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on Entrepreneurship |
| By: | Jesús Fernández-Villaverde; Yang Yu; Francesco Zanetti |
| Abstract: | Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction. This mechanism helps explain the simultaneous rise in R&D spending and decline in TFP growth in the US economy over recent decades. We develop a simple model highlighting the critical role of the inelastic supply of research labor in enabling this effect. Empirical evidence confirms that the research labor supply in the US is indeed inelastic and supports other model predictions: incumbent R&D spending is negatively correlated with creative destruction and sectoral TFP growth while extending incumbents’ lifespan. All these effects are amplified when ideas are harder to find. An extended version of the model quantifies these mechanisms’ implications for productivity, innovation, and policy. |
| Date: | 2025–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:oxf:wpaper:1072 |
| By: | Becker, Annette; Hottenrott, Hanna; Mukherjee, Anwesha |
| Abstract: | Personality drives human decision-making. Research on corporate research and development(R&D), however, typically considers strategic decision-making to be independent of the decisionmaker's personality traits. This study investigates the impact of CEO personality on scaling activities in young firms. In particular, we focus on R&D and investment decisions building on an entrepreneurial decision model that illustrates the different roles of major personality trait (ROCEAN: risk tolerance, openness to experience, conscientiousness, extraversion, neuroticism) in taking both R&D and investment decisions. Results based on detailed data from founders in 4, 732 startups founded between 2011 and 2017 in Germany, show that scaling decisions in entrepreneurial firms are strongly imprinted by the CEO's personality. We find that higher risk tolerance and openness to experience result in a higher likelihood that the firm engages in R&D but only the former matters for levels of R&D expenditures. Comparing R&D decisions to tangible investments, we find that risk tolerance plays a more prominent role in the former but higher scores for openness also drive tangible investments. Founders with higher scores for agreeability and neuroticism are less likely to invest in growth in terms of R&D and tangible investments. More conscientious founders show lower R&D engagement but invest more in tangible assets. We discuss implications for entrepreneurship research and policy. |
| Keywords: | Start-ups, Research & Development, Investment Decisions, Personality Traits, Risk tolerance |
| JEL: | D91 G11 L26 O32 O33 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:314416 |
| By: | Zainab Iftikhar (University of Bonn & CEPR); Anna Zaharieva (Bielefeld University) |
| Abstract: | In this study we evaluate the effects of low-skilled immigration on small businesses, wages and employment in Germany. We develop a search and matching model with heterogeneous workers, cross-skill matching, and endogenous entry into entrepreneurship. The model is calibrated using German Socio-Economic Panel (SOEP) data. Quantitative analysis shows that low-skilled immigration benefits high-skilled workers while negatively affecting the welfare of low-skilled workers. It leads to the endogenous expansion of immigrant entrepreneurial activities, generating positive spillovers for all demographic groups except native entrepreneurs. Overall, there is a marginal loss to the economy in terms of per worker welfare. This loss is mitigated with increased skilled migration from India. Policies restricting immigrant entrepreneurship relax competition for native small businesses but reduce welfare for all other worker groups. Ethnic segregation of small businesses benefits low-skill native entrepreneurs. |
| Keywords: | Entrepreneurship, small business, self-employment, search frictions, immigration |
| JEL: | J23 J31 J61 J64 L26 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:358 |
| By: | Drake, Samielle (Department of Economics, Umeå University) |
| Abstract: | This study examines the impact of local market concentration on the participation and success of small and medium enterprises (SMEs) in Swedish municipal cleaning service procurement auctions. A 10 percentage point reduction in the joint market share of the four largest firms (CR4), while maintaining a constant Herfindahl-Hirschman Index (HHI), results in a 7.5% increase in SME participation and raises the likelihood of an SME winning by 2.4%. Furthermore, the 2014 revisions to the EU public procurement directives mitigated the adverse effects of market concentration. However, despite the increase in participation, there is no evidence that the success rates of SMEs improved following the implementation of the revised EU directives. |
| Keywords: | Public Procurement; Market Concentration; SMEs; Competition; Regulations |
| JEL: | D44 H57 L13 L33 |
| Date: | 2025–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:umnees:1034 |
| By: | Enriques, Luca; Nigro, Casimiro A.; Tröger, Tobias |
