Creative Destruction? Local Business Conditions, Firm Age, and Wages.

While a growing literature has examined the relationship between economic shocks and job creation in startups and established firms, little is known about the quality of these jobs. In this paper, I examine how fluctuations in local business conditions affect the wages of employees at startups and incumbent firms. I identify shocks to local business conditions using plausibly exogenous variation of hurricane strikes in U.S. coastal counties. I find that wages of startup employees increase substantially in response to negative shocks to local business conditions, while there is only a small raise in old firms. This effect does not appear to be driven by changes in supply or demand for labor. These findings are consistent with “cleansing” theories of downturns

Creative Destruction? Local Business Conditions and the Earnings of Employees at Startups.

What drives job quality in startups? In this paper, I examine how fluctuations in local business conditions affect wages in startups and incumbent firms in the retail sector. I identify shocks to local business conditions using plausibly exogenous variation of hurricane strikes in U.S. coastal counties. I find that, on average, wages of startup employees increase in response to negative shocks to local business conditions. This effect does not appear to be driven by changes in supply or demand for labor. These findings are consistent with a “cleansing” effect of downturns, fostering the creation and retainment of more productive jobs, and driving out unproductive ones

Creative Destruction? Local Business Conditions and the Earnings of Employees at Startups.

What drives job quality in startups? In this paper, I examine how fluctuations in local business conditions affect wages in startups and incumbent firms in the retail sector. I identify shocks to local business conditions using plausibly exogenous variation of hurricane strikes in U.S. coastal counties. I find that, on average, wages of startup employees increase in response to negative shocks to local business conditions. This effect does not appear to be driven by changes in supply or demand for labor. These findings are consistent with a “cleansing” effect of downturns, fostering the creation and retainment of more productive jobs, and driving out unproductive ones

Creative Destruction? Local Business Conditions, Firm Age, and Wages.

While a growing literature has examined the relationship between economic shocks and job creation in startups and established firms, little is known about the quality of these jobs. In this paper, I examine how fluctuations in local business conditions affect the wages of employees at startups and incumbent firms. I identify shocks to local business conditions using plausibly exogenous variation of hurricane strikes in U.S. coastal counties. I find that wages of startup employees increase substantially in response to negative shocks to local business conditions, while there is only a small raise in old firms. This effect does not appear to be driven by changes in supply or demand for labor. These findings are consistent with “cleansing” theories of downturns

The signaling value of legal form in debt financing

We examine if a startup's legal form choice is used as a signal by credit providers to infer its risk to default on a loan. We propose that choosing a legal form with low minimum capital requirements signals higher default risk. Arguably, small relationship banks are more likely to use legal form as a screening device when deciding on a loan. Using data from Orbis and the IAB/ZEW Start-up Panel for a sample of German firms, we find evidence consistent with our hypotheses but inconsistent with predictions of several competing explanations, including differential demand for debt or growth opportunities

