nep-sbm New Economics Papers
on Small Business Management
Issue of 2010‒02‒13
twelve papers chosen by
Joao Carlos Correia Leitao
Polytechnic Institute of Portalegre and Technical University of Lisbon

  1. Economic Adversity and Entrepreneurship-led Growth: Lessons from the Indian Software Sector By Athreye, Suma
  2. Geographical distance of innovation collaborations By Jeroen de Jong; Mark Freel
  3. Public Interventions Supporting Innovation in Small and Medium-Size Firms. Successes or Failures? A Probit Analysis By Serena Novero
  4. Research Networks and Inventors’ Mobility as Drivers of Innovation: Evidence from Europe By Ernest Miguelez; Rosina Moreno
  5. Selling the ivory tower and regional development: Technology transfer offices as mediators of university-industry linkages By Reiner, Christian
  6. Importance of Technological Innovation for SME Growth: Evidence from India By Bala Subrahmanya, M. H.; Mathirajan, M.; Krishnaswamy, K. N.
  7. The Role of Personal Relationships for Doing Business in the GPRD, China – Evidence from Hong Kong Electronics SMEs By Frank Bickenbach; Wan-Hsin LIU
  8. Ownership and High-Growth Firms By Bjuggren, Carl Magnus; Daunfeldt, Sven-Olov; Johansson, Dan
  9. Financial Innovation and Endogenous Growth By Stelios Michalopoulos; Luc Lueven; Ross Levine
  10. Turbulence underneath the big calm? Exploring the micro-evidence behind the flat trend of manufacturing productivity in Italy By Giovanni Dosi; Marco Grazzi; Chiara Tomasi; Alessandro Zeli
  11. Venture capital and the financial crisis: an empirical study across industries and countries By Block, Joern; Sandner, Philipp; De Vries, Geertjan
  12. Rain, Rain, Go Away? The Investment Climate, State Business Relations and Firm Performance in India By Vinish, Kathuria; Seethamma Natarajan, Rajesh Raj; Sen, Kunal

  1. By: Athreye, Suma
    Abstract: It is commonly believed that the business environment in developing countries does not allow productive technology-based entrepreneurship to flourish. In this paper, we draw on the experience of Indian software firms where entrepreneurial growth has belied these predictions. This paper argues that the business models chosen by Indian firms were those that best aligned the country’s abundant labour resources and advantages to global demand. Many potentially higher value added opportunities struggled to attain success, but the qualitative value of experimental failures and the capability gaps they exposed was invaluable for collective managerial learning in the industry. Second, the paper also shows that the presence of growth opportunities and the success of firms stimulated institutional evolution to promote entrepreneurial growth. Last we show that the distinctive aggregate contribution of entrepreneurial firms was that they outperformed business houses and multinational subsidiaries in their more productive use of available capital resources whilst achieving similar levels of growth in output and employment. This paper draws upon an earlier shorter paper co-authored with Mike Hobday and titled 'Overcoming Development Adversity: How Entrepreneurs Led Software Development in India'.
    Keywords: Technology entrepreneurship, institutions and economic development, Indian software, intellectual property rights
    Date: 2010
  2. By: Jeroen de Jong; Mark Freel
    Abstract: This paper explores the geographical distance of innovation collaborations in high tech small firms. We test if absorptive capacity is a key determinant. Drawing on survey data from a sample of 316 Dutch high-tech small firms, engaging in 1.245 collaborations, we find most partners to be ‘local’. However, controlling for a variety of potential influences, higher R&D expenditure is positively related to collaboration with more distant organisations.  
    Date: 2010–02–01
  3. By: Serena Novero (Ceris - Institute for Economic Research on Firms and Growth, Moncalieri (Turin), Italy)
    Abstract: The aim of this work is to investigate the probability of success or failure of public interventions, made to support the development of some Italian firms. The great number of small and medium-size enterprises, placed in the Canavese area, north of Turin, Italy, has suffered, in the nineties, of a gap in technological innovation in their production. The Consortium for the Canavese Technological District (CCTD), a public local association established in 1993 specifically to support the firms of the area, has supplied them with some technological, innovative services, sustaining their growth. More exactly, some research centres, named Centres of Competence, were created, with the pre-existing structures of the Polytechnic of Turin and of the firm RTM (placed in Vico Canavese, Province of Turin): their targets were to supply innovative services to the local firms and to place technical machineries at the disposal of the local units, to support their innovation and competitiveness. The present research analyzes a central point: which has been the impact of these services? Which is the probability that a public o private intervention to innovate has success and brings economic growth to the involved firms? This objective is achieved with a Probit Model, built on a panel of 103 firms, that covers a 6-year range (from 1999 to 2004) and contains their balance-sheets data and the technical information regarding their collaborations with the Centres; the results highlight the role of a solid patrimonial stability, of the choice of the right innovations to apply to the production processes as well as the importance of a high previous technological status of the involved enterprises.
