nep-sbm New Economics Papers
on Small Business Management
Issue of 2016‒04‒23
34 papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Unleashing the Export Potential of SMEs in Greece By Iota Kaousar Nassr; Virginia Robano; Gert Wehinger
  2. Knowledge Creation and Dissemination by Local Public Technology Centers in Regional and Sectoral Innovation Systems: Insights from patent data By FUKUGAWA Nobuya
  3. The role of corporate financial structure in the export propensity of manufacturing firms By Miravitlles, Paloma; Mora, Toni; Achcaoucaou, Fariza
  4. The differentiated impacts of organizational innovation practices on technological innovation persistence By Christian Le Bas; Caroline Mothe; Thuc Uyen Nguyen-Thi
  5. International entrepreneurial firms in Chile: an exploratory profile By José Ernesto Amorós; María Soledad Etchebarne; Isabel Torres Zapata; Christian Felzensztein
  6. Assessing complementarity in organizational innovations for technological innovation: the role of knowledge management practices By Caroline Mothe; Uyen Nguyen-Thi; Phu Nguyen Van
  7. Public Support to Innovation Strategies By Laura Barbieri; Daniela Bragoli; Flavia Cortelezzi; Giovanni Marseguerra
  8. “Relatedness, external linkages and innovation” By Ernest Miguélez; Rosina Moreno
  9. Dynamic Entrepreneurship and Technology-Based Innovation By Audretsch, David; Kuratko, Donald; Link, Albert
  10. New Firms and Post-Entry Performance: The Role of Innovation. By Colombelli, Alessandra; Krafft, Jackie; Vivarelli, Marco
  11. Production Networks, Geography, and Firm Performance By Andrew B. BERNARD; Andreas MOXNES; SAITO Yukiko
  12. How do Small and Medium-sized Enterprises Evaluate the Activities of Private Financial Institutions and Government-affiliated Financial Institutions? Is there a difference by firm age? (Japanese) By YAMAMOTO Isamu
  13. Innovation success: What is the role of innovation strategies? By Jové Llopis, Elisenda; Segarra Blasco, Agustí, 1958-
  14. On real investment by new ventures By Schulte, Reinhard
  15. Born Globals in Interactive Branding Environment: A case of the BonAlive By Nikolina Koporcic
  16. Ethnic Entrepreneurship in the U.S. High-tech Industry By Subodh Bhat
  17. Innovation, institutional ownership, and financial constraints By Schain, Jan Philip; Stiebale, Joel
  18. Opportunity versus necessity : understanding the heterogeneity of female micro-entrepreneurs By Calderon,Gabriela; Iacovone,Leonardo; Juarez,Laura
  19. What Determines Firm-level Export Capacity? Evidence from Portuguese firms By Ana Gouveia; Ana Luisa Correia
  20. Innovation, Competition and Productivity. Firm Level Evidence for Eastern Europe and Central Asia By Klaus S. Friesenbichler; Michael Peneder
  21. The European Union’s growing innovation divide By Reinhilde Veugelers
  22. Sourcing Innovation: probing Technology Readiness Levels with a design framework By Fabien Jean; Pascal Le Masson; Benoit Weil
  23. Directors as Connectors: The Impact of the External Networks of Directors on Firms By Quoc-Anh Do; Yen-Teik Lee; Bang Dang Nguyen
  24. Role of Public Research Institutes in National Innovation Systems in Industrialized Countries: The cases of Fraunhofer, NIST, CSIRO, AIST, and ITRI By Patarapong INTARAKUMNERD; GOTO Akira
  25. FDI in R&D: An Introspection By Pohit, Sanjib; Biswas, Pradip
  26. R&D, Scale Effects and Spillovers: New Insights from Emerging Countries By Luintel, Kul B; Khan, Mosahid
  27. Regional Human Capital and University Orientation: A case study on Spain By Sánchez-Barrioluengo, Mabel; Consoli, Davide
  28. Competition makes IT better : evidence on when firms use it more effectively By Iacovone,Leonardo; Pereira Lopez,Mariana De La Paz; Schiffbauer,Marc Tobias
  29. Does environmental policy stringency foster innovation and productivity in OECD countries? By Morales-Lage, Rafael; Bengochea-Morancho, Aurelia; Martínez-Zarzoso, Inmaculada
  30. Networks of Enterprises and Innovations: Evidence from SMEs in Vietnam By Doan, Quang Hung; Vu, Hoang Nam
  31. The Effect of Local Taxes on Firm Performance: Evidence from Geo-referenced Data By Federico Belotti; Edoardo Di Porto; Gianluca Santoni
  32. Business Cycles and Growth By Michaël Assous; Muriel Dal-Pont Legrand; Harald Hagemann
  33. Who Invests in the High-Tech Knowledge Base? By Matt Hopkins; William Lazonick
  34. Revisiting Gertler-Gilchrist Evidence on the Behavior of Small and Large Firms By Kudlyak, Marianna; Sanchez, Juan M.

