nep-sbm New Economics Papers
on Small Business Management
Issue of 2015‒12‒08
sixteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Net employment growth by firm size and age in Italy By Francesco Manaresi
  2. Psychometrics as a tool to improve screening and access to credit By Arráiz,Irani; Bruhn,Miriam; Stucchi,Rodolfo Mario
  3. Factors Affecting Entry into Supply Chain Trade: An Analysis of Firms in Southeast Asia By Ganeshan Wignaraja
  4. Access to finance for innovative SMEs since the financial crisis By Neil Lee; Hiba Sameen; Marc Cowling
  5. Research and Technology Organisations and Smart Specialisation By David CHARLES; Katerina CIAMPI STANCOVA
  6. Learning Entrepreneurship from other Entrepreneurs? By Luigi Guiso; Luigi Pistaferri; Fabiano Schivardi
  7. Moving people with ideas - innovation inter-regional mobility and firm heterogeneity By Riccardo Crescenzi; Luisa Gagliardi
  8. Patent Protection and the Industrial Composition of Multinational Activity: Evidence from U.S. Multinational Firms By Olena Ivus; Walter Park; Kamal Saggi
  9. Patents Rights and Innovation by Small and Large Firms By Mark Schankerman
  10. Where Has All the Skewness Gone? The Decline in High-Growth (Young) Firms in the U.S. By Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
  11. The Role of Clusters and Public Policy in New Regional Economic Path Development By Asheim , Bjørn T.; Isaksen , Arne; Martin , Roman; Trippl , Michaela
  12. Measuring regional innovation in one dimension: More lost than gained? By Matthias Siller; Christoph Hauser; Janette Walde; Gottfried Tappeiner
  13. Subsidies, financial constraints and firm innovative activities in developing economies By Simona Mateut
  14. The globalisation of angel investments By Josh Lerner; Antoinette Schoar; Stanislav Sokolinski; Karen E. Wilson
  15. Impact du développement financier sur la dynamique de création des entreprises : évidence en données de panel sur les pays du MENA By GHANEM, Yasmina; ACHOUCHE, Mohamed
  16. Diversification and firm performance: A study of Indian manufacturing firms By Ravichandran, Archana; Bhaduri, Saumitra

  1. By: Francesco Manaresi (Bank of Italy)
    Abstract: We study how net employment growth rates differ by firm age and size. For this purpose, we exploit a long panel dataset collecting information for all Italian private firms with at least one employee. We find that firm size is not a crucial determinant of firm growth, once age is controlled for. Firms in their early years of life (up to 3 years) display higher growth rates and slightly higher exit rates than older firms. This up-or-out dynamic of Italian firms seem subdued if compared with the US, the other country for which a similar analysis is available. We also exploit the long time series to identify which types of firms are hit the most during economic downturns. Results show that older firms reduce net employment growth the most. The impact on younger firms seem partially cushioned by stronger selection at entry. Conditional on age, size turns out not to be significantly correlated with the drop in net employment growth rates during downturns.
    Keywords: employment growth, firm size, firm age
    JEL: D22 L25
    Date: 2015–11
  2. By: Arráiz,Irani; Bruhn,Miriam; Stucchi,Rodolfo Mario
    Abstract: This paper studies the use of psychometric tests, which were designed by the Entrepreneurial Finance Lab as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. The analysis uses administrative data covering the period from June 2011 to April 2014 to compare debt accrual and repayment behavior patterns across entrepreneurs who were offered a loan based on the traditional credit-scoring method versus the Entrepreneurial Finance Lab tool. The paper finds that the psychometric test can lower the risk of the loan portfolio when used as a secondary screening mechanism for already banked entrepreneurs?that is, those with a credit history. For unbanked entrepreneurs?those without a credit history?using the Entrepreneurial Finance Lab tool can increase access to credit without increasing portfolio risk.