The signaling value of legal form in entrepreneurial debt financing

This study examines the impact of mandatory legal form choices on startups' debt financing opportunities. We posit that an entrepreneur's initial legal form decision serves as a reliable signal to outside lenders, reducing adverse selection concerns. Using data from German startups, we find that limited liability companies with low capital requirements disproportionately secure less debt than their high-capital counterparts. This financing disparity is particularly pronounced for younger firms in areas dominated by small relationship banks, but it diminishes with firm age. Our findings highlight the unintended consequences of recent global deregulation efforts. Executive summary: Formal debt financing is arguably the most important source of external financing for startups. Despite its importance, many startups find it challenging to secure such financing due to informational opacity: they lack the track record or publicly available evidence needed to prove that they are a sound investment. This raises a pressing question: How can startups credibly convey their creditworthiness to potential lenders? We posit that a startup entrepreneur's choice of legal form acts as a pivotal signal to potential lenders, allowing them to differentiate between high-risk and low-risk ventures. Every startup must decide what legal form it will adopt at incorporation. Unlike most other, industry-specific decisions, the choice of legal form acts as a consistent and universally applicable signal. Moreover, recent shifts in global regulations have seen the emergence of companies with low-capital legal forms, a development further underscoring the importance of studying these choices (World Bank, 2020). We theorize that adopting a legal form with high minimum paid-in capital requirements signals that a venture will be less likely to default on a loan: entrepreneurs who anticipate a higher likelihood of default will be less inclined to pick a legal form with high minimum capital requirements since they would be liable for the amount of paid-in capital in the case of bankruptcy. The opportunity costs of such a choice would also be higher as founding a high-capital firm would entail foregoing alternative, safer investment opportunities. Furthermore, the reputational costs and potential stigma of failure associated with defaulting when choosing a high- versus low-capital legal form may induce high-risk types to choose the latter. Importantly, we posit that the legal form choice has signaling value beyond the amount of paid-in capital: among firms with the same amount of equity and similar firm and founder characteristics, those ventures with a low-capital legal form have more difficulty in attracting the necessary external funding. We utilize comprehensive administrative and survey data from German firms to empirically test our hypotheses. In 2008, Germany introduced the “mini-LLC” or “low-capital LLC,” allowing founders to opt for a lower minimum capital requirement than the traditional 25,000 Euro. This shift presented a unique opportunity to study the implications of legal form choice on external financing. Our findings suggest that low-capital LLCs typically secure less debt and more frequently experience financial constraints, despite the lack of any significant difference between their financing needs and those of high-capital LLCs. We further demonstrate that the total effect consists of a mild positive intentional impact from choosing a high-capital legal form and a strong negative unintentional impact from opting for a low-capital form. Notably, these signaling effects are more pronounced for smaller, “relationship banks,” which tend to rely more on nonfinancial cues for risk assessment due to their limited access to sophisticated financial evaluation tools. As the firm-bank relationship matures, the weight of this signal diminishes, indicating that banks adjust their assessment based on acquired knowledge of the firm's quality. However, larger, “transactional banks,” which focus more on hard data, tend to maintain their reliance on this signal for extended periods. For entrepreneurs, the key takeaway is that a trade-off exists between capital requirements and debt accessibility. The stigma tied to low-capital legal forms disproportionately affects their ability to secure debt. Opting for a legal form with low capital requirements might be advantageous to those not heavily dependent on external financing in the early stages, and fostering long-standing relationships with banks is one way of mitigating the unintended consequences of choosing a low-capital legal structure. Entrepreneurs should consider the prevalent banking landscape in their regions; in areas dominated by smaller banks, the legal form choice is especially crucial. For policymakers, the implications are clear. Regulations regarding firm incorporation can unintentionally impact startups' access to external funding, potentially stifling growth. Understanding these dynamics when formulating policies that shape the entrepreneurial landscape is essential

Viral to metazoan marine plankton nucleotide sequences from the Tara Oceans expedition

A unique collection of oceanic samples was gathered by the Tara Oceans expeditions (2009-2013), targeting plankton organisms ranging from viruses to metazoans, and providing rich environmental context measurements. Thanks to recent advances in the field of genomics, extensive sequencing has been performed for a deep genomic analysis of this huge collection of samples. A strategy based on different approaches, such as metabarcoding, metagenomics, single-cell genomics and metatranscriptomics, has been chosen for analysis of size-fractionated plankton communities. Here, we provide detailed procedures applied for genomic data generation, from nucleic acids extraction to sequence production, and we describe registries of genomics datasets available at the European Nucleotide Archive (ENA, www.ebi.ac.uk/ena). The association of these metadata to the experimental procedures applied for their generation will help the scientific community to access these data and facilitate their analysis. This paper complements other efforts to provide a full description of experiments and open science resources generated from the Tara Oceans project, further extending their value for the study of the world's planktonic ecosystems

The Returns to Entrepreneurship in the Labor Market

The aim of this dissertation is to extend prior work on the private and social returns to entrepreneurship by investigating how and why: (i) a spell of entrepreneurship relates to an individual's future earnings trajectory in the labor market, and (ii) local demand shocks affects job creation through new firm formation. Regarding the first research question, the findings show that in rigid labor markets - like Belgium - former entrepreneurs suffer substantial wage losses in the short- and medium-term after exiting entrepreneurship: five years after they have returned to paid employment, former entrepreneurs earn significantly less than similar employees without an entrepreneurial background. We propose that uncertainty regarding the productivity of ex-entrepreneurs in wage work can explain the initial wage penalty. However, after extensive exploration of various potential explanations for the long-term penalty, we still find a non-negligible part that remains unexplained. We label this the wage persistence puzzle. Regarding the second question, I examine which types of firms in sectors related to rebuilding and recovery create jobs in the periods after a region is hit by a hurricane. I find that startups account for a disproportionate share of job creation. I link these findings to theories of rent-sharing where incumbent workers of established firms capture part of the profits that result from positive demand shocks. Startups, by virtue of being new, do not need to raise wages, which explains their higher responsiveness to local economic shocks in terms of job creation.status: publishe