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on Small Business Management |
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Issue of 2010‒01‒16
sixteen papers chosen by Joao Carlos Correia Leitao Polytechnic Institute of Portalegre and Technical University of Lisbon |
| By: | Fried, Harold O.; Tauer, Loren W. |
| Abstract: | A measure of entrepreneur success is important to identify current and future successful ventures, to further our understanding of the entrepreneurial process and to guide public policies to improve the success rate of start-ups. In this paper we propose an index of entrepreneur success that accommodates multiple inputs and outputs, that is predicated on inputs and that mitigates the impact of outliers. We relate the index to characteristics of the entrepreneur and the venture: age, experience, gender, race, competitive advantage, education, and birthplace. The data are from the Kauffman Firm Survey. The index is calculated for 2,863 firms in 2006. |
| Keywords: | entrepreneur, Kauffman Survey, Financial Economics, Productivity Analysis, |
| Date: | 2009–10–16 |
| URL: | http://d.repec.org/n?u=RePEc:ags:cudawp:55933&r=sbm |
| By: | Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Johansson, Dan (Ratio) |
| Abstract: | This essay argues that the economic contribution of certain firms – be they small, young or rapidly growing – has to be understood in a broader context of creative destruction. Growth of some firms requires contraction and exit of some other firms to free up resources that can be reallocated to expanding firms. Entry and expansion are flip sides to exit and contraction and the process through which the factors of production are put into different use defines structural transformation. We analyze institutions and policies conducive to structural transformation, in particular the expansion of high-growth firms (HGFs), since they have empirically been shown to contribute disproportionately to economic development. <p> Firm growth is viewed as resulting from the continuous discovery and use of productive knowledge. Rapid firm growth requires a set of economic actors with complementary competencies that work together to identify and commercialize novel business ideas. The institutional framework determines the incentives for these individuals to acquire and utilize knowledge. We identify a number of institutions that encourage the creation of HGFs and promote structural transformation. In particular, our analysis points to the key roles played by tax structures, labor market regulation, and the contestability of service markets. Even in advanced economies, there is a large untapped economic potential which can be unleashed by institutional changes, such as the opening up of closed markets for entrepreneurial competition. However, there is no “quick-fix” that will boost the frequency of HGFs and structural transformation. Our analysis suggests that policymakers need to adopt a broad approach and implement a wide array of complementary institutional reforms to increase the prevalence of HGFs and to facilitate structural transformation. |
| Keywords: | Entrepreneurship; Firm growth; Gazelles; High-growth firms; High-impact firms; Institutions; Job creation; Rapidly growing firms |
| JEL: | D21 L25 M13 O10 O40 |
| Date: | 2010–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0820&r=sbm |
| By: | Christian Helmers; Mark Rogers |
| Abstract: | This paper provides an overview of a new database that uses intellectual property data to track the innovative activity of firms in the UK. The paper looks at the extent and nature of patenting activity, focusing on micro firms and SMEs. Over the period 2000 to 2007, SME patenting has increased whereas large firm patenting has fallen and micro firm patenting has been roughly con- stant. Most micro and SMEs patent while relatively young (aged ten or less) and this tendency is becoming more pronounced over time. The paper provides a descriptive analysis on micro firms and SMEs that become high growth firms (defined as having greater than 20 percent growth per annum). Overall, 28.0 percent of young micro and SMEs achieve high growth (over 2002 to 2007). In comparison, 29.4 percent of young micro or SMEs that patent achieve high growth. This difference is much greater for firms in the high-tech industries. Moreover, the analysis shows that due to the skewed nature of the firm-level growth distribution, standard conditional mean estimators may fail to uncover important differences in the association between patenting and firm growth across the conditional growth distribution. |
| Keywords: | Firm growth, patents |
| JEL: | L25 O12 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd09-095&r=sbm |
| By: | Makó, Csaba; Csizmadia, Péter; Illéssy, Miklós; Iwasaki, Ichiro; Szanyi, Miklós |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:hit:ceirps:2009-01&r=sbm |
| By: | Kumbhakar, Subal C. (Binghamton University, New York); Ortega-Argilés, Raquel (European Commission); Potters, Lesley (Utrecht School of Economics); Vivarelli, Marco (Università Cattolica del Sacro Cuore); Voigt, Peter (European Commission) |
