nep-sbm New Economics Papers
on Small Business Management
Issue of 2009‒09‒11
seven papers chosen by
Joao Carlos Correia Leitao
Polytechnic Institute of Portalegre and Technical University of Lisbon

  1. Entrepreneurial Progress: Climbing The Entrepreneurial Ladder in Europe and The US By Peter van der Zwan; Ingrid Verheul; Roy Thurik; Isabel Grilo
  2. Territorial Capital and Regional Growth: Increasing Returns in Cognitive Knowledge Use By Roberta Capello; Andrea Caragliu; Peter Nijkamp
  3. Domestic Repercussions of Different Types of FDI: Firm-level Evidence for Taiwanese Manufacturing By Wan-Hsin LIU; Peter Nunnenkamp
  4. Developing Innovative Competences in an Emerging Business System: New Private Enterprises in Hangzhou’s Software Industry By Greeven, M.J.; Xiaodong, Z.
  5. The Financing of R&D and Innovation By Bronwyn H. Hall; Josh Lerner
  6. Relative Performance and R&D Competition By Toshihiro Matsumura; Noriaki Matsushima; Susumu Cato
  7. Firm Performance during Global Economic Slowdown: A View from India By Pradhan, Jaya Prakash

  1. By: Peter van der Zwan (Erasmus University Rotterdam); Ingrid Verheul (Erasmus University Rotterdam and EIM, Zoetermeer); Roy Thurik (Erasmus University Rotterdam, EIM, Zoetermeer, Max Planck Institute of Economics, Jena, and VU University Amsterdam); Isabel Grilo (DG Enterprise, European Commission, Brussels, GREMARS, Université de Lille 3, CORE, Université de Louvain, Belgium)
    Abstract: We investigate which countries have the highest potential to achieve entrepreneurial progress. This progress is defined using an entrepreneurial ladder with five successive steps: “never thought about starting a business”, “thinking about starting a business”, “taking steps to start a business”, “running a business for less than three years”, and “running a business for more than three years”. We assess the influence of individual-level and country-level variables on progression through these stages. Data are used from the 2007 “Flash Eurobarometer Survey on Entrepreneurship”, covering 27 European countries and the United States. We find that countries display large variation in the ease with which businesses come into existence and survive. In the US many people think about setting up a business whereas Europeans are better at achieving higher levels of engagement. Particularly in Austria, France and Lithuania there appear to be low probabilities to advance in the process. Our analysis suggests that country differences can be explained by the level of economic development and risk tolerance while the administrative and financial climate play a role for some steps. The paper also provides results on the influence of individual-level demographic and obstacle perception variables.
    Keywords: entrepreneurship; determinants; nascent entrepreneurship; competitiveness; continuation ratio logit
    JEL: H10 J23 L26 M13 R12
    Date: 2009–08–05
  2. By: Roberta Capello (Politecnico di Milano, Italy); Andrea Caragliu (Politecnico di Milano, Italy, VU University Amsterdam, The Netherlands); Peter Nijkamp (VU University Amsterdam, The Netherlands)
    Abstract: Knowledge drives the growth of nations and regions in a competitive space-economy. Hence, we would expect a strong correlation between investments in R&D, knowledge and learning processes, on the one hand, and productivity increases, on the other. However, the empirical evidence shows consistent discrepancies between knowledge inputs and economic performance across geographical units. This paper addresses this intriguing issue at the regional level, by highlighting both theoretically and empirically the strategic importance played by cognitive elements as part of “territorial capital” in mediating between knowledge production and regional growth. The main proposition of the paper, subject to empirical testing, is that cognitive elements as part of territorial capital magnify the contribution of knowledge by determining the formation of increasing returns to knowledge exploitation.
    Keywords: territorial; capital; regional growth; cognitive; knowledge; rivalry; R&D
    JEL: R11 R15 R58
    Date: 2009–07–28
  3. By: Wan-Hsin LIU; Peter Nunnenkamp
    Abstract: Abstract: It is widely feared that outward FDI gradually hollows out domestic manufacturing and displaces local workers. We address this concern by drawing on exceptionally informative firm-specific data on Taiwanese multinationals in manufacturing. In particular, we assess whether repercussions at home depend on the size, location and type of outward FDI. We control for firm heterogeneity and estimate ordered probit models with the firms’ own assessment of domestic production and employment effects as dependent variables. We find that the probability of negative effects increases slightly with the size of FDI. The effects of locating in China differ from those of locating in advanced countries not only in size but also in sign. In contrast to vertical and export-platform FDI, employment effects of horizontal FDI tend to be positive. The quantitative impact is typically small, however
