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on Small Business Management |
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Issue of 2015‒07‒25
sixteen papers chosen by João Carlos Correia Leitão Universidade da Beira Interior |
| By: | William Kerr (Harvard University); Ufuk Akcigit (University of Pennsylvania); Nicholas Bloom (Stanford); Daron Acemoglu (Massachusetts Institute of Technology) |
| Abstract: | We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A key feature is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using detailed US Census micro data on firm-level output, R&D and patenting. The model provides a good fit to the dynamics of firm entry and exit, output and R&D, and its implied elasticities are in the ballpark of a range of micro estimates. We find industrial policy subsidizing either the R&D or the continued operation of incumbents reduces growth and welfare. For example, a subsidy to incumbent R&D equivalent to 5% of GDP reduces welfare by about 1.5% because it deters entry of new high-type firms. On the contrary, substantial improvements (of the order of 5% improvement in welfare) are possible if the continued operation of incumbents is taxed while at the same time R&D by incumbents and new entrants is subsidized. This is because of a strong selection effect: R&D resources (skilled labor) are inefficiently used by low-type incumbent firms. Subsidies to incumbents encourage the survival and expansion of these firms at the expense of potential high-type entrants. We show that optimal policy encourages the exit of low-type firms and supports R&D by high-type incumbents and entry. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:188&r=sbm |
| By: | Ambrose, Brent W. (Pennsylvania State University and the Federal Reserve Bank of Philadelphia); Cordell, Lawrence R. (Federal Reserve Bank of Philadelphia); Ma, Shuwei (Federal Reserve Bank of Philadelphia) |
| Abstract: | Small businesses are the backbone of the U.S. economy and account for approximately one-half of the private-sector economy and 99% of all businesses. To start a small business, individuals need access to capital. Given the importance of an entrepreneur’s personal debt capacity in financing a startup business, student loan debt, which is difficult to discharge via bankruptcy, can have lasting effects and may have an impact on the ability of future small business owners to raise capital. This study examines the impact of the growth in student debt on net small business formation. We find a significant and economically meaningful negative correlation between changes in student loan debt and net business formation for the smallest group of small businesses, those employing one to four employees. This is important since these small businesses depend heavily on personal debt to finance new business formation. Based on our model, an increase of one standard deviation in student debt reduced the number of businesses with one to four employees by 14% on average between 2000 and 2010. The effect on larger firm formation decreased with firm size, which we interpret to mean that these firms have greater access to outside capital. |
| Keywords: | Student loans; Small business finance; Debt capacity |
| JEL: | D1 H31 I22 I25 I28 R2 |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:15-26&r=sbm |
| By: | Kira Pauka (University of Basel) |
| Abstract: | This paper analyzes how part-time work affects financial and innovative firm performance. Moreover, it provides a detailed examination of part-time work by defining three different forms of part-time work (large, medium and small part-time work) depending on weekly working hours. Considering human capital theory, I expect part-time workers to have lower work experience and to accumulate less human capital. Thus I hypothesize that part-time work affects both, financial and innovative firm performance, negatively. For the empirical investigation I use a large German firm-level data set. The analysis shows that increasing part-time work has a significant negative impact on financial firm performance. Specifically, there are differences with regard to the considered categories of part-time work. Part-time workers having the fewest working hours per week have the strongest negative impact on financial firm performance. However the negative effect of part-time work does not remain for innovative firm performance. The results show no significant difference between part-time and full-time workers in their impact on innovative firm performance. |
| Keywords: | part-time work, financial firm performance, innovation |
| JEL: | J21 L25 M50 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bsl:wpaper:2015/05&r=sbm |
| By: | Blumberg, Boris; Pfann, Gerard Antonie |
