nep-sbm New Economics Papers
on Small Business Management
Issue of 2016‒06‒25
sixteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Small, young, and exporters: New evidence on the determinants of firm growth By M. Grazzi; D. Moschella
  2. What are the biggest obstacles to growth of SMEs in developing countries? - A picture emerging from an enterprise survey By Flora Wang
  3. The interface of networking and 'wasta' in an Arabic context By Sefiani, Yassine; Davies, Barry; Bown, Robin; Kite, Neilson
  4. New Firms and Post-Entry Performance: The Role of Innovation. By Colombelli, Alessandra; Krafft, Jackie; Vivarelli, Marco
  5. Industrial Cluster Policy and Transaction Networks: Evidence from firm-level data in Japan By OKUBO Toshihiro; OKAZAKI Tetsuji; TOMIURA Eiichi
  6. Incorporating innovation subsidies in the CDM framework: Empirical evidence from Belgium By Dirk Czarnitzki; Julie Delanote
  7. Long-term effects of subsidies on firm growth: introducing the concept of outcome additionality By Goerke, Björn; Albers, Sönke
  8. Innovation and Entrepreneurship for the growth and diversification of the GCC Economies By Miniaoui, Hela; Schilirò, Daniele
  9. Entry and technological performance in new technology domains: Technological opportunities, technology competition and technological relatedness By Bart Leten; Rene Belderbos; Bart Van Looy
  10. Patents: A Means to Innovation or Strategic Ends? By Jiri Schwarz; Martin Stepanek
  11. The relationships between, on the hand, size, growth and age of the firm and, on the other hand, small business survival – a constructive critique and a proposal of a new framework By Guimarães Barbosa, Evaldo
  12. Financing Renewable Energy: Who is Financing What and Why it Matters By Mariana Mazzucato; Gregor Semieniuk
  13. Who’s doing who? Growth of sales, employment, assets, profits and R&D entangled in a curious five-way love triangle By Alexander Coad; Nicola Grassano
  14. Implementing Smart Specialisation in Sparsely Populated Areas By Jukka TERÄS; Alexandre DUBOIS; JENS SÖRVIK; MARTINA PERTOLDI
  15. The Clean Development Mechanism and Dynamic Capabilities of Implementing Firms: Evidence from India By Aradhna Aggarwal
  16. Job Creation and the Role of Dependencies By Fornaro, Paolo; Luomaranta, Henri

  1. By: M. Grazzi; D. Moschella
    Abstract: This work investigates how the export status of the firm influences the patterns of growth at different age classes. We address this research question resorting to a novel set of data that links together the universe of Italian firms and detailed data on export transactions. We find that the positive relationship between export status and growth declines with firm age. Further, we also find that, even when accounting for the role of age, the negative size-growth relationship does not disappear, contrary to some recent evidence. These results, which are robust to a series of controls, suggest for a positive signaling role of the export status which is stronger for young exporters or born globals. Exploiting the product-country level dimension of the customs data we also provide, for the first time, evidence on differences in exchange rates pass through between young and experienced exporters. In particular, we find that early exporters appear to be well equipped to face exchange rates variations as their exports decrease less following a currency appreciation.
    JEL: D22 F14 L11 L21 L25
    Date: 2016–06
  2. By: Flora Wang (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: SMEs are drivers of economic growth and job creation in developing countries. It is paramount to determine the factors that hinder their growth. This paper uses the Enterprise Survey from the World Bank which covers data from 119 developing countries to investigate the biggest obstacles SMEs are confronting and the determinants that influence the obstacles as perceived by enterprise managers. The results show that SMEs perceive access to finance as the most significant obstacle which hinders their growth. The key determinants among firms’ characteristics are size, age and growth rate of firms as well as the ownership of the firm. The latter – the role of the state in financing SME - is particularly intriguing. External reasons for the financing dilemma are also examined. It is shown that the main barriers to external financing are high costs of borrowing and a lack of consultant support.
