nep-sbm New Economics Papers
on Small Business Management
Issue of 2016‒05‒21
seventeen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Related Variety, Unrelated Variety, and Regional Growth: The Role of Absorptive Capacity and Entrepreneurship By Michael Fritsch; Sandra Kublina
  2. “Relatedness, external linkages and innovation” By Ernest Miguélez; Rosina Moreno
  3. The pre-Great Recession slowdown in productivity By Cette, Gilbert; Fernald, John G.; Mojon, Benoit
  4. Bankruptcy prediction for SMEs using relational data By TOBBACK, Ellen; MOEYERSOMS, Julie; STANKOVA, Marija; MARTENS, David
  5. R&D and Productivity in the US and the EU: Sectoral Specificities and Differences in the Crisis By Castellani, Davide; Piva, Mariacristina; Schubert, Torben; Vivarelli, Marco
  6. Do Market Imperfections Give Rise to Financial Constraints or Growth Type Compatibility? By Xueping Wu
  7. The geography of innovation in Italy, 1861-1913: evidence from patent data By Alessandro Nuvolari; Michelangelo Vasta
  8. Productivity distribution and drivers of productivity growth in the construction sector By Adam Jaffe; Trinh Le; Nathan Chappell
  9. Implementation of the Small Business Act in the context of new internal market strategy By Joanna Kuczewska
  10. RIO Country Report 2015: Poland By Krzysztof Klincewicz; Katarzyna Szkuta
  11. Market Power and Duration of R&D Investment in a Panel of Italian Firms By M. E. Bontempi; L. Lambertini; E. Medeossi
  12. RIO Country Report 2015: Belgium By Kelchtermans Stijn; Zacharewicz Thomas
  13. RIO Country Report 2015: Slovenia By Bostjan Udovic; Maja Bucar; Hristo Hristov
  14. Trade Liberalisation and Optimal R&D Policies in a Model of Exporting Firms Conducting Process Innovation By Thanh Le; Cuong Le Van
  15. Estimating the local average treatment effect of R&D subsidies in a pan-European program By Hünermund, Paul; Czarnitzki, Dirk
  16. Location and Productivity of Knowledge- and Information-intensive Business Services By MORIKAWA Masayuki

  1. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Sandra Kublina (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: This paper investigates the effect of related and unrelated variety on regional growth in West Germany. In particular, we analyze the role of regional absorptive capacity and new business formation for these effects. We find that West German regions benefit from both types of varieties. The positive effect of unrelated variety on growth is more pronounced in regions with higher levels of absorptive capacity in terms of R&D activities and with higher levels of new business formation. Such moderating effects cannot be found for related variety.
    Keywords: Related variety, unrelated variety, knowledge spillovers, regional absorptive capacity, entrepreneurship, regional growth
    JEL: R11 R12 D62
    Date: 2016–05–10
  2. By: Ernest Miguélez (GREThA, University of Bordeaux & AQR Research Group-IREA. University of Barcelona); Rosina Moreno (AQR Research Group-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 citationsM Relatedness; Knowledge production function. JEL classification: O18; O31; O33; R11
    Date: 2016–04
  3. By: Cette, Gilbert (Banque de France); Fernald, John G. (Federal Reserve Bank of San Francisco); Mojon, Benoit (Banque de France)
    Abstract: In the years since the Great Recession, many observers have highlighted the slow pace of productivity growth around the world. For the United States and Europe, we highlight that this slow pace began prior to the Great Recession. The timing thus suggests that it is important to consider factors other than just the deep crisis itself or policy changes since the crisis. For the United States, at the frontier of knowledge, there was a burst of innovation and reallocation related to the production and use of information technology in the second half of the 1990s and the early 2000s. That burst ran its course prior to the Great Recession. Continental European economies were falling back relative to that frontier at varying rates since the mid-1990s. We provide VAR and panel-data evidence that changes in real interest rates have influenced productivity dynamics in this period. In particular, the sharp decline in real interest rates that took place in Italy and Spain seem to have triggered unfavorable resource reallocations that were large enough to reduce the level of total factor productivity, consistent with recent theories and firm-level evidence.