| Abstract: | Policymakers around the globe have sought to stimulate Venture Capital (VC) investments, and an extensive literature has inquired into the institutional determinants of a vibrant VC market, including corporate law. We contribute to that literature by exploring the significance of corporate law for VC contracting and hence VC investments. Corporate law's relative rigidity or flexibility is key to the efficiency of the contractual technology governing VC deals. Importantly, it can hamper such transactions through a number of "constraints, " which we have identified in a companion paper. To illustrate our point, in another companion paper, we take German and Italian corporate laws as two case studies and show how they are largely averse to VC contracting. In addition, we show that the regulatory constraints they impose stem from blackletter corporate law much less often than from scholarly constructs and courts' interpretations. This chapter anticipates two objections that cast doubt over the importance of our findings as to the construction of vibrant VC markets in Germany and Italy. Specifically, the first of these objections is that VC funds and entrepreneurs planning to run their startups in Germany and Italy can circumvent the strictures of local corporate laws by incorporating abroad, and the other is that formal contracts are inconsequential in VC deals, meaning that the regulatory constraints we document are irrelevant. Meanwhile, the chapter also shows that the detailed understanding of regulatory constraints unveiled by our research can inform more effective policymaking. Ultimately, we make two policy recommendations: first, we propose the adoption of a statutory provision that would explicitly insulate the arrangements that typically shape U.S. VC deals from undue interventions; and, second, we argue in favor of a standard charter aligned with U.S. VC transactional practice that the law itself should declare entirely enforceable. |
| Keywords: | Comparative Corporate Law, Comparative Corporate Governance, Entrepreneurship, Financial Contracting, Private Ordering, Startups, Venture Capital, Entrepreneurial Finance |
| JEL: | G38 K22 L26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:lawfin:313660 |
| By: | Ziruo Chen; Bifei Tian; W. Robert Reed (University of Canterbury); Zhengxin Wang |
| Abstract: | This paper empirically investigates the effects of bilateral investment treaties (BITs) on entrepreneurship through the lens of social network analysis (SNA), focusing on two key network characteristics: centrality and brokerage. We begin by developing a set of hypotheses regarding how a country’s position within the BIT network influences entrepreneurial activity. These hypotheses are tested using a panel dataset of 102 countries spanning 2006–2018. We also examine how these relationships are moderated by economic development and trade integration, and whether they vary across different types of entrepreneurship—including formal vs. informal, male vs. female, and domestic vs. international entrepreneurship. Our findings indicate that centrality has a positive effect on entrepreneurship, while brokerage exerts a negative influence. Moreover, both economic development and trade integration are found to weaken these effects. We also observe differential impacts of BIT network structure across the various entrepreneurship subgroups. |
| Keywords: | BITs network; Entrepreneurship; Centrality; Brokerage; Economic development; Trade integration |
| JEL: | F21 L26 F63 F15 |
| Date: | 2025–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:cbt:econwp:25/06 |
| By: | Enriques, Luca; Nigro, Casimiro A.; Tröger, Tobias |
| Abstract: | Venture capital ("VC") has built a solid reputation for spurring innovation and economic growth, thus emerging as a crown jewel of the U.S. economy since the 1980s. The development of the U.S. VC market has benefited from the enabling nature of U.S. (Delaware) corporate law, which allows parties to devise a complex contractual framework that economists consider the best realworld solution to the market frictions bedeviling the finance of high-tech innovative projects. The law and finance literature has paid attention to corporate law as one of the determinants of VC investments by examining how variations in shareholder protection shape VC contracting. It has underscored the importance of flexible corporate law to enable the tailor-made arrangements that define VC-backed firms' unique governance structure. Vice versa, it has also documented anecdotally how mandatory corporate laws can impede the adoption and use of some specific components of the U.S. contractual framework. This article contributes to this literature, first, by conceptualizing, in a general theoretical framework, the role that flexible or rigid corporate law in action plays in supporting or hindering VC. Second, it identifies the channels through which mandatory corporate law constrains VC contracting. Third, it documents the real-world significance of these phenomena by illustrating how the constraints stemming from the corporate law regimes in force in two European jurisdictions, namely Germany and Italy, impact the transplant of the contractual framework governing VC deals in the U.S. |
| Keywords: | Comparative Corporate Law, Comparative Corporate Governance, Entrepreneurship, Financial Contracting, Private ordering, Start-ups, Venture Capital |
| JEL: | G38 K22 L26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:lawfin:313659 |
| By: | Krämer-Eis, Helmut; Botsari, Antonia; Lang, Frank; Hahn, Clarissa |