| Abstract: | This paper studies the event history of business foundation and distinguishes between transgenerational entrepreneurship and self-made start-ups. Three theoretical concepts of human, financial and social capital are linked to investigate variations over time in the decision process to become self-employed. Data from a cohort of Dutch inhabitants born in 1939/1940 who have been interviewed three times during their lives in 1952, 1983, and 1993 allows testing theoretical hypotheses that state clear differences between these two paths towards business ownership. Empirical results show that the base-line hazard of individuals without self-employed parents increases with time, while people with entrepreneurial parents become self-employed at an early age. Moreover, social capital is a better predictor of enterprise than human capital. |
| Keywords: | entrepreneurship; occupational choice; self-employment; transgenerational mobility |
| JEL: | J24 J62 L26 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10699&r=sbm |
| By: | FU Jiangtao; SHIMAMOTO Daichi; TODO Yasuyuki |
| Abstract: | Using unique firm-level data for manufacturing sectors in Indonesia, we examine how political and economic connections of firms affect their access to finance. We identify the political connections of a particular firm by whether the government owns its shares, whether politicians are on its board of directors, and whether its highly-ranked manager knows any politician personally. We find that politically connected firms are more likely to be able to borrow from state-owned banks. Moreover, being connected to the government raises the probability of being able to borrow as much as needed without any credit constraint. The financial benefit from political connections is more prominent for small and medium enterprises (SMEs) than for large firms. Furthermore, the benefit mostly comes from personal connections with politicians, rather than more formal connections as measured by government ownership or politicians on the boards of directors. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:15087&r=sbm |
| By: | Antonio Accetturo (Bank of Italy); Luciana Aimone (Bank of Italy); Enrico Beretta (Bank of Italy); Silvia Camussi (Bank of Italy); Luigi Cannari (Bank of Italy); Daniele Coin (Bank of Italy); Laura Conti (Bank of Italy); Roberto Cullino (Bank of Italy); Alessandro Fabbrini (Bank of Italy); Cristina Fabrizi (Bank of Italy); Giovanni Iuzzolino (Bank of Italy); Alessandra Mori (Bank of Italy); Elisabetta Olivieri (Bank of Italy); Andrea Orame (Bank of Italy); Anna Laura Mancini (Bank of Italy); Elena Mattevi (Bank of Italy); Paolo Piselli (Bank of Italy); Davide Revelli (Bank of Italy); Paola Rossi (Bank of Italy); Diego Scalise (Bank of Italy); Alessandra Staderini (Bank of Italy); Giulia Martina Tanzi (Bank of Italy); Valerio Vacca (Bank of Italy) |
| Abstract: | The paper analyzes the recent evolution of the economies of the Italian North West, focusing on the phenomena of de-industrialization and the transition to a service economy. The comparison is made with a group of European regions defined as “advanced industrial.” Results show that the sluggish economic growth of the North West (which has worsened in the last decade) has taken place in a context of heavy economic structural changes. Some of these, which are specific to the North West, seem to have further hampered the competitiveness of the area, such as a too slow transition towards technology-intensive manufacturing sectors and to knowledge intensive services. The international comparison shows persistent gaps regarding important factors for growth and innovation; among these, the small firm size, delays in the human capital accumulation, the weakness of the economic and financial situation of enterprises. Even in the long recession, we observe signs of dynamism, like some highly competitive firms and territories, which are able to compete even at international level. |
| Keywords: | growth, structural change, innovation, human capital, financial structure. |
| JEL: | E3 L1 O3 E2 G2 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_282_15&r=sbm |
| By: | Yi Zhou; Canfei He; Shengjun Zhu |
| Abstract: | Creative destruction is a key driving force behind industrial development. The continuing process of creative destruction provides an impetus to regional industrial renewal. Our analytical framework that emphasizes the ways in which firm exit creates a stimulus for firm entry, resulting in incremental innovation and productivity increase is complementary to the process of technological change and industrial renewal articulated by Schumpeter who pays attention to how new entrants bring in radical innovation and new products, making incumbents’ products and technologies obsolete and force them to exit or catch up. Using firm-level data of China’s industries during 1998-2008, this paper seeks to argue that the articulation between firm exit and entry has been constantly shaped by an assemblage of various factors, including firm characteristics, industrial linkages, regional institutions and geographical proximity. |
| Keywords: | Creative destruction, Firm Exit, Firm Entry, Industrial Dynamics, China |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1522&r=sbm |
| By: | L. Chauvet; H. Ehrhart |