    Keywords: Access to Finance,Bankruptcy and Resolution of Financial Distress,Debt Markets,Banks&Banking Reform,Microfinance
    Date: 2015–12–03
  3. By: Ganeshan Wignaraja
    Abstract: This article undertakes a comparative, firm-level analysis of joining supply chain trade in five Southeast Asian economies to improve our understanding of fragmentation of manufacturing across borders. The findings suggests that firm size (reflecting economies of scale to overcome entry costs) matters for joining supply chain trade with large firms playing the dominant role in Southeast Asian economies. Meanwhile, small and medium-sized enterprises (SMEs) make a small contribution to supply chain trade relatively to the sectors employment contribution. However, firm size is not the whole story. Efficiency—particularly investment in building technological capabilities and skills—and access to commercial bank credit also influence joining supply chain trade. The article suggests that governments can facilitate SMEs joining supply chain trade through a market-oriented strategy, modern physical infrastructure, streamlined regulations and efficient business support services.
    Keywords: production fragmentation;global supply chains;SMEs;technological capabilities;access to finance
    Date: 2015–03–24
  4. By: Neil Lee; Hiba Sameen; Marc Cowling
    Abstract: In the wake of the 2008 financial crisis, there has been increased focus on access to finance for small and medium sized firms. Some evidence from before the crisis suggested that it was harder for innovative firms to access finance. Yet no research has considered the differential effect of the crisis on innovative firms. This paper addresses this gap using a dataset of over 10,000 UK SME employers. We find that innovative firms are more likely to be turned down for finance than other firms, and this worsened significantly in the crisis. However, regressions controlling for a host of firm characteristics show that the worsening in general credit conditions has been more pronounced for non-innovative firms with the exception of absolute credit rationing which still remains more severe for innovative firms. The results suggest that there are two issues in the financial system. First, we find evidence of a structural problem which restricts access to finance for innovative firms. Second, we show a cyclical problem has been caused by the financial crisis and impacted relatively more severely on non-innovative firms.
    Keywords: Finance; SME; Entrepreneurship; Recession; Innovation
    JEL: G21 G32 L2 O31
    Date: 2015–03
  5. By: David CHARLES (University of Lincoln); Katerina CIAMPI STANCOVA (European Commission – JRC - IPTS)
    Abstract: Research and Technology Organisations (RTOs) have developed in many European countries at both national and regional levels to assist in the support of local industry, often around specific industrial technologies or sectors. With a core responsibility for technological upgrading they play a key role in regional and national innovation systems. Yet there is great variety in the form and mission of such RTOs, especially in terms of the degree of regional alignment, and whilst some regions are relatively well endowed with multiple RTOs, others are reliant on national RTOs in other regions or even other countries. These geographical challenges are also compounded by changes in the funding of RTOs with a shift to greater reliance on non-government funding and the search for funds from international sources such as global firms or Horizon 2020 projects. So whilst regions may see RTOs as critical regional assets, the RTOs may have a more nuanced attitude as their client base extends beyond national boundaries and they search for new sources of revenue. RTOs have an important role to play in smart specialisation (S3) though and three specific roles have been identified here. First, many RTOs have a policy role and have capabilities to identify industry needs and technological opportunities as a key input into the entrepreneurial discovery process. Second, RTOs, as increasingly international organisations, can facilitate the access to global knowledge for regional firms through their networks and research collaborations. Third RTOs often have a central role in the development of particular cluster groupings through their specialisation around core technologies, and as such can be a central player in the development of such clusters. But all three of these roles involve potential challenges and difficulties as the interests of the RTOs do not necessarily align with the needs of the region. The case studies in this report on RTOs in Spain, Finland, Italy, and the UK illustrate the variety of RTOs and the complexities of their relationships with regional hosts, but also some of the initiatives that are developing to support smart specialisation.