  1. By: Iota Kaousar Nassr; Virginia Robano; Gert Wehinger
    Abstract: Despite Greece’s long history as a trading nation, the country is failing to live up to its export potential. Small and medium-sized enterprises (SMEs) could significantly contribute to strengthening Greece’s export performance, thereby helping to jump-start economic growth and job creation as well as improving the sustainability of fiscal and external accounts. This paper explores aspects of the business, financial and regulatory environment that impede the greater involvement of SMEs in export activity. The paper also discusses the potential role of a development bank and stresses the importance of more R&D and innovation, the need to develop venture and other equity capital financing, and the need to build stronger links and networks between universities and industry. It draws some policy conclusions and suggests policy measures in the areas of finance, regulation, R&D and innovation.
    Keywords: development banks, entrepreneurship, small and medium-sized enterprises, business environment, export performance
    JEL: F1 F43 F6 G2 H81 I23 L25 L26 M13 O3
    Date: 2016–04–20
  2. By: FUKUGAWA Nobuya
    Abstract: Local public technology centers (LPTCs) in Japan help small- and medium-sized enterprises (SMEs) improve productivity through technology transfer. Using a comprehensive patent database and based on frameworks of regional and sector innovation systems, this study quantitatively evaluates LPTCs' technology transfer activities. The key findings can be summarized as follows. First, local SMEs' technological portfolios (the distribution of patents across technological fields) indicate a better fit with the technological portfolios of LPTCs than with those of local universities. This tendency is salient for manufacturing LPTCs. Second, LPTCs collaborate more intensively on research with local SMEs compared to the local universities. This tendency is also salient for manufacturing LPTCs. Third, in regions where SMEs' technological portfolios are concentrated in biotechnology, LPTCs engage more in licensing. In regions where SMEs' technological portfolios are concentrated in mechanical engineering, LPTCs engage more in technical consultation.
    Date: 2016–03
  3. By: Miravitlles, Paloma; Mora, Toni; Achcaoucaou, Fariza
    Abstract: The aim of this study is to analyse the impact of corporate financial structure on a firm's export propensity, especially that of small and medium-sized enterprises (SMEs). The paper contributes to the literature concerned with the relationship between exports and financial constraints from the perspective of firm heterogeneity. Specifically, it explores, by firm size, the link between firms' export propensity and their financial health and ownership concentration. By means of a multivariate probit model applied to a sample of 8,019 Spanish manufacturing firms drawn from the Iberian Balance Sheet Analysis System, this paper provides firm-level evidence for SMEs of a positive link between export propensity and ownership concentration, although if shareholder concentration is very high it can be counterproductive. Other positive effects on the export propensity of SMEs caused either by internal factors (export initial conditions, performance and liquidity) or by external characteristics (regional and sector spillover effects) are also identified.
    Keywords: export propensity,small and medium-size enterprises (SMEs),capital structure,financial constraints,ownership structure
    JEL: F14 G32
    Date: 2016
  4. By: Christian Le Bas (ESDES - École de management de Lyon - Université Catholique de Lyon); Caroline Mothe (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Thuc Uyen Nguyen-Thi (CEPS/INSTEAD - Centre d'Etudes de Populations, de Pauvreté et de Politiques Socio-Economiques / International Networks for Studies in Technology, Environment, Alternatives, Development - Centre d'Etudes de Populations, de Pauvreté et de Politiques Socio-Economiques / International Networks for Studies in Technology, Environment, Alternatives, Development)
    Abstract: This article tests the major determinants of technological (product and process) innovation persistence and provides evidence of the significant role of organizational innovation. Design/methodology/approach Data came from two waves of the Luxembourg Community Innovation Survey (CIS): CIS2006 for 2004–2006 and CIS2008 for 2006–2008. The longitudinal data set resulted in a final sample of 287 firms. A multinomial probit model estimates the likelihood that each firm belongs to one of three longitudinal innovation profiles: no, sporadic, or persistent innovators. Findings The determinants have differentiated impacts on process and technological innovation persistence. Organizational innovation influences technological innovation persistence. In the analysis of detailed organizational practices, strong evidence emerged that knowledge management exerts a crucial effect on product innovation persistence; workplace organization instead is associated with process innovation persistence.
