nep-sbm New Economics Papers
on Small Business Management
Issue of 2016‒02‒23
eighteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Determinants of innovation in Croatian SMEs: Comparison of service and manufacturing firms By Bozic, Ljiljana; Mohnen, Pierre
  2. Research and Development as an Initiator of Fixed Capital Investment By Andrin Spescha; Martin Wörter
  3. Business Models: A Unit of Analysis for Company Performance By Ormrod, Nicholas George
  4. International Technology Diffusion of Joint and Cross-border Patents By Chang, C-L.; McAleer, M.J.; Tang, J-T.
  5. Venture Capital and Knowledge Transfer By Dessí, Roberta; Yin, Nina
  6. Financial constraints and export performance: Evidence from Brazilian micro-data By Fatma Bouattour
  7. Entrepreneurial culture and start-ups: Could a cultural shift in favour of entrepreneurship lead to more innovative start-ups? By Röhl, Klaus-Heiner
  8. Do initial financial conditions determine the fate of start-up firms? By Yuji Honjo; Masatoshi Kato
  9. The Economic Significance of Business Angels - Towards Comparable Indicators By Avdeitchikova, Sofia; Landström, Hans
  10. Industrial Research and Innovation: Evidence for Policy By Mafini Dosso; Petros Gkotsis; Fernando Hervas; Pietro Moncada-Paterno-Castello
  11. “Technological cooperation in Spanish firms” By Erika Raquel Badillo; Rosina Moreno
  12. Entrepreneurship vulnerability to business cycle. A new methodology for identification pro-cyclical and counter-cyclical patterns of entrepreneurial activity. By Lechman, Ewa; Dominiak, Piotr
  13. Broadband Infrastructure and Entrepreneurship: Evidence from German Municipalities By Falck, Oliver; Mazat, Andreas; Stockinger, Bastian
  14. Technology transfer with search intensity and project advertising. By Giorgio Calcagnini; Germana Giombini; Paolo Liberati; Giuseppe Travaglini
  15. Impacts of geographical locations and sociocultural traits on the Vietnamese entrepreneurship By Quan-Hoang Vuong
  16. Understanding the "regional policy mix": A classification and analysis of European regions' support policies By Kroll, Henning
  17. ICT and global sourcing: Evidence for German manufacturing and service firms By Rasel, Fabienne
  18. Creativity, Clusters and the Competitive Advantage of Cities By Martin, Roger; Florida, Richard; Pogue, Melissa; Mellander, Charlotta

  1. By: Bozic, Ljiljana (Institute of Economics, Zagreb); Mohnen, Pierre (UNU-MERIT, SBE, Maastricht University)
    Abstract: In this paper we focus on SMEs in Croatia operating in the manufacturing and services sectors and seek to compare them in terms of their involvement in innovation activities, the factors that determine their decision to innovate in general and in four types of innovations in particular: product/service, process, organisational and marketing innovations. The analysis relies on the Croatian Community Innovation Survey 2010 (CIS 2010) data. To find out whether innovations have a different pattern of drivers in manufacturing and in services, we estimate the probit and multivariate probit models separately on these two groups of firms. The findings reveal that despite some differences, service and manufacturing SMEs are not that different from one another when it comes to innovation activities. Service SMEs are somewhat less likely to introduce technological innovations, but manufacturing and service SMEs do not significantly differ from each other when it comes to non-technological innovations. One noteworthy difference between manufacturing and service SMEs is that the latter rely much more than the former on acquired knowledge.
