|
on Entrepreneurship |
| By: | Joshua S. Gans |
| Abstract: | This paper examines the relationship between Knightian uncertainty and Bayesian approaches to entrepreneurship. Using Bewley's formal model of uncertainty and incomplete preferences, it demonstrates that key predictions from Bayesian entrepreneurship remain robust when accounting for Knightian uncertainty, particularly regarding experimentation, venture financing, and strategic choice. The analysis shows that while Knightian uncertainty creates a more challenging decision environment, it maintains consistency with the three pillars of Bayesian entrepreneurship: heterogeneous beliefs, stronger entrepreneurial priors, and Bayesian updating. The paper also explores connections to effectuation theory, finding that formal uncertainty models can bridge different entrepreneurial methodologies. |
| JEL: | D81 O30 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33507 |
| By: | Morande, Swapnil; Arshi, Tahseen; Gul, Kanwal; Amini, Mitra |
| Abstract: | This pioneering study employs machine learning to predict startup success, addressing the long-standing challenge of deciphering entrepreneurial outcomes amidst uncertainty. Integrating the multidimensional SECURE framework for holistic opportunity evaluation with AI's pattern recognition prowess, the research puts forth a novel analytics-enabled approach to illuminate success determinants. Rigorously constructed predictive models demonstrate remarkable accuracy in forecasting success likelihood, validated through comprehensive statistical analysis. The findings reveal AI’s immense potential in bringing evidence-based objectivity to the complex process of opportunity assessment. On the theoretical front, the research enriches entrepreneurship literature by bridging the knowledge gap at the intersection of structured evaluation tools and data science. On the practical front, it empowers entrepreneurs with an analytical compass for decision-making and helps investors make prudent funding choices. The study also informs policymakers to optimize conditions for entrepreneurship. Overall, it lays the foundation for a new frontier of AI-enabled, data-driven entrepreneurship research and practice. However, acknowledging AI’s limitations, the synthesis underscores the persistent relevance of human creativity alongside data-backed insights. With high predictive performance and multifaceted implications, the SECURE-AI model represents a significant stride toward an analytics-empowered paradigm in entrepreneurship management. |
| Date: | 2023–08–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:p3gyb_v1 |
| By: | Nunez Chaim, Gonzalo Ignacio; Overman, Henry George; Riom, Capucine Anne Veronique |
| Abstract: | We evaluate the impact of the UK's Growth Vouchers Programme, which offered subsidised business advice to 15, 207 randomly selected small and medium size enterprises. Using administrative and survey data, we show that the programme increased turnover by 8.2% but only in the short-term and potentially at the expense of non-supported firms. We find that subsidised advice appears to improve firms' capabilities and practices in a way that is consistent with the increase in turnover. We also demonstrate that propensity score matching introduces a sizeable upward bias to estimated effects on turnover and employment and that this bias grows over time. |
| Keywords: | firm performance; enterprise growth; entrepreneurship; industrial strategy |
| JEL: | D24 L25 M13 O12 L20 D20 |
| Date: | 2024–01–29 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126834 |
| By: | Bradford, William D. (University of Washington); Wang, Chunbei (Virginia Tech); Lofstrom, Magnus (Public Policy Institute of California); Verchot, Michael (University of Washington) |
| Abstract: | This study uses survey data on small business loans granted 2022 -2023 to explore racial disparities in the terms of loans to small firms. Similar data has not been available since the 2003 Survey of Small Business Finances (SSBF). We find that for Hispanic-, Asian American- and Black-owned firms, the interest rate paid was higher than for comparable white-owned firms, adjusting for risk factors determining interest rate on loans, including the firm's industry, financial attributes, owner traits, credit history and type of loan. We also find that while Black-owned firms pay higher interest rates in states with greater broad racial disparity, while it is not statistically significant for the other minority groups. We conducted robustness tests to verify the strength of these results. If our results are nationally representative of firms that borrowed during the period we observe, then collectively on average, Asian, Black-, and Hispanic-owned businesses annually pay $9.1 billion more in interest than white-owned firms of equivalent risk attributes. Another component of credit is collateral. We find that co-signatures from third parties are required more frequently for minority firms than is justified by our economic analysis. |