    Keywords: SMEs, Obstacles to Growth, Financing Dilemma, Developing Countries, firm characteristics, internal and external barriers
    Date: 2016–05
  3. By: Sefiani, Yassine; Davies, Barry; Bown, Robin; Kite, Neilson
    Abstract: ABSTRACT Purpose - The aim of this study is to uncover particular and significant methods of pursuing business connections, in the small manufacturing businesses of Tangier. Prior Work - The significance of networking and its impact on the performance of SMEs was revealed in a number of studies. There have been significant studies on the structural, relational, and cognitive dimensions of social capital in value creation. It can be noted that there are potentially significant differences in the concept of networking particularly those that are influenced by Arabic culture. Approach - A two-stage design, which incorporated both quantitative and qualitative approaches, was employed in this study. Approaches were employed in succession with the findings from the quantitative phase informing the qualitative phase. Initially, a paper and online survey questionnaire was administered to a population of 365 industrial SMEs to gain some insights on the perceptions of owner-managers of the impact of networking on business performance. Following the quantitative phase, fifteen in-depth face-to-face semi-structured interviews were conducted with selected owner-managers of SMEs, forming a judgmental selection, to explore their experiences, beliefs, and attitudes with respect to networking factor. Results - Both quantitative and qualitative phases of the study found that networking was a significant factor in influencing the success of SMEs. The concept of wasta, the Arabic word for connections, emerged from the qualitative phase. Findings show that using wasta, through politico-business networks is important since it enables access to current information that is crucial for the success of SMEs. The concept of wasta was also mentioned in relation to financial resources and suppliers. Findings revealed that strong relationships with suppliers enable firms to get financial resources in the form of trade credits. Furthermore, the relationship between wasta and human resources was also revealed. Findings showed that owner-managers use their network relations through wasta in order to recruit their staff. Implications - The findings of this study add to the understanding of networking in Arabic countries with the importance of wasta in an economy that functions on relationships. The findings of this study could therefore be useful to international managers to assist their intercultural effectiveness by adjusting to culture-specific networking in Tangier. Value - This study supports previous findings of Hutchings & Weir (2006) and contributes additional evidence that suggests the significance of wasta and its impact on SME success.
    Keywords: Networking, Wasta, Performance, SMEs, Arabic, Tangier
    JEL: M19
    Date: 2016–06–09
  4. 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
  5. By: OKUBO Toshihiro; OKAZAKI Tetsuji; TOMIURA Eiichi
    Abstract: Cluster policy is designed to facilitate inter-firm networking. We examine industrial clusters in Japan based on firm-level transaction data. Firms in clusters expand transaction networks at higher speeds, but do so significantly only with firms agglomerated in Tokyo and not with local firms within the same region. By disaggregating firms according to their main bank types, we find that cluster firms expanding networks are mainly financed by regional banks and not by banks with nationwide operations. This suggests the importance of intensive relationships with main banks for inter-firm network formation.
    Date: 2016–05
  6. By: Dirk Czarnitzki; Julie Delanote
    Abstract: This paper integrates innovation input and output effects of R&D subsidies into a modified Crépon–Duguet–Mairesse (CDM) model. Our results largely confirm insights of the input additionality literature, i.e. public subsidies complement private R&D investment. In addition, results point to positive output effects of both purely privately funded and subsidy–induced R&D. Furthermore, we do not find evidence of a premium or discount of subsidy–induced R&D in terms of its marginal contribution on new product sales when compared to purely privately financed R&D.
    Keywords: CDM model, R&D, subsidies, innovation policy
    Date: 2016–06
  7. By: Goerke, Björn; Albers, Sönke
    Abstract: Public agencies provide subsidies for small and medium sized businesses (SMEs) to foster their development in terms of employment and sales. Although input and output additionality have been researched intensively little is known about the actual long-term effects of subsidies on SME growth. Relying on a unique dataset of actual SMEs we provide a means of evaluating whether subsidies lead to the expected positive long-term effects. We apply a specifically designed 3-stage-effects-model (3SEM) from the input of resources to the final outcome. The results imply that the effects of subsidies differ across types: While R&D grants unfold enduring positive effects other subsidies like corporate matchmaking might even harm companies.
    Keywords: subsidies,additionality,innovation
    JEL: L2 H2 O3
    Date: 2016
  8. By: Miniaoui, Hela; Schilirò, Daniele
    Abstract: The region of Gulf Arab states has vast reserves of petroleum that make it a vital source of the global economy. The reduction in oil prices and, in general, their high volatility pose strong challenges to the GCC economies. In the present contribution we argue that innovation and entrepreneurship can be the main drivers to diversify and develop the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE). In fact, in the long-run, diversified economies perform better than mono-sector economies. Moreover, innovation and entrepreneurship are key factors that trigger economic development and contribute to the degree of competitiveness, playing also an important stakeholder role in boosting the overall economic growth rates. Therefore, having an entrepreneurial and innovative capacity is very important in order to facilitate competitiveness and growth in a region such as that of GCC countries. More specifically, in this article we analyze the innovation environment in the GCC countries and their innovation performance. Also we consider the innovation policies, underlining the important role of institutions for innovation. To support our analysis, we take into account of several data and information sources, and surveys. In addition, we provide an overview on entrepreneurship in the GCC countries and grasp the current state of entrepreneurship in these countries. We also aim to identify the conditions to stimulate entrepreneurship and qualify the human capital in order to diversify and develop the non-oil private sector and improve the competitiveness of the GCC economies.
