nep-sbm New Economics Papers
on Small Business Management
Issue of 2014‒08‒28
fourteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Innovation and Job Creation: A sustainable relation? By Daria Ciriaci; Pietro Moncada-Paternò-Castello; Peter Voigt
  2. R&D partnerships and innovation performance: Can there be too much of a good thing? By Hottenrott, Hanna; Lopes-Bento, Cindy
  3. Bank Financing of Start-ups – Findings from a survey By Bjuggren, Per-Olof; Elmoznino Laufer, Michel
  4. Innovation ouverte et évolution des business models dans les pôles de compétitivité : le rôle des intermédiaires dans la création variétale végétale By Isabelle Leroux; Paul Muller; Béatrice Plottu; Caroline Widehem
  5. Effiiciency in regional investments in R&D: implications for territorial growth. By Bergantino, Angela Stefania; Capozza, Claudia; De Carlo, Angela
  6. Toward a Theory of the Entrepreneurial Process By Leyden, Dennis; Link, Albert
  7. A note on firm age and the margins of exports: First evidence from Germany By Wagner, Joachim
  8. Toward an Assessment of Impacts from U.S. Technology and Innovation Policies By Bozeman, Barry; Link, Albert N.
  9. Stylized facts on productivity growth : evidence from firm-level data in Croatia By Iootty, Mariana; Correa, Paulo; Radas, Sonja; Skrinjaric, Bruno
  10. Firm Entry and Employment Dynamics in the Great Recession By Siemer, Michael
  11. Professors in the boardroom and their impact on corporate governance and firm performance By Francis, Bill B.; Hasan, Iftekhar; Wu, Qiang
  12. Defining Clusters of Related Industries By Mercedes Delgado; Michael E. Porter; Scott Stern
  13. What old stagers could teach us: Examining age complementarities in regional innovation systems By Arntz, Melanie; Gregory, Terry
  14. The Moderating Role of FDI Motives and Embeddedness on the Performance of Foreign and Domestic Firms in Emerging Markets By Tilo F. Halaszovich; Sarianna M. Lundan

  1. By: Daria Ciriaci (JRC-IPTS); Pietro Moncada-Paternò-Castello (JRC-IPTS); Peter Voigt (University of Barcelona, IEB)
    Abstract: This study examines growth patterns of innovative and non innovative firms and, in this regard, whether being an innovator determines company trajectories; i.e. whether there are systematic differences in the persistence of the jobs created by innovating vs. non-innovating firms. For this purpose, a semi-parametric quantile regression approach has been adopted examining serial correlation in employment by drawing on a unique longitudinal dataset of 3,300 Spanish firms over the years 2002-2009, obtained by matching different waves of the Spanish Encuesta sobre Innovacion en las Empresas, the Spanish innovation survey, which is administered every year by the Spanish National Statistics Institute (INE). The empirical results of the study indicate that among those firms experiencing high organic employment growth, smaller and younger innovative firms grow more, at average, than larger innovative firms. Moreover, the jobs created by innovative firms, in general, appear to be rather persistent over time whereas those created by non innovative firms do not. Among declining firms, non-innovators tend to deteriorate faster in terms of economic performance. Overall, evidence suggests that being innovative supports and stabilizes a firm's organic employment growth pattern and being smaller and younger seems to be a sufficient condition to experience high employment growth, i.e. – with regard to the latter – it is not necessary to have a comparably high R&D spending / being an R&D intensive company.
