Theodore DeWitt (TD), UMass Boston, interviewing Vera Rocha (VR), Copenhagen Business School, Winner (along with Olenka Kacperczyk, London Business School) of the Best Entrepreneurship Paper Award for “The impact of entrepreneurship on community Integration: Evidence from a quasi-natural experiment”
TD: Congratulations on winning the OMT Best Entrepreneurship Paper Award! Can you briefly highlight what your paper is about?
VR: Thank you! In this paper, my co-author (Olenka Kacperczyk from London Business School) and I study how lowering entry barriers to entrepreneurship affects social integration. Our main finding is that communities in which entry barriers decline experience subsequent decline in crime incidence. This finding is intriguing in its own right, but we subsequently uncover the main mechanisms behind it. Specifically, our analyses reveal that increased labor market participation and dramatic improvements in working conditions among disadvantaged groups are responsible for the effect we observed. Following the reform, disadvantaged individuals are more likely to be hired by incumbent firms and/or experience better working conditions (in terms of wages and probability of obtaining a permanent contract). We further show that incumbent firms tap into these unexplored pools of labor (especially young unskilled men, who are often excluded from the labor market and more inclined to engage in crime) as a response to increased competition for labor, which in turn enhances social integration at the community-level.
TD: How did you gain access to the Quadros de Pessoal (QP) database, and do you see country-level administrative data like this as a rich future source of data for entrepreneurial and management research?
VR: I started working with QP database for my Master’s thesis and used it extensively in my PhD. We need to be (at least partly) affiliated to one of the Portuguese universities with access to the data and to submit a brief project to the Ministry of Employment to be allowed to use them. The QP database is comparable to the famous Scandinavian employer-employee datasets and, to some extent, the US Census. It is a very rich and reliable yearly panel of all the private firms and each of their employees operating in Portugal since the mid-80s. It is therefore a great source of data to study entrepreneurship-related questions and a variety of other management and strategy topics.
TD: Do you have future research planned along the lines of the community-level impacts of lowered barriers to entrepreneurship?
VR: Crime incidence is just one facet of community (dis)integration, and we believe that many more would be worth investigating with these or other data. A variety of dimensions related to labor market and income inequality (e.g., across different ethnic groups) are potentially affected by barriers to entry as well. How incumbent firms strategize in response to those changes is also likely to impact community outcomes. All these constitute exciting avenues for future research.
TD: Do you think Portugal’s experiences with the benefits of lowering barriers to entrepreneurship can be generalized to other countries, as well, or is Portugal a special case?
VR: I do not think Portugal is a special case. We use this particular reform change as an exogeneous increase in entrepreneurial rates, which might make our setting quite particular, since Portugal was, before the reform, one of the OECD countries with the highest entry barriers (both in terms of time and money required to start a firm). While crime and inequality figures in Portugal are not as high as in many other countries (like the US), we still find significant and sizable effects. This may suggest that our estimates are, in fact, lower-bound findings, and that patterns could be even stronger in countries where community disintegration is more pronounced.
TD: What did you enjoy most about this research project?
VR: I think that looking at the impacts of entrepreneurship from a social perspective is still an unexplored, yet crucial, area of research, and knowing that a study like this can provide quite important contributions – for both theory and practice – makes it particularly exciting.
TD: Would you like to share any challenges you faced during the research and writing process? If so, how did you overcome them?
VR: Working on a topic that is still relatively unexplored makes the project more exciting, but also more challenging. One of the main challenges has been how to position the paper and which audiences to target, since we seem to be crossing several perspectives and our findings might be of interest for different groups. Delving deeper into the key underlying mechanisms is often challenging as well; even though the data we have are quite rich, there are always aspects we cannot fully observe or control for. Nevertheless, we are excited to work on this project together and presenting it to multiple audiences has been very helpful to overcoming those hurdles.