nep-sbm New Economics Papers
on Small Business Management
Issue of 2009‒08‒30
twenty papers chosen by
Joao Carlos Correia Leitao
Technical University of Lisbon

  1. Agglomeration Externalities and Entrepreneurship - micro-level evidence from Sweden By Baltzopoulos, Apostolos
  2. Entrepreneurial Innovations, Entrepreneurship Policy and Globalization By Douhan, Robin; Norbäck, Pehr-Johan; Persson, Lars
  3. Economic growth across Chinese provinces: in search of innovation-driven gains By Funke, Michael; Yu, Hao
  4. Determinants of MNE Subsidiaries Decisions to Set Up Own R&D Laboratories - Theory and Evidence By Kottaridi, Constantina; Papanastassiou, Marina; Pitelis, Christos
  5. The Firm and the Region as Breeding Grounds for Entrepreneurs By Baltzopoulos, Apostolos
  6. Equity Financing and Innovation: is Europe different from the United States? By Martinsson, Gustav
  7. How do Organisational and Cognitive Distances Shape Firms’ Interactions with Universities and Public Research Institutes? By Broström, Anders; McKelvey, Maureen
  8. The Global-Local Interplay of MNE and Non-MNE Firms By Johansson, Börje; Lööf, Hans
  9. A spatial multilevel analysis of Italian SMEs Productivity By Giorgio Fazio; Davide Piacentino
  10. The geography of research and development activity in the U.S. By Kristy Buzard; Gerald Carlino
  11. What Determines the Attractiveness of EU Regions to the Location of Multinational Firms in the ICT Sector? By Siedschlag, Iulia; Zhang, Xiaoheng; Smith, Donal
  12. Spatial Effects of Foreign Direct Investment in US States By Eckhardt Bode; Peter Nunnenkamp; Andreas Waldkirch
  13. Human Capital, Talent, Agglomeration and Regional Growth By Karlsson, Charlie; Johansson, Börje; Stough, Roger R.
  14. Intracompany Governance and Innovation By Sharon Belenzon; Tomer Berkovitz; Patrick Bolton
  15. ICT as an Enabler for Innovation Adoption By Verkerk, M.; Pijl, G. van der; Asperen, E. van
  16. International outsourcing and labour demand: Evidence from Finnish firm-level data By Böckerman, Petri; Riihimäki, Elisa
  17. Factors influencing the Internationalisation of Firms: Micro Foundations of Macro Determinants By Pitelis, Christos; Argitis, George
  18. Corporate Equality and Equity Prices: Doing Well While Doing Good? By Shihe Fu; Liwei Shan
  19. Macroeconomic Factors and Swedish Small and Medium-Sized Manufacturing Firm Failure By Salman, A. Khalik; von Friedrichs, Yvonne; Shukur, Ghazi
  20. Co-operative Stakeholders. Who Counts in Co-operatives, and How? By Caroline Gijselinckx

  1. By: Baltzopoulos, Apostolos (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Past research on the effects of agglomeration externalities on regional economic development is inconclusive and has focused mainly on employment growth and innovative output. This paper considers the link between agglomeration externalities and entrepreneurship. It does so by looking at the importance of Marshallian specialization and Jacobian diversity externalities for regional entrepreneurial output implementing an individual level data set that allows considering not only the effect on total number of start-ups but also on the propensity of the entrepreneur to start his new venture in an industry he has previous experience in. The results suggest that while Marshallian externalities have a positive, Jacobian externalities have a negative effect on regional entrepreneurial output. However, Jacobian externalities increase the probability that an entrepreneur will start a firm in an industry he has relevant experience in, especially in the case of knowledge intensive industries.
    Keywords: Entrepreneurship; externalities; spatial agglomeration
    JEL: O12 O18 R11 R30
    Date: 2009–08–26
  2. By: Douhan, Robin (Research Institute of Industrial Economics (IFN)); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: What explains the world-wide trend of pro-entrepreneurial policies in the last few decades? We study entrepreneurial policy in a lobbying model taking into account the con.ict of interest between entrepreneurs and incumbents. It is shown that international market integration leads to more pro-entrepreneurial policies. It becomes more difficult to protect the profits of incumbent firms from entrepreneurial entry and pro-entrepreneurial policies make foreign entrepreneurs less aggressive. Making use of the Doing Business database, we find, consistent with our theory, evidence that international openness reduces barriers to entry for new entrepreneurs and that the effect is stronger in countries with more rent-seeking governments.