    Keywords: Innovation probability, Public interventions, Firms growth, Qualitative choice models
    JEL: C35 D92 H71 O31
    Date: 2008–12
  4. By: Ernest Miguelez (Faculty of Economics, University of Barcelona); Rosina Moreno (Faculty of Economics, University of Barcelona)
    Abstract: TWe investigate the importance of the labour mobility of inventors, as well as the scale, extent and density of their collaborative research networks, for regional innovation outcomes. To do so, we apply a knowledge production function framework at the regional level and include inventors’ networks and their labour mobility as regressors. Our empirical approach takes full account of spatial interactions by estimating a spatial lag model together, where necessary, with a spatial error model. In addition, standard errors are calculated using spatial heteroskedasticity and autocorrelation consistent estimators to ensure their robustness in the presence of spatial error autocorrelation and heteroskedasticity of unknown form. Our results point to the existence of a robust positive correlation between intra-regional labour mobility and regional innovation, whilst the relationship with networks is less clear. However, networking across regions positively correlates with a region’s innovation intensity.
    Keywords: Speed Limits; inventors’ mobility, networks of co-inventors, knowledge production function, spatial econometrics, European regions
    Date: 2009–11
  5. By: Reiner, Christian (University of Salzburg)
    Abstract: This article focuses on the role of Technology Transfer Offices (TTOs) in regional development in three Austrian regions that represent different types of regional economies. TTOs can be defined as “bridging institutions” between academia and business. The value added by this approach emerges due to empirical results demonstrating that the variety of TTO functions and their respective spatial-profile of activities depend heavily on the regional context. Regional economic structure and regional policy systematically shape the spatial profile of TTO activities. The distinction between active and passive TTOs emerged as an important one regarding their potential regional economic development impact. While passive TTOs merely facilitate already existing contacts of the academic staff, active TTOs generate new university-industry linkages. These additionally created contacts are heavily biased towards the regional level. Intellectual property rights (IPR)-related TTO activities show a rather weak regional impact. This might prove problematic for policy makers that foster the patent-oriented commercialization of knowledge as a means to intensify knowledge spillovers from the universities to regional or national firms.
    Keywords: Universities; Technology transfer offices; regional innovation systems; regional policy; Austria
    JEL: I23 I28 O33 O34 R11 R58
    Date: 2010–02–01
  6. By: Bala Subrahmanya, M. H.; Mathirajan, M.; Krishnaswamy, K. N.
    Abstract: This paper probes the drivers, dimensions, achievements, and outcomes of technological innovations carried out by SMEs in the auto components, electronics, and machine tool sectors of Bangalore in India. Further, it ascertains the growth rates of innovative SMEs vis-à-vis non-innovative SMEs in terms of sales turnover, employment, and investment. Thereafter, it probes the relationship between innovation and growth of SMEs by (i) estimating a correlation between innovation sales and sales growth, (ii) calculating innovation sales for high, medium, and low growth innovative SMEs and doing a aggregate one-way ANOVA, and (iii) ascertaining the influence of innovation sales, along with investment growth and employment growth on gross value-added growth by means of multiple regression analysis. The paper brings out substantial evidence to argue that innovations of SMEs contributed to their growth.
    Keywords: Technological innovations, sales growth, auto components, electronics, machine tools, Bangalore
    Date: 2010
  7. By: Frank Bickenbach; Wan-Hsin LIU
    Abstract: This paper investigates the role of personal relationships for doing business in the Greater Pearl River Delta, China. First, it discusses the interplay of formal and informal (relationship-based) institutions from the point of view of institutional economics, with a focus on economies with weak formal contracting and property rights institutions. Second, it describes the institutional environment for doing business in China, and in the PRD in particular. Third, it uses data obtained from a survey among executives of Hong Kong electronics SMEs with business operations in the PRD to gain insights into their perceptions on the importance and the motives of using personal relationships for business in PRD in general, and on the impact of personal relationships on different strategic business decisions (on location, partner, and formal governance structures) for companies’ production as well as innovation activities. The results confirm the importance of personal relationships for doing business in the PRD, in general. There is evidence of substantial differences as to the role of personal relationships between production and innovation activities
    Keywords: personal relationships, formal and informal institutions, production, innovation, China, company survey
    JEL: L20 L63 P0
    Date: 2010–01
  8. By: Bjuggren, Carl Magnus (Ratio); Daunfeldt, Sven-Olov (Ratio); Johansson, Dan (Ratio)
    Abstract: Empirical studies demonstrate that most net job-growth originates from a small number of high-growth firms (HGFs). The purpose of this paper is to analyze whether firm ownership – private non-family, or family – matters for being classified as a HGF, using data covering all firms in Sweden during 1993-2006. We find that ownership and changes of ownership are correlated with being a HGF, and that the method of measuring growth affects the results. In line with previous research, the age and size of firms, as well as belonging to an enterprise group, are also correlated with being a HGF.
