Extreme Events, Entrepreneurial Start-Ups, and Innovation: Theoretical Conjectures

Economics of Disasters and Climate Change, vol. 5, pp. 329–353

Abstract

In light of the COVID-19 pandemic, we scrutinize what has been established in the literature on whether entrepreneurship can cause and resolve extreme events, the immediate and long-run impacts of extreme events on entrepreneurship, and whether extreme events can positively impact (some) entrepreneurship and innovation. Based on this, we utilize a partial equilibrium model to provide several conjectures on the impact of COVID-19 on entrepreneurship, and to derive policy recommendations for recovery. We illustrate that while entrepreneurship recovery will benefit from measures such as direct subsidies for start-ups, firms' revenue losses, and loan liabilities, it will also benefit from aggregate demand-side support and income redistribution measures, as well as from measures that facilitate the innovation-response to the Keynesian supply-shock caused by the pandemic, such as access to online retail and well-functioning global transportation and logistics.

Authors 2

1. Thomas Gries

   Paderborn University

   Affiliation as printed

   Department of Economics, University of Paderborn, Paderborn, Germany

2. Wim A. Naudé corresponding Aachen

   RWTH Aachen University · University College Cork

   Affiliation as printed

   Cork University Business School, University College Cork, Cork, Ireland

   RWTH Aachen University, Aachen, Germany