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on Entrepreneurship |
| By: | Ufuk Akcigit (University of Chicago); Raman S. Chhina (University of Chicago); Seyit Cilasun (TED University); Javier Miranda (Halle Institute for Economic Research, and Friedrich-Schiller University Jena); Nicolas Serrano-Velarde (Bocconi University) |
| Abstract: | Utilizing near real-time QuickBooks data from over 1.6 million small businesses and a targeted survey, this paper highlights the critical role credit card financing plays for small business activity. We examine a two year period beginning in January of 2021. A turbulent period during which, credit card usage by small U.S. businesses nearly doubled, interest payments rose by 60%, and delinquencies reached 2.8%. We find, first, monthly credit card payments were up to three times higher than loan payments during this time. Second, we use targeted surveys of these small businesses to establish credit cards as a key financing source in response to firm-level shocks, such as uncertain cash flows and overdue invoices. Third, we establish the importance of credit cards as an important financial transmission mechanism. Following the Federal Reserve’s rate hikes in early 2022, banks cut credit card supply, leading to a 15.75% drop in balances and a 10% decline in revenue growth, as well as a 1.5% decrease in employment growth among U.S. small businesses. These higher rates also rendered interest payments unsustainable for many, contributing to half of the observed increase in delinquencies. Lastly, a simple heterogeneous firm model with a cash-in-hand constraint illustrates the significant macroeconomic impact of credit card financing on small business activity. |
| Keywords: | Small Businesses, Entrepreneurship, Credit Cards, Credit, Job Creation, Turnover |
| JEL: | J23 J63 O47 |
| Date: | 2025–03–20 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2025-0003 |
| By: | Bettina Bruggemann; Zachary L. Mahone; Thomas Palmer |
| Abstract: | Ownership changes are common across firms of all sizes, and they have meaningful impacts on firm performance. Using a panel of Canadian administrative data we document that sales are an important margin in the firm life cycle, larger than exit rates for employer firms. Applying an event-study framework, we find that (a) survival rates initially decline post sale, leveling off after three years and (b) conditional on survival, profits are permanently higher. Embedding ownership changes in a model of firm dynamics, we find that 4.5% of entrants survive due to the option value of sale and that, within ten years from birth, 13% of dispersion in firm size is attributable to realized ownership changes. Moreover, ownership changes are particularly important for high productivity firms, accounting for one quarter of revenue concentration among the top 1% of businesses. |
| Keywords: | Firm Dynamics; Ownership Changes; Firm Concentration |
| JEL: | E0 L25 D22 M13 G30 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:mcm:deptwp:2025-03 |
| By: | Sam Desiere (Ghent University); Tiziano Toniolo (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Gert Bijnens (National Bank of Belgium) |
| 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: | 2025–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:ctl:louvir:2025005 |
| By: | Gakpa, Lewis-Landry |
| Abstract: | This paper investigates how financial inclusion affects individuals' decisions to start businesses in the context of six sub-Saharan African countries, using micro-data from the FinScope and FinAccess surveys. To do so, we use an instrumental variable (IV) technique to assess the empirical relationships. Overall, the results reveal that access to both banking services, formal non banking services, informal financial services and mobile money services positively and significantly influenced the decision to start businesses in the six countries. Furthermore, although the results show that a range of both demand POLICY BRIEF Financial Inclusion and Entrepreneurship in Six sub-Saharan African Countries: Evidence from Finaccess and Finscope Survey Data Lewis-Landry Gakpa October 2023 / No.793 2 Policy Brief No.793 and supply side barriers prevent individuals from accessing banking services for entrepreneurial purposes, supply side constraints are the most common barriers to individuals starting a business. In view of the above, policy interventions should first aim at creating an enabling environment to increase people's access to all types of financial services and secondly, address both supply and demand side constraints to promote entrepreneurship and economic growth. All of these measures should be aimed at increasing the level of financial inclusion with a view to stimulating entrepreneurial activities, which are the real pillars in the development and poverty reduction process in sub-Saharan African countries. |
| Date: | 2024–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:4387c5f4-4f65-4460-829f-be0dcfa82685 |
| By: | Yoshiki Ando (Boston University); Emin Dinlersoz (Bureau of the Census); Jeremy Greenwood (University of Pennsylvania); Ruben Piazzesi (University of Pennsylvania) |
