Small Business Economics

Knowledge networks in regional clusters are fundamental to support innovation and local development. Within clusters, family firms are key in creating business opportunities and supporting the establishment of inter-organizational networks. Yet, their role within regional clusters for knowledge transfers is still not well understood, especially in comparison with non-family firms. This paper applies Exponential Random Graph Models (ERGMs) to network data collected from the Parabiago cluster, one of the most important Italian footwear clusters, to contribute to a better understanding of the network strategies of family firms. We identify distinct network strategies associated with the cluster firms, accounting for different knowledge exchange types: technological, market, and managerial. In our modelling, we control for firm-level attributes and dyadic-level attributes, such as geographical distance and cognitive proximity between cluster firms. Our results suggest that the proneness of family firms to grow networks is highly robust relative to non-family firm relationships, irrespective of knowledge types being exchanged. Moreover, family firms tend to establish connections with other family firms, showing the presence of homophily in their networking approach; however, non-family firms are rather different, since they do not have the same homophilous approach when it comes to exchange knowledge with other non-family firms. These results indicate that the nature of ownership is driving knowledge exchange differences. This key feature of family-only relationships in clusters may help managers and policymakers in devising more effective and targeted cluster strategies.

Plain English Summary The winner of the 2022 Global Award for Entrepreneurship Research, Saras Sarasvathy, has improved our understanding of how entrepreneurs make decisions and has developed new concepts and ideas about the entrepreneurial process. Professor Sarasvathy introduced the term “effectuation” to emphasize how (expert) entrepreneurs operate in uncertain, unclear, and ill-structured problem situations. In short, she developed five principles used by entrepreneurs to control rather than predict the future. These principles emphasize how entrepreneurs use available resources and trustworthy partners as well as think in terms of affordable loss rather than profit maximization. Entrepreneurs also often see unforeseen surprises as opportunities rather than problems. This view has now emerged as one of the key approaches in entrepreneurship theory, empirics, and practice within management research on entrepreneurship.

Plain English Summary As the “entrepreneurial economy” shifts to an “ossified economy,” the rate of zombie enterprises is increasing, while entrepreneurship is decreasing. This study finds that lowering barriers to entry by reducing government intervention and breaking administrative monopolies can facilitate the disposal of zombie enterprises and stimulate entrepreneurship. The competition effects originating from the entry of new firms promote a shift in the business strategy of zombie enterprises from rent-seeking to innovation-driven. The scale effect shows that the improved business environment breaks restrictive growth barriers, expands market boundaries, and improves total factor productivity. Eventually, zombie enterprises recover and survive in a healthier, more dynamic, and sustainable way. Economic vitality and resource allocation efficiency increase significantly. Our findings inform best practices for a policy designed to stimulate the “entrepreneurial economy.” Moving forward, the government needs to reduce barriers to entry and strengthen market mechanisms to promote disruptive entrepreneurship and dynamic capitalism.

Plain English Summary Technological progress can lead to a heightened demand for external funding. Using a comprehensive survey of small and medium-sized enterprises (SMEs), this study examines the relationship between technological progress and the financial constraints faced by SMEs. More importantly, we account for the heterogeneous impact of access to different external financing and find that technological progress will incur a higher level of financial constraints, particularly for firms relying on indirect financing methods. We also find that digital financial inclusion can help to alleviate these financial constraints. The implication of our study is that policymakers should prioritize measures to improve the efficiency of banking systems and enhance lending opportunities for innovative SMEs, while also promoting the growth of digital financial inclusion.

Long-term orientation (LTO) is an essential strategic option for firms to shape their future success, in particular for SMEs which are often submerged by daily operations. Surprisingly, little is known about the underlying personal and contextual drivers of LTO in an SME context. To unravel why some SME entrepreneurs adopt an LTO, while others seem to be stuck in short term and daily operations, we consider the (interacting) impact of both personal and contextual drivers. We carefully select well known drivers for their impact on various other aspects of SME’s LTO: Need for achievement, as a personal driver, and the entrepreneur’s perception of the institutional entrepreneurial support (PIES), as a contextual driver. The latter consists of a regulative, normative and cognitive institutional dimension. Based on a study on 176 SMEs in an emerging country, Indonesia, we confirm that both personal as well as contextual drivers individually and interactively impact an SME’s LTO. Specifically, when highly achievement motivated entrepreneurs perceive that institutional regulations support entrepreneurial activities, they tend to adopt a higher level of LTO. We discuss implications for SMEs and policy makers, and provide suggestions for future research.

Entrepreneurial ecosystems are wealthy environments in which entrepreneurs, firms, and governments can operate frictionless, contributing to innovation and economic growth. The investigation of the structure of such systems is an open issue. We provide insights on this aspect through the formulation of seven network-based principles associating specific network metrics to distinct structural features of entrepreneurial ecosystems. In this way, we aim to support the measurement of the structural characteristics of an entrepreneurial ecosystem and the design of policy interventions in case of unmet properties. The proposed methodology is applied to an original network built on the relationships occurring on Twitter among 612 noteworthy start-ups from seven different European countries. This is a novel way to conceptualize entrepreneurial ecosystems considering online interactions. Thus, this work represents a first attempt to analyze the structure of entrepreneurial ecosystems considering their network architecture to guide policy-making decisions. Our results suggest a partial ecosystem-like nature of the analyzed network, providing evidence about possible policy recommendations.

Plain English Summary This study reports that climate risk positively affects EGAs, which suggests that climate risk encourages entrepreneurs to scale up their ventures and generates opportunities for them to do so. Thus, entrepreneurs should proactively leverage climate risk to boost the growth of their ventures. This study also finds that the impact of climate risk on EGAs is stronger for female entrepreneurs. While female entrepreneurs have difficulties to grow their ventures, they can exploit climate risk to realize the objectives. Third, the study finds that the effect of climate risk on EGAs is stronger for non-solo founders than for solo founders, suggesting that entrepreneurs can more effectively respond to climate risk by partnering with others.