    Keywords: R&D,persistence,innovation,Technological innovation,organizational innovation
    Date: 2015
  5. By: José Ernesto Amorós; María Soledad Etchebarne; Isabel Torres Zapata; Christian Felzensztein (School of Business and Economics, Universidad del Desarrollo)
    Abstract: The internationalization of new small and medium-sized enterprises is a challenge for many developing countries, especially those with open economies and small internal markets like Chile. This study, in an exploratory way, analyzes some of the factors that determine how new ventures are oriented to international markets from their early-stages. This paper develops a model that integrates variables related to firm characteristics like industrial sector, competitiveness, and size of the firm with a degree of internationalization. The empirical analysis uses data from the Global Entrepreneurship Monitor´s (GEM) adult population survey carried out in Chile during the period 2007-2013 (n=4,208). An ordinal logit regression model was used to test the hypotheses. Descriptive results show that 12.8% of Chilean entrepreneurs in the sample have a relatively high tendency towards internationalization and that the factors related to competitiveness are significant in respect to this tendency. The size of the firm and the propensity to create employment are also significant. Practical implications are discussed
    Keywords: Early internationalization; industrial sector; size; competitiveness; Chile; Global Entrepreneurship Monitor
    Date: 2015–09
  6. By: Caroline Mothe (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Uyen Nguyen-Thi (CEPS/INSTEAD - Centre d'Etudes de Populations, de Pauvreté et de Politiques Socio-Economiques / International Networks for Studies in Technology, Environment, Alternatives, Development - Centre d'Etudes de Populations, de Pauvreté et de Politiques Socio-Economiques / International Networks for Studies in Technology, Environment, Alternatives, Development); Phu Nguyen Van (BETA - Bureau d'Economie Théorique et Appliquée - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We here empirically investigate the pattern of complementarity between four organizational practices. Firm-level data were drawn from the Community Innovation Survey (CIS) carried out in 2008 in Luxembourg. Supermodularity tests confirm the crucial role of organizational innovation in raising firms’ technological innovation. The pattern of complementarity between organizational practices differs according to the type of innovation, i.e. product or process innovation, but also according to whether the firm is in the first stage of the innovation process (i.e. being innovative or not) or in a later stage (i.e. innovation performance in terms of sales of new products).
    Keywords: Supermodularity, Technological innovation,Complementarity, Organizational innovation, Substitution
    Date: 2015
  7. By: Laura Barbieri (Dipartimento di Scienze Economiche e Sociali, Università Cattolica); Daniela Bragoli (Dipartimento di Discipline matematiche, Finanza matematica ed Econometria, Università Cattolica); Flavia Cortelezzi (Dipartimento di Diritto, Economia e Culture, Università degli Studi dell’Insubria); Giovanni Marseguerra (Dipartimento di Discipline matematiche, Finanza matematica ed Econometria, Università Cattolica)
    Abstract: This study investigates whether the receipt of public R&D funding determines firm's R&D strategy election. Using the Community Innovation Survey (CIS) dataset including more than 3000 Italian manufacturing companies, we adopt a multinomial logit model after controlling for sample selection and endogeneity issues which arise when dealing with CIS data. The main finding is that public R&D funding in uences whether firms select the make, the buy or the make&buy strategy and in particular firms, after receiving public support, prefer the composite strategy rather than the single strategies. This result turns out to be good news given that government support, correcting for the market failures which characterize the combined strategy, favors the strategy which seems to enhance a positive synergy between in house R&D and external sourcing.
    Keywords: Public Funding, R&D strategies, CIS Survey
    JEL: G32 O31 D21
    Date: 2015–12
  8. By: Ernest Miguélez (GREThA, University of Bordeaux & AQR-IREA, University of Barcelona.); Rosina Moreno (AQR-IREA, University of Barcelona.)
    Abstract: This paper has two main objectives. First, it estimates the impact of related and unrelated variety of European regions’ knowledge structure on their patenting activity. Second, it looks at the role of technological relatedness and extra-local knowledge acquisitions for local innovative activity. Specifically, it assesses how external technological relatedness affects regional innovation performance. Results confirm the strong relevance of related variety for regional innovation; whereas the impact of unrelated variety seems relevant only for the generation of breakthrough innovations. The study also shows that external knowledge flows have a higher impact, the higher the similarity between these flows and the extant local knowledge base.
    Keywords: variety, patents, patent citations, relatedness, knowledge production function JEL classification: O18, O31, O33, R11
    Date: 2016–04
  9. By: Audretsch, David (Indiana University); Kuratko, Donald (Indiana University); Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: This paper seeks to distinguish between dynamic and static entrepreneurship. We define the construct of dynamic entrepreneurship in terms of Schumpeterian innovativeness and then develop a hypothesis suggesting that human capital is conducive to such action. In contrast, a paucity of human capital is more conducive to static entrepreneurship (defined in terms of organizational or ownership status). Based on a rich data set of entrepreneurs receiving research funding through the U.S. Small Business Innovation Research (SBIR) program, our empirical evidence suggests that academic-based human capital is positively correlated with dynamic behavior, whereas as business-based human capital and prior business experience is not.
    Keywords: Dynamic entrepreneurship; Static entrepreneurship; Schumpeterian innovation; human capital; Small Business Innovation Research (SBIR) Program
    JEL: J24 L26 O38
    Date: 2016–04–14
  10. By: Colombelli, Alessandra; Krafft, Jackie; Vivarelli, Marco (University of Turin)
    Abstract: This paper investigates the reasons why entry per se is not necessarily good and the evidence showing that innovative startups survive longer than their non-innovative counterparts. In this framework, our own empirical analysis shows that greater survival is achieved when startups engage successfully in both product innovation and process innovation, with a key role of the latter. Moreover, this study goes beyond a purely microeconomic perspective and discusses the key role of the environment within which innovative entries occur. What shown and discussed in this contribution strongly supports the proposal that the creation and survival of innovative start-ups should become one qualifying point of the economic policy agenda.