| Abstract: | The main objective of this study is to investigate the impact of corporate R&D activities on firms' performance, measured by labour productivity. To this end, the stochastic frontier technique is applied, basing the analysis on a unique unbalanced longitudinal dataset consisting of 532 top European R&D investors over the period 2000–2005. R&D stocks are considered as pivotal input in order to control for their particular contribution to firm-level efficiency. Conceptually, the study quantifies the technical inefficiency of a given company and tests empirically whether R&D activities could explain the distance from the efficient boundary of the production possibility set, i.e. the production frontier. From a policy perspective, the results of this study suggest that – if the aim is to leverage companies' productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. By contrast, supporting corporate R&D in the low-tech sector turns out to have a minor effect. Instead, encouraging investment in fixed assets appears vital for the productivity of low-tech industries. However, with regard to firms' technical efficiency, R&D matters for all industries (unlike capital intensity). Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an 'erga omnes' approach across all sectors appears inappropriate. |
| Keywords: | corporate R&D, productivity, technical efficiency, stochastic frontier analysis |
| JEL: | L2 O3 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4657&r=sbm |
| By: | Raquel Ortega-Argilés (JRC-IPTS); Lesley Potters (JRC-IPTS); Peter Voigt (JRC-IPTS) |
| Abstract: | The importance of SMEs in Europe’s innovation process can be seen in both the academic and the political arena. Adopted in June 2008, the ‘Small Business Act’ for Europe reflects the Commission’s political will to recognise the central role of SMEs in the EU economy and was the first to put in place a comprehensive SME policy framework for the EU and its Member States. One of its main aims is to promote growth among SMEs by helping them to tackle problems that hamper their development. This kind of policy calls for a more in-depth look into the nature of the SME population in Europe. Several attempts have been made in recent years to draw taxonomies of firms, but mostly they do not control for size effects within the defined groups of firms. The purpose of this paper is to typify different groups of R&D-intensive SMEs distinguished according to their inputs into the innovation process. In particular, we draw attention to SMEs that contribute the most to the industrial R&D investment in the EU. To do so, we run a cluster analysis on a sample of top European R&D SME investors based on a unique dataset made up of the different waves of the European R&D Investment Scoreboard. The results show that several clusters of R&D-intensive SMEs can be defined by certain characteristics, but that the diversity between clusters calls for a more careful understanding before developing measures to support European R&D-intensive SMEs. For companies labelled as ‘corporate laboratories’ according to the cluster analysis, it would be legitimate to question support for R&D, as these firms do not seem to have significant problems in finding investors that believe in their business model. On the other hand, e.g. the ‘Gazelles’ do in fact grow, but struggle with the high capital investment needed to become and remain large. In this case, it seems it would be more effective to focus on the weaknesses (physical expansion) of these firms rather than supporting their strengths (knowledge, R&D). |
| Keywords: | SMEs; innovation inputs; cluster analysis |
| JEL: | O33 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:wpaper:200915&r=sbm |
| By: | André van Stel; David Storey; Chantal Hartog |
| Abstract: | This paper examines variations in entrepreneurship across twenty developed countries, using three measures of entrepreneurship which we broadly describe as prestart, early-stage and established enterprises. It then links these measures to the economic institutional framework, holding constant a range of other factors. Two groups of conclusions emerge. The first is that the factors that influence pre-start, early-stage and established enterprises differ often quite sharply. Second, our results broadly confirm earlier work suggesting that social security entitlements, taxes, and employment protection legislation are negatively associated with (different forms of) entrepreneurial activity. However, our novel finding is that countries with a "better" rule of law have lower entrepreneurship. We explain this apparently counter-intuitive finding by arguing that in developed economies the benefits of the rule of law accrue primarily to large enterprises. |
| Date: | 2010–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:eim:papers:h201003&r=sbm |
| By: | Chia-Hui Huang; Chih-Hai Yang |