This work explores the link between firm performance in emerging economies and transport infrastructure endowment, as a key element of the entrepreneurial ecosystem. We ground on the idea that transport infrastructures, by enabling connectivity, interactions and the exchange of knowledge and ideas, have the potential to enhance commercial opportunity recognition, technological development and, thus, firm economic performance. We also emphasize the crucial role of logistics system performance in providing better linkages between suppliers, firms and customers. The empirical analysis is focused on emerging economies whose infrastructure endowment is lower than those of developed ones; thus, its improvement is likely to be associated with better performance of their firms and economies. The results suggest that part of country-level differences in firm’s labour productivity is explained by transport endowment. Particularly, transport networks, such as roads and railways, and the logistics system and services show strong and positive relationships with productivity, while transport nodes, such as airports and ports, show little or no association. This might occur because networks spread knowledge spillovers in a more capillary way compared to nodes. Overall, the empirical results suggest that policy-makers in emerging economies can sustain the economic performance of firms, with beneficial effects on the economic system, by improving their transport endowment.

How can governments attract entrepreneurs and their businesses? The view that new business creation grows with the optimal level of government investment remains appealing to policymakers. In contrast with this active approach, we build a model where governments may adopt a passive approach to stimulating business creation. The insights from this model suggest new business creation depends positively on factors beyond government investments—attracting high-skilled migrants to the region and lower property prices, taxes, and fines on firms in the informal sector. These findings suggest whether entrepreneurs generate business creation in the region does not only depend on government investments. It also depends on location and skilled migration. Our model also provides methodological implications—the relationship between government investments and new business creation is endogenously determined, so unless adjustments are made, econometric estimates will be biased and inconsistent. We conclude with policy and managerial implications.

Predicting entrepreneurial development based on individual and business-related characteristics is a key objective of entrepreneurship research. In this context, we investigate whether the motives of becoming an entrepreneur influence the subsequent entrepreneurial development. In our analysis, we examine a broad range of business outcomes including survival and income, as well as job creation, and expansion and innovation activities for up to 40 months after business formation. Using the self-determination theory as conceptual background, we aggregate the start-up motives into a continuous motivational index. We show – based on a unique dataset of German start-ups from unemployment and non-unemployment – that the later business performance is better, the higher they score on this index. Effects are particularly strong for growth-oriented outcomes like innovation and expansion activities. In a next step, we examine three underlying motivational categories that we term opportunity, career ambition, and necessity. We show that individuals driven by opportunity motives perform better in terms of innovation and business expansion activities, while career ambition is positively associated with survival, income, and the probability of hiring employees. All effects are robust to the inclusion of a large battery of covariates that are proven to be important determinants of entrepreneurial performance.

Plain English Summary Ownership does not automatically imply control over corporate action. Rather, it is the influence through representation on the board of directors that really matters. Yet, in one of the most cited studies in the family firm internationalization literature, Sciascia et al. (2012) neglect the prominent role of family directors. Drawing on stewardship and stagnation arguments, they only hypothesize that family ownership and international expansion have an inverted U-shaped relationship. To assess the generalizability of their findings, we test their hypothesis on a different sample. In addition, we extend their study to develop a more complex theoretical foundation of the influence of family representation on the board of directors, and the relative moderating role of firm age and size, on firm internationalization. While unable to replicate the results of their study, we find empirical support for our theoretical arguments. Our study offers two key implications. First, the need for replication studies to contribute to theory development. Second, the different effects of the juxtaposition of family and non-family directors on firm internationalization according to firm age and size.

Plain English Summary Women entrepreneurs who are awarded Small Business Innovation Research Phase I Awards are less likely than male entrepreneurs to receive follow-on Phase II Awards. We investigate whether women-owned small, entrepreneurial firms, funded through Phase I Small Business Innovation Research awards, are more or less successful than male-owned firms in obtaining follow-on Phase II funding. From an empirical examination of 2059 National Institutes of Health (NIH) funded Phase I research projects, of which 12% are in woman-owned firms, woman-owned firms are less likely to receive follow-on Phase II research funding. In response, we suggest that woman-owned firms increase the diversity of their research base through a research partnership with a university. Thus, the principal finding of this study is our policy recommendations for how NIH can improve the Phase I to Phase II success rate of its funded research to small firms.

Plain English Summary Overeducated communities rich in natural resources are primed for entrepreneurship. By measuring a skills gaps based on the match between the education level of the local population and the education required by employers, we quantify the extent of educational mismatch across US counties. We find that overeducated places (more people with a bachelor’s degree than would be predicted by the existing employers) are more entrepreneurial, especially if they are rich in natural amenities and rural. Our results imply the importance of place-based economic policy, highlighting how local context matters and may ultimately determine the success of any given strategy.

Plain English Summary Is there a link between democracy and entrepreneurship? This study provides the first systematic empirical evidence that the link actually exists. By using longitudinal data from 23 countries over the 1972–2010 period, we document that democracy is conducive to entrepreneurship. Not only transitions to democracy, but also changes in the intensity of democracy affect entrepreneurial activity. How can democracy foster entrepreneurship? We show that the promotion of freedom and social interchange, which facilitate the creation and the diffusion of knowledge, and the pursuit of civil society participation in political processes, which enhances institutional trust, are two channels driving the positive effect. We also find that entrepreneurship is sensitive to both contemporaneous and historical level of democratization. By providing the first evidence that entrepreneurship is directly connected to democracy, our findings make an important contribution to the entrepreneurship literature. Not only does entrepreneurship matter, but in particular, it is the result of vibrant democracy. If we want entrepreneurship to prosper, there is a need to preserve and nurture democracy.

Plain English Summary Generous unemployment payments can either “make or break you”! In simple words, while social benefits may contribute to income support and poverty prevention among the unemployed, these can also harm the economy by breaking one of its most important engines: entrepreneurship. By focusing on 23 EU countries, the paper highlights a negative impact of unemployment compensations on overall but also opportunity entrepreneurs, while the effects on necessity entrepreneurs are inconclusive. New business creation is inhibited when unemployment benefit systems offer generous compensations, especially at the beginning of the unemployment spell. At long unemployment durations, high-quality policies and programmes for entrepreneurs efficiently act towards diminishing such side effects. Our findings suggest that, when choosing the design features of social security systems, policymakers should definitely consider their adverse impact on entrepreneurship. Even when unemployment benefits are large, their side effects could be limited by compensatory measures, such as stricter job-search requirements or allowing unemployed individuals to keep receiving compensation while in the process of creating a new business.

