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on Entrepreneurship |
| By: | Bo Becker; Efraim Benmelech; Joao Monteiro |
| Abstract: | In 2008, the aggregate market value of U.S.-listed firms was roughly one-third higher than that of European-listed firms. By 2023, it was more than 300% higher, a difference of $34 trillion. The valuation gap is broad-based, rather than concentrated among a few superstar firms, and is driven by differences in firm values, not in the number of listed firms. Across sectors, the gap is larger in R&D-intensive industries and in industries with high returns to scale. European firms’ size is strongly correlated with home-country GDP, whereas U.S. firms’ size is unrelated to home-state GDP. Smaller European firms also face a particularly large cost-of-capital gap and do not appear able to substitute debt for limited access to equity financing, including venture capital. Taken together, these facts suggest that financial and product-market frictions constrain European firms’ ability to scale. |
| JEL: | G12 G15 G32 O36 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35577 |
| By: | Reyes Ortega, Santiago; Freeman, Kianna Rachael; Hernando Kaminsky, Pablo Daniel; Huber, Jeremias Luca; Mauro, Paolo |
| Abstract: | Venture capital is widely viewed as financing knowledge-intensive, R&D-driven startups, but owing to data constraints, this view has been based largely on high-income economies. By taking a global perspective, this paper documents that what venture capital finances differs systematically across economies, varying with institutional and business conditions rather than following a single model. Using a new cross-country dataset that harmonizes firm-level venture capital records with equity issuance data for more than 150 economies, the data shows that VC markets differ across countries not only in scale but in kind. Outside high-income countries, rather than being concentrated in knowledge intangibles, venture capital tilts–at both the sector and firm levels–toward organizational intangibles such as distribution, logistics, and payments. Highlighting the unique features of venture capital, this pattern is absent from public equity markets, where sectoral composition is far more similar across income levels. An accounting decomposition separates venture capital depth into the rate at which firms enter the market and the funding each entrant attracts, and entry accounts for the largest cross-country gaps. Moreover, the business environment is associated with VC primarily through entry, linked both to the size of the market and to the composition of what venture capital finances, the latter through entry into knowledge-intensive sectors in particular. |
| Date: | 2026–08–31 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11438 |
| By: | Hennings, Christian Hermann |
| Abstract: | Venture capital (VC) plays a central role in financing entrepreneurial ventures. Despite its importance, the relationship between risk and return remains difficult to explain by standard financial theory. Standard asset pricing theory conceptualizes risk as an ex-ante, observable characteristic that is compensated by expected returns through a stable, separable relationship. However, in VC markets illiquidity, staged financing, information asymmetries, and highly skewed payoff distributions violate these assumptions. Risk and return are jointly determined by financing dynamics, investor heterogeneity, and market conditions, so that realized returns reflect a combination of technological, financing, timing, and macroeconomic risks. This dissertation advances the argument that the risk-return relationship in VC is not a stable trade-off but varies systematically with financing conditions and investor composition. The seven empirical chapters collectively examine how staged financing, capital supply dynamics, and regional and organizational heterogeneity across investor types influence observed performance patterns. The findings show that risk and return in VC are shaped by market conditions, investor structure, and regional environments. Expansionary periods increase venture survival and delay the realization of downside risk. In contrast, contractionary periods reduce capital supply and accelerate selection. Consequently, identical underlying venture risk may result in different observed performance outcomes, depending on the prevailing market regime, the type of investor providing capital, and the institutional and financial depth of the regional ecosystem. Differences in investor resources, organizational form, and regional institutional frameworks systematically affect funding continuity, exit timing, and the distribution of realized returns. Overall, this dissertation contributes a unified framework that integrates insights from asset pricing, entrepreneurial finance, behavioral finance, and macro finance. It demonstrates that deviations from classical risk-return logic in VC arise systematically from the interaction of staged financing, investor heterogeneity, and regime-dependent capital supply, implying that observed performance patterns reflect structural market dynamics rather than stable risk premia. |
| Date: | 2026–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:161940 |
| By: | Grakolet Gourene (Economic Commission for Africa); Zuzana Brixiova Schwidrowski (Economic Commission for Africa); Jiri Balcar (VSB - Technical University of Ostrava); Lenka Johnson Filipova (VSB - Technical University of Ostrava) |