| Abstract: | Abstract The adoption of advanced technologies has important implications for employment and growth. The analysis of firm-level data from US Census Bureau indicates that firms with advanced technologies are disproportionately backed by venture capital (VC). While both advanced technology use and VC backing separately matter significantly for firm outcomes, VC backing has a larger effect on firms with advanced technology. A model of startups is constructed featuring decisions to use advanced technology and VC. The model is matched up with facts about firms' employment, technology use, and VC reliance. The implications of business taxation and subsidies are studied, and the significance of the availability of advanced technology and VC in the economy is quantified. |
| Keywords: | Advanced technology, banks, capital gains taxation, corporate income taxation, difference-in-difference analysis, employment, firm-level data, reallocation effect, startups, subsidies, synergy, venture capital, technology adoption, US Census data |
| JEL: | O30 O40 G20 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:eag:rereps:40 |
| By: | Eichenauer, Vera; Köppl, Stefan; Köppl-Turyna, Monika |
| Abstract: | In this paper we analyze the effects of investment screening on cross-border venture capital investments in Europe between 2007 and 2022. The data we work with is originally based on PRISM data which has been extended by Eichenauer and Wang and which we combine with deal data from Preqin to assess investment activity. Our results point to unintended negative effects: while the number of actually blocked deals has remained very low, the associated uncertainty and an increase in transaction costs have led to a significant decline in cross-border deals. The effects are stronger in the case of financial (i.e. "non-strategic") investors, for late-stage venture capital deals, and for deals with investors from non-OECD countries. Moreover, we observe changes in the size of deals and their structure. This has profound policy implications for the financing of innovation in Europe. |
| Keywords: | cross-border venture capital, investment screening, Europe, transaction costs |
| JEL: | F55 F21 G24 L14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:313651 |
| By: | Filippo Biondi (Düsseldorf Institute for Competition Economics); Sergio Inferrera (Queen Mary University of London, School of Economics and Finance); Matthias Mertens (Massachusetts Institute of Technology); Javier Miranda (Halle Institute for Economic Research (IWH), Friedrich-Schiller University, and CompNet) |
| Abstract: | We study changes in job reallocation in Europe after 2000 using novel micro-aggregated data that we collected for 19 European countries. In all countries, we document broad-based declines in job reallocation rates that concern most economic sectors and size classes. These declines are mainly driven by dynamics within sectors, size, and age classes rather than by compositional changes. Simultaneously, employment shares of young firms decline. Consistent with US evidence, firms’ employment has become less responsive to productivity shocks. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive and apply a firm-level framework that relates changes in firms’ market power, labor market imperfections, and production technology to firms’ responsiveness and job reallocation. Using German firm-level data, we find that changes in markups and labor output elasticities, rather than adjustment costs, are key in rationalizing declining responsiveness. |
| Keywords: | Business dynamism, job reallocation, productivity, responsiveness of labor demand, market power, technology, European cross-country data |
| JEL: | D24 D43 J21 J23 J42 L11 L25 |
| Date: | 2025–03–20 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2025-0004 |
| By: | Yingying Zhang Zhang (IUJ Research Institute, International University of Japan); Zanele Penelope Phiri (IUJ Research Institute, International University of Japan) |
| Keywords: | Sustainable Agriculture, Agri-Entrepreneurship, Smallholder Farmers, Innovation and Resilience, Eswatini Agriculture |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iuj:wpaper:ems_2025_02 |
| By: | Lemma, Tesfaye T.; Mlilo, Mthokozisi |
| Abstract: | The meteoric rise of digital financial services (DFS) in recent years has sparked the debate on whether they help financially constrained businesses to overcome their performance disadvantages. This study sought to examine whether female-owned enterprises, which tend to be more financially constrained than those owned by men, could curb their performance disadvantage attributable to financial constraints by using mobile moneya form of digital financial technology. Analysing data drawn from 317 firms subsumed in the 2018 World Bank Enterprise Survey on Kenya, we found that the use of mobile money for financial transactions reduces the performance disadvantage of female-owned firms. Using the OaxacaBlinder decomposition analysis, we further found that female-owned enterprises which use mobile money for financial transactions were able to cut circa 42.5% of their performance disadvantage induced by financial constraints. In additional analyses, we demonstrated that the influence of access to traditional financial services on the association between a firms use of mobile money and its performance outcomes is statistically insignificant. Overall, the findings highlight that women-owned firms could exploit mobile money technology to mitigate the gender gap in performance outcomes. |