Plain English Summary Access to public credit guarantee schemes negatively impact SMEs’ financial equilibrium, but their recovery occurs 2 years after guarantee issue. How does one select eligible firms to prevent zombification? Using a confidential dataset provided by the Italian Ministry of Economic Development on guarantees issued by the Central Guarantee Fund, we investigate this topic with an unprecedented level of salience. Our findings reveal the need for cautious interventions on firms in financial distress and for the introduction of stress tests to select beneficiaries. Our results show that specific guarantee lines could be applied for direct guarantees granted to micro-sized enterprises and companies operating in the service sector to maximize the additionality of public resources. This study has practical, policy and societal implications, guiding SMEs in their assessment of the overall medium-term effects of guarantees and policy-makers in their rethinking of guarantee schemes to resolve trade-offs between effectiveness and sustainability.

Plain English Summary The global financial crisis which began in 2007 and the subsequent sovereign debt crisis which began in 2010 negatively affected many small- and medium-sized enterprises (SMEs) in accessing finance. Over the period 2014–2019, the ECB implemented various ‘unconventional monetary policy’ (UMP) tools to make it easier for companies to get loans, to boost economic growth and to bring inflation close to their 2% target. We use the ECB/EC Survey on the Access to Finance of Enterprises (SAFE) to examine the relationship between monetary policy and the ability of SMEs to access finance in countries that were most badly affected by the two crises. These are known as the ‘stressed’ countries and are Greece, Ireland, Italy, Portugal and Spain. We show that UMP increased the probability that firms in stressed countries with higher debt-to-assets ratio are credit constrained. However, this effect is insignificant in non-stressed countries. Additionally, we find little evidence that risky firms are credit constrained during periods of UMP, when risk is measured from the firms’ viewpoint. However, smaller and younger firms—which are also seen as risky—do suffer from financial constraints. There are a number of policy implications arising from this research. First, monetary policy should operate in a manner that SMEs in all euro-area countries have similar access to bank finance. Second, monetary policy should make sure that UMP assists smaller and younger firms. Finally, public policy could also intervene to support technologies to allow access to real-time transaction flows between banks and firms to allow banks to be better informed about the risk profile of firms and allocate funds to SMEs that warrant liquidity.

Plain English Summary Family firms are the most common firm type around the world. Many of them, also those in later family generations, are run by members of the business-owning family. This is surprising since prior research has identified strong reasons that speak against family management such as nepotism, altruism, lower managerial skills, and a small pool of qualified family candidates. Our study contributes to solving this puzzle by developing a theoretical economic model. We show in this model that hiring a family manager is oftentimes the optimal decision when managers have to perform multiple tasks and, more specifically, need to take care of both economic and non-economic goals of the business-owning family. Non-economic goals comprise family goals (e.g., maintaining family harmony, reputation, tradition, and dynastic control) but also stakeholder-oriented sustainability goals (e.g., maintaining good relations with employees and avoiding environmental pollution). Achieving such non-economic goals, however, is often interrelated with economic tasks or goals. For example, to become a stable and highly reputable employer implies that you may have to forgo shutting down an unprofitable business unit, which saves jobs but has negative consequences for the firm’s competitive position and financial performance. This interrelationship between the two tasks or goals, together with the fact that the achievement of non-economic goals is often more difficult to measure than the achievement of economic goals, makes it difficult to provide effective managerial incentives for them. We find that, under incentive contracts, non-family managers direct more attention towards economic goals while family managers, as such, are more reluctant to neglect non-economic goals. That is why family managers may be the optimal hiring choice despite them often having lower abilities across the two tasks. With the results from our theoretical model, our study contributes to the literature on family managers and agency costs in family firms by providing a new explanation for the high prevalence of family managers in family firms, namely the agency costs resulting from the managers’ multitask problem in family firms. By highlighting the importance of non-economic goals, our study moreover adds to the current discussion about how to select and incentivize managers to pursue (social and environmental) sustainability goals. Our study has practical implications for family firms and their hiring practices regarding family members. In fact, we show that, in many cases, it is perfectly reasonable and meaningful to select and hire a family manager to run the family business even if he or she exhibits relatively weak skills in economic tasks. The relative benefit of family over non-family managers increases with a higher importance attached to non-economic (sustainability) goals by the owner family, with a better measurement of a manager’s achievement regarding these goals, and with a stronger reinforcing interdependence between economic and non-economic goals.

Based on the cases of 117 Chinese academic entrepreneurs, we use fuzzy-set qualitative comparative analysis (fsQCA) to analyze the independent and joint effect of regional policy support, organizational support, and individual characteristics on academics’ entrepreneurial motivation. The results show that (1) there are six pathways to entrepreneurs’ strong intrinsic and extrinsic motivation, but the core conditions are different. (2) Analyzing the logic behind different configurations, we summarize three entrepreneurial models: the male-dominated model causes both strong intrinsic and extrinsic motivation, the institution-driven model causes strong intrinsic motivation, and the wealth-oriented model causes strong extrinsic motivation. (3) For male academic entrepreneurs with low academic rank and poor financial status, regional policy support and organizational support substitute for each other in motivating strong intrinsic motivation. Meanwhile, males may have strong extrinsic motivation in the early and late stages of their research life. We enrich the research on the antecedents for academic entrepreneurial motivation from a configuration perspective and provide a reference for further understanding of researchers’ entrepreneurial behavior.

Entrepreneurial activity, its emergence, and development are considered important for the well-being of nations, especially for those in transition from one economic system or industrial setting into another. A crucial question is, why countries with similar basic resources develop differently regarding entrepreneurial activities over time? This study delivers new insights on ecosystems developing during different historical eras, and why some ecosystem factors have an impact not only during one point in time but also in the long-term. The paper focuses on Azerbaijan, a country with a turbulent history, and volatile formal institutions, endowed with natural resources, and now heavily dependent on the export of oil and gas. To transform the economy and overcome this resource dependency, entrepreneurial activities could provide one solution; however, the contribution of entrepreneurship in the economic development and growth remains low. This paper provides an analysis of why the promise of entrepreneurship remains quite elusive in Azerbaijan. The study contributes to the literature on entrepreneurship by drawing on archival data to gain insights on how the historical role of entrepreneurship and the underlying ecosystem have imprinted their long-term development of current entrepreneurial activities. It proposes a framework for a systematic, and long-term analysis of the factors and mechanisms comprising the ecosystem-approach and shaping entrepreneurial outcomes across a broad spectrum of historical and contemporary contexts.