    Keywords: Croatia, innovation, services, manufacturing, SME, multivariate probit
    JEL: O31 L80
    Date: 2016–02–16
  2. By: Andrin Spescha (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Martin Wörter (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: This paper investigates the causal relationship between firms’ research and development expenditures (R&D) and their investments into fixed capital. The literature provides two contrasting views in this respect. The first view holds that a firm’s research activity causes, via the creation of inventions, subsequent investment into fixed capital, as the firm needs additional capacities to produce the new goods or services that follow from the inventions. The second view holds that firms’ fixed capital investments cause intensified research activity, as novel capital goods from external suppliers offer the firms’ researchers a wide range of additional technical possibilities of how to build new prototypes. Using panel data of Swiss firms ranging from 1990 to 2014, the paper applies, contrasting the existing empirical literature only based on VARs, a 2SLS approach to uncover the direction of causality between R&D and fixed capital investment. In order to obtain exogenous instruments, the paper exploits shocks to i) technological opportunities and ii) sales from capital goods suppliers. Results show a one-way causal relationship; we find evidence for that firms’ R&D expenditures cause fixed capital investments, but we do not find evidence for the reverse effect. When additionally looking at innovation performance, R&D activities turn out to be complementary to fixed capital investment, in the sense that they markedly increase the expected return on investment. Thus, increasing research activity may not just be valuable for long-run economic growth but, via investment, may also give the economy a head start in times of a prolonged economic downturn.
    Keywords: Investment, Research and Development, Invention, Technological Opportunities, Complementarity
    JEL: O33
    Date: 2016–02
  3. By: Ormrod, Nicholas George
    Abstract: Business models have been popularised in recent practitioner literature as a tool for summarising and representing how a company generates value. But academic consensus remains absent with a multitude of different definitions and typologies generally structured for application within a single focal business. There remains an opportunity to use the business model beyond intra application and act as a unit of analysis for inter-enterprise comparison. Weill et al (2006) have created a typology titled the MIT Business Model Archetypes. This research applies the MIT typology to New Zealand’s publically listed companies to generate a business model landscape. Several financial metrics are used to compare the performance and patterns of different business models. Interesting patterns emerge such as 33% annual compound growth for gross shareholder returns exhibited by one archetype, and a total of six out of nine that exhibit higher returns than the S&P/NZX50 index. The two research questions proposed are; can a business model be used as a unit of analysis? And, do some business models perform differently than others? The results of this analysis evidence a positive response to both questions.
    Keywords: Business, Model, Archetype,
    Date: 2015
  4. By: Chang, C-L.; McAleer, M.J.; Tang, J-T.
    Abstract: __Abstract__ With the advent of globalization, economic and financial interactions among countries have become widespread. Given technological advancements, the factors of production can no longer be considered to be just labor and capital. In the pursuit of economic growth, every country has sensibly invested in international cooperation, learning, innovation, technology diffusion and knowledge. In this paper, we use a panel data set of 40 countries from 1981 to 2008 and a negative binomial model, using a novel set of cross-border patents and joint patents as proxy variables for technology diffusion, in order to investigate such diffusion. The empirical results suggest that, if it is desired to shift from foreign to domestic technology, it is necessary to increase expenditure on R&D for business enterprises and higher education, exports and technology. If the focus is on increasing bilateral technology diffusion, it is necessary to increase expenditure on R&D for higher education and technology.
    Keywords: International Technology Diffusion, Exports, Imports, Joint Patent, Cross-border Patent, R&D, Negative Binomial Panel Data.
    JEL: F14 F21 O30 O57
    Date: 2015–05–15
  5. By: Dessí, Roberta; Yin, Nina
    Abstract: This paper explores a new role for venture capitalists, as knowledge intermediaries. A venture capital investor can communicate valuable knowledge to an entrepreneur, facilitating innovation. The venture capitalist can also communicate the entrepreneur's innovative knowledge to other portfolio companies. We study the costs and benefits of these two forms of knowledge transfer, and their implications for investment, innovation, and product market competition. The model also sheds light on the choice between venture capital and other forms of finance, and the determinants of the decision to seek patent protection for innovations. Our analysis provides a rationale for the use of contingencies (specifically, patent approval) in VC contracts documented by Kaplan and Stromberg (2003), and for recent evidence on patterns of syndication among venture capitalists.