    Keywords: smart specialisation, research and technology organisations, regional innovation, research and innovation
    Date: 2015–11
  6. By: Luigi Guiso (EIEF); Luigi Pistaferri (Stanford University); Fabiano Schivardi (Bocconi University and EIEF)
    Abstract: We document that individuals who grew up in areas with high density of firms are more likely, as adults, to become entrepreneurs, controlling for the density of firms in their current location. Conditional on becoming entrepreneurs, the same individuals are also more likely to be successful entrepreneurs, as measured by business income or firm productivity. Strikingly, firm density at entrepreneur’s young age is more important than current firm density for business performance. These results are not driven by better access to external finance or intergenerational occupation choices. They are instead consistent with entrepreneurial capabilities being at least partly learnable through social contacts. In keeping with this interpretation, we find that entrepreneurs who at the age of 18 lived in areas with a higher firm density tend to adopt better managerial practices (enhancing productivity) later in life.
    Date: 2015
  7. By: Riccardo Crescenzi; Luisa Gagliardi
    Abstract: This paper looks at the link between inter-regional mobility, innovation and firms’ behavioural heterogeneity in their reliance on localised external sources of knowledge. By linking patent data (capturing inventors’ inter-regional mobility) with firm-level data (providing information on firms’ innovation inputs and behaviour) a robust identification strategy makes it possible to shed new light on the geographical mobility-innovation nexus. The analysis of English firms suggests that firm-level heterogeneity – largely overlooked in previous studies - is the key to explain the innovation impact of inter-regional mobility over and above learning-by-hiring mechanisms. A causal link between inflows of new inventors into the local labour market and innovation emerges only for firms that make the use of external knowledge sources an integral part of their innovation strategies.
    Keywords: innovation; labour mobility; inter-regional migration; spillovers
    JEL: J61 O15 O31 R23
    Date: 2015–04
  8. By: Olena Ivus (Queen's University); Walter Park (American University); Kamal Saggi (Vanderbilt University)
    Abstract: Using data on U.S. firms' technology licensing to local agents in developing countries, this paper examines the impact of patent protection on internal and arms-length technology transfer. The effects of protection vary across products according to their complexity. Consistent with theories of internalization, we find that patent reforms enable local firms to attract more arms-length technology transfer, especially of simple products which are relatively easy to imitate. Affiliated licensing also rises among simple products, but falls among complex products. The results withstand several robustness checks, including controlling for endogeneity by using colonial origin as an instrument, and are equally strong whether patent protection is measured by its intensity or by the timing of reforms. The results have significance for patent policy in the developing world, where access to knowledge is critical. Through arms-length technology contracts, proprietary knowledge diffuses beyond firm boundaries, enabling local agents to access not only the protected technology but also know-how.
    Keywords: International Technology Transfer, Licensing, Developing Countries, Product Complexity, Intellectual Property Rights, and Imitation Risk
    JEL: O3 F2
    Date: 2015–12–02
  9. By: Mark Schankerman
    Abstract: This paper studies the causal impact of patents on subsequent innovation by the patent holder. The analysis is based on court invalidation of patents by the U.S. Court of Appeals for the Federal Circuit, and exploits the random allocation of judges to control for the endogeneity of the judicial decision. Patent invalidation leads to a 50 percent decrease in patenting by the patent holder, on average, but the impact depends critically on characteristics of the patentee and the competitive environment. The effect is entirely driven by small innovative firms in technology fields where they face many large incumbents. Invalidation of patents held by large firms does not change the intensity of their innovation but shifts the technological direction of their subsequent patenting.
    Keywords: patents, innovation, courts
    JEL: O31 O32 O34 K41 L24
    Date: 2015–11
  10. By: Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
    Abstract: The pace of business dynamism and entrepreneurship in the U.S. has declined over recent decades. We show that the character of that decline changed around 2000. Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms. Prior research has shown that the sustained contribution of business startups to job creation stems from a relatively small fraction of high-growth young firms. The presence of these high-growth young firms contributes to a highly (positively) skewed firm growth rate distribution. In 1999, a firm at the 90th percentile of the employment growth rate distribution grew about 31 percent faster than the median firm. Moreover, the 90-50 differential was 16 percent larger than the 50-10 differential reflecting the positive skewness of the employment growth rate distribution. We show that the shape of the firm employment growth distribution changes substantially in the post-2000 period. By 2007, the 90-50 differential was only 4 percent larger than the 50-10, and it continued to exhibit a trend decline through 2011. The reflects a sharp drop in the 90th percentile of the growth rate distribution accounted for by the declining share of young firms and the declining propensity for young firms to be high-growth firms.