Supplier firms, especially the more resource constraint SMEs, form alliances for product innovation. Supplier firms can try to push in creative inputs while needing to align them with the overall solution of the buyer. Our study zooms in on this push and alignment balancing act. Our theoretical model is informed by the attention-based view. It considers two centralization mechanisms, relationship intensity and formalized specifications of the buyer firm. Our dependent variable is innovation of the SME supplier. The model hypothesizes linear and non-linear effects by relationship intensity and the buyer’s detailed and formalized specifications (e.g., functional principles, features, and design elements). Data collected from 279 European supplier SMEs reveals that moderate levels of “post-formational specifications” proposed by the buyer firm are associated with greater product innovation of the supplier. Interestingly, less product innovation results when the specifications of the buyer are either minimal or high. Stronger relationship intensity allows greater product innovation as it enables partners to capture more benefits from the post-formational specifications as they constructively work together.

Plain English Summary The tax incentive for specific productivity-enhancing equipment introduced in 2014 for Japanese small and medium-sized enterprises mitigates financial constraints in upgrading capital. We estimate the causal effects of a tax incentive for specific productivity-enhancing equipment introduced in 2014 for Japanese small and medium-sized enterprises (SMEs). Using firm-level panel data, we obtain the following findings. First, the introduction of the tax incentive did not on average increase the capital investment rate of firms eligible for the tax incentive, which could be due to the small number of firms using the incentive. Second, the firms using the tax incentive increased their capital investment rate and improved labor productivity more than the comparable firms that hold the stated capital close to but more than the criterion of SMEs did. Third, firms using the tax incentive did not increase capital intensity. Fourth, more financially constrained firms using the tax incentive increased their capital investment rate to a greater degree. These results show that the use of the tax incentive mitigates financial constraints in upgrading capital.

Despite the relevance of crowdfunding as a financing tool for underrepresented entrepreneurs, prior research pays scant attention to the funding gap for refugee entrepreneurs. Using a composite framework that integrates both entrepreneurship research and signalling theory, the current study investigates how microfinance institutions (MFIs) and refugee entrepreneurs can deploy signals to pursue entrepreneurial opportunities on digital platforms. The results, based on refugee data pertaining to 5615 loans on Kiva during 2015–2018, reveal that when refugee loan campaigns are affiliated with an MFI that itself features lower default rates, achieves high profitability, adopts an entrepreneurial support orientation, operates transnationally and is digitally focused, the campaign achieves better crowdfunding performance outcomes than refugees campaigns affiliated with an MFI that lacks these features. These findings provide clear evidence that when MFIs offer reputational signals, visible to the crowd of lenders, it can increase entrepreneurial financing and democratize resource acquisition among financially excluded refugee entrepreneurs. Plain English Summary Can microfinance institutions boost crowdfunding among refugee entrepreneurs and their small businesses? Yes, they can. Third-party signals may support growth in alternative finance for #refugees. While research on entrepreneurship has largely targeted immigrant entrepreneurs, the refugee context has been neglected, namely how refugee entrepreneurs fund their economic activities. With signalling literature on new venture financing of entrepreneurship being greatly fragmented, we contribute to the understanding of how crowdfunding microfinance boost venture financing of refugees. We study the gain of legitimacy by refugee entrepreneurs displayed through reputational signals intertwined with the reputation of microfinance institutions (MFI). Our results reveal higher success in funding outcomes when the loan campaign is linked with microfinance institutions with lower loan default rates, higher profitability, driven by entrepreneurial support, operating internationally and with a digital presence, compared with MFI that lacks these features. Our work has relevant implications for underrepresented refugee entrepreneurs, crowdfunding actors, policymakers and scholars. Our findings indicate that the affiliation between refugees-microfinance institutions creates certain reputational signals which enhance entrepreneurial finance and shape conditions for societal integration in the host country. For crowdfunding platforms, we show that to develop an effective, self-perpetuating entrepreneurial ecosystem, they should work to build their reputation among lenders, by capitalizing on and making third-party signals more readily available. At the same time, they must conduct due diligence to assess and monitor MFIs’ behaviour. Policy makers are recommended to build up on this digital microfinance experience to enhance new venturing finance refugee programs. We, thus, extend prior findings about the importance of third-party affiliations by establishing a composite framework of third-party signals in the context of new venture financing for financially excluded communities, and refugees in particular. Accordingly, for scholars, we offer cross-disciplinary insights into which characteristics of intermediaries can facilitate links between the supply (crowd of lenders) and demand (refugee entrepreneurs) sides in prosocial crowdfunding.

Gender roles demand that women devote more time to non-market labor such as childcare and household responsibilities. Therefore, the labor market hinders women’s ability to compete with their male counterparts, whose time is less subject to the demands of non-market work. The result is a performance gap between men and women. To obtain the flexibility to more efficiently perform both their market and non-market work, many women choose to be self-employed and operate their businesses from home. Using a large sample of US firms, we find that women who choose to operate their own businesses from home are able to narrow the performance gap between men and women entrepreneurs. Plain English Summary Women partially overcome societal disadvantages by running businesses from home. Women business owners achieve significant synergies by working from home that enable them to narrow the gap in performance relative to men. An analysis of over 600,000 small businesses reveals that there is a significant gap in performance between businesses run by men versus those run by women. Prior research shows that men enjoy structural advantages over women due to society’s demands on women’s time to perform household duties or provide childcare. We find that women are able to narrow the resulting performance gap by operating their businesses from home, providing them increased flexibility to manage their time. Our paper indicates that supporting women-owned businesses with policies that grant greater flexibility or more equitably or efficiently distribute household work can improve economic efficiency.

Plain English Summary Although female entrepreneurs are still discriminated against compared to their male counterparts in academia as well as outside, in terms of resources as well as business preferences, we demonstrate that university support is beneficial to female academic entrepreneurship with respect to other forms of female entrepreneurship. In virtue of their university affiliation, women-led academic spinoffs result to grow more than women-led nonacademic innovative startups. At the same time, they tend to show lower survival rates, which makes them more similar to men-led companies. Therefore, the principal implication of this study is that female academic entrepreneurship is relevant for entrepreneurial ecosystems and the entire society in terms of generating growth opportunities. Thereby, the role of universities is fundamental, as they provide resources, skills, and competencies through which female entrepreneurs may be empowered.