| Abstract: | Based on the EIF VC and PE Mid-Market Surveys (the largest of its kind in Europe), whereby 671 fund managers investing in either the VC or the PE Mid-Market in Europe provided their opinions and input, our new research report delves deeper into skills and skills gaps in the European ecosystem, at both investor and portfolio company level. Key findings: While the importance attributed to specific skills differs among VC and PE mid-market fund managers, a common concern is that sustainability-related knowledge and STEM skills are currently missing at investor level. Training is the main means to fill soft-skills gaps, while new hiring or outsourcing is used to fill gaps arising from industry knowledge, legal and STEM skills. Team culture fit and personality are the most important qualities when hiring junior talent. For senior recruits, network and work experience are also important. Fund managers build their teams according to the importance they assign to the different skills, perceiving as relatively more important the skills they are endowed with in their own investment teams. By contrast, at portfolio company level, they tend to assign higher importance to the skills missing in the management team of their portfolio companies. An investee's management team is the most important investment selection criterion stated by fund managers. At the same time, both VC and PE mid-market fund managers perceive leadership and people management as the most important skill for the management team of their portfolio companies, but also the one lacking the most. The skills of investor and portfolio company teams can to a certain extent complement each other. Hence, jointly analysing skills gaps at both the investor and the portfolio company level enables us to identify, on the one hand, skills for which portfolio companies need to be on average autonomous or self-sustaining, and on the other hand, skills in which fund managers can support and provide value-added to portfolio companies. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eifwps:313619 |
| By: | Monica Robayo-Abril; Britta Rude |
| Keywords: | Social Development-Social Inclusion & Institutions Gender-Gender Informatics Gender-Gender Monitoring and Evaluation Private Sector Development-Social Entrepreneurship and Business Clusters |
| Date: | 2023–11 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wboper:40668 |
| By: | World Bank |
| Keywords: | Social Development-Social Inclusion & Institutions Social Protections and Labor-Employment and Unemployment Poverty Reduction-Employment and Shared Growth Gender-Gender and Social Policy |
| Date: | 2023–10 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wboper:40537 |
| By: | Gert Bijnens (Economics and Research Department, National Bank of Belgium); Sam Desiere (Ghent University); Tiziano Toniolo (IRES/LIDAM, UCLouvain) |
| Abstract: | Policies supporting small businesses are popular among policymakers but often criticised by economists for their potential to distort the economy. This paper provides a comprehensive evaluation of a unique policy that subsidises the first employee. Empirically, we find that the policy led to a surge in the number of firms employing exactly one employee, without a noticeable effect on the number of firms with two or more employees. A simple frictionless general equilibrium model of occupational choices predicts the empirical facts remarkably well. Leveraging our model, we show that the general equilibrium effects on wages and aggregate output are likely to be small. However, the policy is expensive. Our findings support the traditional view that size-dependent subsidies distort the optimal allocation of resources.. |
| Keywords: | size-dependent policies; firm entry; small firms; wage subsidies; payroll taxes. |
| JEL: | D22 H25 J08 L25 L26 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202503-473 |
| By: | Tanu Goyal (Indian Council for Research on International Economic Relations (ICRIER)); Havishaye Puri (Indian Council for Research on International Economic Relations (ICRIER)); Riya Khanna |
| Abstract: | This report presents comprehensive inter-temporal and cross-sectional insights based on a survey of 2, 365 MSMEs, spread over 12 states and more than 20 clusters. It examines the year-on-year performance of firms and compares firms which are integrated on e-commerce platforms with the non-integrated firms, focusing on business metrics and well as other parameters like the firms' ability to access finance and international markets. The report highlights that e-commerce integration that began as a post-pandemic necessity, is now becoming a strategic choice to address some structural bottlenecks that the MSMEs face such as lack of access to finance and international markets. It shows that digitalisation is a key driver of accelerated growth. Moreover, it has important second order benefits that contributes to enterprise development. |
| Keywords: | MSMEs, digitalisation, survey, e-commerce, Infrastructure, icrier |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bdc:report:25-r-10 |
| By: | Botsari, Antonia; Gvetadze, Salome; Lang, Frank |
| Abstract: | This working paper provides an updated overview of the key markets the EIF focuses on, highlighting the challenges and opportunities in SME financing during these uncertain times. It reviews the overall market environment, explores developments in SME equity, guarantees, securitisation, and inclusive finance markets, and discusses how these areas are shaping the support available to SMEs. The paper reflects the EIF's commitment to addressing financing gaps and fostering sustainable growth across Europe. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eifwps:313620 |