    Date: 2015–11
  11. By: Asheim , Bjørn T. (UiS Business School/Centre for Innovation Research, University of Stavanger; CIRCLE, Lund University; BI-Norwegian Business School); Isaksen , Arne (University of Agder, Norway); Martin , Roman (CIRCLE, Lund University); Trippl , Michaela (CIRCLE, Lund University)
    Abstract: This chapter deals with the role of clusters and public policy in new regional economic path development. New path development is analysed from an institutional perspective by focussing on changes in the wider regional innovation system (RIS), including firms, universities and governmental agencies, and by placing emphasis on the role that public policy can play. We argue that new regional economic path development requires a broad-based policy approach that stimulates cross-fertilizing effects between different industrial activities within and beyond the region. While cluster policies are well suited to support the growth and sustainment of existing industries, policies for new path development should aim at regional diversification and variety creation, preferably based on existing strengths and expertise in the region. These ideas are central to the Constructing Regional Advantage (CRA) approach. Empirically, the chapter draws on case study research on two new regional economic growth paths in Sweden and Norway, namely the new media cluster in Southern Sweden and the Oslo Cancer cluster. While the first is an example of path renewal through combining knowledge bases, the latter is an example for new path creation based on scientific knowledge. The empirical analysis underlines the role that public policy can play in facilitating new regional economic path development.
    Keywords: new path development; cluster evolution; regional innovation policy; constructing regional advantage; Oslo Cancer Cluster; New Media
    JEL: O18 O20 O38 R11
    Date: 2015–12–02
  12. By: Matthias Siller; Christoph Hauser; Janette Walde; Gottfried Tappeiner
    Abstract: In both academic literature and political discussions the concept of innovation is recognized as an essential ingredient in economic development and competitiveness for firms, regions, and nations. Innovation also ranks at the top of policy agendas in the field of regional policy. Therefore, the attractiveness of an appropriate innovation index for ranking regions and further developing them along a more or less objective measurement scale is evident. However, whether such rankings help convey a better understanding of innovation and its drivers, or whether they are merely a special type of ‘beauty contest’ with little substance is the focus of our analyses. To deny the latter, the innovation output indicators used for the composite index have to be appropriate representatives of the underlying innovation concept and each indicator has to be driven by the same impact factors. If this is not the case, interpretation of the index inevitably gives rise to partly inappropriate policy recommendations. In order to demonstrate this claim we elaborate a set of innovation indicators at the regional level based on the theoretical concept of the OECD document ‘The Measurement of Scientific and Technological Activities, Proposed Guidelines for Collecting and Interpreting Technological Innovation Data’ known as the ‘Oslo Manual’ (OECD, 2005) and their empirical implementation in the Community Innovation Survey. Additionally, innovation drivers well established in the literature are collected to estimate their impact on each innovation indicator as well as on the composite index derived from the innovation indicators. The question whether innovation should be measured as a multidimensional concept and investigated using various indicators or whether simplifying innovation to a one-dimensional concept is appropriate is clearly answered in favor of the multidimensional approach. Surprisingly, this is not due to the multidimensionality of the indicators themselves (all statistical measures indicate that the considered variables are sufficiently represented by one component), but to our first evidence that the innovation output indicators are driven by various impact factors and can therefore be influenced by various political strategies. According to these findings any type of innovation ranking is of very limited use.