    Keywords: competition; contracts; innovation; knowledge intermediaries; patents; venture capital
    JEL: D82 D86 G24 L22
    Date: 2015–02
  6. By: Fatma Bouattour (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine)
    Abstract: Despite the growing role of Brazil in international trade, exports still face challenges. Following the theoretical framework of Manova (2013), this paper provides firm-level evidence that financial constraints hamper the export performances. Using customs data from Brazil, I show through a probability model, that Large firms exhibit more probability to have export performances when compared with Small and Medium-sized firms, and that this advantage tends to decrease in industries with high external funding needs. The sectors financial vulnerability is proxied with two measures borrowed from Rajan and Zingales (1998) and computed for Brazilian industries over the recent period of the 2000s. The results are globally robust to the modification of the proxies of sectoral external finance dependence, used in the literature. Other tests demonstrate that Brazilian subsidiaries have greater chances to be export performant, and that there is a "regional effect" that makes some Brazilian regions export more than others. This paper also provides an insight of the effects of the global crisis of 2008 on the export patterns.
    Keywords: Export,firms,international trade
    Date: 2015–06–22
  7. By: Röhl, Klaus-Heiner
    Abstract: Europe is lagging behind the United States and Israel in the number of successful start-ups. Highly innovative start-ups that grow to become global companies the size of Google or Amazon within just a few years are not being founded here. Many of Europe’s countries and regions are experiencing persistent low growth with high unemployment, which is something a boom in new companies implementing new creative ideas could help alleviate. Even in Germany, which has a much better macroeconomic performance, the number of companies being founded has been falling for several years. There are strong indicators that Europe’s aforementioned weakness when it comes to the starting of new companies may also have a cultural dimension. Regions which are seeing particularly strong numbers of innovative start-ups being founded appear to have a strong entrepreneurial spirit. This policy paper will therefore examine what defines the entrepreneurial culture of successful start-up regions and to what extent different entrepreneurial cultures contribute to the differences in entrepreneurial activity between large areas of continental Europe and other highly developed economies, especially the United States, the United Kingdom, and Israel. This paper will examine both the societal and institutional framework that exists in an entrepreneurial culture and the personality structure of successful entrepreneurs. Following an international comparison of enterprise birth rates, this paper will review the different start-up systems in Europe, the United States, and Israel, which are also expected to have a connection to differences in the availability of venture capital. Finally, this paper considers the role of the education system in transferring business knowledge and entrepreneurship. This is followed by a conclusion in which recommendations are given regarding how to develop an entrepreneurial culture and a willingness to take risks.
    Abstract: Europa hinkt im Vergleich zu den Vereinigten Staaten oder Israel bei der Zahl erfolgreicher Startups hinterher. Innovationsstarke Gründungen, die innerhalb weniger Jahre zu globalen Konzernen wie Google oder Amazon heranwachsen, finden nicht hier statt. In vielen Staaten und Regionen Europas gibt es eine hartnäckige Wachstumsschwäche mit hoher Arbeitslosigkeit, zu deren Überwindung auch ein Gründungsboom zur Umsetzung neuer kreativer Ideen beitragen könnte. Selbst in Deutschland, das eine gute makroökonomische Performance vorweist, sinken die Gründungszahlen seit mehreren Jahren. Vieles weist darauf hin, dass die konstatierte Gründungsschwäche Europas auch eine kulturelle Dimension besitzen könnte. Besonders gründungsstarke Regionen, die auf innovative Start-ups konzentriert sind, haben offenbar einen starken 'Entrepreneurial Spirit'. In diesem Policy Paper wird deshalb der Frage nachgegangen, was die 'Entrepreneurial Culture' erfolgreicher Gründungsregionen ausmacht und inwieweit eine unterschiedliche Gründungskultur zu den Differenzen im Gründungsgeschehen zwischen weiten Teilen Europas und anderen hoch entwickelten Volkswirtschaften, speziell den Vereinigten Staaten, Großbritannien und Israel, beiträgt. Neben den gesellschaftlichen und institutionellen Rahmenbedingungen einer Gründerkultur wird auch auf die Persönlichkeitsstruktur erfolgreicher Entrepreneure beleuchtet. Nach einem internationalen Vergleich der Gründungsquoten wird auf die unterschiedlichen Startup-Systeme in Europa, Amerika und Israel eingegangen, die auch auf Unterschiede in der Verfügbarkeit von Wagniskapital zurückzuführen sein dürften. Abschließend wird die Rolle des Bildungssystems in der Vermittlung von wirtschaftlichen Kenntnissen sowie Entrepreneurship beleuchtet, bevor im Fazit Empfehlungen zum Ausbau von Gründerkultur und Risikobereitschaft gegeben werden.