    Date: 2016–03
  11. By: Andrew B. BERNARD; Andreas MOXNES; SAITO Yukiko
    Abstract: This paper examines the importance of buyer-supplier relationships, geography, and the structure of the production network in firm performance. We develop a simple model where firms can outsource tasks and search for suppliers in different locations. Low search and outsourcing costs lead firms to search more and find better suppliers. This in turn drives down firms' marginal production costs. We test the theory by exploiting the opening of a high-speed train line (shinkansen) in Japan which lowered the cost of passenger travel but left shipping costs unchanged. Using an exhaustive dataset on firms' buyer-seller linkages, we find significant improvements in firm performance as well as creation of new buyer-seller links, which are consistent with the model.
    Date: 2016–03
  12. By: YAMAMOTO Isamu
    Abstract: It is commonly agreed that both private and government-affiliated financial institutions should support small and medium-sized enterprises in accordance with their life stages. In this paper, using the questionnaire survey conducted in 2013 (4,635 companies responded), we analyze how firm ages affect their opinions on financial institutions. Compared with old firms, young firms tend to answer that they don't have main banks. When young firms borrow from the main banks, their borrowings are highly covered by the public credit guarantee. In addition, we find that, at the early stage when main banks don't have enough qualitative information about the firms, financing by the Japan Finance Corporation (JFC) is likely to stimulate private financial institutions, while regarding older firms that have established relationships with banks, such stimulating effect is weak. Finally, there are no clear trends with respect to age for many questions. Therefore, it should be noted that the financial needs of firms don't change simply according to firm ages.
    Date: 2016–03
  13. By: Jové Llopis, Elisenda; Segarra Blasco, Agustí, 1958-
    Abstract: The objective of this paper is to explore the role played by firms' strategies during innovation process and its effects on innovation success. We argue that firm's innovative decisions not only concern how much innovation effort to make but, more especially, what kind of innovation objectives to pursue, which refer to strategic decisions taken at the level of the firm. Our econometric analysis is based on a sample of 3,919 manufacturing and services firms taken from the Spanish Technological Innovation Panel (PITEC) for the period 2008–2012. Firstly, applying a principal component analysis we identified a diverse range of innovation strategies (no strategy, unfocused, market, production, cost and environmental and regulatory strategy). Secondly, after controlling positive skewness of the dependent variables a generalized linear model is used to exanimate the impact of these innovation strategies. Our empirical results reveal some relevant aspects. Firstly, firms that do not have a well-defined innovation strategy experience fewer probability of being a successful innovative firm. Secondly, firms that do have an innovation strategy, but not focused on any specific orientation, have enhanced innovation success, but less than that of firms with an oriented strategy. Finally, the results also show that there is a good fit between an oriented strategy pursued by firms and their innovation success. Keywords: innovation objectives, innovation strategy, innovation success, Spain JEL Classification Numbers: D21. O31. O32
    Keywords: Conducta organitzacional, Innovacions tecnològiques -- Direcció i administració, 33 - Economia,
    Date: 2015
  14. By: Schulte, Reinhard
    Abstract: This paper contributes to the literature on new firms in two ways. First, by addressing new venture investment, it focuses on a largely neglected, but important, issue of new firm business decisions. Second, it provides a valuable picture for how real investing by new businesses is going to evolve over time. Results suggest that investments by new firms are prone to an s-shaped time pattern rather than a random, linear or a gradually growing trajectory, or a capital market driven behavior as is assumed usually in the literature on investment decisions. By constructing a framework for future research on new venture investment, this article suggests specific research opportunities for future contributions to this body of knowledge. Based on the developed theorem, four main strands for future research can be identified, namely, (1) the empirical validation of the theorem per se, including trajectory, duration, and level of investment; (2) the link between investment and funding of the venture; (3) the link between investment and new venture development; and (4) investment as an adjustment of aggregate capital stock.
    Keywords: new ventures,start up,investment,investment dynamics,investment patterns
    JEL: D92 L25 M13 M21
    Date: 2015
  15. By: Nikolina Koporcic (Åbo Akademi University)
    Abstract: Interactive Branding (I-Branding) environment consists of business network environments in which companies cooperate with each other through mutual interactions that are based on three dimensions: internal, external and mutual branding dimension. I-Branding as an activity is therefore presented as a business strategy through which a company is positioning itself in a local and foreign network of business relationships. Internationalization provides a new lens for this process, in which different networks of large distances are all interconnected through interactions of three branding dimensions. Born global companies are small companies with early and rapid internationalization, which are successfully implementing their strategies and fighting for a favourable position in foreign networks. In order to discover challenges and opportunities of becoming successful so rapidly, a family owned company in the pharmaceutical industry is followed over the years. Based on case findings, the paper suggests managerial implications for start-ups and born global companies, together with some direction for a future theoretical and empirical research.
    Keywords: Interactive Branding, Born Globals, B2B, Business Networks, Internationalization.