This study reviews initial coin offerings (ICOs) based on 80 empirical studies from 2018 to 2022. We apply a blend of bibliomet-ric and content analysis to consolidate ICOs' prior findings, track the evolutionary impact, and explore the semantic discourse and underlying theories in entrepreneurial finance. The content analysis concludes with five main streams that extensively explain the advent of ICOs, main features, embedded technologies, pricing, valuation, regulatory frameworks, frauds, and scams. It contributes to a better understanding of the ICOs hype under the following contexts: benefits versus challenges, decentralised system versus market stability, speculative behaviour and herding versus market efficiency , and geographical spread versus systematic risk. The study is beneficial for portfolio managers , hedgers, wealth managers, investors, policy-makers, regulators, and entrepreneurs. Plain English Summary ICO Boom and Bust: What is Next? The study fosters the knowledge of ICOs as a new financing avenue. It consolidates prior empirical studies and extracts valuable findings from different perspectives: benefits versus challenges, decentralised system versus market stability, speculative behaviour and herding versus market efficiency, and geographical spread versus systematic risk. This study reviews initial coin offerings (ICOs) based on 80 empirical studies from 2018 to 2022. It impacts portfolio managers, hedgers, wealth managers, investors, policymak-ers, regulators, and entrepreneurs.

Labor market institutions (LMIs) could enable new firm entry by lowering burdens to attracting and retaining human capital or restrict new firm entry by increasing concerns of additional demands on ventures facing liabilities of newness and smallness. In this study, we focus on the LMI of the right of association, and whether its relationship with new business entry depends on the vertical ordering of bargaining (represented in the centralization of collective bargaining) or the horizontal synchronization of wage-setting (represented in the coordination of wage-setting). In a panel of 44 countries covering the period 2005–2019, we find that the right of association in the market sector is positively associated with new business entry; however, with increasing centralization of collective bargaining, the association becomes negative. Coordination of wage-setting does not significantly affect the relationship between the right of association and new business entry. The results are robust to accounting for both serial correlation and cross-sectional correlation in the panel regressions and carry implications for policymakers regarding the effects of LMIs on new business creation.

This study explores how entrepreneurial firms responded to - and displayed resilience in - coping with the uncertainty generated by an unexpected crisis. We examine how entrepreneurs leveraged slack resources to build organizational resilience and, thanks to their entrepreneurial attitude, could eventually turn adversities into opportunities. Through a multiple case study, four key entrepreneurial responses emerge about the type of slack resources (business or family) and extent of entrepreneurial attitude (favourable or unfavourable) leveraged: “waiting while seeding”, “keeping business as usual”, “striving to resist” and “surfing the pandemic”. Slack resources, both business and family, can enable the absorption of a shock, contributing to building absorptive resilience, or the adaptation to the shock, contributing to building adaptive resilience. Yet, they are not sufficient to turn adversities into opportunities because firms also require a favourable entrepreneurial attitude to activate slack.Plain English Summary How entrepreneurial firms respond to - and display resilience in - coping with a crisis’s uncertainty varies according to the entrepreneurial attitude of the entrepreneur and the typology of slack resource leveraged. We find that these firms responded to the Covid 19 crisis either through: “waiting while seeding”, “keeping business as usual”, “striving to resist” or “surfing the pandemic”. The four responses differ in the type of slack resources — business or family — and extent of entrepreneurial attitude — favourable or unfavourable — leveraged. Slack resources, both business and family, are not sufficient to turn adversities into opportunities because firms require a favourable entrepreneurial attitude to activate slack. The study contributes to business practice by showing that both family and non-family businesses to thrive in the “new normal” era will have to develop the entrepreneurial resources of the team. Policymakers must be attentive to how firms’ accumulated resources are deployed during times of crisis and foster the capture of opportunities out of the storm.

Using survey data from a representative sample of Irish Small and Medium Enterprises (SMEs), we study how firms are likely to perform under macroeconomic forecasts of the pandemic recovery. The rate of financial distress among firms is expected to fall under baseline forecasts from a peak of 12% in 2020 to 7% by 2024. We find that those firms that struggle to recover by the end of our scenario window were mostly unprofitable or distressed prior to the pandemic. Beyond our baseline case, we further model three alternative recovery scenarios to study the effect of fiscal support tapering, a partial recovery due to structural change in sectoral demand, and a financing gap driven by credit risk retrenchment by lenders. Our findings highlight the continued importance of “bridging” liquidity finance provision to ensure the long-term solvency of viable firms. Plain English Summary What proportion of SMEs are financially unviable in the post-pandemic economy? We study data from a representation sample of Irish SMEs and consider how they will perform under forecasts of the pandemic recovery. In our baseline scenario, we estimate that 7% of firms will remain distressed by 2024 and we find that most of these firms were unprofitable or already distressed prior to the pandemic. We look at a number of alternative macroeconomic scenarios, including where government supports are withdrawn, firms in some sectors do not fully recover, and where lenders lower the amount of money they are willing to extend to loan applicants. The impact of government support tapering alone is expected to be modest, and a partial recovery for some firms is not expected to raise aggregate distress by a sizeable amount. However, a sharp contraction in lending to otherwise viable firms leads to a significantly heightened distress rate. Policy measures that seek to support liquidity finance provision to viable firms will continue to have a role in the pandemic recovery.

This study applies a stochastic frontier model to examine the relationship between firm size and efficiency using a novel approach. The first novelty is that this study examines large and small firms separately to allow for heterogeneity between firm group sizes in terms of measuring the size-efficiency relationship. The second is that we use a modified frontier model which explicitly includes a family firm variable when measuring firm efficiency. Empirical results reveal that firms are in fact heterogeneous, with small- and medium-sized enterprises (SMEs) exhibiting a U-shaped scale efficiency curve, while large enterprises (LE) exhibit an efficiency curve which is positive and linear. Robust results also confirm that family firms are relatively more efficient than non-family firms. In addition, while controlling for family firms does not appear to change the firm’s size-efficiency dynamics, failure to control for family firms leads to a bias in characterizing the nature of the firm’s production returns to scale. This study reveals that with scale expansion, firm efficiency dynamics vary depending on firm size. Empirical results show that SMEs go through an initial stage of efficiency loss and then rebound, exhibiting a U-shaped efficiency curve, while for LEs, the effect is linear with a slightly positive slope as firm efficiency increases slowly and steadily. Findings suggest that there are implications for entrepreneurship policy, as the important role of family firms in increasing firm production efficiency is revealed. There are also important implications for small business research, as results show that failure to control for family effects in the efficiency model can cause misjudgement in characterizing production as increasing in returns to scale rather than decreasing returns to scale.

