Simeon Djankov, Eva (Yiwen) Zhang, 03 March 2021

Steep falls in entrepreneurial activity were recorded in early 2020 across G7 economies. In the US, however, the creation of US startups shot up by 24% relative to the previous year. This column uses data on new company applications in the US since 2004 to show that firm birth generally accelerates in the aftermath of economic crises and that this pattern was particularly pronounced in 2020, fuelled by the government assistance provided to small businesses. It also shows that US firm births are estimated to have surpassed firm deaths in 2020, unlike in the aftermath of the previous financial crisis.

Petr Sedláček, Vincent Sterk, 25 April 2020

Startups are being hit hard by the COVID-19 pandemic and the lockdown. Introducing a ‘startup calculator’ that allows anyone to compute the aggregate employment losses under various economic scenarios, this column explores the effects of a decline in startup activity on aggregate employment. Job losses may be large and may last well beyond the pandemic itself.

Hans Hvide, Tom G. Meling, 16 December 2019

Successfully predicting which startups will thrive has long bedevilled economists. Using data from procurement auctions in Norway, this column finds that temporary demand shocks have long-term effects: startups that win a procurement auction are 20% larger than the runners-up, even years after the contract work has ended. In terms of job creation and sales growth, winning a procurement auction seems to have much larger effects for startups than for mature firms, which suggests the potential value in public policies that promote startups’ participation in government procurement auctions.

Michael Roach, Henry Sauermann, John D. Skrentny, 24 November 2019

The propensity of foreign STEM talent to found or join startups in the US is widely recognised but little understood. Using unique longitudinal data from over 5,600 STEM PhDs, this column reveals that during graduate school, foreign students exhibit more entrepreneurial personality traits and career preferences than their native peers. After graduation, however, they are less likely to found companies or work in startups. These results suggest that US immigration policies may deter newly minted PhDs from participating in entrepreneurship.

Ufuk Akcigit, Emin Dinlersoz, Jeremy Greenwood, Veronika Penciakova, 24 September 2019

Differences between the majority of mediocre firms and the exceptional, innovative ones range from the founders’ backgrounds to their paths of innovation. This column assesses the impact of venture capital funding on the growth trajectories firms take. Employment and patenting data show venture capital-backed firms are likely to achieve greater success and contribute more significantly to the aggregate economy. The absence of venture capital funding would lower aggregate growth by 28%.

Jacques Bughin, 26 February 2019

The US and China are clear leaders in investment in, and the adoption of, artificial intelligence. This column argues that while Europe lags in these areas, it is home to high levels of developer talent and to significant AI hubs. European AI may thrive if its human capital and innovation culture are combined with levels of investment seen elsewhere.

Peter Egger, Katharina Erhardt, Christian Keuschnigg, 25 February 2019

The effect of taxes on firm-level investments is very heterogeneous. This column shows that the impact of corporate taxation is up to 70% higher for entrepreneurial firms than for managerial ones, while dividend taxation negatively affects the investment of financially constrained firms but entails no significant impact on cash-rich firms. Policy should provide targeted tax relief to the most constrained firms, where taxes are most harmful, if other policies are unsuccessful in improving access to external funds.

Sari Pekkala Kerr, William Kerr, 21 September 2018

There is a contentious global debate surrounding the impact of immigrants on local labour markets. One less contentious aspect has been the notion that immigrant entrepreneurs can have major positive effects for the host economy. This column uses novel US data to explore how immigrant entrepreneurs affect local labour markets and compare with native entrepreneurs. Key findings include substantial geographic variation in immigrant startup rates, lower hiring and salaries, and slightly higher female ownership in immigrant-owned firms. 

Bronwyn Hall, 19 July 2018

Patent protection is assumed to benefit entrepreneurs seeking investment, because patents signal quality and are an asset that can be resold if a startup fails. This column argues that the evidence for these benefits is inconclusive. Notably, patents acquired in a secondary market may be used for rent-seeking, rather than to incentivise innovation.

Benjamin Pugsley, Petr Sedláček, Vincent Sterk, 11 May 2018

In order to design effective policies to foster high-growth startups, we must first understand what sets these ‘gazelles’ apart from other startups. This column combines data covering US employers since the late 1970s with a macroeconomic model of firm dynamics to show that much of the performance of a firm is driven by factors that are determined at or just before the time of startup. Understanding how policies affect which types of people aspire to become entrepreneurs, how they develop business models, and which ideas they ultimately pursue is therefore important.

Erika Färnstrand Damsgaard, Per Hjertstrand, Pehr-Johan Norbäck, Lars Persson, Helder Vasconcelos, 23 November 2017

Most developed economies provide significant subsidies to small businesses to encourage innovation. This column argues that while subsidies to reduce entry costs may increase entrepreneurial entry, they can also lead to a reduction in the likelihood of ‘breakthrough’ inventions. Entry costs, which are incurred when an innovation project is successful, prompt small firms and entrepreneurs to pursue high-risk, high-reward innovations.


CEPR Policy Research