    JEL: L25 L26 M13 M14
    Date: 2016
  8. By: Yuji Honjo (Faculty of Commerce, Chuo University); Masatoshi Kato (School of Economics, Kwansei Gakuin University)
    Abstract: Using a survival analysis approach, this paper investigates the impact of initial financial conditions on the post-entry performance of firms. We examine whether initial financial conditions affect the duration of survival among start-up firms in Japan, distinguishing between failure and merger. We provide evidence that start-up firms that rely more on equity than debt financing are less likely to fail within a shorter period, but we find little evidence that initial equity size has a significant effect on the likelihood of failure. Moreover, we find the negative effect of equity financing on the likelihood of failure to be greater for start-up firms founded following the abolition of regulations governing a minimum paid-in capital requirement. Furthermore, the results reveal that start-up firms with larger initial equity are more likely to exit through merger. Overall, the findings suggest that initial capital structure is a critical determinant of exit route.
    Keywords: Business failure, Competing risk, Equity financing, Initial financial conditions, Merger
    JEL: C24 G32 M13
    Date: 2016–01
  9. By: Avdeitchikova, Sofia (The Ratio institute); Landström, Hans (Lund University)
    Abstract: Due to their importance for fostering high-growth entrepreneurship, business angels have over the last decades attracted considerable interest among policy-makers around the world. However, most of the policy initiatives to support business angel investing have been made without any strong empirical basis to guide them. Thus, the research results so far have done little to inform policy-makers regarding – what is the state of business angel market and what (if any) policy action is required? In this paper, we take one step in the direction of “making sense” of the existing evidence. We make a differentiation between the scope of the business angel investing and the significance of business angel investing and relate the recent empirical estimates of the business angel activity to the supply of venture finance on the one hand and the demand for venture finance on the other. In this respect, we move beyond talking about the scope of the business angel market and discuss the importance or potential impact of this source of finance for new and growing ventures.
    Keywords: business angels; entrepreneurship policy; indicators; supply-side; demand-side.
    JEL: G18 M13 M20 O16
    Date: 2014–12–31
  10. By: Mafini Dosso (European Commission – JRC - IPTS); Petros Gkotsis (European Commission – JRC - IPTS); Fernando Hervas (European Commission – JRC - IPTS); Pietro Moncada-Paterno-Castello (European Commission – JRC - IPTS)
    Abstract: This policy Brief addresses the results of the fifth European Conference on Corporate R&D and Innovation, CONCORDi 2015, on ‘Industrial Research and Innovation: evidence for policy’. Taking stock from the underlined background issues, the document presents the main evidence-based insights for policy drawing upon the contributions and debates. It also highlights the main implications for industrial and innovation policies making and for the science-policy interface. A series of open questions for policy and evidence makers conclude the brief.
    Keywords: corporate R&D, innovation, evidence for policy
    Date: 2015–11
  11. By: Erika Raquel Badillo (AQR Research Group. University of Barcelona.); Rosina Moreno (AQR Research Group.Faculty of Economics, University of Barcelona)
    Abstract: This paper aims to study to what extent participating in technological cooperation agreements can be a useful mechanism for improving the innovative capacity of Spanish firms, specially in the context of the economic recession. We analyse if there are differences in the returns obtained from cooperation alliances according to the firm’s size as well as different geographical scopes of such alliances. In addition, we want to study to what extent innovation cooperation may have a different effect on incremental innovations than on radical/breakthrough innovation s. We use the Spanish Technological Innovation Panel from 2004 to 2012 to provide evidence on the above issues.