    Keywords: Serial correlation; quantile regression; Spanish firms; firm size, firms age; job creation; YICs
    JEL: L11 L25
    Date: 2013–01
  2. By: Hottenrott, Hanna; Lopes-Bento, Cindy
    Abstract: R&D collaboration facilitates pooling of complementary skills, learning from the partner as well as sharing risks and costs. Research therefore repeatedly stressed the positive relationship between collaborative R&D and innovation performance. Collaboration, however, involves transaction costs in form of coordination and monitoring efforts and requires knowledge disclosure. This study explicitly considers a firm's collaboration intensity, that is, the share of collaborative R&D projects in a firms' total R&D projects in a sample of mostly small and medium-sized firms (SMEs). We can confirm previous findings in terms of gains for innovation performance, but also show that collaboration has decreasing and even negative returns on product innovation if its intensity increases above a certain threshold. In particular, costs start outweighing benefits if a firm pursues more than about two thirds of its R&D projects in collaboration. --
    Keywords: innovation performance,product innovation,R&D partnerships,collaboration intensity,SMEs,transaction costs,selection model,endogenous switching
    JEL: O31 O32 O33 O34
    Date: 2014
  3. By: Bjuggren, Per-Olof (The Ratio institute and Jönköping School of Economics.); Elmoznino Laufer, Michel (The Ratio institute)
    Abstract: In the paper we look at the bank lending routines of Swedish banks and their consequences for external financing of start-ups. Results from a questionnaire sent out to start-ups listed in the files of the Swedish interest organization “NyföretagarCentrum” were used. We looked at firms founded during the period 2010-2011, which can be considered family firms in terms of the ownership structure. The survey indicated that bank loans had to be backed up with personal assets used as collaterals and personal guarantees of repayment. Essentially, the entrepreneur personally takes all risk. The corporate form does not work. Risk-adverse persons with innovative business ideas will hesitate to realize their ideas. The consequences for economic growth and employment will be negative. Research questions posed in this study are: • How do start-up firms finance their business? • How much personal financial risk must an entrepreneur with a start-up business shoulder? • How do they try to mitigate the financial risk through financial bootstrapping? • What are the alternatives to bank loans? Law and economics theories about how collaterals and safeguards can overcome the double trust problem between entrepreneurs and financiers will be used. Bank regulations play a decisive role in these cases. The contribution of the paper is that it gives both a theoretical and empirical explanation to why start- ups have to be financed by the entrepreneur. There is a shortage of empirical studies that show this.
    Keywords: Start-ups; Bank loans; Asymmetric information; External financing
    JEL: G21 G32 L26 M13
    Date: 2014–08–06
  4. By: Isabelle Leroux (GRANEM, Université d'Angers); Paul Muller (Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux, INRA); Béatrice Plottu (GRANEM, Institut Supérieur des Sciences Agronomiques, Agroalimentaires, Horticoles et du Paysage (Agrocampus Ouest)); Caroline Widehem (GRANEM, Institut Supérieur des Sciences Agronomiques, Agroalimentaires, Horticoles et du Paysage (Agrocampus Ouest))
    Abstract: Par le financement de projets collaboratifs, la politique française des pôles de compétitivité implique une approche particulière de l’innovation ouverte portant principalement sur la co-construction et le partage d’une ressource commune aux partenaires du projet. Ceci peut impliquer une remise en question des pratiques d’innovation ouverte et de nouvelles contraintes et opportunités amenant les entreprises à envisager une évolution de leur business model. Cependant, de telles évolutions peuvent être entravées par des freins internes et externes. Le rôle d’intermédiation joué par les instances d’animation, de coordination et de transfert des pôles de compétitivité est essentiel pour les lever.
    Abstract: The French « Pôles de compétitivité » policy notably entails the financing of collaborative projects. This gives rise to a particular approach to open innovation that mainly relies on the co-constructing and the sharing of a resource common to stakeholders. This may entail a questioning of current innovation practices, thus giving rise to new constraints and opportunities lead firms to reconsider their business model. However, internal and external constraints may impede their evolution. Governing bodies of « Pôles de compétitivité » play a central role in releasing stakeholders from those impediments as they act as innovation intermediaries.
    Keywords: business model innovation, open innovation, competitiveness cluster, innovation intermediary, innovation, innovation ouverte, intermédiaire d'innovation, modèlepôle de competitiviteintermédiation
    Date: 2014
  5. By: Bergantino, Angela Stefania; Capozza, Claudia; De Carlo, Angela
    Date: 2013
  6. By: Leyden, Dennis (University of North Carolina at Greensboro, Department of Economics); Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: This paper models the entrepreneurial process as both creation and discovery composed of an iterative two-step process where entrepreneurs create social networks based on subjective expectations about the future effectiveness of those networks, and then choose the innovation to pursue and map a search process to discover how to bring the innovation to fruition. Critical to this process is the mix of strong ties and weak ties that make up social networks and the ability to carry forward the social capital embodied in such networks. The tendency of long-existing entrepreneurs to be less innovative can be explained using this model.