| Abstract: | This paper explores the impact of foreign aid on firm growth for a panel of 4,342 firms in 29 developing countries, 11 of which are in Africa. Using the World Bank Enterprise Surveys data and controlling for firm fixed effects, we find a positive impact of foreign aid on firms' sales growth. This result is robust to several checks, notably to the instrumentation of aid and to estimations on various sub-samples. We then provide evidence that the positive effect of aid is especially strong for firms operating in sectors that are intensive in infrastructure and external finance, suggesting that aid may improve firm performance through the alleviation of infrastructure and financing constraints in developing countries. |
| Keywords: | Foreign aid. Firm growth. Infrastructure constraint. Financing constraint |
| JEL: | F35 O16 O50 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:563&r=sbm |
| By: | Oya Alper; Martin Hommes |
| Keywords: | Finance and Financial Sector Development - Microfinance Small Scale Enterprise Private Sector Development - Small and Medium Size Enterprises Banks and Banking Reform Finance and Financial Sector Development - Access to Finance Industry |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:21726&r=sbm |
| By: | Timothy Guinnane (Economic Growth Center, Yale University); Susana (University of Murcia, Spain) |
| Abstract: | Economists have long neglected study of an important contractual decision, a firm’s choice of legal form. Enterprise form shapes the relations among a firm’s owners as well as many features of a firm’s interactions with the rest of the economy. Using unusual firm-level data on Spain 1886-1936, we estimate nested logit models of the determinants of enterprise form choice. In 1919, Spain introduced a new enterprise form that compromised between partnerships and corporations, and displaced larger partnerships and smaller corporations. This Sociedad de Responsabilidad Limitada was especially important for small and median-sized enterprises whose owners were not related. |
| Keywords: | Law and finance, law and economics, legal form of enterprise, Spanish economic history, limited partnership, limited-liability company |
| JEL: | K20 N43 N44 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:1049&r=sbm |
| By: | Martin, Roman (CIRCLE, Lund University); Trippl, Michaela (CIRCLE, Lund University) |
| Abstract: | This paper extends research on long-term cluster evolution with a context sensitive conceptual framework that highlights how configurations of regional innovation systems (RIS), their knowledge base specificities and policy actions can shape cluster development and transformation. By doing so, we redress the neglect of regional context specific factors by current accounts of cluster life cycle models. The empirical part of the paper deals with the evolution of the ICT cluster in Scania, southern Sweden. The emergence of the cluster in the early 1980s was enabled by a strong analytical and synthetic knowledge base in the region, and the subsequent growth was driven by intense collaboration between industry and academia. The changing geography of the ICT industry in the past decade brought along new challenges for the existing companies and led to a transformation of the cluster towards a new growth trajectory. Cluster transformation was facilitated by policy actions that promoted symbolic knowledge activities in the region. The strategy was to combine existing competences in mobile communication with new competences in media and design, and to develop new industrial activities around the theme of New Media, which integrates analytical, synthetic and symbolic knowledge. In the case of Scania, the endowment of the RIS of a variety of knowledge bases and their combination has led to successful cluster development in spite of challenges resulting from changing socio-economic conditions. |
| Keywords: | Cluster evolution; knowledge bases; regional innovation systems; innovation policy; ICT; New Media; Sweden |
| JEL: | B52 O33 O38 |
| Date: | 2015–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2015_024&r=sbm |
| By: | Di Cintio, Marco; Grassi, Emanuele |
| Abstract: | The role of patents is threefold: first, they are important to state the property rights of an invention; second, they are necessary to secure financing for starting a new venture; third, they are fundamental to recoup R&D investments. The main difficulty in preventing unauthorized use of an innovation is in the establishment of ranges and contexts of patents applicability. Noting the imperfections of the patent legal system, the authors are in a position to consider an economy with two levels of competition under different market structures: the inter-sector monopolistic competition and the intra-sector Cournot oligopoly. The explicit consideration of strategic interactions in a model of endogenous growth produces interesting results. Considering the sectorial market share as the indicator of patent system enforcement, the authors find that growth takes place, if and only if, there are some property rights of private knowledge produced by R&D activities. In turn, the patent system translates into a low degree of competition among firms. Its influence on the growth rate goes in a single unambiguous direction. As competition rises, few resources are available for R&D, so the growth rate goes down. |