    Keywords: Innovation; Entrepreneurship; Diversification; Competitiveness; Growth; GCC countries
    JEL: L10 L26 M13 O31 O38
    Date: 2016–06
  9. By: Bart Leten; Rene Belderbos; Bart Van Looy
    Abstract: Entry and success in new technology domains (NTDs) is essential for firms’ long-term performance. We argue that firms' choices to enter NTDs and their subsequent performance in these domains are not only governed by firm–level factors but also by environmental characteristics. Entry is encouraged by the richness of opportunities for technology development, while technology competition by incumbent firms discourages entry and render entries that do take place less successful. Firms are expected to be positioned heterogeneously to recognize and capitalize on technological opportunities, depending on the presence of a related technology base. We find qualified support for these conjectures in a longitudinal analysis of entry and technological performance in NTDs by 176 R&D intensive firms. While opportunity rich technology environments attract entries by firms even if these NTDs are distal from firms’ existing technologies, firms require related technological expertise in order to exploit technological opportunities post-entry.
    Keywords: Competition, entry, innovation, relatedness, technological opportunities, technology search
    Date: 2016–05
  10. By: Jiri Schwarz (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Czech National Bank, Na Prikope 28, 115 03 Prague 1, Czech Republic); Martin Stepanek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper utilizes a data set of over 208,000 U.S. patents applied for between 1975 and 2010 to study development of strategic patenting over time and across industries. With received citations as a measure of patent social value, we use data envelopment analysis to estimate firm-level relative importance of strategic versus protective patenting. Our novel identification strategy reveals there was an almost universal drop in patent social value in the second half of the 1990s, signaling a shift towards the strategic use of patents. But the development of patenting strategies continued even after 2000 with semiconductor companies increasing their focus on patent value relative to companies from other industries. On average, aerospace and software companies preferred the production of valuable patents, but patenting strategies can differ vastly even among companies operating within one industry. The results confirm our expectations regarding the focus of aerospace companies on socially valuable patents.
    Keywords: Patents, patent value, strategic patenting, intellectual property rights
    JEL: D23 K11 O32 O34
    Date: 2016–04
  11. By: Guimarães Barbosa, Evaldo
    Abstract: This article claims that the basic relationships between, on the one side, size, growth and age of the small firm and, on the other side, the small firm’s hazard of exit is, apart from the “honeymoon” and the “liability of senescence” effects, non-linear, either U-shaped or inverted U-shaped. Variations from these patterns are dependent upon choices of different specifications and the presence or absence from the multivariate analysis of the real determinants for which size, growth and age of the firm proxy. The article also claims that the quadratic specification that has traditionally been fitted is rarely the most adequate, since other combinations of different pairs of exponents would certainly better capture nuances of the relationships being regressed. The article conclusively claims that these realizations explain findings in the extant literature that are awkward, unexpected, embarrassing and unacceptable and interpretations that are many times even more inapplicable.
    Keywords: Small firms; Survival determinants; Size, growth and age; Cox regression
    JEL: M21
    Date: 2016–06–19
  12. By: Mariana Mazzucato (Science Policy Research Unit, University of Sussex.); Gregor Semieniuk (Science Policy Research Unit, University of Sussex.)
    Abstract: Accelerating innovation in renewable energy (RE) requires not just more finance, but finance servicing the entire innovation landscape. Given that finance is not "neutral", more information is required on the quality of finance that meets technology and innovation stage-specific financing needs for the commercialization of RE technologies. We investigate the relationship between different financial actors with investment in different RE technologies. We construct a new deal-level dataset of global RE asset finance from 2004 to 2014 based on Bloomberg New Energy Finance data, that distinguishes 10 investor types (e.g. private banks, public banks, utilities) and 11 RE technologies into which they invest. We also construct a heuristic investment risk measure that varies with technology, time and country of investment. We nd that particular investor types have preferences for particular risk levels, and hence particular types of RE. Some investor types invested into far riskier portfolios than others, and financing of individual high-risk technologies depended on investment by specific investor types. After the 2008 financial crisis, state-owned or controlled companies and banks emerged as the high-risk taking locomotives of RE asset finance. We use these preliminary results to formulate new questions for future RE policy, and encourage further research.