    Keywords: high-growth firms; gazelles; firm growth; firm ownership; family firms; rapid firm growth
    JEL: D24 L25 L26
    Date: 2010–02–01
  9. By: Stelios Michalopoulos; Luc Lueven; Ross Levine
    Abstract: We model technological and financial innovation as reflecting the decisions of profit maximizing agents and explore the implications for economic growth. We start with a Schumpeterian endogenous growth model where entrepreneurs earn monopoly profits by inventing better goods and financiers arise to screen entrepeneurs. A novel feature of the model is that financiers also engage in the costly, risky, and potentially profitable process of innovation: Financiers can invent more effective processes for screening entrepreneurs. Every existing screening process, however, becomes less effective as technology advances. Consequently, technological innovation and, thus, economic growth stop unless financiers continually innovate. Historical observations and empirical evidence are more consistent with this dynamic model of financial innovation and endogenous growth than with existing models of financial development and growth.
    Keywords: Invention, Economic Growth, Corporate Finance, Financial Institutions, Technological Change, Entrepreneurship.
    JEL: G0 O31 O4
    Date: 2010
  10. By: Giovanni Dosi; Marco Grazzi; Chiara Tomasi; Alessandro Zeli
    Abstract: Italy ranked last in terms of manufacturing productivity growth according to OECD estimates over the last decade with a flat, if not declining, trend. In this work we investigate the underlying firm-level dynamics of enterprises on the grounds of a database developed by the Italian Statistical Office (ISTAT) covering the period 1989-2004 and containing information on more than 100,000 firms. Over the period not only the indicators of central tendency of the distribution of labour productivities have not significantly changed, but also the whole sectoral distributions have remained relatively stable over time, with their support at least not shrinking or even possibly widening over time. This is even more surprising if one takes into consideration the 'Euro' shock that occurred during the period of investigation. On the contrary we observe that inter-decile differences in productivity have been increasing. Further, heterogeneous firms' characteristics (i.e. export activity and innovativeness) appear to have contributed to boost such intra-industry differences. Given such wide heterogeneities we resort to quantile regressions to identify the impact of a set of regressors at different levels of the conditional distribution of labor productivity. One phenomenon that we observe is what we call a tendency toward 'neo-dualism' involving the co-existence of a small group of dynamic firms with a bigger ensemble of much less technologically progressive ones.
    Keywords: productivity; firm dynamics; market selection; trade; euro shock; quantile regressions
    JEL: C14 D20 F10 L10 L16 L25
    Date: 2010–01–28
  11. By: Block, Joern; Sandner, Philipp; De Vries, Geertjan
    Abstract: This study analyzes the effect of the 2008 financial crisis on the venture capital market. We show that the crisis is associated with a decrease in the number of initial funding rounds as well as with a decrease in the amount of funds raised in later funding rounds. The effects of the crisis differed across industries and were stronger in the US than in other countries. We suggest that the crisis has led to a severe ‘funding gap’ in the financing of technological development and innovation
    Keywords: Venture capital; financial crisis; innovation finance; entrepreneurial finance; recession
    JEL: M13 G24 O3
    Date: 2010–01–27
  12. By: Vinish, Kathuria; Seethamma Natarajan, Rajesh Raj; Sen, Kunal
    Abstract: It is commonly argued that a better investment climate reform – that is, lower distortions in the institutional, policy and regulatory environment in which firms operate - lead to discernible improvements in firm performance. In this paper, we argue that effective state business relations condition better investment climate outcomes and that the deeper institutional determinants of firm performance are the former. We examine the effect of effective state-business relations of total factor productivity (TFP) for formal sector firms in India for the years 2000-01 and 2004-05 and find support for this hypothesis.
    Keywords: State business relations; total factor productivity; India
    JEL: D24
    Date: 2010–01–23

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