    Keywords: Regional innovation, Innovation dimensions, Patent applications, Community Innovation Survey
    JEL: R11 O31 O33
    Date: 2015–11
  13. By: Simona Mateut
    Abstract: This paper extends the investigation on the relationship between public subsidies and innovation to firms in developing economies. The analysis merges the innovation subsidy literature with the stream focusing on financial constraints for innovation. Innovation is defined broadly to include the introduction of new products or services and the upgrade of existing ones, which is relevant for developing economies. The results obtained using a range of econometric techniques and alternative measures of financial constraints suggest a positive correlation between public subsidies and the innovative activities of 11,998 firms across thirty Eastern Europe and Central Asia countries.
    Keywords: innovation, subsidies, financial constraints
    Date: 2015
  14. By: Josh Lerner; Antoinette Schoar; Stanislav Sokolinski; Karen E. Wilson
    Abstract: Highlights The last decade has seen a rapid expansion and deepening of the types of vehicles that fund start-up firms in the U.S. and worldwide. In particular, we have seen a growing role of angel groups and other more “individualistic” funding options for start-ups, such as super angels or crowd sourcing platforms. Authors seek to understand the nature and consequences of angel investments across a variety of geographies with varying levels of venture capital markets and other forms of risk capital. They ask whether angel investors improve the outcomes and performance of the start-ups they invest in. Furthermore we want to understand whether and how the types of firms that seek angel funding vary with the overall entrepreneurial ecosystem in a country. Authors examine the records of 13 angel investment groups based in 12 nations and with applicants for financing transactions from 21 nations, examining both the applicants that were considered and rejected and those that were funded. Key findings from the analysis are two-fold. First, angel investors have a positive impact on the growth of the firms they fund, their performance, and survival. Second, they find that the selection of firms that apply for angel funding is different across countries.
    Date: 2015–09
  15. By: GHANEM, Yasmina; ACHOUCHE, Mohamed
    Abstract: Résumé: Sur un panel de 14 pays de la région Moyen Orient, Afrique du Nord (MENA), le présent papier examine si le développement financier entraîne un effet considérable sur le développement de l’entrepreneuriat en facilitant l’émergence de nouvelles entreprises. Les résultats estimés par les doubles moindres carrés généralisés en variables instrumentales accentuent l’importance des systèmes financiers développés pour la dynamique de création des entreprises. Globalement, le développement financier et sa composante expliquée par la qualité institutionnelle affectent positivement et significativement la densité d’entrée dans les pays pétroliers comparativement aux pays non pétroliers.
    Abstract: Using a panel of 14 Middle East, North Africa (MENA) countries, this paper investigates and examines whether financial development trains a substantial effect on entrepreneurship development by facilitating the rise of new firms. Generalized Two-Stage Least Squares estimate results with instrumental variables highlight the relevance of developed financial systems for the creation of new firms. In Overall, financial development and its component explained by the institutional quality exert a positive and significant effect on new entry density in oil MENA countries compared to non-oil ones.
    Keywords: développement financier, création des entreprises, densité d’entrée, MENA, panel.
    JEL: C23 E69 G21 L26
    Date: 2015–11–30
  16. By: Ravichandran, Archana; Bhaduri, Saumitra
    Abstract: The advantages and disadvantages of diversification and its impact on productivity or performance of a firm have been debated upon by academics and business professionals all over, although views on the topic still differ widely. While popular views are that related diversification increases value and unrelated diversification decreases value, the results of research conducted on the effects of overall diversification (without distinguishing between related and unrelated diversification) on productivity are of conflicting nature. This paper focuses on this relationship in the context of the Indian manufacturing sector. Along with this, it also expounds on the existence of an optimal diversification point for the Indian context. Data used is obtained from CMIE Prowess for the period 2003 to 2014 and standard econometric analysis on panel data is carried out to find the stated relationship. Tobin’s q is used as a measure of performance of the firm. The results show that highly diversified firms perform poorly on account of vertical diversification while horizontal diversification has a positive effect on performance.
    Keywords: productivity, diversification, Tobin’s q, related, unrelated
    JEL: D22 L25
    Date: 2015–06

This nep-sbm issue is ©2015 by João Carlos Correia Leitão. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.