    Keywords: renewable energy nance, direction of innovation, nancial actor types, deployment, technology risk, investment portfolio
    Date: 2016–12
  13. By: Alexander Coad (European Commission – JRC - IPTS); Nicola Grassano (European Commission – JRC - IPTS)
    Abstract: Understanding causal relationships among key economic variables is crucial for policy makers, who wish to e.g. stimulate private R&D growth. To this end, we applied a technique recently imported from the Machine Learning community (Structural Vector Autoregressions (SVARs) identified using Independent Components Analysis (ICA)) to a set of the world’s largest R&D investors. Our analysis highlights the key role of sales growth, rather than profits growth, in stimulating R&D growth. R&D growth appears at the end of the causal ordering of the growth process. Our results suggest that policies to increase private R&D would do better to target sales rather than profits.
    Keywords: R&D investment, firm growth, SVAR, sales growth, industrial dynamics
    JEL: L25 O30
    Date: 2016–06
  14. By: Jukka TERÄS (Nordregio, Stockholm (Sweden)); Alexandre DUBOIS (Swedish University of Agricultural Sciences, Uppsala (Sweden)); JENS SÖRVIK (European Commission – JRC - IPTS); MARTINA PERTOLDI (European Commission – JRC - IPTS)
    Abstract: This Working Paper explores Research and Innovation Strategies for Smart Specialisation (RIS3) in Sparsely Populated Areas (SPA). The paper discusses the most significant elements of Smart Specialisation (S3) in SPA focusing on its theoretical background as well as on the empirical processes related to the introduction and implementation of the S3 concept in selected European regions. Presenting both issues emerging from theoretical debates and practice-based examples, this paper provides a critical discussion on the operationalisation of S3 in the specific context of European Sparsely Populated Areas. SPA should not be seen as regions lagging behind by definition but as regions with specific characteristics including challenges and opportunities. The analysis of the case-study regions demonstrates that SPA have been able to create innovative environments in sparsely populated and remote areas and that there is a mind-set and willingness to utilise the possibilities provided by S3 processes. However, in doing so SPA need to strengthen their competitiveness with extra-regional knowledge and networking pipelines and even more so than other types of regions in consideration of the lack of critical mass. The specific characteristics and features of SPA often with abundant natural resources, but with limited human capital and lack of agglomeration economies need to be carefully studied and the regional actors need not only to be heard but also to be invited to an inclusive S3 process. The cases discussed enlighten the need to address S3 as an overarching framework for territorial development based on the integration of complementary policies.
    Keywords: Regional Policy, Smart Specialisation, Sparsely Populated Areas, territorial diversity, place-based approach, policy integration
    Date: 2015–11
  15. By: Aradhna Aggarwal
    Abstract: This study assesses the impact of the Clean Development Mechanism (CDM) on the dynamic capabilities of implementing firms in India. While doing so, it uses three indicators of firms' dynamic capabilities: R&D expenditures to sales ratio, fuel consumption to sales ratio and total factor productivity growth. It moves away from the analysis of technology transfer claims made in either Project Development Documents or primary surveys to use actual information on firms' performance for the analysis. A difference-in-difference design is used by defining CDM-implementing firms as the treatment group and non-CDM firms as the control group for the pre- and post-CDM implementation periods. We control for unobserved fixed effects of firms and time periods and observed characteristics of firms and CDM projects. The analysis draws on the balance sheet data of 612 firms from India between 2001 and 2012 from the PROWESS database. Our results reveal that the CDM implementation does not have significant outcome effects on the dynamic capabilities of firms. Much depends on the type and size of the project, and size of the firm.
    Keywords: CDM, Dynamic capability, R&D, Fuel efficiency, Total factor productivity, India
  16. By: Fornaro, Paolo; Luomaranta, Henri
    Abstract: We contribute to the large literature on the relation between firm size and job creation by examining the effects of dependences between enterprises. Using Finnish monthly data encompassing the population of Finnish private businesses, we calculate gross job creation and destruction, together with net job creation, for different size classes and industries. Importantly, we divide firms into a dependent (i.e. owned, at least partially, by a large company) and independent category. The analysis is based on both a dataset including entry and exit and a sample considering only continuous companies, to control for the effects of firm's age. Due to the quality of the data, we are able to isolate the 'organic' growth of firms, disregarding the effects of mergers and split-offs together with other legal restructurings. We find that independent companies have shown considerably higher net job creation, even after taking age into account. However, dependent firms do not show particularly different behavior with respect to the sensitivity to aggregate conditions, compared to their independent counterparts.
    Keywords: Dependencies, Job Creation, Firm-level Data, Large datasets, Employment statistics
    JEL: E24 E32 J63 L25 L26
    Date: 2016–05–01

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