| Date: | 2024–07–17 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:34087862-28f2-450f-858d-c328a7842054 |
| By: | Muhoza, Benjamin Kanze; Majune, Socrates Kraido |
| Abstract: | This study analyses the effect of political instability on firm performance in the Democratic Republic of Congo (DRC), one of the most unstable countries in sub-Saharan Africa. We use pooled panel data for three waves of the World Bank Enterprise Survey of the DRC (2006, 2010, and 2013) to analyse the effect of political instability on five measures of performance: employee growth, sales growth, productivity, investment, and export status. Results from the endogenous switching model reveal that political instability adversely affects firm performance in the DRC. In the presence of political instability, employee POLICY BRIEF Political Instability and Firm Performance in the Democratic Republic of Congo Benjamin Kanze Muhoza and Socrates Kraido Majune October 2023 / No.786 2 Policy Brief No.786 growth, sales growth, productivity, and investment growth significantly decline. Conversely, firms that do not experience political instability grow in terms of employee growth, sales growth, productivity, investment, and exporting activities. Our results are robust when we proxy political instability with losses due to theft, robbery, and vandalism. For purposes of policy, we recommend that political stability should be enhanced through political goodwill and legislation that advocates for peace. Firms can also push for this agenda through their business associations and platforms such as public-private partnerships that link them to the government. |
| Date: | 2024–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:a38292f3-622c-4e63-8076-14dc81a21bf4 |
| By: | Okumu, Ibrahim Mike; Nathan, Sunday; Bbaale, Edward |
| Abstract: | This paper examines the moderating role of the business environment in the relationship between the gender of the top manager and firm performance (measured as sales per employee), and whether female-managed firms perform better the higher the proportion of female employees in the firm. The paper uses World Bank Enterprise Survey data of 14, 561 firms from 29 African countries collected between 2010 and 2016. The descriptive analysis reveals significant variation in the performance and experience of business environment constraints that disadvantage female-managed firms. Controlling for potential endogeneity POLICY BRIEF Gender and Firm Performance in Africa: Does the Business Environment Play a Moderating Role? Ibrahim Mike Okumu, Sunday Nathan and Edward Bbaale October 2023 / No.799 2 Policy Brief No.799 and country fixed effects, we show that female-managed firms are associated with lower performance compared to male-managed firms. Electricity outages, informal competition, and corruption account for the performance gap between female and male-managed firms. However, we show that large female-managed firms perform better than male-managed large firms. Overall, the results imply that strengthening Africas business environment is central to closing the performance gap between male and female managers. |
| Date: | 2024–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:0c596f70-cbbc-4b74-8c87-0fe515852400 |
| By: | Klüh, Ulrich |
| Abstract: | We collect observations on how power constitutes itself in decentralized digital platform constellations that position themselves as alternatives to platforms operated by big tech (which we coin "hyperledgers"). We then compare these forms of power to the incumbent structures, the so called "hyperscalers". Such a comparison yields new insights into the way power "works" in surveillance-based platform capitalism. The crucial insight of our analysis is that it is highly unlikely that platform alternatives can be scaled up decisively within the current capitalist accumulation regime. Instead of focusing on finding business models within this regime, platform alternatives should therefore strive for regime change. This, however, would require new alliances, in particular between the victims of surveillance (workers and consumers) and the platform alternatives. The latter, in turn, would not only require massive public funding, but also support from civil society actors representing workers (i.e. unions) to be able to compete with incumbent hyperscalers. |
| Keywords: | Power relations, platform and surveillance capitalism, entrepreneurial activism, organizing studies, labor relations, democratization |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:znwudp:313639 |
| By: | Gakpa, Lewis-Landry |