    JEL: L19 F20 M13
  16. By: Subodh Bhat (San Francisco State University)
    Abstract: Since the 1990s, there has been an explosion of startups by Indians and Chinese in the U.S. high-tech industry. This study investigates the motivations, support systems, networks, attitudes and behaviors of these new Indian entrepreneurs based on interviews with over two dozen entrepreneurs and a web survey of eighty respondents. The respondent sample was predominantly male, between 30 and 49 years of age and had masters degrees.Our respondent entrepreneurs were motivated primarily by the desire to create something new and the potential for making money. Other major motivators were the propensity for action (“doing†), the excitement of entrepreneurship, the desire for autonomy and having the technological edge or industry vision. They relied on friends, former co-workers and relatives for help in starting the business. They also highlighted the importance of fellow Indians (informal rather than formal networks) in the startup process. This was also demonstrated in the fact that about three-fourth of the co-founders of our respondents’ businesses were Indians. Surprisingly, university ties and formal professional networks, whether Indian or not, were rated least influential in the startup process. Whereas former co-workers, friends, and other Indians helped across a range of business functions, family help was mainly in the realm of finance. Only one-fifth of these entrepreneurs received help from any government institution. Our respondents rated their success in business as quite high on various measures. Unfortunately, they also reported that their businesses were not generally quite profitable. They judged their success not only on the basis of typical business barometers like revenues and profits, but also on personal wealth, sense of achievement and organization-building.Our respondents attributed their success mainly to hard work and focus or drive. Other major factors were supportive relationships at work and with family and friends, technical knowledge and experience, command of English, education in the U.S., and access to finance. Friends, former co-workers, and the general category of Indians played major roles in the success of these entrepreneurs. Surprisingly, relatives and university mates were not considered very crucial for success. Business or professional organizations were rated least important.
    Keywords: Entrepreneurship, high-tech, startup success
  17. By: Schain, Jan Philip; Stiebale, Joel
    Abstract: We analyze the relationship between institutional investors, innovation and financing constraints. Building on the empirical framework of Aghion et al. (2013), we find that the effect of institutional ownership on innovation is concentrated in industries with high dependence on external finance and among firms which are a priori likely to be financially constrained. The complementarity between institutional ownership and competition, predicted by the original paper's theory where institutional investors increase innovation through reducing career risks, disappears once this heterogeneity is taken into account. We also provide evidence that the sensitivity of R&D investment to internal funds decreases with institutional ownership.
    JEL: G23 G32 L25 M10 O31 O34
    Date: 2016
  18. By: Calderon,Gabriela; Iacovone,Leonardo; Juarez,Laura
    Abstract: Entrepreneurs that voluntarily choose to start a business because they are able to identify a good business opportunity and act on it -- opportunity entrepreneurs -- might be different along various dimensions from those who are forced to become entrepreneurs because of lack of other alternatives -- necessity entrepreneurs. To provide evidence on these differences, this paper exploits a unique data set covering a wide array of characteristics, including cognitive skills, non-cognitive skills and managerial practices, for a large sample of female entrepreneurs in Mexico. Descriptive results show that on average opportunity entrepreneurs have better performance and higher skills than necessity entrepreneurs. A discriminant analysis reveals that discrimination is difficult to achieve based on these observables, which suggests the existence of unobservables driving both the decision to become an opportunity entrepreneur and performance. Thus, an instrumental variables estimation is conducted, using state economic growth in the year the business was set up as an instrument for opportunity, to confirm that opportunity entrepreneurs have higher performance and better management practices.
    Keywords: Business in Development,E-Business,Business Environment,Microfinance,Competitiveness and Competition Policy
    Date: 2016–04–13
  19. By: Ana Gouveia (Gabinete de Planeamento, Estratégia, Avaliação e Relações Internacionais / Office for Economic Policy and International Affairs - Ministério das Finanças / Ministry of Finance); Ana Luisa Correia
    Abstract: Internationalization of firms is an indicator of their competitiveness. Using a dataset that covers all Portuguese non-financial corporations, we assess, at micro level, what are the key factors that explain the export capacity of individual firms (and thereby of increased competitiveness). From a public policy perspective, we show that policies to promote innovation and investment have a positive impact on the firm-level probability of exporting. Also, younger firms are more prone to export and there are learning effects from the export activity. The reduction of barriers to competition in internal markets is also important to promote firms’ internationalization.
    Keywords: Keywords: Internationalization; Competitiveness; Barriers; Exports
    JEL: D22
    Date: 2015–07
  20. By: Klaus S. Friesenbichler (WIFO); Michael Peneder (WIFO)
    Abstract: We investigate the drivers of firm level productivity in catching-up economies by jointly estimating its relationship to innovation and competition using data from the EBRD-WB Business Environment and Enterprise Performance Survey (BEEPS) in Eastern Europe and Central Asia. The findings confirm an inverted-U shaped impact of competition on R&D. Both competition and innovation have a simultaneous positive effect on labour productivity in terms of either sales or value added per employee, as does a high share of university graduates and foreign ownership. Further positive impacts come from firm size, exports, or population density. Innovation and foreign ownership appear to be the strongest drivers of multifactor productivity.