    Keywords: Innovation cooperation; Technological partners; Performance; Spanish firms. JEL classification: L25; O31; O33; R1
    Date: 2016–01
  12. By: Lechman, Ewa; Dominiak, Piotr
    Abstract: In literature, there is ongoing discussion whether entrepreneurial activity, approximated by, for instance, changes in self-employment, tends to behave pro-cyclically, counter-cyclically or rather is a-cyclical. Thus far, both theoretical and empirical evidence, where various multiple methodological approaches are used, does not provide clear answer to the latter; while widely offered explanations are scattered and lack robustness. Regarding the latter, some evidence may be traced in works of Kollinger and Thurik (2012), which using data for 22 OECD countries over the period 1972-2007, use Granger-causality tests to verify if entrepreneur activities are leading or lagging indicator over the business cycles; and their findings they show that entrepreneurship is leading indicator of the business cycle. Rampini (2004), using canonical real business cycle model, finds that entrepreneurship behaves pro-cyclical, which is associated with changes in risk aversion during respective phases of business cycle. Carmona et al. (2010), using quarterly data for self-employment and GDP in Spain and the United States, over the period 1987-2004, adopt the cross-correlations and VAR models to demonstrate that the hypothesis on pro-cyclicality of self-employment cannot be confirmed. At the same time, they present rather mixed results for various groups of self-employed. Klapper et al. (2014), using data for 109 countries over the period 2002-2012, find that entrepreneurial behavior demonstrates strong pro-cyclical patterns. More recent evidence may be also found in works of, inter alia, Parker (2002), Parker et al. (2012a,b), Milan et al. (2012), Baptista and Preto (2011). This paper is designed to contribute to the present state of the art, by presenting a novel methodological approach to identification of the relationship between the intensity of entrepreneurial activity and business cycle. Put differently, we aim unveil if entrepreneurship (approximated by changes in self-employment) behaves pro-cyclically, counter-cyclically or a-cyclically. To exemplify our new conceptual approach, we use quarterly data on deflated gross domestic product and self-employment. The empirical evidence presents the case of Italy. The period of analysis is restricted to the years 1995-2014. All statistics are extracted from OECD datasets on Annual Labor Force and Gross Domestic Product.
    Keywords: entrepreneurship, self-employment, vulnerability, small and medium sized enterprises, business cycle, economic growth
    JEL: A1 B41 D22 E3
    Date: 2016
  13. By: Falck, Oliver; Mazat, Andreas; Stockinger, Bastian
    Abstract: Policy makers in many places regularly call for broadband infrastructure deployment to foster regional development. While some empirical studies deal with the productivity impact of broadband Internet availability, few hard facts are known about its relation to establishment start-up. This paper contributes to closing the gap, providing causal evidence on the impact of broadband Internet availability on establishment start-up. We apply an instrumental variables approach, exploiting technological peculiarities of the preexisting voice telephony network that impeded high-speed Internet availability to circumvent endogeneity bias. We find that Internet effects on establishment start-up might take some time to realize and are likely heterogeneous across sectors, establishment size and knowledge intensity.
    Date: 2015
  14. By: Giorgio Calcagnini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo" and Mo.Fi.R., Ancona, Italy); Germana Giombini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo" and Mo.Fi.R., Ancona, Italy); Paolo Liberati (Department of Economics, Università degli Studi di Roma Tre, Rome, Italy.); Giuseppe Travaglini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")
    Abstract: TIn this paper we present a model where technology transfer is embedded into a competitive model of utility and profit maximization and is the result of a matching process between heterogeneous Knowledge Transfer Offices (KTOs) and innovative firmrms. Our model improves on previous literature by endogenizing the process that drives the dynamics of university researchers in search and firm vacant projects. We are able to show that the KTOs' reservation fee rate must be greater than the ratio between the marginal researcher cost and the marginal utility of matched projects, and that technology transfer strictly depends on the efficiency units of searching researchers and vacant projects. Further, we show that firm technological progress might be too low when KTOs too much intensively search for project matches. This occurs because both sides of the market ignore the externalities of their decisions. Finally, behavioral complementarity, substitutability, and free riding are all potential equilibrium outcomes.
