: | M13 O31 O33 |
| Date: | 2023–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2312&r=ent |
| By: | Nakatani, Ryota |
| Abstract: | Multifactor productivity (MFP) growth is an imperative economic engine. MFP dynamism across five advanced and seven developing countries from 1996 to 2015 is analyzed, elucidating its association with financing and intangible assets. Debt is manifested by its inverted U-shaped nonlinear relationship with MFP advancement, while corporate cash holdings are negatively (positively) associated with MFP development in five (three) countries. The heterogeneous relationships between intangible assets and MFP growth are identified across industries, countries, and time; intangible assets are requisite MFP growth enhancers for manufacturing in developing countries, for service businesses in advanced countries, and for the period after the global financial crisis. The greater the productivity effect of intangible assets is, the higher a country’s per-capita income and/or governance quality becomes. Additionally, the results evince the catching-up of MFP to the technological frontier. Moreover, older firms exhibit slower MFP growth than their peers, whilst the positive effects of firm size on MFP growth are larger in high-tech and knowledge-intensive industries. |
| Keywords: | Industrial Analysis; Multifactor Productivity Growth; Cash Holding; Debt Financing; Knowledge and Technology Intensive Sectors; Intangible Assets |
| JEL: | D22 D24 G32 L25 L6 L8 M21 O34 O57 |
| Date: | 2024–03–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120503&r=ent |