| Keywords: | product differentiation,endogenous growth,market structure,R&D |
| JEL: | E10 L13 L16 O31 O40 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201549&r=sbm |
| By: | Hayashi, Fumiko (Federal Reserve Bank of Kansas City); Li, Grace (International Monetary Fund); Wang, Zhu (Federal Reserve Bank of Richmond) |
| Abstract: | This paper examines innovation, deregulation, and fi rm dynamics over the life cycle of the U.S. ATM and debit card industry. In doing so, we construct a dynamic equilibrium model to study how a major product innovation (introducing the new debit card function) interacted with banking deregulation drove the industry shakeout. Calibrating the model to a novel data set on ATM network entry,exit, size, and product offerings shows that our theory fits the quantitative pattern of the industry well. The model also allows us to conduct counterfactual analyses to evaluate the respective roles that innovation and deregulation played in the industry evolution. |
| JEL: | G2 L10 O30 |
| Date: | 2015–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:15-08&r=sbm |
| By: | Pascal Nguyen; Nahid Rahman (Finance Discipline Group, UTS Business School, University of Technology, Sydney); Alex Tong; Ruoyun Zhao (Finance Discipline Group, UTS Business School, University of Technology, Sydney) |
| Abstract: | We study the effect of board size on firm value in Australia. Using a large sample of Australian firms over the period 2001-2011, we find strong evidence of a negative relationship. We show that firms with a large board are associated with CEO compensation that is sensitive to firm size, but not to firm performance. This incentive to accumulate assets is congruent with the fact that firms with a large board also exhibit lower operating performance and higher operating costs. Furthermore, we find that the effect of board size is stronger in small firms. This result might explain why earlier studies, which focused on large Australian firms, found board size to have little impact on firm value. |
| Keywords: | board of directors; corporate governance; firm performance; CEO compensation |
| JEL: | G30 G31 G32 G34 |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:wpaper:182&r=sbm |
| By: | Andrés Rodríguez-Pose; Callum Wilkie |
| Abstract: | Smart specialization approaches to regional innovation policies have attracted, and in all likelihood will continue to attract, considerable attention. With this attention has come significant interest in one of the approach’s defining features: the ‘entrepreneurial discovery process’ (EDP). While this interest has yielded substantial progress in the development of a comprehensive collective understanding of the EDP, several important, even vital, aspects of the EDP remain ‘under-‘ or even ‘unaddressed’. This essay aims to fill what we consider to be two prominent gaps in the aforementioned collective understanding by, first, identifying the actors who are responsible for the EDP, investigating their respective roles, and exploring how they should be engaged, and, second, by dissecting the relationship between the EDP and the institutional context within which it occurs recognizing that institutions can exercise tremendous influence on the effectiveness and outcomes of the EDP. Four prominent conclusions emerge from this exercise – each of which is made explicit in the final section of the paper – that will hopefully contribute to the more effective implementation and execution of the EDP across diverse socioeconomic and institutional contexts. |
| Keywords: | Smart specialisation, entrepreneurial discovery process (EDP), innovation, innovation policy, institutions, Europe. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1523&r=sbm |
| By: | Suprinovič, Olga; Schneck, Stefan; Kay, Rosemarie |
| Abstract: | This paper analyzes how statutory entitlements to maternity or parental leave affect female entry into self-employment after childbirth. For our estimations we use comprehensive panel data for German adults born between 1944 and 1989. We find that utilization of statutory parental leave decreases women's probability to switch into self-employment. This effect is statistically significant for start-ups in highskilled occupations. In contrast, start-ups in low-skilled occupations are not significantly affected by statutory parental leave. |
| Abstract: | Der Aufsatz untersucht, wie sich familienbedingte Erwerbsunterbrechungen auf die Gründungsneigung von Frauen auswirken. Hierfür wurden Paneldaten für die Erwachsenenbevölkerung in Deutschland (Geburtsjahrgänge 1944 bis 1989) ausgewertet. Das Ergebnis: Gesetzlich geregelte familienbedingte Auszeiten reduzieren signifikant die Wahrscheinlichkeit, dass eine Frau sich in einem hochqualifizierten Tätigkeitsbereich selbstständig macht. Für Gründungen in den gering qualifizierten Bereichen konnte ebenfalls ein negativer, jedoch nicht signifikanter Effekt solcher Erwerbsunterbrechungen nachgewiesen werden. |
| Keywords: | family policy,parental leave,women's self-employment |
| JEL: | J16 J18 L26 M13 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifmwps:0315&r=sbm |