    Keywords: entrepreneurship; social networks; innovation; technology
    JEL: L26 M13 O31 O33
    Date: 2014–08–14
  7. By: Wagner, Joachim (Leuphana University Lueneburg, Germany, Royal Institute of Technology (KTH), and Centre of Excellence for Science and Innovation Studies (CESIS), Stockholm, Sweden)
    Abstract: This note uses a new tailor-made data set to investigate the link between firm age and the extensive and intensive margins of exports empirically for the first time for Germany. Results turn out to be fully in line with the theoretical considerations. Older firms are more often exporters, export more and more different goods to more different destination countries, and export to more distant destination markets.
    Keywords: Exports; firm age; export margins; Germany
    JEL: F14
    Date: 2014–07–24
  8. By: Bozeman, Barry (Arizona State University); Link, Albert N. (University of North Carolina at Greensboro, Department of Economics)
    Abstract: Five important policy initiatives were promulgated in response to the slowdown in U.S. productivity in the early-1970s, and then again in the late-1970s and early-1980s. These initiatives included the Bayh-Dole Act of 1980, the Stevenson-Wydler Act of 1980, the R&E Tax Credit of 1981, the Small Business Innovation and Development Act of 1982, and the National Cooperative Research Act of 1984. Scholars and policy-makers have long debated the direction and magnitude of impacts from these policies but empirical evidence remains modest, especially evidence of their aggregate effects. Our assessment of these policies is based on quantifying their collective impact on industrial investments in R&D in the post-productivity slowdown period. Our findings support the conclusion that the relative levels of industrial investments in R&D from 1980 forward were significantly higher than before, ceteris paribus.
    Keywords: technology; innovation; R&D; policy assessment
    JEL: H50 O31 O33 O47
    Date: 2014–08–14
  9. By: Iootty, Mariana; Correa, Paulo; Radas, Sonja; Skrinjaric, Bruno
    Abstract: Drawing on a representative sample of firms, this paper presents some microeconomic evidence on the productivity growth process in Croatia since the onset of recession (2008-12). Four types of results are highlighted. First, there is a persistent (and increasing) heterogeneity in the performance of Croatian firms along outcome measures. Second, Croatia lags behind regional peers in entrepreneurship measures, which suggests a comparatively lower economic dynamism. Third, the lack of dynamism displayed by the Croatian economy is confirmed when looking at the firm entry and exit process: the analytical results point to reduced firm dynamism compared with Croatia's peers in Europe and Central Asia. Fourth, the contribution of net entry to overall productivity growth in Croatia is surprisingly negative. This is contrary to what would be expected based on the literature and suggests that the process of"destructive creation"in Croatia has not been efficient, as the market might be eliminating firms that are potentially productive. Policies that foster market contestability should be pursued, especially policies aiming at better product market regulation (such as liberalization of entry into the service sector, particularly retail and infrastructure). Measures to help finance entrepreneurship (in promising sectors) should be used to support enhancements in firm productivity. In addition, appropriate bankruptcy rules play a key role by easing the exit process and allowing low-productive units to leave the market and free resources that can be better used by other, more efficient, firms.
    Keywords: E-Business,Economic Theory&Research,Microfinance,Labor Markets,Markets and Market Access
    Date: 2014–07–01
  10. By: Siemer, Michael (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: The 2007-2009 recession is characterized by: a large drop in employment, an unprecedented decline in firm entry, and a slow recovery. Using confidential firm-level data, I show that financial constraints reduced employment growth in small relative to large firms by 4.8 to 10.5 percentage points. The effect of financial constraints is robust to controlling for aggregate demand and is particularly strong in small young firms. I show in a heterogeneous firms model with endogenous firm entry and financial constraints that a large financial shock results in a long-lasting recession caused by a "missing generation" of entrants.
    Keywords: Employment; firm entry; financial crisis; small business; financial friction; slow recovery; start-ups
    JEL: E24 E32 E44 G01 J20 L25
    Date: 2014–07–30
  11. By: Francis, Bill B. (Lally School of Management, Rensselaer Polytechnic Institute); Hasan, Iftekhar (Fordham University and Bank of Finland); Wu, Qiang (Lally School of Management, Rensselaer Polytechnic Institute)
    Abstract: Directors from academia served on the boards of around 40% of S&P 1,500 firms over the 1998–2011 period. This paper investigates the effects of academic directors on corporate governance and firm performance. We find that companies with directors from academia are associated with higher performance and this relation is driven by professors without administrative jobs. We also find that academic directors play an important governance role through their advising and monitoring functions. Specifically, our results show that the presence of academic directors is associated with higher acquisition performance, higher number of patents and citations, higher stock price informativeness, lower discretionary accruals, lower CEO compensation, and higher CEO forced turnover-performance sensitivity. Overall, our results provide supportive evidence that academic directors are valuable advisors and effective monitors and that, in general, firms benefit from having academic directors.