| Abstract: | Cette etude examine comment l'inclusion financiere agit sur la decision des individus de creer une entreprise dans le contexte de six pays d'Afrique subsaharienne, en utilisant des micro-donnees provenant des enquetes FinScope et FinAccess. Pour ce faire, nous utilisons une technique de variable instrumentale (IV) pour evaluer les relations empiriques. Dans l'ensemble, les resultats revelent que l'acces aux services bancaires, aux services non bancaires formels, aux services financiers informels et aux services d'argent mobile a influence de maniere positive et significative la decision de creer une entreprise dans les six pays. En outre, bien que les resultats montrent qu'une serie d'obstacles lies a la demande et a l'offre empechent les individus d'acceder aux services bancaires a des fins entrepreneuriales, les contraintes liees a l'offre sont les obstacles les plus courants a la creation d'une entreprise. Compte tenu de ce qui precede, les interventions politiques devraient tout d'abord viser a creer un environnement favorable afin d'accroitre l'acces des personnes a tous les types de services financiers et, ensuite, s'attaquer aux contraintes liees a l'offre et a la demande afin de promouvoir l'esprit d'entreprise et la croissance economique. Toutes ces mesures devraient viser a accroitre le niveau d'inclusion financiere en vue de stimuler les activites entrepreneuriales, qui sont les veritables piliers du processus de developpement et de reduction de la pauvrete dans les pays d'Afrique subsaharienne. |
| Date: | 2024–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:aer:wpaper:0fc3863c-27b1-4680-82fe-142ace32354e |
| By: | Kay, Rosemarie; Nielen, Sebastian; Bijediçc-Krumm, Teita; Butkowski, Olivier K.; Reiff, Annika |
| Abstract: | Die Nutzung einiger Finanzierungsquellen wird davon beeinflusst, ob der Leitung eines jungen Unternehmens Frauen angehören. So zeigen Analysen auf Basis des IAB/ZEW Gründungspanels und ergänzende Expertinneninterviews, dass rein frauengeführte Unternehmen Bankkredite seltener nutzen als rein männer- und gemischtgeschlechtlich geführte Unternehmen. Demgegenüber greifen frauengeführte Unternehmen häufiger auf öffentliche Förderung sowie Freunde und Familie zurück, während Risikokapital häufiger von männergeführten Unternehmen genutzt wird. Frauen- und männergeführte junge Unternehmen haben gleich häufig Probleme bei der Beschaffung von Bankkrediten. Die geringere Nutzung von Bankkrediten seitens frauengeführter Unternehmen beruht vielmehr auf Selbstrationierung, das heißt, sie verzichten häufiger als männergeführte Unternehmen von vornherein auf die Beantragung eines Kredits, weil sie dessen Ablehnung erwarten. |
| Abstract: | The use of some sources of financing depends on whether the management of a young business is female. Analyses based on the IAB/ZEW Start-up Panel and supplementary interviews with female experts show that purely female-led businesses use bank loans less frequently than purely male-led and mixed-gender led businesses. In contrast, women-led businesses more frequently draw on public funding as well as friends and family, while venture capital is used more frequently by male-led businesses. Women-led young businesses undergo as often as men-led young businesses problems in obtaining bank loans. Thus, women-led businesses using bank loans less often is rather due to self-rationing, i.e., they are more likely than menled businesses to refrain from applying for a loan from the outset because they expect it to be rejected. |
| Keywords: | Finanzierung, Finanzierungsschwierigkeiten, Selbstrationierung, frauengeführte Unternehmen, Financing, financing difficulties, self-rationing, women-led businesses |
| JEL: | D22 G30 J16 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifmmat:313011 |
| By: | Laurikka, Annu |
| Abstract: | Abstract The study examines the relationship between firm size and its management’s subjectively perceived growth constraints and financing limitations. Additionally, it explores Finland’s business size dynamics and their development from 2008 to 2022. The results indicate that company size transitions are rare, with most businesses remaining in their original size category. However, growth potential is particularly identified in medium-sized and Mittelstand companies. Heavy regulation and administrative obligations are the most commonly reported barriers to growth. Furthermore, up to half of Mittelstand and large companies report growth barriers due to higher cost levels compared to competitors. A more detailed analysis shows that company size, when measured by the number of employees, has only a limited effect on growth barriers. Differences become clearer when measured by revenue, though ownership structure, growth ambition, and industry are also significantly associated with many growth barriers. Small businesses more frequently face constraints related to debt aversion, capacity limitations, sales and marketing challenges, and finding skilled labor. Financial barriers do not vary significantly across company sizes, but larger companies are less frequently hindered by the availability of debt and equity financing for investments compared to smaller businesses. |
| Keywords: | Business growth, Growth barriers, Financial constraints, Company size dynamics, Mittelstand companies |
| JEL: | L11 L20 L21 L25 L53 D22 |
| Date: | 2025–03–05 |
| URL: | https://d.repec.org/n?u=RePEc:rif:report:160 |