| Abstract: | This paper investigates the effect of tax incentives on R&D activities in Taiwanese manufacturing firms. Specifically, we assess the potential R&D-enhancing effect on recipients of R&D tax credits compared with their non-recipient counterparts. Moreover, the potential difference in the R&D-enhancing effect between high-tech and non-high-tech firms is also examined. Utilizing a firm-level panel dataset during 2001 and 2005, empirical results obtained by propensity score matching show that recipients of R&D tax credits appear on average to have 93.53% higher R&D expenditures and a 14.47% higher growth rate for R&D expenditures than non-recipients with similar characteristics. The R&D-enhancing effect of R&D tax credits is not found to be particularly relevant to high-tech or non-high-tech firms. We further employ a generalized method of moment (GMM) of the panel fixed model to control for the endogeneity of R&D tax credits and firm heterogeneity in determining R&D expenditure. Various estimates based on the entire sample and high-tech-firms are quite similar and there is a significantly R&D-enhancing effect of R&D tax credits. This result suggests that the R&D preferential policy has induced more R&D expenditure by firms in Taiwan. While the existence of the R&D-enhancing effect brought on by tax incentives is intuitive, the estimates can provide insightful implications for the R&D tax policy. |
| Keywords: | R&D, Tax, Propensity Score Matching |
| JEL: | H25 H32 K34 O32 O38 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd09-102&r=sbm |
| By: | Kirti Sharda |
| Abstract: | Despite the importance of outsourcing firms and the highly competitive nature of the outsourcing industry, there has been minimal examination of outsourcing firm strategy. This paper investigates the strategic focus of 60 outsourcing firms using empirical data collected through survey and semi-structured interviews from 226 top management team respondents. Factor and cluster analysis reveal three outsourcing firm archetypes based on their strategic orientation, namely, superachievers, quality advocates and defenders. The dominance of these archetypes also varies across business activities offered by sample firms. By delineating dimensions underlying outsourcing form strategy and by identifying archetypes of strategic orientation, the paper provides an understanding of key differentiators of outsourcing firm performance. |
| Date: | 2009–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2009-12-03&r=sbm |
| By: | Elena Verdolini (Fondazione Eni Enrico Mattei and Catholic University of Milan); Marzio Galeotti (University of Milan and IEFE-Bocconi) |
| Abstract: | This paper contributes to the induced innovation literature by extending the analysis of supply and demand determinants of innovation in energy-efficient technologies to account for international knowledge flows and spillovers. In the first part of the paper we select a sample of 38 innovating countries and we study how knowledge related to energy-efficient technologies flows across geographical and technological space. We demonstrate that higher geographical and technological distances are associated with a lower probability of knowledge flow. In the second part of the paper, we use our previous estimates to construct stocks of internal and external knowledge for a panel of 17 countries and present an econometric analysis of the supply and demand determinants of innovation accounting for international knowledge spillovers. Our results confirm the role of demand-pull effects, as proxied by energy prices, as well as that of technological opportunity, as proxied by the knowledge stocks. In particular, this paper provides evidence that spillovers between countries have a significant positive impact on further innovation in energy-efficient technologies. |
| Keywords: | Innovation, Technology Diffusion, Knowledge Spillovers, Energy-Efficient Technologies |
| JEL: | O33 Q55 C13 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2009.123&r=sbm |
| By: | Siedschlag, Iulia; Zhang, Xiaoheng; Smith, Donal |
| Abstract: | We analyse the location decisions of 8,468 foreign affiliates in the Information and Communication Technologies (ICT) sector established in 224 regions in the European Union over the period 1998-2008. Our results suggest that on average, the location probability of foreign affiliates in ICT manufacturing and services increases with market size, market potential, the presence of other foreign-owned firms in the ICT sector, human capital, income tax, and decreases with the corporation tax rate. In addition, in the case of foreign affiliates in ICT services, the innovation intensity in the ICT sector has a positive effect on the location probability. We find that relevant geographical structures for the location decision are different for multinationals with a parent firm in the European Union and the United States. |
| Keywords: | Conditional logit/European Union/Foreign direct investment/Information and Communication Technologies/Location choice/Nested logit |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp336&r=sbm |
| By: | Szabolcs Blazsek; ALvaro Escribano |