    Keywords: innovation, competition, productivity, development, transition economies, simultaneous system
    Date: 2016–04–13
  21. By: Reinhilde Veugelers
    Abstract: Highlights There is a significant divide between the European Union countries with the greatest capacity to innovate, and those with the least capacity to innovate. The difficult convergence process has been proceeding only very slowly and unevenly, and more recently seems to have come to a halt. For footnotes and references, see the PDF version of this paper. A particular weak spot for the EU is corporate investment in research; in this area, the intra-EU divide is growing. As the business sector is responsible for the persistent R&D intensity gap between the EU and the United States and Asia, the persistent failure of lagging EU countries to catch up in this area provides much of the explanation for the EU’s weak performance compared to other economies. The evidence shows that the deployment of public budgets and the mix of policies employed by EU member states have tended to aggravate the intra-EU divide. The EU needs to better understand its growing internal innovation divide if it is to achieve its ambition of becoming a world innovation leader. 1. Introduction The European Union’s lofty ambition is that its growth should be socially and environmentally sustainable and its future prosperity should be built on foundations of innovation. But ambition has so far not translated into leading performance. According to the European Commission’s 2015 Innovation Union Scoreboard indicator (IUS), a composite indicator developed to assess innovation performance, Europe is not doing well. The EU’s IUS score is only 81 percent of that of the United States. For the moment, Europe still has a substantial lead over emerging markets. But China, with an IUS score still half of the EU's, is catching up fast. On private expenditure on research and development, a key indicator to assess a nation’s capacity for innovation, the EU is lagging significantly. Its private R&D-to-GDP ratio is 57 percent of the US level. In terms of public expenditure on R&D, there is no gap between the EU and the US. But Europe’s overall R&D-to-GDP-ratio continues to stand at 2 percent, far from the EU's 3 percent target and significantly lower than the US, Japan, South Korea and Singapore. China has caught up fast and in terms of overall R&D spending is already on par with the EU. This Policy Contribution examines the EU’s struggle to improve its capacity for innovation, in particular the differences between EU member states in terms of their capacity to innovate. Is the EU’s failure to catch up a failure of its innovation-leading member states to defend and further improve their leading positions? Or is it because its innovation-lagging member states fail to catch up and the EU has not closed the innovation divide between its member countries? We show a serious divide between EU member states in terms of their capacity to innovate, with convergence taking place only very slowly and unevenly. More recently, the already-difficult convergence process seems to have come to a halt. In terms of the innovation policies used by member states, the evidence shows that the deployment of public budgets and the mix of instruments might have aggravated the divide. 2. The innovation capacity of EU member states - a growing divide The innovation capacity of nations measures their ability to generate new ideas and to translate them into economic growth and prosperity (Furman et al, 2002). Because of differences in initial conditions and because of differences in how EU countries have sought to create innovation-based growth, we can expect substantial differences between European countries in terms of innovation capacity. We would however expect that the process of EU integration would allow lagging countries to catch up faster, pushing convergence within the EU in terms of innovation capacity, along with economic convergence. In order to assess countries’ innovation capacities, a range of factors needs to be explored. In addition to the availability of R&D inputs, public R&D infrastructure and financing, this includes the linking of public and private bodies involved in innovation, incentives for firms to innovate, and the ability of firms to create and capture value from their innovations on world markets (Furman et al, 2002). To measure innovation capacity, we use the Summary Innovation Index from the IUS. This covers eight aspects of innovation capacity - human resources, public research systems, finance, investment by firms, linkages, intellectual property rights, innovations and economic effects1. We measure the variation in innovation capacity across the EU countries. Convergence occurs when the variation decreases over time. The divide in innovation capacity measures the gap between the best and worst performers within a group of countries2. When looking within the EU at differences in IUS performance (Table 1), the countries at the top are Denmark, Finland, Germany and Sweden, while Bulgaria, Latvia and Romania sit at the bottom.
    Date: 2016–04
  22. By: Fabien Jean (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Pascal Le Masson (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Benoit Weil (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Supplier-buyer exchanges are well addressed in literature except in the case of unknown objects. Sourcing Innovation, i.e. the process of finding external sources of innovation and then bringing those innovations into the firm should transform incoming unknown objects to ascribe them value. Technology Readiness Levels (TRL) have formalised the unknown in supplier-buyer exchanges in many industries for forty years but there is no evidence that they enable that transformation. We then use design theories, i.e. the Technology-Environment framework, to probe TRL through analysing ten cases combining documents analyses and longitudinal studies. We found that TRL avoid fixating on a low mature technology and are not an obstacle at genericity; however they fixate when the buyer waits a certain TRL prior exploring the new technology value. Finally TRL are unable to guide designers towards generativity notably because they embrace a definition of Environment focused on the prototyping method.
    Keywords: generativity,supplier-buyer exchanges, Technology-Environment framework, design theory, innovation theory, fixation
    Date: 2015–11–09
  23. By: Quoc-Anh Do (Département d'économie); Yen-Teik Lee (Singapore Management University); Bang Dang Nguyen (University of Cambridge)
    Abstract: The external networks of directors significantly impact firm value and decisions. Surrounding close gubernatorial elections, local firms with directors connected to winners increase value by 4.1% over firms connected to losers. Director network’s value increases with network strength and activities, and is not due to network homophily. Connected firms are more likely to receive state subsidies, loans, and tax credits. They obtain better access to bank loans, borrow more, pay lower interest, invest and employ more, and enjoy better long-term performance. Network benefits are concentrated on connected firms, possibly through quid pro quo deals, and unlikely spread to industry competitors.