    JEL: D24 E23 E44 F45 O47
    Date: 2016–03–28
  4. By: TOBBACK, Ellen; MOEYERSOMS, Julie; STANKOVA, Marija; MARTENS, David
    Abstract: Bankruptcy prediction has been a popular and challenging research area for decades. Most prediction models are built using traditional data such as financial gures, stock market data and firm specific variables. We complement such dense data with ne-grained data by including information on the company's directors and managers in the prediction models. This information is used to build a network between Belgian enterprises, where two companies are related if they share or have shared a director or high-level manager. We start from two possibly related assumptions: (i) if a company is linked to many (or only) bankrupt firms, it will have a higher probability of becoming bankrupt and (ii) the management has an inuence on the performance of the company and incompetent or fraudulent managers can lead a company into bankruptcy. The weighted-vote relational neighbour (wvRN) classier is applied on the created network and transforms the relationships between companies in bankruptcy prediction scores, thereby assuming that a company is more likely to file for bankruptcy if one of the related companies in its network has failed. The more related companies have failed, the higher the predicted probability of bankruptcy. The relational model is then benchmarked against a base model that contains only structured data such as financial ratios. Finally, an ensemble model is built that combines the relational model's output scores with the structured data. We find that this ensemble model outperforms the base model when detecting the riskiest firms, especially when predicting two-years ahead.
    Date: 2016–04
  5. By: Castellani, Davide (Henley Business School, University of Reading); Piva, Mariacristina (Università Cattolica del Sacro Cuore); Schubert, Torben (CIRCLE, Lund University); Vivarelli, Marco (Università Cattolica del Sacro Cuore, IZA, UNU-MERIT)
    Abstract: Using data on the US and EU top R&D spenders from 2004 until 2012, this paper investigates the sources of the US/EU productivity gap. We find robust evidence that US firms have a higher capacity to translate R&D into productivity gains (especially in the high-tech industries), and this contributes to explaining the higher productivity of US firms. Conversely, EU firms are more likely to achieve productivity gains through capital-embodied technological change at least in medium and low-tech sectors. Our results also show that the US/EU productivity gap has worsened during the crisis period, as the EU companies have been more affected by the economic crisis in their capacity to translate R&D investments into productivity. Based on these findings, we make a case for a learning-based and selective R&D funding, which - instead of purely aiming at stimulating higher R&D expenditures - works on improving the firms’ capabilities to transform R&D into productivity gains.
    Keywords: R&D; productivity; economic crisis; US; EU
    JEL: O33 O51 O52
    Date: 2016–05–09
  6. By: Xueping Wu (City University of Hong Kong)
    Abstract: It is commonly believed that market imperfections impose financing constraints on corporate investment and impede economic growth. But neoclassic theory insists that investment opportunities have an overriding effect on corporate investment despite market imperfections. This paper shows that market imperfections do not hinder corporate investment to the extent that growth type compatibility of investment and financing effectively mitigates asymmetric informational problems. Our study deals with listed firms which, unlike private firms, have access to external finance in the capital markets.What we call growth type compatibility characterizes the equilibrium in which investment styles (characterized by R&D versus fixed asset investment) and optimal financing arrangements (equity versus debt financing) go hand in hand with corresponding firm growth types. High-growth type firms have dominant asymmetric information on growth opportunities and low-growth type firms have dominant asymmetric information on assets-in-place. Distinct growth types constitute distinct informational imperfections.Growth type compatibility starts with the premise that firms with a particular growth type attract and accommodate a certain type of competitively available human capital (or knowledge capital). This gives rise to persistently distinct corporate investment styles and optimal financial policies in response. Wu and Au Yeung (2009, 2012) find that growth type compatibility contributes to the persistence in both leverage ratios and propensity to pay dividends.Using Compustat data on US firms, this paper shows that high and low firm growth types constitute persistently distinct informational imperfections. Growth type is positively correlated with investment style (measured by R&D/[Capex+R&D]), both being persistent over time and negatively affecting the sensitivity of investment to cash flow. At the same time, the growth-type-aligned investment style positively affects the sensitivity of equity-and-debt-financing-differential to market conditions, reflecting a growth-type-aligned pecking order in financing. These findings suggest the effect of growth type compatibility rather than that of financing constraints. The persistence of high and low growth types indicates that informational imperfections do not necessarily impose meaningful financing constraints on listed firms in well-functioning capital markets.
