Conference Agenda

A majority of small U.S. businesses attempting to reorganize in bankruptcy fail to successfully do so. Subchapter V of Chapter 11 was introduced in 2020 for firms with less than $7.5 million in total liabilities to streamline the process by reducing bankruptcy costs and negotiation frictions, and enabling entrepreneurs to retain their ownership. Employing regression-discontinuity and difference-in-differences designs, we show that many small businesses reorganize under the new procedures that otherwise would have been liquidated. Further, expected creditor recoveries are at least as high in Subchapter V as in similar small business reorganizations, and post-bankruptcy survival rates are no lower. Our results show that the increased ability to preserve small businesses is not associated with a bias toward continuing unviable firms, and that creditors are not harmed by a shift in bargaining power toward small business owners.

We show that credit access is a key firm-level barrier to exporting. We analyze a credit support scheme in Portugal that provided government guarantees on loans to small and medium-sized enterprises. Regression discontinuity estimates based on program eligibility criteria indicate that qualifying firms are more likely to export, and to expand the scope and scale of their export activity. The impacts are persistent. Treated firms have longer continuous trading relationships and receive more trade credit in the years that follow the scheme. Our results suggest that access to credit allows productive firms to overcome the sunk costs necessary to enter new export markets.

This paper uses novel data on the migration of European startups to the United States to understand Europe's main disadvantages in startup performance. I use positive sorting in migration as an identification strategy: because of positive sorting, the simple cross-sectional comparison gives an upper bound on the effect of the U.S. ecosystem compared to the European one. Results show that U.S. migrants receive much more venture capital (VC) funding, produce more innovation, and reach much bigger scale by exit than startups staying in Europe. More surprisingly, however, U.S. migrants do not increase revenue for many years after migration, incur higher losses for long time periods, and do not have a higher likelihood of successful exit than European stayers. Furthermore, a large part of the difference in innovation and scale can be explained by the U.S. funding advantage. These results are consistent with the view that technology, product, and exit markets hinder European startups little, if at all, but that Europe’s VC funding market is its major obstacle to startup performance.