nep-sbm New Economics Papers
on Small Business Management
Issue of 2015‒12‒01
ten papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Inverted-U relationship between innovation and survival: Evidence from firm-level UK data By Ugur, Mehmet; Trushin, Eshref; Solomon, Edna
  2. Barriers to Innovation: Can Firm Age Help Lower Them? By Gabriele Pellegrino
  3. Allocation of Company Research and Development Expenditures to Industries Using a Tobit Model By Christian Awuku-Budu; Leo Sveikauskas
  4. R&D and productivity in OECD firms and industries: A hierarchical meta-regression analysis By Ugur, Mehmet; Trushin, Eshref; Solomon, Edna; Guidi, Francesco
  5. Regional Growth and Convergence in the UK: the Role of MNE Subsidiaries and Domestic Firms By Bournakis, Ioannis; Papanastassiou, Marina; Pitelis, Christos
  6. Too much or not enough heterogeneity in Innovation Policies among EU Member States? By Reinhilde Veugelers
  7. The Relevance of Soft Information for Predicting Small Business Credit Default: Evidence from a Social Bank By Simon Cornée
  8. Breakthrough innovations in aircraft and the intellectual property system, 1900-1975 By David C. Mowery
  9. High-growth firms: the role of management and capabilities By Simone Bertini; Tommaso FerraresiAuthor-X-Name-First: Tommaso; Marco Mariani; Edoardo Loris Rossi
  10. Do Firms Respond to Stronger Patent Protection by Doing More R&D? By Joel Blit; Mauricio Zelaya

  1. By: Ugur, Mehmet; Trushin, Eshref; Solomon, Edna
    Abstract: Theoretical and empirical work on innovation and firm survival has produced varied and often conflicting findings. In this paper, we draw on Schumpeterian models of competition and innovation and stochastic models of firm dynamics to demonstrate that the conflicting findings may be due to linear specifications of the innovation-survival relationship. We demonstrate that a quadratic specification is appropriate theoretically and fits the data well. Our findings from an unbalanced panel of 39,705 UK firms from 1997-2012 indicate that an inverted-U relationship holds for different types of R&D expenditures and sources of funding. We also report that R&D intensity is more likely to increase survival when firms are in more concentrated industries and in Pavitt technology classes consisting of specialized suppliers of technology and scale-intensive industries. Finally, we report that the effects of firm and industry characteristics as well as macroeconomic environment indicators are all consistent with prior findings. The results are robust to step-wise modeling, controlling for left truncation and use of lagged values to address potential simultaneity bias.
    Keywords: Innovation, post-entry performance, R&D, survival analysis
    JEL: C41 D22 L1 O21 O3
    Date: 2015–10–19
  2. By: Gabriele Pellegrino (World Intellectual Property Organization, Economics and Statistics Division, 34, chemin des Colombettes CH-1211 Geneva 20, Switzerland; EPFL, College of Management of Technology, Lausanne; Barcelona Institute of Economics, University of Barcelona, Barcelona)
    Abstract: This paper examines how firm age can affect a firm’s perception of the obstacles (deterring vs. revealed) that hamper and delay innovation. Using a comprehensive panel of Spanish firms for the period 2004-2011, the empirical analysis conducted shows that distinct types of obstacle are perceived differently by firms of different ages. First, a clear-cut negative relationship is identified between firm age and a firm’s assessment of both the internal and external shortages of financial resources. Second, young firms seem to be less sensitive to the lack of qualified personnel when initiating an innovative project than when they are already engaged in such activities. By contrast, the attempts of mature firms to engage in innovation activity are significantly affected by the lack of qualified personnel. Finally, mature incumbents appear to attach greater importance to obstacles related to market structure and demand than is the case of firms with less experience.
    Keywords: Barriers to innovation, firm age, probit panel data model
    JEL: C23 O31 O32 O33
    Date: 2015–11
  3. By: Christian Awuku-Budu; Leo Sveikauskas
    Abstract: This paper uses Census microdata and a regression-based approach to assign multi-division firms’ pre-2008 Research and Development (R&D) expenditures to more than one industry. Since multi-division firms conduct R&D in more than one industry, assigning R&D to corresponding industries provides a more accurate representation of where R&D actually takes place and provides a consistent time-series with the National Science Foundation R&D by line of business information. Firm R&D is allocated to industries on the basis of observed industry payroll, as befits the historic importance of payroll in Census assignments of firms to industry. The results demonstrate that the method of assigning R&D to industries on the basis of payroll works well in earlier years, but becomes less effective over time as firms outsource their manufacturing function.
    Keywords: business R&D, industry classification, Tobit model, establishment payroll
    Date: 2015–11
  4. By: Ugur, Mehmet; Trushin, Eshref; Solomon, Edna; Guidi, Francesco
    Abstract: Effects of R&D investment on frim/industry productivity have been investigated widely thanks to pioneering contributions by Zvi Griliches and others in late 1970s and early 1980s. We aim to establish where the balance of the evidence lies and what factors may explain the variation in the research findings. Using 1,258 estimates from 65 primary studies and hierarchical meta-regression models, we report that the average elasticity and rate-of-return estimates are both positive, but smaller than those reported in prior narrative reviews and meta-analysis studies. We discuss the likely sources of upward bias in prior reviews, investigate the sources of heterogeneity in the evidence base, and discuss the implications for future research. Overall, this study contributes to existing knowledge by placing the elasticity and rate-of-return estimates under a critical spot light and providing empirically-verifiable explanations for the variation in the evidence base.