    Keywords: Investment, Informational Imperfections, Growth Type, Financing Constraints
    JEL: D92 G30 G31
  7. By: Alessandro Nuvolari; Michelangelo Vasta
    Abstract: In this paper we provide a systematic appraisal of the spatial patterns of inventive activity in Italy in the period 1861-1913. Our main source of evidence is a data-set containing all patents granted in Italy in five benchmark years (1864-65, 1881, 1891, 1902, 1911). Our geographical unit of analysis is the province, an administrative district of the time. First, using some simple descriptive statistics, we introduce a characterization of the spatial distribution of patents and of its evolution over time. Second, we perform an econometric exercise in which we assess the connection between different forms of human capital and patent intensity. We are able to establish a robust correlation between literacy and “basic” patent intensity and robust correlation between secondary technical education and scientific and engineering studies and “high quality” patent intensity. Third, we study the connection between patents and industrialization. Our exercise shows that patents exerted a significant role in accounting for the level of industrial production. Interestingly enough, in this context, the role of patents was possibly more relevant than that of the availability of water-power and of the level of real wages (two factors that were pointed out by the previous literature, mostly on the basis of rather impressionistic accounts of the evidence). Our study warrants two main conclusions. First, domestic inventive activities were an important element of the industrialization process, even in a late-comer country such as Italy. Second, at the time of the unification, Northern provinces were characterized by more effective innovation systems. This factor contributes to explain the growing divide in economic performance between the North and the South of the country during the Liberal age
    Date: 2015–12
  8. By: Adam Jaffe (Motu Economic and Public Policy Research); Trinh Le (Motu Economic and Public Policy Research); Nathan Chappell (Motu Economic and Public Policy Research)
    Abstract: This study draws on firm-level data from the Longitudinal Business Database to examine productivity in the New Zealand construction industry. It finds that over the period 2001–2012, on average labour productivity in this industry grew by 1.7 percent annually and multi-factor productivity by 0.5 percent annually, compared with 0.5 and 0.1 percent annually respectively for firms in the overall measured sector. Within the construction industry, productivity growth rates vary markedly by sub-industry and other firm characteristics. Labour productivity is more widely dispersed across the construction industry than is multi-factor productivity. High-productivity firms tend to be younger, more likely to be a new start-up, to belong to a business group, and to locate in Auckland than low-productivity firms. Working-proprietor-only firms are slightly less productive on average than employing firms, and also exhibit much greater productivity variation. Overall, however, productivity variation or dispersion is no greater in construction than in other industries. We decompose productivity changes over time into that due to changes at continuing firms, to reallocation of output from low- to high-productivity firms, and to entry and exit. In the ‘Building construction’ and ‘Heavy and civil engineering and construction’ industries, productivity was enhanced by net entry and reallocation, but reduced by an overall decline in the productivity of continuing firms. In the ‘Construction services’ industry, net entry, reallocation, and productivity improvement of continuing firms all contributed to positive productivity growth.
    Keywords: Construction industry, labour productivity, multi-factor productivity
    JEL: D24 L74
    Date: 2016–05
  9. By: Joanna Kuczewska (Faculty of Economics, University of Gdansk)
    Abstract: The aim of the paper is the assessment of the implementation of the SBA in the context of a new internal market strategy. This study will attempt to answer the following questions: Is the implementation process of the SMA principles in the EU Member States effective? Is this process align with the new internal market strategy? The tasks of the paper are the following: analysis of the main principles of SBA, implementation of the SBA in various combinations: countries comparison and principles comparison using the Eurostat database, assessment of the implementation of the SBA – opinions of companies and other organisations and finally presentation of the new SBA project in the context of new internal Market strategy. The first part of analysis carried in the paper is based on the SBA principles and objectives analysis. Then the assessment and level of its implementation has been done (cross-country and cross-principles statistical analysis). In the second part of this analysis, the results of direct survey carried out among companies and other organisations have been presented. The key results of the analysis indicate that the implementation of the SBA principles is not effective in all Member States and it must be aligned with the new internal market strategy. It should focus on SMEs and start-ups support.
    Keywords: the EU internal market strategy, Small Business Act principles
    JEL: L53 O52
    Date: 2016–04
  10. By: Krzysztof Klincewicz (University of Warsaw); Katarzyna Szkuta (European Commission – JRC - IPTS)
    Abstract: The 2015 series of RIO Country Reports analyse and assess the policy and the national research and innovation system developments in relation to national policy priorities and the EU policy agenda with special focus on ERA and Innovation Union. The executive summaries of these reports put forward the main challenges of the research and innovation systems.
    Keywords: R&I system, R&I policy, ERA, innovation union, Semester analysis, Poland
    JEL: I20 O30 Z18
    Date: 2016–04
  11. By: M. E. Bontempi; L. Lambertini; E. Medeossi
    Abstract: Studies about innovation find evidence of a positive relationship between technological advancement and firm performance, in particular when the innovative effort is continuous. This paper aims to further the analysis on the duration of R&D investment at the firm level. The contribution of this study is threefold: first, we extend Máñez et al. [2014], Triguero et al. [2014] analysis for Spain to the Italian case: we use a panel of manufacturing and service companies, thus enlarging the view of R&D duration within the European countries. Secondly, from a methodological point of view, we employ both discrete- and continuous-time duration models, in order to test the Proportional Hazards (PH) assumption, i.e. the assumption that the hazard rate is equivalent over time across groups. Last, but not least, we assess whether a firm’s likelihood of continuing investment in R&D depends on the market power of companies. We test alternative measures for market power: the classical price-cost margin and a new proxy for the firm demand elasticity, obtained from a specific survey question. Results are in line with the hypothesis that R&D presents considerable temporal spill overs and strong persistence, even once unobserved heterogeneity is controlled for. Also, we argue that the appropriate proxy for market power is the firm demand elasticity, and we find support for the Schumpeterian hypothesis.