    Keywords: External Networks of Directors; Board of Directors; Connectors; Regression Discontinuity Design; Close Gubernatorial Election
    Date: 2016–04
  24. By: Patarapong INTARAKUMNERD; GOTO Akira
    Abstract: Public research institutes (PRIs) were established for many reasons including promoting defense related research and health related research. Helping domestic industries remain as one of the important missions for PRIs even when the countries have become industrialized and firms' technological capabilities are high. PRIs aim to upgrade existing industries, especially small and medium-sized enterprises (SMEs), as well as spearheading new ones. They can conduct research to solve today's problems in the existing industries and those of next-generation technologies which may lead to the creation of new industries. Moreover, the relationship between PRIs and firms and non-firm actors such as universities became more intense, open, horizontal, international, and long term. To reduce risk and uncertainty inherent in the research mentioned above, the intermediary roles of PRIs are becoming increasingly important. The emphasis and the ways that PRIs help industry change over time and vary across countries as they are an integral part of national innovation systems. This makes generalization difficult, but the experiences of five leading PRIs in Germany, Taiwan, Japan, Australia, and the United States shows that the balances between contract research vs. longer term research with its own initiative, mobility of researchers vs. retaining core researchers, and competitive grants and funds from industry vs. block grants from governments are important in keeping PRIs relevant to industry needs and maintaining research standards. These balances depend on the nature of the national innovation system in which they are embedded. The governance of PRIs is of particular importance to maintain proper balances.
    Date: 2016–03
  25. By: Pohit, Sanjib; Biswas, Pradip
    Abstract: Of late, India has emerged as an attractive destination of foreign direct investment (FDI). Along with it, multinationals have been investing significantly in research and development in India. In this context, this paper makes an attempt to analyze salient features of FDI in R&D and makes an assessment of the gains from R&D initiatives of MNCs in India. To be specific, the paper attempts to demystify the FDI flows in R&D with a view to understand whether this type of flows would help in raising the innovation potential of India. We find that there has been a rise FDI in R&D in India. However, the rise has not been commensurate only with rise in Core R&D activities. Rather, more than 50% of the inflows in R&D by MNCs have come for non-core R&D activities. This will not help in promoting innovation culture in India and make India a global manufacturing hub.
    Keywords: FDI, R&D, Core R&D, India, Manufacture, Non-core R&D
    JEL: F23
    Date: 2016–04–15
  26. By: Luintel, Kul B (Cardiff Business School); Khan, Mosahid
    Abstract: There has been a concomitant rise in R&D and the rate of economic growth in emerging countries. Analyzing a panel of 31 emerging countries, we find convincing evidence of scale effects which make government policies potent for long-run growth. This contrasts sharply with the well known findings of Jones (1995a). Innovations show increasing returns to knowledge stock, implying that the diminishing returns assumed by some semi-endogenous growth models might not be generalized. International R&D spillovers raise the innovation bar. The observed growth rates of emerging economies appear in transition therefore their growth rates may recede with the passage of time.
    Keywords: Scale Effects; Ideas Production; Diffusion; Panel Integration and Cointegration
    JEL: O3 O4 O47
    Date: 2016–04
  27. By: Sánchez-Barrioluengo, Mabel; Consoli, Davide
    Abstract: This paper explores the relationship between regional human capital (HC) and the processes of knowledge creation and mobilization due to Higher Education Institutions (HEIs). Although the nexus between these dimensions emerges frequently in both the scholarly and policy discourses, no study has so far investigated explicitly how their connection works. Using occupations as a proxy for the skill content of jobs, we analyse individual (gender, schooling and age) and regional (university orientation) factors that influence HC employment structure in Spanish regions over the period 2003-2010. The main finding is that teaching university mission is a robust predictor of high-skill employment, while the impact of engagement (research and knowledge transfer) activities is more sensitive to structural characteristics of the regional socio-economic context.
    Keywords: Human Capital, University Orientation, Skills, Region
    JEL: J24
    Date: 2016–04–11
  28. By: Iacovone,Leonardo; Pereira Lopez,Mariana De La Paz; Schiffbauer,Marc Tobias
    Abstract: This paper uses a unique firm-level data set for Mexico, with information never used for research before, to assess how use of information technology (IT henceforth) influences firm performance. Further, the paper explores if, in the context of increasing competition from China, this effect is different for firms more strongly affected by competition where incentives for upgrading and innovation may be more intense. In this perspective, the paper analyzes the complementarity between IT and other changes spurred by competition, taking advantage of the exogenous shock generated by Chinese competition. The results indicate that IT use has higher effects over productivity in the case of firms facing higher competition from China, in the domestic market and in the U.S. market. Furthermore, the paper shows how these changes appear to be driven by complementary investments in innovation and organizational changes.