    Keywords: Technology transfer, Matching, Externalities
    JEL: O31 O32
    Date: 2015
  15. By: Quan-Hoang Vuong
    Abstract: This paper presents new results that are obtained from investigations into a 2015 Vietnamese entrepreneurs survey data, containing 3071 observations. Evidence found from the estimations using multinomial logits supports relationships between several sociocultural factors and entrepreneurshiprelated performance or traits has been found. Specifically, those relationships include: a) Active participation in entrepreneurs' social networks and reported value of creativity; b) CSR-willingness and reported entrepreneurs' perseverance; c) Transforming of sociocultural values and entrepreneurs' decisiveness; and, d) Lessons learned from others' failures and perceived chance of success. Using geographical locations as control variate, evaluations of the baseline-category logits models indicate their varying effects on the outcomes when combined with the sociocultural factors that are found statistically significant. Empirical probabilities that help to learn in details about behavioral patterns are provided; and toward the end, the paper offers a discussion on some striking insights and useful explanations on this entrepreneurship data set.
    Keywords: Entrepreneurship; creativity; perseverance; cultural changes; transitional economies
    JEL: L26 M13 O33
    Date: 2016–02–04
  16. By: Kroll, Henning
    Abstract: In recent years, no small number of studies have emphasised the importance of "getting the policy mix right". What that term, "policy mix" relates to, however, remained less than clear, not least as a result of the absence of an appropriate database on regional policies. With the Regional Innovation Monitor repository, such a database has now become available. Using this novel source of data, this paper identifies specific types of "policy mixes" common among European regions as well as external and internal factors that determine regional policy makers' choices of policy mixes. Finally, it demonstrates that regions' choice of a particular policy mixes may have influenced their economic resilience during the recent years of crisis.
    Date: 2016
  17. By: Rasel, Fabienne
    Abstract: This paper analyses the relevance of information and communication technologies (ICT) for firms' probability of global sourcing of inputs. Using firm-level data from Germany in 2009, which include mainly small and medium-sized firms, the empirical analysis differentiates between manufacturing and service firms. The results show some differences between the manufacturing and service sector. Controlling for various sources of firm heterogeneity, the global sourcing probability is increasing in the firms' share of employees with Internet access in the manufacturing sector. E-commerce-intensive firms are more likely to source inputs from abroad but generally, this relationship between e-commerce and global sourcing is only robust in services and much stronger there than in manufacturing. In both sectors, it is strongest in industries with higher upstream industry diversity. Moreover, labour productivity is positively linked to global sourcing. The findings support arguments for the importance of the Internet for global trade and they confirm the productivity advantage of importing in comparison to non-importing firms that is stated in the literature.
    Keywords: global sourcing,importing,information and communication technologies,inputs
    JEL: D22 L23 F14
    Date: 2015
  18. By: Martin, Roger (Martin Prosperity Institute & University of Toronto); Florida, Richard (Martin Prosperity Institute & University of Toronto); Pogue, Melissa (Martin Prosperity Institute & University of Toronto); Mellander, Charlotta (Jönköping International Business School, & Centre of Excellence for Science and Innovation Studies)
    Abstract: Purpose – The article marries Michael Porter’s industrial cluster theory of traded and local clusters to Richard Florida’s occupational approach of creative and routine workers to gain a better understanding of the process of economic development. By combining these two approaches, four major industrial-occupational categories are identified. The shares of U.S. Employment in each – creative-in-traded, creative-in-local, routine-in-traded and routine-in-local – are calculated and a correlation analysis is used to examine the relationship of each to regional economic development indicators. Our findings show that economic growth and development is positively related to employment in the creative-in-traded category. While metros with a higher share of creative-in-traded employment enjoy higher wages and incomes overall, these benefits are not experienced by all worker categories. The share of creative-in-traded employment is also positively and significantly associated with higher inequality. After accounting for higher median housing costs, routine workers in both traded and local industries are found to be relatively worse off in metros with high shares of creative-in-traded employment, on average.
    Keywords: Creativity; clusters; cities; metros; occupations; regional development
    JEL: J30 O10 R10
    Date: 2015–06–24

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