    Keywords: Entrepreneurship; Regulation; Innovation; Market Integration; Lobbying
    JEL: D73 F15 L26 L51 O31
    Date: 2009–08–24
  3. By: Funke, Michael (BOFIT); Yu, Hao (BOFIT)
    Abstract: In this paper we analyse the impact of R&D on total factor productivity across Chinese provinces. We introduce innovations explicitly into a production function and evaluate their contribution to economic growth in 1993 - 2006. The empirical results highlight the importance and the interaction between local and external research. The evidence indicates that growth in China is not explained simply by factor input accumulation.
    Keywords: China; R&D; R&D Spillovers; patents; regional economic growth; semiparametric estimators
    JEL: C14 O47 R11 R12
    Date: 2009–08–26
  4. By: Kottaridi, Constantina; Papanastassiou, Marina; Pitelis, Christos
    Abstract: We explore the determinants of MNE subsidiaries decisions to set-up own R&D laboratories drawing on evidence from UK regions. In this context, we also test for the interaction between firm's internal and external environments. We also integrate extant IB and strategic management literatures and incorporate recent debates in New Economic Geography (NEG) in specifying the 'external environment'. We find support for the role of firm's 'productive opportunity' and predictions of the NEG on the basis of an analysis of primary data. We discuss implications for managerial practice and government regional policies.
    Keywords: MNE subsidiaries, R&D laboratory, internal and external environment, productive opportunity
    Date: 2009
  5. By: Baltzopoulos, Apostolos (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: The present study carries out a mutli-level analysis of entrepeneurship by considering the choice of the individual to leave his job position to become self-employed. A comprehensive data-set matching the individual to his place of work allows controlling for the characteristics of both the firm and the region he worked in before starting his own firm. The results suggest that small firms spawn entrepreneurs more frequently and individuals working in larger regions that are characterized by larger local markets, higher accumulation of knowledge resources and higher population density are more likely to transcend into entrepreneurship. I also find evidence that people are more likely to select the path of self-employment in the face of weak local competition.
    Keywords: Entrepreneurship; self-employment; externalities
    JEL: D01 O12 O18 R10
    Date: 2009–08–26
  6. By: Martinsson, Gustav (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: During the mid and late 1990s young, high-tech firms in the U.S. experienced a supply shift in both internal and external equity fueling a finance driven boom in corporate R&D. I estimate dynamic R&D regression models for high-tech firms, separately for the U.K. and Continental Europe, and find significant cash flow effects for newly listed firms in both samples, but only the new, high-tech firms in the U.K. experienced a supply shift in external equity as well. The findings of this paper suggest a channel through which market based financial systems outperform the bank based economies of Continental Europe.
    Keywords: Financing constraints; R&D; Stock Issues; Econometrics; Financial markets; international economics
    JEL: G32 O32
    Date: 2009–08–26
  7. By: Broström, Anders (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); McKelvey, Maureen (RIDE and Institute of Innovation and Entrepreneurship)
    Abstract: This paper examines how the institutional set-up of public research organisations (PROs) affects how firms are able to utilise direct interaction with publicly employed researchers. We argue that the role that PRO interaction has to play in the firm’s innovation processes depend on the organisational and cognitive distances between the firm and the PRO. In particular, this paper empirically explores how Swedish engineering firms assess the value of R&D partnerships with universities and research institutes. Our theoretical discussion of organizational distance suggests that managers should perceive institute contacts to be more strongly associated with short-term R&D projects than university contacts. This hypothesis cannot be verified. Following from our discussion of cognitive distance, we find that firms with advanced R&D capabilities obtain differential benefits. Their interaction with universities provides impulses for innovation and offers opportunities to learn to a greater extent than contacts with public research institutes. However, firms with less advanced R&D capabilities perceive no significant differences between university and institute interaction. Thus, both organizational and cognitive distance affect firms’ interactions with PROs, and our results have implications for the current push in Europe to reform universities and institutes.
