nep-sbm New Economics Papers
on Small Business Management
Issue of 2015‒10‒25
nine papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Patents as Quality Signals? The Implications for Financing Constraints on R&D By Bronwyn Hall
  2. Employment Effect of Innovation By D'Artis Kancs; Boriss Siliverstovs
  3. Firm Growth and Selection in a Finite Economy By Staley, Mark
  4. R&D Spillovers and Employment: A Micro-econometric Analysis By Aldieri, Luigi; Garofalo, Antonio; Vinci, Concetto Paolo
  5. Human Resources and Innovation: Total Factor Productivity and Foreign Human Capital By Fassio, Claudio; Kalantaryan, Sona; Venturini, Alessandra
  6. Industry structure, entrepreneurship, and culture: An empirical analysis using historical coalfields By Stuetzer, Michael; Obschonka, Martin; Audretsch, David B.; Wyrwich, Michael; Rentfrow, Peter J.; Coombes, Mike; Shaw-Taylor, Leigh; Satchell, Max
  7. Misallocation and Total Factor Productivity in Italy: Evidence from Firm-Level Data By Sara Calligaris
  8. Firm Selection and Corporate Cash Holdings By Berardino Palazzo; Juliane Begenau
  9. La performance des lieux de co-création de connaissances : le cas des FabLab By Rapahël Suire

  1. By: Bronwyn Hall
    Abstract: Information about the success of a new technology is usually held asymmetrically between the research and development (R&D)-performing firm and potential lenders and investors. This raises the cost of capital for financing R&D externally, resulting in financing constraints on R&D especially for firms with limited internal resources. Previous literature provided evidence for start-up firms on the role of patents as signals to investors, in particular to Venture Capitalists. This study adds to previous insights by studying the effects of firms’ patenting activity on the degree of financing constraints on R&D for a panel of established firms. The results show that patents do indeed attenuate financing constraints for small firms where information asymmetries may be particularly high and collateral value is low. Larger firms are not only less subject to financing constraints, but also do not seem to benefit from a patent quality signal.
    Date: 2014–07
  2. By: D'Artis Kancs (European Commission – JRC - IPTS); Boriss Siliverstovs (KOF Swiss Economic Institute – ETH Zurich)
    Abstract: The present paper estimates and decomposes the employment effect of innovation by R&D intensity levels. Our microeconometric analysis is based on a large international panel data set from the EU Industrial R&D Investment Scoreboard. Employing flexible semi-parametric methods - the generalised propensity score - allows us to recover the full functional relationship between R&D investment and firm employment, and to address important econometric issues, which is not possible in the standard estimation approach used in the previous literature. Our results suggest that modest innovators do not create and may even destruct jobs by raising their R&D expenditures. Most of the jobs in the economy are created by innovation followers: increasing innovation by 1% may increase employment up to 0.7%. The job creation effect of innovation reaches its peak when R&D intensity is around 100% of the total capital expenditure, after which the positive employment effect declines and becomes statistically insignificant. Innovation leaders do not create jobs by further increasing their R&D expenditures, which are already very high.
    Keywords: Innovation, R&D investment, causal inference, semi-parametric, employment, job creation, GPS
    JEL: C14 C21 F23 J20 J23 O30 O32 O33
    Date: 2015–07
  3. By: Staley, Mark
    Abstract: A model of firm dynamics is presented in which the growth rate of knowledge capital is linked to productivity, and productivity fluctuates randomly. The distribution of productivity forms a stable traveling wave, representing a growing economy. Granularity is maintained by way of spinoffs, resulting in a firm size distribution that rapidly approaches the Zipf distribution. An unexpected consequence of the model is that the growth rate is proportional to the log of the number of firms. The model also implies that specialization is positive for growth.
    Keywords: Growth, Ideas, Selection, Scale effect
    JEL: O40 O41
    Date: 2015–10–12
  4. By: Aldieri, Luigi; Garofalo, Antonio; Vinci, Concetto Paolo
    Abstract: In this paper we analyze the relationship between R&D activity, spillovers and employment at the firm level. A reduced form labour demand equation is estimated. R&D expenditures can account for both product and process innovation. The analysis is based upon a new dataset composed of 879 worldwide R&D-intensive manufacturing firms whose information has been collected for the period 2002-2010. We use data from all EU R&D investment scoreboards editions issued every year until 2011 by the JRC-IPTS (scoreboards). The main contribution to the existing literature is to investigate also the impact of outside R&D activity on own employment level. In particular, the paper investigates the role of R&D spillovers within the pillars of the Triad: United States, Japan and European economic area, but it goes beyond the previous studies by considering more opportune spillover components. Indeed, the potential stock of spillovers is dissociated into four components: the national stock, the international stock, the intra-industry stock and finally the inter-industry one. In this way, we will be able to appreciate to what extent geographical and cultural contiguity matters, by using an updated sample relative to large worldwide firms. The empirical results suggest a significant impact of R&D spillover effects on firms’ employment but the results are quite differentiated according to the spillover stock type and this may represent a relevant source of policy implications.