| Abstract: | During the past two decades, innovations protected by patents have played a key role in business strategies. This fact enhanced studies of the determinants of patents and the impact of patents on innovation and competitive advantage. Sustaining competitive advantages is as important as creating them. Patents help sustaining competivite advantages by increasing the production cost of competitors, by signaling a better quality of products and by serving as barriers to entry. If patents are rewards for innovation, more R&D should be reflected in more patents applications but this is not the end of the story. There is empirical evidence showing that patents through time are becoming easier to get and more valuable to the firm due to increasing damage awards from infringers. These facts question the constant and static nature of the relationship between R&D and patents. Furthermore, innovation creates important knowledge spillovers due to its imperfect appropriability. Our paper investigates these dynamic effects using U.S. patent data from 1979 to 2000 with alternative model specifications for patent counts. We introduce a general dynamic count panel data model with dynamic observable and unobservable spillovers, which encompasses previous models, is able to control for the endogeneity of R&D and therefore can be consistently estimated by maximum likelihood. Apart from allowing for firm specific fixed and random effects, we introduce a common unobserved component, or secret stock of knowledge, that affects differently the propensity to patent of each firm across sectors due to their different absorptive capacity. |
| Keywords: | Point process, Conditional intensity, Latent factor, R&D spillovers, Patents, Secret innovations |
| JEL: | C15 C31 C32 C33 C41 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we098951&r=sbm |
| By: | Castelli , Annalisa (University of Rome, Italy); Dwyer, Gerald P (Federal Reserve Bank of Atlanta, USA); Hasan, Iftekhar (Rensselaer Polytechnic Institute, USA and Bank of Finland) |
| Abstract: | We examine the connection between the number of bank relationships and firms’ performance using a unique data set on Italian small firms for which banks are a major source of financing. Our evidence indicates that return on equity and return on assets decrease as the number of bank relationships increases, the effects being stronger for small firms than for large firms. We also find that the ratio of interest expense to assets increases as the number of relationships increases. Particularly for small firms, these results are consistent with finding that suggest that having fewer bank relationships reduces the information asymmetries and agency problems and outweighs the hold-up problems. |
| Keywords: | bank relationships; small business lending; firms’ performance |
| JEL: | D21 G21 G32 |
| Date: | 2009–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2009_036&r=sbm |
| By: | Chin Hee Hahn; Chang Gyun Park |
| Abstract: | The paper analyzes whether firms that start exporting become more productive utilizing recently developed sample matching procedures to control the problems from self-selection into the export market. We use plant level panel data on Korean manufacturing sector from 1990 to 1998. We find clear and robust empirical evidence in favor of the learning-by-exporting effect; total factor productivity differentials between exporters and their domestic counterparts arises and widens during several years after export market entry. We also find that the effect is more pronounced for firms that have higher skill-intensity, higher share of exports in production, and are small in size. Overall, the evidence suggests that exporting is one important channel through which domestic firms acquire accesses to advanced knowledge and better technology. Also, the stronger learning-by-doing effect for firms with higher skill-intensity seems to support the view that gabsorptive capacityh matters to receive knowledge spillovers from exporting activity. |
| Keywords: | Learning-by-exporting, Productivity, Propensity score matching |
| JEL: | F14 O12 O19 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd09-096&r=sbm |
| By: | Arthur Grimes (Motu Economic and Public Policy Research & University of Waikato); Cleo Ren (Motu Economic and Public Policy Research); Philip Stevens (Ministry of Economic Development) |
| Abstract: | Fast internet access is widely considered to be a productivity-enhancing factor. Internet access speeds vary regionally within countries and even within cities. Despite articulate pleas for network upgrades to accelerate internet access, there is little rigorous research quantifying benefits to individual firms that arise from upgraded internet connectivity. We use a large New Zealand micro-survey of firms linked to unit record firm financial data to determine the impact that differing types of internet access have on firm productivity. Propensity score matching is used to control for factors, including the firm’s (lagged) productivity, that determine firms’ internet access choices. Having matched firms, we examine the productivity impacts that arise when a firm adopts different types (speeds) of internet connectivity. Broadband adoption is found to boost productivity but we find no productivity differences across broadband type. The results provide the first firm-level estimates internationally of the degree of productivity gains sourced from upgraded internet access. |
| Keywords: | Internet, broadband, productivity |
| JEL: | O33 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:09_15&r=sbm |
| By: | Jeroen de Jong; Willem Hulsink |
| Abstract: | Small firms may rely on a variety of network partners, and in various roles, to identify and exploit opportunities for innovation. This paper adds to the literature on innovation networking by developing a typology at the level of innovation objects, rather than at the firm or industry level. |
| Date: | 2010–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:eim:papers:h201002&r=sbm |