    Keywords: public research organisations; organisation of public research; universities; institutes; R&D interaction
    JEL: M21 O31 O32
    Date: 2009–08–26
  8. By: Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: During a sequence of decades we can observe a co-evolution of globalization through network formation of multinational (MNE) firms and concentration in specific places due to agglomerative forces. First, innovation ideas arrive at a faster speed to firms with past experience of innovation activities and with established export market contacts. Second, innovativeness is strongly dependent on corporate and ownership structure. Third, the returns to innovation efforts are positively influenced by firms’ capability to exploit extended markets. All these phenomena can be theoretically explained by MNE’s capacity to coordinate global supply chains and orchestrate localized R&D activities and knowledge flows. The paper illuminates how attributes of MNEs and non-MNEs differ, and how these differences affect the productivity and export intensity. It also shows how agglomeration economies affect MNEs and non-MNEs.
    Keywords: globalization; agglomeration; corporate ownership structure; innovation; exports; productivity
    JEL: C16 F14 L25 O33 R12 R30
    Date: 2009–08–26
  9. By: Giorgio Fazio; Davide Piacentino
    Abstract: In this paper, we adapt multilevel analysis methods to investigate the spatial variability of SMEs productivity across the Italian territory, and account for differences in the socio-economic context. Our results suggest that to properly capture the variability of the data, it is important to allow for both spatial mean and slope effects. Social decay has the expected negative impact. However, while this effect is larger on firms with smaller capital intensity, firms with higher capital intensity seem to be less affected by geography. Greater territorial heterogeneity emerges among those firms with lower capital to labour ratios.
    Keywords: Firm heterogeneity, Spatial variability, Socio-economic Context, Multilevel Analysis
    JEL: C31 R11 R12 R30
    Date: 2009–06
  10. By: Kristy Buzard; Gerald Carlino
    Abstract: This study details the location patterns of R&D labs in the U.S., but it differs from past studies in a number of ways. First, rather than looking at the geographic concentration of manufacturing firms (e.g., Ellison and Glaeser, 1997; Rosenthal and Strange, 2001; and Duranton and Overman, 2005), the authors consider the spatial concentration of private R&D activity. Second, rather than focusing on the concentration of employment in a given industry, the authors look at the clustering of individual R&D labs by industry. Third, following Duranton and Overman (2005), the authors look for geographic clusters of labs that represent statistically significant departures from spatial randomness using simulation techniques. The authors find that R&D activity for most industries tends to be concentrated in the Northeast corridor, around the Great Lakes, in California's Bay Area, and in southern California. They argue that the high spatial concentration of R&D activity facilitates the exchange of ideas among firms and aids in the creation of new goods and new ways of producing existing goods. They run a regression of an Ellison and Glaeser (1997) style index measuring the spatial concentration of R&D labs on geographic proxies for knowledge spillovers and other characteristics and find evidence that localized knowledge spillovers are important for innovative activity.
    Keywords: Research and development ; Geography
    Date: 2009
  11. By: Siedschlag, Iulia (ESRI); Zhang, Xiaoheng (ESRI); Smith, Donal (ESRI)
    Abstract: We examine the attractiveness of European Union regions for location of multinationals in the Information and Communication Technologies (ICT) sector. Using data on 8,543 foreign subsidiaries established in 229 regions of the European Union over the period 1998-2008 we find that on average, the location probability increases with regional demand, agglomeration economies, technological development, flexibility of labour markets, and information technology infrastructure. The determinants of the location choice of ICT multinationals are different for regions in Western Europe and Central and Eastern Europe. While in Western Europe, regions with higher GDP per capita are preferred for both ICT multinationals in manufacturing and service sectors, in Central and Eastern Europe, regions with lower GDP per capita attract the bulk of ICT multinationals in the service sector. Unemployment rates appear negatively correlated with the probability of location in the whole European Union and Western Europe, while they increase attractiveness for regions in Central and Eastern Europe. Some determinants are also found to have heterogeneous effects on multinationals from different countries. In particular, US multinationals are not sensitive to labour costs while EU multinationals respond to this factor negatively.
    Keywords: Foreign direct investment; Information and Communication Technologies; Location choice; Conditional logit; Nested logit; European Union.