| Keywords: | entrepreneurship, self-employment, business ownership, racial disparity, minority, loan pricing |
| JEL: | D4 G2 J15 L26 M |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17730 |
| By: | Krieger, Bastian; Füner, Lena; Prüfer, Malte |
| Abstract: | We explore which start-ups win in public procurement. Most notably, our analysis presents significant differences between firms applying for tenders with and without functional criteria. First, we use representative telephone survey data to estimate public procurement applicant and winner shares for the population of German start-ups. We find in total eleven percent of start-up firms applied for public tenders since their foundation, and 65 percent of them won at least one tender. Additionally, younger and more innovative firms tend to apply for and win tenders with functional criteria, while older and less innovative firms tend to apply for and win tenders without functional criteria. Second, we employ non-linear estimation methods to identify firm and founder characteristics predicting to win public tenders within the group of applicants. Start-ups applying for functional tenders profit from smaller foundation teams, younger founders, more industry experience, and higher innovation capacities, while start-ups applying for tenders without functional criteria, profit from larger foundation teams, older founders, more industry experience, and the absence of founding experience |
| Keywords: | Public procurement, Start-up firms, Innovation |
| JEL: | H57 L26 O38 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312190 |
| By: | Young Soo Jang; Steven N. Kaplan |
| Abstract: | We study venture capital (VC) selection using the deal flow and investment decisions for more than 8, 000 sourced deals from one early-stage VC in detail. The (unconditional) likelihood that a sourced start-up raises at least $1 million in VC funding from some VC firm is roughly 30%. The deals the VC scored and invested in perform better than the deals the VC scored and did not invest which perform better than the deals the VC did not score, suggesting that the VC has selection ability. At the same time, the selection is noisy as only 32% (13%) of the invested firms have raised more than $10 ($25) million in VC funding. The VC evaluated the deals it scored on team, market, product and exit characteristics. Team is most successful at explaining VC funding of at least $1 million, but does not explain larger financings or success. Market and product have more explanatory power for VC funding of more than $10, $25 and $50 million as well as longer term outcomes. Consistent with other recent work, this is consistent with VCs overweighting team in their initial investment decision. |
| JEL: | G23 G32 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33483 |
| By: | Gaétan de Rassenfosse; Adam B. Jaffe |
| Abstract: | Ensuring broad access to the patent system is crucial for fostering innovation and promoting economic growth. To support this goal, the U.S. Patent and Trademark Office offers reduced fees for small and micro entities. This paper investigates whether fee rates affect the filing of applications by small and micro entities. Exploiting recent fee reforms, the study evaluates the relationship between fee changes and the number of new entrants, controlling for potential confounding factors such as legislative changes. The findings suggest that fee reductions alone are insufficient to significantly increase participation in the patent system among small and micro entities. |
| JEL: | O30 O31 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33492 |
| By: | Calice, Pietro |
| Abstract: | Access to finance is a key obstacle for the growth and development of small and medium-sized enterprises in fragile and conflict affected situations. This paper provides empirical evidence on the key macrofinancial and institutional drivers of financial inclusion of small and medium-sized enterprises in a large sample of countries, highlighting the comparative importance of factors affecting countries with and without fragile and conflict affected situations. The results show that macroeconomic and institutional stability, along with reduced informality, banking sector soundness, and improved credit information environment, are associated with higher financial inclusion of small and medium-sized enterprises. The results also show that strengthening the rule of law, government effectiveness, and control of corruption while increasing financial depth and reducing public sector borrowing and banking market concentration could help close the small and medium-sized enterprise financial inclusion gap between fragile and conflict affected situation countries and the best performing countries. These effects are generally stronger in middle-income countries with fragile and conflict affected situations than in low-income countries with fragile and conflict affected situations. The results point to the importance of adopting comprehensive macrofinancial and institutional strategies to improve financial inclusion of small and medium-sized enterprises in countries with fragile and conflict affected situations, tailoring reforms to country contexts. |