    Keywords: E-Business,ICT Policy and Strategies,Technology Industry,Labor Policies,Knowledge for Development
    Date: 2016–04–13
  29. By: Morales-Lage, Rafael; Bengochea-Morancho, Aurelia; Martínez-Zarzoso, Inmaculada
    Abstract: In this paper we use panel data models and quantile regressions to test the "weak" and "strong" versions of the Porter hypothesis, using data from 14 OECD countries over the period 1990-2011. A newly-released environmental policy stringency index (EPS) provided by the OECD is used as an indicator of the stringency of environmental regulations in order to tackle endogeneity issues of proxies used in earlier research. The findings indicate that more stringent environmental regulations positively influence R&D expenditure, the number of patent applications and total factor productivity (TFP). The results show that environmental stringency has a positive effect on R&D, mainly for the lower quantiles (0.10, 0.25) of the distribution of R&D, whereas for the number of patent applications and total factor productivity, the effect increases for the highest quantiles (0.75, 0.90) of the distribution of the targeted indicators.
    Keywords: environmental regulations,Porter hypothesis,OECD,innovation,quantile regression
    JEL: Q43 Q48 Q53
    Date: 2016
  30. By: Doan, Quang Hung; Vu, Hoang Nam
    Abstract: By using the latest dataset from the survey of SMEs conducted in Vietnam in 2011, we show that a firm both participating in a wider network of input suppliers, buyers, and associations of enterprises and conducting innovative activities in production has higher labor productivity than others, implying that networks of enterprises and innovation are complementary to each other in affecting performance of SMEs in Vietnam. We also find that supports of the government including providing better infrastructure to the SMEs and helping the SMEs to be formalized when being established are conducive to the development of the SMEs in Vietnam.
    Keywords: Complementary, supermodularity, Network, Innovation, SMEs.
    JEL: D58 O3
    Date: 2016–01
  31. By: Federico Belotti (CEIS,University of Rome "Tor Vergata"); Edoardo Di Porto (University of Naples Federico II, CSEF and UCFS Uppsala University); Gianluca Santoni (CEPII)
    Abstract: This paper investigates the impact of business property taxation on firms' performance using a panel of italian manufacturing firms. To account for endogeneity in local taxation, we exploit a pairwise spatial differenced generalized method of moments estimator. As well as providing robust inference, we also improve on existing work by exploiting the exogenous variation in local taxes generated by the political alignment of each local government with the central one. We find that property taxation exerts a negative impact on firms' employment, capital and sales to such an extent as to significantly affect total factor productivity.
    Keywords: Local taxation, endogeneity, spatial differencing, two-way clustering.
    JEL: H22 H71 R38
    Date: 2016–04–13
  32. By: Michaël Assous (PHARE; University of Paris 1); Muriel Dal-Pont Legrand (GREDEG CNRS; Université Nice Sophia Antipolis); Harald Hagemann (University of Hohenheim, Stuttgart)
    Keywords: Business cycle, growth
  33. By: Matt Hopkins (The Academic-Industry Research Network.); William Lazonick (University of Massachusetts Lowell and The Academic-Industry Research Network.)
    Abstract: A nation must accumulate a high-tech knowledge base to prosper. In this paper, we provide a historical perspective on the interaction of household families, government agencies, and business enterprises, or what we call “the investment triad†, in providing a foundation for the accumulation of a high-tech knowledge base in the United States. Households and governments interact by making investments in education. Governments and businesses interact in the development of the high-tech knowledge base by investing in research and development. Businesses and households interact to invest in the knowledge base through the employment relation. The quality of these interactions in terms of complementarity and sophistication are of critical importance to the productivity performance of investments in the knowledge base. Most discussions of investing in the high-tech knowledge base focus on investments made in R&D by government and business as well as universities and non-profits. We argue that investment in R&D does not capture the productivity of R&D in generating high-quality, low cost high-tech products, nor how the revenues from those products support the higher incomes of the broad base of employees in the high-tech labor force. Over the past decade total R&D spending as a percent of GDP in the United States has remained high by historical standards, with Business-funded R&D exceeding the proportion of Government-funded R&D in the total. Yet there is a sense in the United States that over the past two to three decades the institutional arrangements for investing in the knowledge base have broken down. We hypothesize that the innovation problem resides in the interaction of the organizations – household families, government agencies, and business enterprises – in the investment triad. Using the investment-triad framework, this report provides an historical overview of the evolution of the institutional arrangements for investing in the knowledge base in the United States since the mid-19th century, culminating in an agenda for research on the contemporary operation and performance of the investment triad.
    JEL: H1 I2 L2 O3 P1
    Date: 2014–05
  34. By: Kudlyak, Marianna (Federal Reserve Bank of Richmond); Sanchez, Juan M. (Federal Reserve Bank of Richmond)
    Abstract: Gertler and Gilchrist (1994) provide evidence for the prevailing view that adverse shocks are propagated via credit constraints of small firms. We revisit the behavior of small versus large firms during the episodes of credit disruption andrecessions in the sample extended to cover the 2007-09 economic crisis. We find that large firms' short-term debt and sales contracted relatively more than those of small firms during the 2007-09 episode. Furthermore, the short-term debt of large firms also contracted relatively more in the previous tight money episodes if one takes into account the longer period that it takes for large firms' debt to reach its post-shock trough. Our findings challenge the view that propagation of shocks in the economy takes place via credit constraints of small firms.
    JEL: E32 E51 E52
    Date: 2016–04–13

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