    Date: 2009
  12. By: Eckhardt Bode; Peter Nunnenkamp; Andreas Waldkirch
    Abstract: Abstract: This paper estimates the aggregate productivity effects of Marshallian externalities generated by foreign direct investments (FDI) in the US. In contrast to earlier work, this paper puts special emphasis on controlling for Marshallian externalities and other intra- and inter-regional spillovers generated by domestic firms. The productivity effects of these externalities may, if not accounted for appropriately, be falsely attributed to FDI. This paper also deals with the potential endogeneity of FDI and the presence of spatial lags by employing a system generalized method of moments (GMM) estimator. We use a regional production function framework that models Marshallian externalities and other intra- and inter-regional spillovers explicitly as determinants of total factor productivity, and tests several empirical specifications of this model, using data for US states from 1977—2003. The results indicate that FDI does, in fact, generate positive externalities, while those from domestic firms are negative
    Keywords: Foreign Direct Investment, US States, Spatial Econometrics, Marshallian Externalities
    JEL: C31 F21 F23
    Date: 2009–07
  13. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Stough, Roger R. (School of Public Policy, George Mason University)
    Abstract: This paper is an introductory overview highlighting some of the current knowledge as regards three critical questions related to the emerging knowledge economy: i) Why does human capital and talent tend to agglomerate in large urban regions?, ii) How does this agglomeration affect the location of different types of economic activities?, and iii) How does this agglomeration affect regional growth? There are different underlying agglomerative forces creating spatially concentrated increasing returns to scale. Also, cities become centres of various amenities due to general increases in real incomes offering people spare time activities. One major reason for the agglomeration of production in urban regions and metro¬politan areas today is the existence of various positive externalities, providing good settings for industries and firms with knowledge-intensive and knowledge-creation activities, specialised business service firms and headquarters of multinational firms. There are strong tentative empirical evidences that the agglomeration of human capital contributes to regional development and growth. However, there is uncertainty concerning the size of the human capital externalities.
    Keywords: Human Capital Externalities; Talent; Knowledge Creation; Knowledge Spillover; Agglomeration; Urban Region; Regional Growth
    JEL: D62 D83 J24 R12 R23
    Date: 2009–08–26
  14. By: Sharon Belenzon; Tomer Berkovitz; Patrick Bolton
    Abstract: This paper examines the relation between ownership, corporate form, and innovation for a cross-section of private and publicly traded innovating firms in the US and 15 European countries. A striking novel observation emerges from our analysis: while most innovating firms in the US are publicly traded conglomerates, a substantial fraction of innovation is concentrated in private firms and in business groups in continental European countries. We find virtually no variation across US industries in the corporate form of innovating firms, but a substantial variation across industries in continental European countries, where business groups tend to be concentrated in industries with a slower and more fundamental innovation cycle and where intellectual protection of innovators seems to be of paramount importance. Our findings suggest that innovative companies choose the corporate form most conducive to R&D, as predicted by the Coasian view of how firms form. This is especially true in Europe, where there are fewer regulatory hurdles to the formation of business groups and hybrid corporate forms. It is less the case in the US, where conglomerates are generally favored.
    JEL: O16 O31 O32
    Date: 2009–08
  15. By: Verkerk, M.; Pijl, G. van der; Asperen, E. van (Erasmus Econometric Institute)
    Abstract: In this paper we investigate how two online services (a portal and a digital library) may influence the adoption of an innovation. It is known from prior surveys that the installation services branch of the Dutch building industry has a relatively slow adoption rate for innovations. We examine if these two online services can influence the attitude towards the adoption of innovations. From the academic literature we have derived a list of factors that influence the attitude towards adoption by individuals. We limited this project to a number of factors that are commonly referred to as technological factors. Using an online digital library and a custom-built portal, we conducted a field experiment with a post-test only control group design for one particular innovative product (a gas-analysis device); the test was performed using a survey. Our main finding is that the portal has a significant and positive effect towards the adoption of the innovation by an individual. We did not find a significant impact for the use of the digital library. On the basis of this experiment, we propose that online services that offer a high degree of interaction amongst their users are more likely to induce an increase in the willingness of an individual to adopt an innovation.
    Keywords: innovation;adoption;portal;digital library;field experiment.
    Date: 2009–07–30
  16. By: Böckerman, Petri; Riihimäki, Elisa
    Abstract: We examine the employment effects of international outsourcing by using firm-level data from the Finnish manufacturing sector. A major advantage of our data is that outsourcing is defined based on firms’ actual use of intermediate inputs from foreign trade statistics. The estimates show that intensive outsourcing (more than two times the 2-digit industry median) does not reduce employment nor have an effect on the share of low-skilled workers.