| Date: | 2023–03–14 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10363 |
| By: | Amin, Mohammad; Jolevski, Filip; Islam, Asif Mohammed |
| Abstract: | This study analyzes the difference in the decline in sales between small and medium-size enterprises and large firms (the “gap”) following the outbreak of COVID-19 in 19 developing countries. The decline in sales as a percentage of the pre-pandemic level was bigger for small and medium-size enterprises by 12.2 percentage points. The paper uses the Kitagawa-Oaxaca-Blinder and quantile decomposition methods to estimate individual factors’ contributions to the gap at the mean and across the sales decline distribution. Several important results emerge. First, relative to large firms, small and medium-size enterprises faced greater incidence of input supply disruptions during the pandemic, had lower initial labor productivity levels, and were concentrated in country-industry cells with a bigger sales declines. These differences in the level of factors widened the gap. Small and medium-size enterprises also suffered more than large firms from a given level of financial constraints, input supply disruptions, and country-industry-specific factors, and benefitted less from a given level of initial labor productivity. These differences in the returns to factors also widened the gap. Second, the gap was much larger at the relatively high quantiles of sales decline distribution, indicating that relative to large firms, small and medium-size enterprises were much less resilient to large shocks than small shocks. Third, individual factors’ contribution to the gap varied across the sales decline distribution. Thus, the optimal policy mix depends on the size of the shock. Fourth, there were some important differences between geographical regions in what drove the gap. Thus, an eclectic policy approach is needed that duly accounts for the prevailing local conditions. |
| Date: | 2023–09–08 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10562 |
| By: | Batabyal, Amitrajeet; Beladi, Hamid |
| Abstract: | We analyze a stylized creative region populated by three groups of individuals: the elites who hold political and taxing power, the entrepreneurial creative class that produces a knowledge good, and workers. Political competition between the elites and the creative class results in the elites levying distortionary taxes on the creative class. We provide a rationale for this kind of taxation and then present two results. First, we demonstrate that this kind of distortionary taxation reduces the equilibrium growth rate of the economy of our creative region. Second, we explain why this negative result arises. |
| Keywords: | Creative Class, Distortionary Tax, Elite, Political Competition |
| JEL: | H21 R11 |
| Date: | 2024–11–15 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123673 |
| By: | Brucal, Arlan Zandro Ilagan; Grover, Arti Goswami |
| Abstract: | Most crises have a disproportionately larger negative effect on micro-sized firms. Yet, the heterogeneity of impact within micro-sized firms is lesser known. Using five waves of the World Bank's Business Pulse Survey data, this paper finds that firms with zero to four employees have a much larger drop in sales and slower recovery rate compared to micro-sized firms with five to nine employees. The overall differences in the resilience between the two groups of micro-sized firms could potentially be due to a uniformly lower productivity level of firms with zero to four employees. Within the two groups of micro-sized firms, resilience is correlated with their liquidity position, managerial attitudes as well as their abilities. Using discriminant analysis, this paper confirms that a significant proportion of micro-sized firms mimic the behavior of larger firms in terms of their resilience to shocks and could potentially be “misclassified” as micro-sized. These findings have important implications for targeting and tailoring support for enhancing businesses' resilience to shocks. |
| Date: | 2023–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10556 |
| By: | Davies, Elwyn Adriaan Robin; Deffebach, Peter William; Iacovone, Leonardo; Mckenzie, David J. |
| Abstract: | Standard in-person business training programs are costly and difficult to scale to the millions of microenterprises in the developing world. The authors conducted an experiment to test the feasibility, cost-savings, and impact of delivering live training sessions over Zoom to microentrepreneurs in Mexico and Guatemala. This paper demonstrates that it is now feasible to recruit and train self-employed women online, covering a wide geographic area, with few technology issues. However, the cost savings over in-person classes are less than expected. Training improved business practices and performance over two months, but the impacts had dissipated within six months. |
| Date: | 2023–09–26 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10574 |