Plain English Summary For entrepreneurs receiving more funding than sought in a crowdfunding campaign would seem to be a welcome outcome. However, prior studies have shown that such overfunding can have both positive and negative effects on subsequent product-development outcomes. To shed light on when the effects of overfunding are predominantly positive and when are they predominantly negative, we derive theory on how a product’s category spanning—that is, the positioning of a product in multiple product categories—may impact the effect of overfunding; specifically, on the probability that a product is released and on audience perceptions of the product’s quality. We test these predictions with data from video-game product-development projects crowdfunded on Kickstarter. Our results show that for products with low category spanning, overfunding can be beneficial in terms of both product release and audience perceptions of quality, while high overfunding for products with high category spanning can have detrimental effects for audience perceptions of quality.

Plain English Summary Do characteristics of investors’ birthplace shape behavior? We study community-level social capital and investments in equity crowdfunding and show that cultural factors, rather than the environment, are correlated with investment choices. People born or living in high social capital areas are more likely to trust others, either because of higher cooperative values and beliefs stowed in their cultural makeup, or because of the influence of the surrounding environment. We find that higher inborn social capital of investors results in higher amounts pledged to riskier campaigns, while conditions in their living place have no impact. By unveiling such relationship, we find interesting implications for entrepreneurs and managers of crowdfunding platforms. Founders of risky ventures should target pledgers born in districts where local social capital is more prominent. Platforms’ managers should support entrepreneurs in following this strategy and consider existing clients' place of birth in marketing efforts to maximize the probability of success.

The Paycheck Protection Program (PPP) provided approximately US $790 billion in COVID-19 relief funds to small businesses across the United States. This study merges a verified industry dataset of craft beer producers with government microdata on PPP loan recipients to examine the relationship between PPP funding and small business performance during the pandemic. Results indicate that firms receiving PPP funding were more likely to remain in operation and experience a smaller decline in annual production. However, even within a single industry, COVID-19 had heterogeneous effects on different market segments, demonstrating the importance of a firm’s pre-pandemic business model on its flexibility and resiliency during a crisis. Finally, using a quasi-experiment that exploits a natural break in the loan program, the study suggests a positive causal effect of the role of loan approval timing on short-run performance outcomes. These findings provide evidence that the PPP alleviated some losses induced by COVID-19, but questions remain about the program’s distribution and long-term impacts. Plain English Summary The US federal government created the Paycheck Protection Program (PPP) to minimize the economic damages from COVID-19 on workers and small businesses. One industry hit particularly hard by the pandemic was the craft brewing industry, making it an ideal industry to explore whether the PPP achieved its objectives. The results show that receiving a PPP loan increased the likelihood of remaining in business through the pandemic. Additionally, while most craft breweries experienced a decline in annual production from 2019 to 2020, firms that received a PPP loan experienced a smaller reduction. Breweries that received the earliest funding also performed better, suggesting that loan timing played a key role in performance outcomes. Taken together, the study suggests that the government program helped reduce economic damages associated with COVID-19, but more work is needed to fully understand the program’s impact.

Plain English Summary In the war for talent, entrepreneurs interacting with job seekers should display passion but not excessively, especially when their venture’s products/services are highly innovative. To help new ventures overcome the severe recruiting challenges they typically face, we study how entrepreneurs can use verbal and nonverbal communication to persuasively communicate their ventures’ unique features to job seekers to enlarge their applicant pools. We asked a sample of individuals on the job market to watch videos of entrepreneurs presenting their ventures’ products/services and evaluate these ventures’ attractiveness as employers. These evaluations indicate that new ventures are considered more attractive employers when entrepreneurs communicate the innovativeness of ventures’ products/services and display moderate passion. Thus, the main implication of this study is that entrepreneurs looking for applicants should convey information about the novelty of their ventures’ products/services and display passion when interacting with job seekers while avoiding excessive outwardly manifestations of passion.

The paper draws on network theory to employ concepts of homophily and heterophily to investigate whether the presence of familiar, unfamiliar or a mix of actors in an entrepreneurial ecosystem is related to start-up rates. The empirical focus of this study is on 81 UK university entrepreneurial ecosystems and their outputs in terms of academic spinoff companies. The paper finds that university entrepreneurial ecosystems with access to actors of predominantly heterophilious character are associated with higher spinoff start-up rates. It is concluded that in stimulating the development of successful entrepreneurial ecosystems there is a clear need to focus on their openness to heterophilious actors, inclusive of other ecosystems. This is especially important in the context of network lock-in that may arise from dependence on homophilious ties. Plain English Summary Entrepreneurial ecosystems characterised by openness to diverse actors generate more firms, as shown in a study focusing on 81 UK university entrepreneurial ecosystems. The paper studies network character of actors in entrepreneurial ecosystems and whether this character is associated with start-up rates. Specifically, it focuses on the familiarity of actors, inspecting whether it is related to greater venture formations. In so doing, the study examines 81 UK university entrepreneurial ecosystems. It finds that university entrepreneurial ecosystems that generate more ventures are associated with having a presence of actors of unfamiliar character, drawing attention to the openness of ecosystems’ networks. The key implication of the study is in recognising the link between the ecosystem’s openness to diverse actors and its entrepreneurial performance.

While scholars agree that institutions are critical for enabling and constraining entrepreneurial action, the mechanisms by which institutions shape individual entrepreneurs’ actions remain underdeveloped. Whereas a prior work focuses on the direct and moderating effects of institutions on entrepreneurial action, we propose that institutions also indirectly influence entrepreneurial action through their influence on the mental models of actors. To that end, we theorize an underexplored role of institutions: shaping three socio-cognitive traits (SCT)—opportunity recognition, entrepreneurial self-efficacy, and fear of failure—that influence entrepreneurial action. Using GEM data from 735,244 individuals in 86 countries, we test and find evidence that SCTs mediate the relationship between institutions and opportunity entrepreneurship. The social legitimacy of entrepreneurship exerts a weaker direct effect on opportunity entrepreneurship but a stronger indirect effect through the SCT channels relative to pro-market institutions. Our study thus provides more nuanced findings concerning the ways formal and informal institutions, as well as the direct and indirect effects of institutions, enable and constrain entrepreneurial action.