    Keywords: International outsourcing; offshoring; labour demand; propensity score matching
    JEL: F16 F23
    Date: 2009–08–21
  17. By: Pitelis, Christos; Argitis, George
    Abstract: We draw on insights from the theory of the multinational enterprise (MNE) to explain outward investment and (thus) internationalisation. We claim that micro insights from the work of Stephen Hymer, Edith Penrose and other extant theories of the MNE can serve as micro foundations of some macro determinants of internationalisation. The focus on macro determinants pursues and develops an earlier critique of the theory of the MNE by Penrose; that it fails to distinguish between intra-national and inter-national expansion of firms. We propose demand-side national business cycle considerations as a Penrose-inspired answer to the Penrosean critique. Our evidence derives from USA and UK data, supports insights from Hymer, Vernon, Penrose and our response to the Penrosean challenge.
    Keywords: Hymer, Penrose, Business Cycle, Outward Investment
    Date: 2009
  18. By: Shihe Fu; Liwei Shan
    Abstract: Two competing hypotheses, value enhancing and value discounting, state that implementing socially responsible corporate policies can have positive or negative effects on firm value. This paper tests how a specific type of social responsibility–corporate equality–affects firm value. Corporate equality is measured by the corporate equality index (CEI). This index quantifies how companies treat their gay, lesbian, bisexual, and transgender employees, consumers, and investors. Using a sample of CEI-rated, publicly traded firms in the U.S., we find that, between 2002 and 2006, firms with a higher degree of corporate equality have higher stock returns and higher market valuation (Q). We provide suggestive, causal evidence that corporate equality enhances firm value through better performance in product markets and labor markets: Firms with a higher degree of corporate equality also tend to have larger sales, higher profit margins, higher employee productivity, and attract more employees. These results are robust to the inclusion of unobserved firm-heterogeneities. Overall, our results support the value-enhancing effects of corporate social responsibility.
    Keywords: Corporate equality; social responsibility; socially responsible investment; stock returns; performance.
    JEL: G11 G12 J70 M14
    Date: 2009–09–08
  19. By: Salman, A. Khalik (CAFO, Växjö University); von Friedrichs, Yvonne (CAFO, Växjö University); Shukur, Ghazi (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper employs a time series cointegration approach to evaluate the relationship between manufacturing firm failure and macroeconomic factors for the Swedish manufacturing sector in the period 1986 – 2006. It uses quarterly data for this period. We found that in long run a firms’ failure is negatively related to the level of industrial activity, money supply, GNP and economic openness rate, and positively related to the real wage. Time series Error Correction Model (ECM) estimates suggest that macroeconomic risk factors impinge on firm failures on the same direction in both the short run and the long run and that adjustment to stabilise the relationship is quite slow.
    Keywords: firm failure; macroeconomic factors; cointegration analysis; diagnostic tests
    JEL: D01 D02
    Date: 2009–08–26
  20. By: Caroline Gijselinckx (HIVA, Catholic University of Leuven)
    Abstract: Who counts in co-operatives, and how? In this paper empirical results are presented from recent quantitative and qualitative studies on Belgian co-operatives in which questions about who counts in co-operatives and how were treated (Develtere, Meireman & Raymaekers, 2005; Dujardin, Mertens & Van Opstal, 2008; Van Opstal, Gijselinckx & Wyns, 2008; Van Opstal & Gijselinckx, 2008). The exploratory empirical evidence is presented after a brief overview of recent insights in stakeholder theory, inspiring the way co-operatives’ stakeholders can be conceived. Although in stakeholder theory multiple types of stakeholders are distinguished, the evidence presented leads us to the conclusion that a continuum between weak and strong models of multi-stakeholdership can be observed in Belgian co-operatives, with most of the cooperatives studied situated in the classical single-member model and weaker models of multistakeholdership. We look for explanations for the emerging pattern and try to formulate ways to overcome hindrances for the development of multi-stakeholder co-operative entrepreneurship, especially in the provision of quasi public goods and services, a gingerly growing field in the Belgian co-operative sector.
    Keywords: co-operatives, stakeholder theory, multi-stakeholdership, member involvement, member participation, member advantages, corporate social responsibility
    JEL: G39 J54 M14 P13
    Date: 2009–08

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