    Keywords: academic directors; professors; firm performance; advising; monitoring
    JEL: G30 G34 M41
    Date: 2014–07–09
  12. By: Mercedes Delgado; Michael E. Porter; Scott Stern
    Abstract: Clusters are geographic concentrations of industries related by knowledge, skills, inputs, demand, and/or other linkages. A growing body of empirical literature has shown the positive impact of clusters on regional and industry performance, including job creation, patenting, and new business formation. There is an increasing need for cluster-based data to support research, facilitate comparisons of clusters across regions, and support policymakers and practitioners in defining regional strategies. This paper develops a novel clustering algorithm that systematically generates and assesses sets of cluster definitions (i.e., groups of closely related industries). We implement the algorithm using 2009 data for U.S. industries (6-digit NAICS), and propose a new set of benchmark cluster definitions that incorporates measures of inter-industry linkages based on co-location patterns, input-output links, and similarities in labor occupations. We also illustrate the algorithm’s ability to compare alternative sets of cluster definitions by evaluating our new set against existing sets in the literature. We find that our proposed set outperforms other methods in capturing a wide range of inter-industry linkages, including grouping industries within the same 3-digit NAICS.
    JEL: R0 R1
    Date: 2014–08
  13. By: Arntz, Melanie; Gregory, Terry
    Abstract: Concerns have been raised that demographic ageing may weaken the competitiveness of knowledge-based economies and increase regional disparities. The age-creativity link is however far from clear at the aggregate level. Contributing to this debate, we estimate the causal effect of the workforce age structure on patenting activities for local labour markets in Germany using a flexible knowledge production function and accounting for potential endogeneity of the regional workforce structure. Overall, our results suggest that younger workers boost regional innovations, but this effect partly hinges on the presence of older workers as younger and older workers turn out to be complements in the production of knowledge. With demographic aging mainly increasing the older workforce and shrinking the younger one, our results imply that innovation levels in ageing societies may drop in the future. Moreover, differences in the regional age structure currently explain around a sixth of the innovation gap across German regions. --
    Keywords: regional innovation system,demographic ageing,knowledge production function,regional disparities,age complementarities
    JEL: R12 R23 J11
    Date: 2014
  14. By: Tilo F. Halaszovich (University of Bremen - International Management and Governance & ZenTra); Sarianna M. Lundan (University of Bremen - International Management and Governance & ZenTra)
    Abstract: Foreign firms entering emerging markets are usually assumed to be superior to the domestic competitors in the host country. Their superior firm specific advantages (FSAs) allow them to outcompete incumbent rivals and to internalize the gains from foreign direct investment (FDI) entirely. Most of these results are based on resource or efficiency seeking FDI. More recently, the motive for FDI in these markets has shifted to market seeking. A consequence of this shift is the need for foreign firms to get deeper embedded in the institutional envi-ronment of the host country. The institutional environment of emerging markets is consid-erably different from developed countries. Coping with the institutional obstacles of a host country can be assumed to moderate the ability of a foreign firm to exploit its FSAs. We ana-lyze the impact of the firm's degree of embeddedness on its performance in emerging mar-kets using the World Bank’s Enterprise Survey Manufacturing Sector Module data on 15,715 firms from 78 emerging markets. We use the degree of localization of sourcing and sales to measure the degree of embeddedness in the host country market. We find that both dimen-sions are subject to a reversed U-shaped function. That is, by extending the degree of local sales and local sourcing up to a certain percentage, a firm can realize positive performance growth by becoming more embedded into the emerging market, but beyond this point, the performance impact is negative. We also find that foreign firms involved in local sales seem to lose part of their ability to exploit their ownership advantages as compared to foreign firms that export their production.
    Keywords: emerging market FDI, FDI motives, institutional environment
    JEL: F23
    Date: 2014–08

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