In this article, we develop a gendered analysis of the expectations of venture growth by nascent entrepreneurs. Male entrepreneurs are notably overrepresented in the small cohort of firms that attain growth; to explore this phenomenon, we draw upon expectation theory during the nascency period to analyse the antecedents of growth outcomes. To refine this analysis, we factor in risk propensity, measuring the impact of the 2008 financial crisis on fundraising plans. Using UK data gathered between 2002 and 2020 from 5490 nascent entrepreneurs to test our hypotheses, we found that those with the greatest levels of start-up capital and high levels of risk tolerance had the highest expectations of growth and were likely to be male. This small cohort of growth-oriented entrepreneurs was termed ‘deviant men’ given their outlier status. Women became more cautious after the crisis, so even those with similar access to start-up capital as the deviant men had lower expectations of growth. We conclude by noting that at the nascency stage, expectations of growth are a critical influence upon future outcomes; a small cohort of deviant men has the highest expectations of growth, with women disadvantaged by gendered risk adversity.

Family firms are one of the most ubiquitous forms of business organizations worldwide. Their survival and growth are thus not only crucial for the firms themselves but also for the overall economy. One of the factors that influence their survival and development are their financing decisions. These decisions are generally described through the pecking order theory. However, not much is known about the applicability of this theory in private family firms. Given the shortcomings (both theoretically and empirically) of the current literature, we analyze 1087 incremental financing decisions from 277 family firms to develop and test a specific family firm pecking order. We integrate the elements of the socioemotional wealth perspective to theoretically explain the preferred order and introduce family capital into the pecking order model. Our findings indicate that family firms first prefer internal financing, next debt financing, followed by family capital, and last external capital. We also find that SEW considerations play a role in this financing decision. Especially the retention of control over the firm and the aim to pass the firm to the next generation appear to play an important role in determining this order. These dimensions ensure that family firms try to avoid extra capital. However, when it is needed, they will opt for family capital over external capital. This paper thus provides more insight into the reasoning behind financing decisions in private family firms. Plain English Summary How do family firms finance their investments? When looking for ways to finance their investments, firms have several options. According to traditional finance theories, they generally follow a so-called pecking order: they prefer to first use their internal funds, before turning to external financing. For family firms, the most ubiquitous form of business organization worldwide, two important aspects have been ignored in this research until now. First, socioemotional aspects influence decision-making in family firms and thus probably also financing decisions. Next, the business family itself can act as an external source of finance, which is not yet accounted for in the current pecking order model. In this research, we take these issues into account in order to develop—theoretically and empirically—a family firm pecking order. We investigate over a thousand financing decisions of 277 privately held family firms. Our results show that they prefer internal financing, followed by bank debt, family capital, and external capital. Especially the retention of control over the firm and the aim to pass the firm to the next generation appear to play an important role in determining this order. Our research thus indicates that future research should pay attention to the peculiarities of family firms when investigating their financing decision.

We empirically examine the relationship between business regulation and total (i.e., formal and informal) entrepreneurship using a unique panel data set. We estimate separate regressions for opportunity-driven and necessity-driven nascent entrepreneurship as well as young business entrepreneurship based on two different estimation methods (pooled OLS and system GMM). Our results show that business regulation generally rather hinders entrepreneurship. If we additionally consider the development stage of countries, we find different results for high-income and lower-income countries: first, we surprisingly find that stricter employment protection legislation positively affects entrepreneurship in lower-income countries where the informal sector is larger. This might be because more rigid employment laws make waged employment less attractive to employers, who thus push employees into dependent or informal self-employment. Second, we find that stricter insolvency regulation hinders entrepreneurship only in high-income economies. In lower-income economies, where there are more unregistered businesses, insolvency laws might be more difficult to enforce, so entrepreneurship rates are less affected. Third, we find that government intervention in the form of high-quality governmental support programs stimulates opportunity nascent and young business entrepreneurship. This relationship is apparent only in high-income countries, where the formal sector is larger, as such programs typically address formal rather than informal entrepreneurs. Governmental support programs may thus reach the goal of facilitating entrepreneurship only in high-income economies.

Plain English Summary Use mobility indexes from CQTPMs to make precise inference about persistence in firm growth performance! This paper proposes a new method to measure the degree of persistence in the growth process of firms. Improving upon previous studies, we provide exact statistical inference and control for possible confounding factors. Application of our method to firm-level data on the UK and four major European economies, reveals a statistically significant, albeit small tendency of firms to repeat their past growth. However, we also observe considerable turbulence in the growth rates distribution over time. Persistence in growth is more strongly associated with sectoral characteristics such as productivity, business dynamism and trade openness, than with country-specific or time-specific factors. These findings pose interesting challenges to the theory. They also imply that policies addressed to foster growth in a specific group of firms are likely to have a volatile and transient effect. Our approach is flexible and suited for wide applicability in other domains of firm-level analysis.

Plain English Summary Access to bank financing, a key growth determinant for Black and Latino-owned firms, is most accessible in prosperous metro areas with large minority populations and much less so in those with an entrenched heritage of institutionalized racism. Minority-owned firms doubled their nationwide paid employee numbers from 2002 to 2018, while White-owned firms generated only a 5% increase. Increased bank lending facilitated their rapid growth. Our objective is to identify regional traits associated with small business viability, paying particular attention to the ability of minority-owned firms to obtain bank financing. To link regional characteristics to bank policies, local economic well-being measures and racial intolerance levels are used to identify areas where banks are inclined to employ fair lending practices. Our fair lending proxy measure is the willingness of banks to participate in CRA agreements. Local customs and traditions shape bank acceptance or rejection of these agreements. Most banks in metro areas where institutional racism is deeply embedded do not participate in CRA agreements, while in prosperous areas with large minority populations, most do. The incidence of creditworthy borrowers discouraged from seeking bank financing drops significantly where CRA agreements are present locally.

