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on Entrepreneurship |
| By: | Ms. Li Liu; Mr. Ben Lockwood; Eddy H.F. Tam |
| Abstract: | This paper studies the effect of the VAT threshold on firm growth in the UK, using exogenous variation over time in the threshold, combined with turnover bin fixed effects, for identification. We find robust evidence that annual growth in turnover slows by about 1 percentage point when firm turnover gets close to the threshold, with no evidence of higher growth when the threshold is passed. Growth in firm costs shows a similar pattern, indicating that the response to the threshold is likely to be a real response rather than an evasion response. Firms that habitually register even when their turnover is below the VAT threshold (voluntary registered firms) have growth that is unaffected by the threshold, whereas firms that select into the Flat-Rate Scheme have a less pronounced slowdown response than other firms. Similar patterns of turnover and cost growth around the threshold are also observed for non-incorporated businesses. Finally, simulation results clarify the relative contribution of ``crossers" (firms who eventually register for VAT) and ``non-crossers" (those who permanently stay below the threshold) in explaining our empirical findings. |
| Keywords: | VAT; size-based threshold; firm growth |
| Date: | 2024–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2024/033&r=ent |
| By: | Vincenzo Cuciniello (Bank of Italy); Claudio Michelacci (EIEF); Luigi Paciello (EIEF) |
| Abstract: | Business creation subsidies are a means for reducing firm debt and bankruptcy risk. Do they work? To answer the question, we consider a general equilibrium model where firms are financially constrained at entry and borrow in a competitive market by issuing long-term debt. A subsidy stimulates entry and market competition, which increases the bankruptcy rate of incumbent firms. If the subsidy is paid out ex ante to finance start-up expenditures, the subsidy reduces the debt and the bankruptcy rate of start-ups; if paid out ex post as a refund for start-up expenditures, the subsidy crowds out the equity rather than the debt of start-ups and their bankruptcy rate also increases. The model is calibrated to match North-South differences across Italian provinces. The optimal subsidy in the South is paid out entirely ex ante and yields an increase in welfare equivalent to almost one percent of consumption. When the same subsidy is paid out ex post as a proportion of 60 per cent, it results in a welfare loss of a similar amount. We discuss the implications for the ‘I Stay in the South’ policy recently introduced in Italy. |
| Keywords: | Firm dynamics, overborrowing, ratchet effect |
| JEL: | E44 E62 G32 G33 |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1424_23&r=ent |
| By: | Michele Cascarano (Bank of Italy); Filippo Natoli (Bank of Italy); Andrea Petrella (Bank of Italy) |
| Abstract: | Climate change has long-term effects on the size and composition of a country's business sector. Using administrative data on the universe of Italian firms, we find that an increase in the number of very hot days per year persistently reduces the growth rate of active firms in the market in the medium run. This is due to a drop in firm entry and an increase in firm exit, with relocation playing a minor role. A firm-level investigation reveals a dichotomy between firms that persistently suffer as a result of higher temperatures and those that improve their profitability by adapting to a hotter climate: a combination of size and age best identifies the two groups, where older, smaller-sized firms lie at one extreme and younger, larger firms at the other. According to an average climate scenario, the projected evolution of local temperatures will impact firm demography further, also exacerbating the divergent effects across warmer and colder areas over the current decade. |
| Keywords: | climate change, temperatures, firm dynamics |
| JEL: | D22 R12 Q54 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1418_23&r=ent |
| By: | Matilde Cappelletti (University of Mannheim and ZEW Mannheim); Leonardo Maria Giuffrida (ZEW Mannheim, MaCCI and CESifo); Gabriele Rovigatti (Bank of Italy) |
| Abstract: | In this paper, we investigate the impact of public procurement on business survival. Using Italy as a case study, we construct a large-scale dataset of firms covering balance-sheets, income-statements, and administrative records and match these data with public contract data. Employing a regression discontinuity design for close-call auctions, we find that winners are subsequently more likely to stay in the market than marginal losers and that the boost in survival chances lasts longer than the contract duration. We document that this effect is associated with earnings substitution rather than increased total revenue and that winners experience no increase in productivity. Securing contracts relaxes credit constraints and acts as a mechanism to foster survival. |
| Keywords: | firm survival, firm dynamics, public demand, public procurement, demand shocks, productivity, credit, auctions, regression discontinuity design |
| JEL: | D25 D44 H32 H57 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1439_24&r=ent |
| By: | Shinozaki , Shigehiro (Asian Development Bank); Miyakawa, Daisuke (Waseda University); Arahan, Romeo (Asian Development Bank) |