    JEL: C23 C41 D22 G32 L10 O30
    Date: 2016–02
  12. By: Kelchtermans Stijn (Catholic University of Leuven); Zacharewicz Thomas (European Commission – JRC - IPTS)
    Abstract: The 2015 series of RIO Country Reports analyse and assess the policy and the national research and innovation system developments in relation to national policy priorities and the EU policy agenda with special focus on ERA and Innovation Union. The executive summaries of these reports put forward the main challenges of the research and innovation systems.
    Keywords: R&I system, R&I policy, ERA, innovation union, Semester analysis, Belgium
    JEL: I20 O30 Z18
    Date: 2016–05
  13. By: Bostjan Udovic (Independent expert); Maja Bucar (Independent expert); Hristo Hristov (European Commission – JRC - IPTS)
    Abstract: The 2015 series of RIO Country Reports analyse and assess the policy and the national research and innovation system developments in relation to national policy priorities and the EU policy agenda with special focus on ERA and Innovation Union. The executive summaries of these reports put forward the main challenges of the research and innovation systems.
    Keywords: R&I system, R&I policy, ERA, innovation union, Semester analysis, Slovenia
    JEL: I20 O30 Z18
    Date: 2016–04
  14. By: Thanh Le (University of Qeensland and Flinders University); Cuong Le Van (Centre d'Economie de la Sorbonne - Paris School of Economics, IPAG Business School)
    Abstract: This paper discusses the impact of trade liberalisation and R&D policies on exporting firms' incentive to innovate and social welfare. Key factors determining the government's optimal policy are the strength of R&D spillover effect and the toughness of firm competition. When firms only compete in an overseas market, the optimal policy is to tax R&D. Trade liberalisation in the overseas market induces a higher R&D tax rate to be imposed on firms. When firms also conduct business in the home market, the government should financially support firms' R&D. Trade liberalisation always increases firms' output sales, R&D investments, and social welfare
    Keywords: Trade; R&D spillovers; subsidies; welfare; process innovation
    JEL: F12 F13 F15 O31
    Date: 2016–03
  15. By: Hünermund, Paul; Czarnitzki, Dirk
    Abstract: We investigate the effect of Europe's largest multilateral subsidy program for R&D-performing, small and medium-sized enterprises on firm growth. The program was organized under a specific budget allocation rule, referred to as Virtual Common Pot (VCP), which is designed to avoid cross-subsidization between participating countries. This rule creates exogenous variation in treatment status and allows us to identify the local average treatment effect of public R&D grants. In addition, we compare the program's effect under the VCP rule with the standard situation of a Real Common Pot (RCP), where program authorities allocate a single budget according to uniform project evaluation criteria. Our estimates suggest no average effect of grants on firm growth but treatment effects are heterogeneous and increase with project quality. A Real Common Pot would have reduced the cost of policy-induced job creation by 27%. We discuss the implications of our findings for the coordination of national policy programs within the European Research Area.
    Keywords: Joint Programming Iniatives,R&D Policy,Virtual Common Pot,Instrumental Variable Estimation,European Research Area
    JEL: O38 H25 C31
    Date: 2016
  16. By: MORIKAWA Masayuki
    Abstract: Knowledge-intensive business services (KIBS), which produce skill-intensive services used as intermediate inputs, are becoming important for the economic growth and international competitiveness of advanced countries. This study, using establishment- and company-level micro data, analyzes the productivity of knowledge- and information-intensive services in Japan, including information services, publishers, and design services. We focus on the effect of urban density on the productivity of these services. Our estimations reveal that doubling the employment density of municipalities is associated with around 5% higher labor productivity of service providers, which is larger than that found in the manufacturing industry. However, quantitatively, the economies of density vary for individual services, suggesting that the services to be promoted by small and medium cities differ from those for which large metropolitan cities such as Tokyo and Osaka have strong comparative advantages.
    Date: 2016–04
  17. By: Cenk Gokce ADAS (Istanbul University, Faculty of Economics)
    Abstract: It is believed that export firms are more productive than non-export firms. The reasons for that exporting firms have to endure additional cost because of transport costs, marketing research, advertising, local regulations etc. Export firms are also inclined to pay higher wages than non-export firms, because they use a higher skilled and more productive labours. Hence, export firms have to be more productive due to these additional costs. The aim of this study is to explain whether the productivity advantage of export firms does lead to a profitability advantage of exporters compared to non-export firms. For this reason, this paper attempts to summarise previous empirical studies on the firm level data considering the relationship between exporting firms, productivity, and profitability.
    Keywords: Productivity; Profitability; Exporting Firms; Manufacturing Sectors; Firm Level Data.
    JEL: D22 F14 L60

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