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Small Business Economics

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24.10.2022

Venture creation in the aftermath of COVID-19: The impact of US governor party affiliation and discretion

verfasst von: Cameron J. Borgholthaus, Joshua V. White, Erik Markin, Vishal K. Gupta

Erschienen in: Small Business Economics | Ausgabe 2/2023

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Abstract

In the USA, governors became central figures in the fight against the novel coronavirus. In many cases, state leaders were forced to choose between preserving life and protecting economic livelihood. While prior research has underscored the important role that US governors played in implementing healthcare policies at the onset of the COVID-19 pandemic, we know little about how characteristics of state leaders impacted self-employment. In this paper, we draw from upper echelons theory to examine how governor party and discretion impacted venture creation in the food and restaurant industry. Interestingly, we find no significant relationship between governor party and venture creation. However, we find that when the governor and legislature were unified in their political party — irrespective of party line — there were a higher number of new food and restaurant ventures created. We also found this effect to be strengthened when small business unemployment levels were higher. We explore the implications of these results for how unity of command may be beneficial during times of crisis.

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At the beginning of the COVID-19 pandemic, there were 26 states led by governors affiliated with the Republican Party and 24 states led by governors affiliated with the Democratic Party.

We used data from the 2020 United States Census to measure population and population density. However, due to potential endogeneity concerns regarding moving patterns during the pandemic, we also tested the model using 2019 estimated population data and found similar results.

Although the direct effect of governor party on food and restaurant venture creation was not significant, the interaction effect of governor party and small business unemployment was significant. Thus, we felt the need to test for endogeneity in the model.

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Titel: Venture creation in the aftermath of COVID-19: The impact of US governor party affiliation and discretion
verfasst von: Cameron J. Borgholthaus
Joshua V. White
Erik Markin
Vishal K. Gupta
Publikationsdatum: 24.10.2022
Verlag: Springer US
Erschienen in: Small Business Economics / Ausgabe 2/2023
Print ISSN: 0921-898X
Elektronische ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-022-00705-7

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