    Keywords: FDI location, type of FDI, domestic employment, home production, firm heterogeneity
    JEL: F23
    Date: 2009–09
  4. By: Greeven, M.J.; Xiaodong, Z. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: What kind of innovative competences are credibly developed by private entrepreneurs in China’s transition economy? On the basis of original empirical fieldwork in 45 software enterprises in Hangzhou, Zhejiang Province, we propose a working theory of innovative competence development in an emerging private sector. Combining resource-based and institutional perspectives we argue that Chinese private enterprises in Hangzhou were able to develop unique innovative competences to overcome resource constraints and manage technical - and market risks while respecting the location and sector-specific constraints. The findings suggest that private software enterprises in Hangzhou developed five innovative competences: organizational integration, financial commitment, external knowledge transformation, reputation development and strategic flexibility. The analysis further allows to propose three implications: 1) These five competences form a ‘configuration’ or coherent set of competences in this particular institutional setting; 2) Technological – and institutional regimes shape the potential range of innovative competences firms credibly develop depending on the available resources of the firm; 3) Innovative competences can be functional equivalents of institutions in the absence of well-developed, mature formal institutions.
    Keywords: private entrepreneurs;innovation;China;software industry;institutions;competences;business system
    Date: 2009–08–08
  5. By: Bronwyn H. Hall; Josh Lerner
    Abstract: Evidence on the “funding gap“ for investment innovation is surveyed. The focus is on financial market reasons for underinvestment that exist even when externality-induced underinvestment is absent. We conclude that while small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital, the evidence for high costs of R&D capital for large firms is mixed. Nevertheless, large established firms do appear to prefer internal funds for financing such investments and they manage their cash flow to ensure this. Evidence shows that there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets for VC exit are not highly developed. We conclude by suggesting areas for further research.
    JEL: G24 G32 O32 O38
    Date: 2009–09
  6. By: Toshihiro Matsumura; Noriaki Matsushima; Susumu Cato
    Abstract: This paper formulates a duopoly model in which firms care about relative profits as well as their own profits. Our purpose is to investigate the relationship between the weight of relative performance and R&D expenditure. We find a non-monotone relationship between the weight of relative performance in their objectives and their R&D levels. Both highly reciprocal (altruism) and negative reciprocal attitudes yield high levels of R&D, while the intermediate situations yield low levels of R&D.
    Date: 2009–08
  7. By: Pradhan, Jaya Prakash
    Abstract: This study has analyzed the relative growth performance of Indian firms under the current economic slowdown and explored factors helping certain Indian companies to do relatively better even in this crisis period. It has been observed that the overall growth and stability of the global economy has become extremely important for the growth performance of Indian firms. In fact, sales and profitability growth of some 450 Indian manufacturing and IT firms were significantly reversed with the condition of global market turning adverse since late 2008. It is interesting that those Indian firms were relatively young in age and more focused on global market have been better off in terms of sales and profit growth than other firms. Also large firms and those having higher advertising intensities have enjoyed higher profit growth in this period. The concern for policy markers is that Indian companies have significantly reduced their technological activities due to falling sales and profit growth under the slowdown, besides their slashing of resource allocation for advertising and labour.
    Keywords: Economic Slowdown; Firm Growth; India.
    JEL: E32 O53 L10
    Date: 2009–09–07

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