US sanctions, workforce dynamics, and corporate entrepreneurship: evidence from Iran

Abstract

Purpose This study aims to explore how political sanctions imposed by the US government have influenced workforce dynamics and corporate entrepreneurship within Iranian listed firms. Design/methodology/approach The study utilizes a difference-in-differences approach to compare the workforce compositions and corporate entrepreneurship of Iranian listed firms subjected to US sanctions with those unaffected by sanctions both before and after the implementation of sanctions. The empirical analysis utilizes data from Iranian listed firms spanning from 2013 to 2023. Findings Our analysis reveals a significant decrease in employment rates among sanctioned firms, indicating a reduction in their workforce size. However, interestingly, we also observe a simultaneous positive effect on the educational qualifications of employees, as evidenced by increases in academic credentials and training hours, coupled with higher research and development (R&D) expenditures. These shifts in human capital investment and R&D spending contribute to a heightened level of entrepreneurship in the subsequent year. Furthermore, our findings suggest that firms enhance their entrepreneurial activities by prioritizing innovation in processes over exploring new business domains. Originality/value Through this investigation, our study elucidates the intricate relationship between sanctions and corporate entrepreneurship, highlighting a complex dynamic wherein sanctions, despite reducing workforce quantity, encourage investments in workforce quality and efficiency, ultimately fostering an environment conducive to enhanced entrepreneurship.