The benefits of entrepreneurial mentorship are well documented, but there is limited research on how entrepreneurs connect with mentors, especially in digital settings. We partnered with an online platform that connects entrepreneurs to potential mentors to conduct a field experiment in online mentoring. Drawing on literature on entrepreneurial mentorship and Social Cognitive Theory, we compared the effects of three interventions on the likelihood of reaching out and making a connection with a mentor in a digital setting. We find that showing entrepreneurs a video of a successful mentor–mentee relationship increases the chances that they will reach out to a potential mentor but does not improve their chances of making a connection. These findings are more pronounced for female entrepreneurs. While not all entrepreneurs adopt the offered interventions, those that make the effort to learn to navigate the online platform and craft a suitable introductory message are successful in establishing a mentoring connection. We discuss these implications for both theory and practice.

Plain English Summary During the initial outbreak of the COVID-19 pandemic in the USA, governors played a critical role in creating policy that either helped to preserve life or protect economic livelihood. Our research examines how two particularly important characteristics of governors and the political environment — party affiliation and discretion — impacted new venture creation within the food and restaurant industry, which is an important indicator of economic recovery. Using a publicly available, hand-collected dataset inclusive of all 50 states, we find that the political party of the governor has no effect on venture creation. However, we demonstrate that when the governorship and state legislature were aligned and led by members with the same party affiliation, the state experienced a greater number of new venture creation in the food and restaurant industry than when leaders of these two branches of government were not aligned. We further found that the effect of governor discretion was stronger when small business unemployment levels were higher. Our findings have implications for practice by suggesting that a unity of command government structure can be advantageous for economic outcomes during crises.

Formal education is correlated with entrepreneurial activity and success, but correlation does not indicate causation. Education and entrepreneurship are both influenced by other related factors. The current study estimates the causal effects of formal education on entrepreneurship outcomes by instrumenting for an individual’s years of schooling using cohort mean years of maternal schooling observed decades prior. We differentiate self-employment by industry employment growth and firm incorporation status. Policymakers are especially interested in entrepreneurship with the potential to create substantial employment growth. We find that an additional year of schooling increases self-employment in high-growth industries by 1.12 percentage points for women and by 0.88 percentage points for men. Education reduces the probability of male self-employment in shrinking industries. Education also increases incorporated self-employment for women and men and reduces unincorporated self-employment among men but not women. The overall probability of self-employment increases with education for women but is unaffected by education for men. The results suggest that formal education enhances entrepreneurship.

Plain English Summary Leveraging Autonomy as a Stress-Coping Resource for Entrepreneurial Well-Being. External environmental disruptive events have promoted an urgent need for a better understanding of the factors associated with entrepreneurial burnout. We explored whether entrepreneur autonomy is a liability or a coping strategy. Insights from the conservation of resources and psychology theories were used to explore burnout reported by entrepreneurs in France. Entrepreneur emotional demands (i.e., strains) increased the risk of burnout. This risk was reduced when entrepreneurs had autonomy and job satisfaction resources. While the autonomy resource enabled the buffering of emotional strains that increase burnout, this was not the case with regard to the job satisfaction resource. Entrepreneurs need to obtain and maintain autonomy over time, which enables them to recuperate from emotional strains. Practitioners can play a role in encouraging entrepreneurs to be aware of the need to accumulate autonomy and job satisfaction resources, and the need to invest in coping strategies to reduce the risk of burnout.

Entrepreneurial activities differ substantially across populations. However, whether and how the entrepreneurial culture can contribute to these variations are not yet well understood. Using internal migrants instead of international migrants widely used in previous research, this study proves the original entrepreneurial culture’s persistent effects on migrant entrepreneurship. With a unique database, the China Labor-force Dynamics Survey (CLDS), we reveal that every additional start-up per 1000 people in the city of origin in 2004 is associated with a 3.2% increase in the probability that the internal migrant will start a business in host cities during 2014 and 2016. Our results are consistent with several robustness tests, confirming the existence and persistence of the original entrepreneurial culture. Further analysis reveals that entrepreneurial culture of origin leads to migrant entrepreneurship through enhancing social networks, promoting role models, and cultivating traits that favor entrepreneurship. Through these channels, the intangible entrepreneurial culture of origin can be transformed into tangible business opportunities and migrants’ willingness and capability to do business, which stimulates their entrepreneurial activities in host cities.

Plain English Summary Having a founder who is affiliated with prestigious organizations makes a start-up venture more attractive to young jobseekers and allows start-ups to hire them at a lower cost. Attracting talented employees is critical but challenging for start-ups, since jobseekers often know little about them. This paper argues that having a founder who is affiliated with prestigious organizations can act as a valuable signal to jobseekers. Our results suggest that a founder’s affiliations with prestigious organizations make a start-up venture more attractive to jobseekers, and that they do so by signaling attractive founder-related attributes, rather than venture-related attributes. One implication is that, despite the debate about the usefulness of obtaining prestigious credentials, there are benefits for entrepreneurs of doing so, and that those who lack such credentials may need to overcome this disadvantage by obtaining other forms of personal achievement.

Plain English Summary This systematic literature review puts a spotlight on the role of the individual accountant in family firms. Our review reveals that accountants take four distinct roles in family firms: a traditional bean counter, a decision-maker, an advisor, and a protector and mediator. Our review further shows that accountants play a key role in accounting and strategy-related decisions of consequence for family firms. We also outline areas where additional research efforts can help to generate a better understanding of how, when, and why individual accountants, in addition to their accounting function, matter for the family firms that employ them. The principal implication of this study is that research should embark on further exploration of the individual accountant in the family firm context and employ diverse methods and theories in doing so.

Plain English Summary Possessing knowledge in AI techniques decreases the chance of creating radical knowledge in general, but SMEs benefit from such knowledge. Conversely, knowledge in AI applications is more beneficial for large firms. Artificial intelligence (AI) is often seen as a key technology for future economic growth. However, some firms may have an advantage in utilizing AI knowledge to create radical innovation. This paper investigates the influence of AI-related knowledge in firms on the emergence of radical innovations with a specific focus on the differences between SMEs and large firms. We find that application-related AI knowledge increases the likelihood for radical innovations, while technique-related AI knowledge decreases it. Nevertheless, SMEs have an advantage in utilizing AI techniques to generate radical innovations. Thus, the principal implication of this study is that SMEs should focus on AI techniques, allowing them to capture unseen technological opportunities which cannot be obtained in a formalized R&D process within a large firm.