    Keywords: R&D, knowledge capital, productivity, meta-analysis
    JEL: C8 D24 O30 O32
    Date: 2015–08–11
  5. By: Bournakis, Ioannis; Papanastassiou, Marina; Pitelis, Christos
    Abstract: This paper explores the relative effects of Multinational Enterprises’ (MNEs) subsidiaries to domestic firms (DOMS) on regional productivity growth in the UK. We combine regional and firm level data to explore the relative importance of three key characteristics of Multinational Enterprises’ subsidiaries: R&D, intangible assets and exports. Our main results indicate that MNE subsidiaries are on average more R&D intensive and have a higher level of investment in intangibles which impact significantly on regional productivity growth. The results are shown not to be symmetric when we take into account the country of origin of MNE subsidiaries, the role of R&D, intangibles and exports depending on the country of origin of the parental MNE. Two key implications can be derived from our findings: (a) DOMS can sometimes be more advantageous for local development; (b) the contribution of MNEs subsidiaries to the regional economy depends on its degree of embeddedness in the local economy. These two findings can provide a large scope for regional policy making.
    Keywords: Total Factor Productivity (TFP), Regions, Multinationals, Subsidiaries, Domestic Firms, R&D, Intangibles, Exports
    JEL: F23 O47 R3
    Date: 2015–11–26
  6. By: Reinhilde Veugelers
    Abstract: This contribution focuses on the heterogeneity in innovation capacity within Europe across its different Member States. Who are the leading and who are the lagging EU countries? Is there a trend towards convergence over time? And how has the crisis affected this trend of convergence? We then take a look at the research and innovation policies which the EU countries have in place and try to assess whether these policies match with the heterogeneous EU countries’ innovation capacity positions. We examine both the budgets allocated by EU Member States to R&I as well as the various kinds of R&I policy programmes being deployed. More particularly, we examine how heterogeneous the deployment of policy instruments is across EU member states and whether this matches with the heterogeneity in innovation capacity development among EU countries. Notwithstanding the large and increasing heterogeneity among EU countries in innovation capacity development, the evidence on innovation policies in EU countries shows a relative homogeneity of policy mixes in different countries. Current innovation policy mixes of instruments do not well reflect the countries’ levels of innovation capacity development.
    Keywords: Innovation, innovation policy, institutional reforms, multi-level governance
    JEL: O31 O38
    Date: 2015–08
  7. By: Simon Cornée
    Abstract: Using a unique, hand-collected database of 389 small loans granted by a French social bank dealing with genuinely small, informationally opaque businesses (mainly social enterprises), our study highlights the relevance of including soft information (especially on management quality) to improve credit default prediction. Comparing our findings with those of previous studies also reveals that the more opaque the borrower, the higher the predictive value of soft information in comparison with hard. Finally, a cost-benefit analysis shows that including soft information is economically valuable once collection costs have been accounted for, albeit to a moderate extent.
    Keywords: Credit Default Prediction; Credit Rating; Relationship Lending; Social Banking
    JEL: G21 M21
    Date: 2015–10–23
  8. By: David C. Mowery (Haas School of Business, University of California Berkeley, USA)
    Abstract: Modern commercial aircraft are complex products that incorporate innovations in technologies ranging from advanced materials to software and electronics. Although commercial aircraft assuredly qualify as a transformative innovation, in fact today’s commercial aircraft are the result of a process of incremental innovation and improvement that dates back more than a century. A great many of these improvements and incremental innovations originated from government-supported R&D programs sponsored by the military services or government research laboratories. The adoption of commercial-aircraft innovations within many industrial economies, including the United States, also has been influenced by government regulation of air transportation. This paper provides a historical characterization of the innovation and record of technical progress in US commercial aircraft during the 1900-1975 period. It identifies the sources of support for innovation and technological adoption, and examines the origins and impacts of “breakthrough innovations” on the overall evolution of the global commercial aircraft industry. The paper also assesses the role of patents in these important innovations.
    Keywords: Innovation, airplane, intellectual property
    JEL: O3 O34 O38 N7
    Date: 2015–11
  9. By: Simone Bertini (IRPET); Tommaso FerraresiAuthor-X-Name-First: Tommaso (IRPET); Marco Mariani (IRPET); Edoardo Loris Rossi (IRPET)
    Abstract: The present study analyzes the managerial practices of high-growth firms, an issue which is still unexplored in the relevant literature. Its aim is to verify whether the excellent performances of these firms are matched by significant differences in management skills. The main results suggest that, although they are not radically different from the others, fast-growing firms are somehow characterized by more advanced managerial practices and pay greater attention to learning-related aspects. Some of these aspects differentiate constant-growth firms from the non-constant growth ones.
    Keywords: High-growth firms, management
    Date: 2014
  10. By: Joel Blit (Department of Economics, University of Waterloo); Mauricio Zelaya (Department of Economics, University of Waterloo)
    Abstract: We examine whether stronger intellectual property rights (IPR) promote firm R&D, using changes in the IPR of export-partner countries as an exogenous source of variation. Constructing an export-weighted index of trade partner IPR by country-industry-year, we find that R&D responds strongly to trade partner IPR, and this after including industry, year, country, and interacted fixed effects. We further find evidence of this relationship at the level of the establishment, using a unique Canadian dataset. Our results suggest a causal link between IPR and firm R&D investments.
    JEL: O34
    Date: 2015–08

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