| Abstract: | Family-owned firms account for majority of small and medium-sized enterprises (SMEs) in Arab countries, but evidence on the impact of this ownership type on access to credit in the region is scarce. Yet the issue is key for understanding barriers to the emergence of dynamic private sector and growth acceleration. To reduce this knowledge gap, our paper examines links between family ownership and credit constraints faced by SMEs in Egypt, Jordan, Morocco, and Tunisia, utilizing the World Bank Enterprise Surveys. We find that while family-owned firms have a higher need for credit than nonfamily-owned firms, they are more likely to be discouraged from applying for it. Due to this self-selection out of credit markets, they are more credit constrained than nonfamily firms, even though their credit application rejection rates are lower. Stronger firm governance, including presence of formal business strategies and improved managerial practices, can encourage family-owned SMEs to apply for credit more often and ease their access to finance. |
| Keywords: | Family-owned SMEs, access to bank credit, firm governance, Arab Countries |
| JEL: | D22 G21 G32 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:rza:ersawp:9 |
| By: | Shakti Shree Manivannan; Brinda Viswanathan (Professor at Madras School of Economics, Chennai.) |
| Abstract: | Self-employment dominates and continues to increase its share in India’s employment landscape whether agricultural or non-agricultural. A large part of it is necessity-driven and undertaken for survival, as opposed to entrepreneurial self-employment driven by innovation and opportunity. By incorporating gender-specific effects, this study uncovers sources of disparities in gross value-added (GVA) based on gender of the proprietor, using data from India’s Unincorporated Non-Agricultural Enterprises (UNAEs) survey for 2023-24. Cross-tabulations reveal a pronounced gender gap in firm performance: female-led UNAEs are disproportionately concentrated in the lowest GVA quartile. Lower-GVA firms have less educated proprietors and operate from household premises as own account workers; features that typically characterise female proprietors. Quantile regression analysis of the log transformed GVA shows that, controlling for other covariates, compared to urban men, urban women close in by the top quartile, while rural women close the gap by nearly one-half between the 25th and 75th percentiles. The median regression model, allowing for proprietor- and firm-level factors to differ across male-and female-led enterprises, further shows that female proprietors diverge from male proprietors primarily in hiring patterns, business location, and industry choice, while education and social background have relatively uniform effects across genders. This relatively underexplored analysis of UNAEs also highlights that data limitations permit only a minimal assessment on the role of gender composition of hired workers. Length: 44 pages |
| Keywords: | Unincorporated non-agricultural enterprises, Gross Value Added, Gendered Performance, Quantile Regression Classification-JEL: : J16, L26, O17 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:mad:wpaper:2026-310 |
| By: | Negar Mohammadi Jazi (London School of Economics); Felipe Netto (Bank of England) |
| Abstract: | We analyse how risk-based capital requirements shape competition and credit allocation in the UK unsecured Small and Medium-sized Enterprises (SME) lending market using confidential loan-level data. Motivated by empirical patterns, we develop and estimate a structural model with screening, asymmetric information, and imperfect competition, in which banks and non-bank lenders differ in regulatory treatment. We estimate lender-specific costs and screening precision, and show how these features jointly account for the observed lender market shares across borrower risk and loan size segments. Our results indicate that regulation interacts with heterogeneity in information processing and costs to shape equilibrium pricing and credit allocation, with non-bank lending reflecting not only regulatory differences but also comparative advantages in screening technology. Our model provides a quantitative framework for evaluating regulatory policy in markets with both regulated and non-regulated intermediaries. |
| Keywords: | Small business lending;asymmetric information;non-bank financial intermediaries;screening;capital regulation |
| JEL: | G20 G21 G23 G28 |
| Date: | 2026–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:023313 |
| By: | Vlaicu, Razvan |
| Abstract: | This paper reviews the impact evaluation evidence on how expanding formal credit affects small and medium enterprise (SME) performance, focusing on developing countries, particularly Latin America, while using evidence from advanced economies to sharpen mechanisms and external validity. Across the core evidence base, the meta-analytic mean effects of formal loans are economically meaningful: employment rises by about 12% on average, sales by about 18%, and profits by about 18%, albeit with substantial heterogeneity across settings, programs, and outcome horizons. The effects are larger in some large-scale public interventions and in programs explicitly targeting constrained firms but smaller or statistically indistinguishable from zero in others. Taken together, the evidence supports the view that relaxing financial constraints can raise SME scale and performance, but it also underscores that credit expansions are not automatically welfare improving, can create distributional and competitive spillovers, and are sensitive to program design, targeting, and local financial architecture. |
| Keywords: | credit access;SME performance;Developing countires |
| JEL: | E22 E24 E50 G21 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14711 |