    Keywords: Panel Data Models, R&D Spillovers, Employment
    JEL: J20 O33
    Date: 2015–10–16
  5. By: Fassio, Claudio (Lund University); Kalantaryan, Sona (Migration Policy Centre); Venturini, Alessandra (University of Turin)
    Abstract: The objective of this paper is to analyse the role of migrants in innovation in Europe. We use Total Factor Productivity as a measure of innovation and focus on the three largest European countries – France, Germany and the United Kingdom – in the years 1994-2007. Unlike previous research, which mainly employs a regional approach, we analyse the link between migration and innovation at the sectoral level. This allows us to measure the direct contribution of migrants in the sector in which they are actually employed. Moreover, it allows a distinction between the real contribution of migrants to innovation from possible inter-sectoral complementarities, which might as well foster innovation. We control for the different components of human-capital, such as age, education and diversity of origin. To address the possible endogeneity of migration we draw on an instrumental variable strategy originally devised by Card (2001) and adapt it at the sector level. The results show that overall migrants are relevant in all sectors, but some important differences emerge across sectors: highly-educated migrants show a larger positive effect in the high-tech sectors, while middle- and low-educated ones are more relevant in manufacturing. The diversity of countries of origin contributes to innovation only in the services sectors, confirming that in empirical analyses at the regional or national level the diversity measure might capture the complementarity between sectors rather than the contribution of different national skills.
    Keywords: migration, innovation, highly skilled migrants, low skilled migrants
    JEL: F22 O31 O32
    Date: 2015–10
  6. By: Stuetzer, Michael; Obschonka, Martin; Audretsch, David B.; Wyrwich, Michael; Rentfrow, Peter J.; Coombes, Mike; Shaw-Taylor, Leigh; Satchell, Max
    Abstract: There is mounting evidence demonstrating that entrepreneurship is spatially clustered and that these spatial differences are quite persistent over long periods of time. However, especially the sources of that persistence are not yet well-understood, and it is largely unclear whether persistent differences in entrepreneurship are reflected in differences in entrepreneurship culture across space as it is often argued in the literature. We approach the cluster phenomenon by theorizing that a historically high regional presence of large-scale firms negatively affects entrepreneurship, due to low levels of human capital and entrepreneurial skills, fewer opportunities for entry and entrepreneurship inhibiting formal and informal institutions. These effects can become self-perpetuating over time, ultimately resulting in persistent low levels of entrepreneurship activity and entrepreneurship culture. Using data from Great Britain, we analyze this long-term imprinting effect by using the distance to coalfields as an exogenous instrument for the regional presence of large-scale industries. IV regressions show that British regions with high employment shares of large-scale industries in the 19th century, due to spatial proximity to coalfields, have lower entrepreneurship rates and weaker entrepreneurship culture today. We control for an array of competing hypotheses like agglomeration forces, the regional knowledge stock, climate, and soil quality. Our main results are robust with respect to inclusion of these control variables and various other modifications which demonstrates the credibility of our empirical identification strategy. A mediation analysis reveals that a substantial part of the impact of large-scale industries on entrepreneurship is through human capital.
    Keywords: Entrepreneurship; entrepreneurship culture; Industrial Revolution; industry structure; personality
    JEL: L26 L64 N13 N53 N94
    Date: 2015
  7. By: Sara Calligaris (University of Rome \Tor Vergata" & EIEF)
    Abstract: Over the last two decades, total factor productivity (TFP) in Italy decreased by 0.2% per year, while increasing on average in the Euro-area countries. This decline suggests the existence of large inefficiencies in the allocation of resources, making the Italian case particularly interesting and suitable in order to study the role of misallocation. In this paper, I quantify the within-industry misallocation of inputs in Italy over the period 1993{2011, by applying the Hsieh and Klenow's (2009) methodology. Using a micro-level longitudinal dataset of Italian manufacturing firms, I find that, in the hypothetical absence of distortions, aggregate TFP in manufacturing would be boosted by 58% in 1993, by 67% in 2006 and by 80% in 2011. This leads to a twofold conclusion: first, misallocation plays a crucial role in determining the inefficiency level of the Italian manufacturing sector; second, misallocation has increased over time. Given the magnitude of the results obtained and the policy implications related thereto, I take a step ahead by checking to what extent the degree of misallocation can be attributed to specific characteristics of the Italian firms: it emerges that misallocation is higher for firms located in the South and at low-technological intensity, as well as for small or young firms.
    Keywords: Allocative ineffciencies, productivity slowdown, Manufacturing, CERVED dataset.
    JEL: D24 L60 O47
    Date: 2015–10–14
  8. By: Berardino Palazzo (Boston University, School of management); Juliane Begenau (Harvard Business School)
    Abstract: This paper proposes a novel explanation for the secular increase in the cash holdings of public U.S. firms. We show that this fact results from a change in the composition of firms. Since the end of the 70s, the proportion of new economy firms that engage in R&D has increased dramatically. These types of firms enter the Compustat sample with more cash holdings. In contrast, old economy firms' cash holdings have remained stable over time. We use a firm industry model with endogenous entry in the stock market to explore three competing hypothesis: 1) a structural change in the composition of U.S. firms; 2) lower entry costs/better IPO conditions for new economy firms; 3) institutional reasons such as a change in the tax benefit of R&D activities.
    Date: 2015
  9. By: Rapahël Suire (CREM, UMR CNRS 6211, University of Rennes 1, France)
    Abstract: If FabLab (Fabrication Laboratory) is nowadays a huge phenomenon their performance based on their socio-economic embeddedness is still an open research question. From an original world database (N=48), we show that production of documented projects and transformation of those projects into new company is a function of interactions between FabLab and its innovative eco-system. In particular, everything remains equal, interactions with peripheral and explorative actors lead to higher level of creativity and documented projects. New company creation appears to be significantly higher when FabLab is an intermediary platform or a middleground between these peripheral actors and a core of bigger companies more oriented in exploitation and seeming harvesting FabLab’s creativity.
    Keywords: FabLab, platform, middleground, networks, knowledge
    JEL: D20 L10 O32 R11
    Date: 2015–10

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