| Abstract: | Limited data on micro, small, and medium-sized enterprises (MSMEs) make it difficult for governments to design appropriate MSME policies in Asia and the Pacific. To identify factors affecting MSME development and promote evidence-based policymaking, we propose a probabilistic principal component analysis method that works despite current data limitations. The study uses time-series MSME data collected from 25 developing member countries of the Asian Development Bank (ADB) through the Asia Small and Medium-Sized Enterprise Monitor project. The estimation results suggest that sound MSME credit markets, diversified financing options, support for new businesses and job creation, and active MSME participation in global marketplaces play a critical role in ensuring a smooth business recovery from various crises and shocks affecting developing Asia and the Pacific. |
| Keywords: | SME development; access to finance; financial inclusion; SME policy; probabilistic principal component analysis; Southeast Asia; South Asia; Central and West Asia; the Pacific |
| JEL: | D22 G20 L20 L50 |
| Date: | 2024–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0715&r=ent |
| By: | Tan, Yeng-May (Xiamen University Malaysia); Autio, Erkko (Imperial College Business School); Estrada, Gemma (Asian Development Bank); Park, Donghyun (Asian Development Bank); Uddin, Gazi Salah (Linköping University) |
| Abstract: | Information and communication technology or digital technology helped entrepreneurs survive the coronavirus disease (COVID-19) restrictions. For instance, they shifted to online sales in the face of stringent lockdowns and mobility constraints. The enhanced resilience of entrepreneurs, in turn, contributed to the resilience of the broader economy. This study explores the relationship between the quality of a country’s digital entrepreneurial ecosystem, measured by the Global Index of Digital Entrepreneurship Systems (GIDES), and its economic performance during the COVID-19 pandemic. Based on a cross-country analysis of 100 global economies, we find a positive association between GIDES and economic performance during the pandemic. This suggests that the quality of a country’s environment for digital entrepreneurs can strengthen its economic resilience even in the face of major shocks. |
| Keywords: | digital entrepreneurship; digitalization; entrepreneurial ecosystem; economic resilience; COVID-19; Global Index of Digital Entrepreneurship Systems (GIDES) |
| JEL: | F62 L26 L86 |
| Date: | 2024–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0716&r=ent |
| By: | Krämer-Eis, Helmut; Botsari, Antonia; Gvetadze, Salome; Lang, Frank; Torfs, Wouter |
| Abstract: | This working paper provides an overview of the main markets relevant to the EIF, thereby documenting the impact of the polycrisis and the related challenging economic environment on SME financing. The publication first discusses the general market environment and then covers the markets for SME equity and debt products. In addition, it focuses on a number of thematic policy areas that are of particular interest to the EIF, such as Inclusive Finance, Fintech and Green finance & investment. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eifwps:283600&r=ent |
| By: | Keraga, Mezid N. (Ethiopian Civil Service University); Lööf, Hans (Royal Institute of Technology); Stephan, Andreas (Linnaeus University) |
| Abstract: | This paper presents new insights into the relationship between innovation and employment in low-income countries. We use firm-level data sourced from the World Bank Enterprise Survey (ES) and focus on six sub-Saharan African (SSA) economies over the period 2003-2019. The econometric results from difference-in-differences (DiD) estimations, in conjunction with propensity score matching show a positive influence of product innovation on both permanent and total firm-level employment. The evidence for employment impact of process innovations is weak. Considering relations between firms, we find a positive intra-industry spillover effect from both product and process innovation on employment in firms operating within the same two-digit industry, while the results for inter-industry spillovers are non-significant or negative. |
| Keywords: | Innovation; Employment; Sub-Saharan; Spillover effects; DID; Matching approach |
| JEL: | J20 O30 |
| Date: | 2024–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0497&r=ent |
| By: | Doina Muresan (Dimitrie Cantemir Christian University, Bucharest, Romania) |
| Abstract: | The paper enhances the current understanding of public administration's support for entrepreneurship, providing knowledge that could generate interest in this topic. It analyzes the collaboration among public policies, the public sector, the private sector, and non-governmental organizations, and the following dependent variables: innovation, e-government and digitization, entrepreneurship support ecosystems, and risks in this approach. The academic significance of this research lies in its provision of evidence for the moderating role of NGOs in expanding PPPs to support entrepreneurs. The paper reviews European and national specialized literature in the field of social entrepreneurship. This review focuses on the role of public administrations in supporting social projects and proposes a conceptual model that outlines its empirical boundaries. Additionally, the paper outlines the statistical methods used for this part of the analysis. The findings then lead to suggestions for future research on the role of public administration as a facilitator of social entrepreneurship. |
| Keywords: | public entrepreneurship, public policies, public private partnership, social entrepreneurship |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:smo:raiswp:0303&r=ent |