nep-sbm New Economics Papers
on Small Business Management
Issue of 2016‒07‒09
sixteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Does Internal and External Research and Development Affect Innovation of Small and Medium-Sized Enterprises? Evidence from India and Pakistan By Rehman, Naqeeb Ur
  2. Creativity pays off. Innovation, innovation strategy, and internationalization By Tomasz Brodzicki; Dorota Ciolek
  3. The Impact of Finance on the Performance of Thai Manufacturing Small and Medium-Sized Enterprises By Amornkitvikai, Yot; Harvie, Charles
  4. Entrepreneurial Experimentation: A key function in Entrepreneurial Systems of Innovation By Lindholm-Dahlstrand, Asa; Andersson, Martin; Carlsson, Bo
  5. Firm investment and financial conditions in the euro area: evidence from firm-level data By Hiona Balfoussia; Heather D. Gibson
  6. Schnell wachsende Unternehmen in Deutschland: Charakteristika und Determinanten ihres Wachstums By Schlepphorst, Susanne; Schlömer-Laufen, Nadine
  7. Policy instruments to improve MSMEs access to external financing in developing countries: A survey By Modeste Dayé; Romain Houssa; Paul Reding
  8. Incorporating innovation subsidies in the CDM framework: Empirical evidence from Belgium By Czarnitzki, Dirk; Delanote, Julie
  9. Growing by learning: firm-level evidence on the size-productivity nexus By Enrique Moral-Benito
  10. Technological capabilities, technological dynamism and innovation offshoring By Schubert, Torben; Baier, Elisabeth; Rammer, Christian
  11. Utilization of Female and Foreign Employees among Japanese Firms: An empirical analysis using firm panel data (Japanese) By TAKAMURA Shizuka
  12. Agglomeration and Technological Spillovers: Firm-Level Evidence from China's Electric Apparatus Industry By He, Ming; Chen, Yang; Schramm, Ronald M.
  13. The effect of bank shocks on firm-level and aggregate investment By Amador, João; Nagengast, Arne J.
  14. Situation Analyses Business Transfer Ecosystem in France: Situation Analysis in 2015 By Erno Tornikoski; Christophe Bonnet; Bérangère Deschamps; Gilles Lecointre; Mickael Buffart
  15. Post-reorganization survival: a semi-parametric and non-parametric analysis of firm characteristics By Lara Abdel Fattah; Sylvain Barthélémy; Nadine Levratto; Benjamin Trempont
  16. Institutions vs. ‘First-Nature’ Geography – What Drives Economic Growth in Europe’s Regions? By Tobias Ketterer; Andrés Rodríguez-Pose

  1. By: Rehman, Naqeeb Ur (Asian Development Bank Institute)
    Abstract: This study investigates the impact of internal and external research and development (R&D) on the innovation performance of small and medium-sized enterprises (SMEs) in India and Pakistan. Micro-level data was obtained for 3,492 Indian and 696 Pakistani SMEs from the World Bank’s Enterprise Survey, and bivariate probit estimation techniques were used. The results show that internal and external R&D positively affects product and process innovations. However, this effect is stronger for Indian SMEs. The negative relationship between firm size and innovation output implies that SMEs in both countries face resource constraints. Further, Indian SMEs are dominant in terms of undertaking internal R&D and generating product and process innovations relative to those in Pakistan. The complementary rel¬ationship between internal and external R&D has been examined for both countries. The study is unique in comparing Indian and Pakistani SMEs innovation activities using micro-level data. The results suggest that business managers can utilize a balanced combination of internal and external R&D to accelerate innovation output and increase absorptive capacity. Specifically, public support for innovation, such as R&D grants, subsidies, and tax credits, could encourage SMEs to undertake more radical innovations.
    Keywords: India; Pakistan; SME; R&D; innovation; technology; firm; product innovation; process innovation; external R&D; internal R&D; absorptive capacity; innovative capacity; public support; incentives; output; bank loans; subsidies; tax credit
    JEL: D22 L25 O31 O32
    Date: 2016–06–24
  2. By: Tomasz Brodzicki (University of Gdansk, Faculty of Economics; Institute for Development, Sopot); Dorota Ciolek (University of Gdansk, Faculty of Management, Department of Econometrics, Sopot, Poland; Institute for Development, Sopot, Poland;)
    Abstract: A lot of recent empirical research points to the superior performance of exporting firms in comparison to non-exporters. Exporters on average are found to be larger, more productive, more capital and skilled-intensive than non-exporters At the same time, innovation and exporting seem to be inextricably linked at firm-level. Apart from several recent studies, the literature on it for Poland is scarce. This paper analyses the relationship between innovation behaviour, declared innovation strategy and internationalization in a panel of firms from Poland from an extensive survey conducted by the Institute for Development. The results support the idea that the superior performance of the exporters is linked to a large extent to their superior innovation performance. Exporters prove to be more focused on innovations, are more aware of the need to implement changes, and are better prepared to introduce them in reality. They are more probable to be creative and are more likely to behave in a more strategic manner assuming the position of a market leader. We positively identify critical linkages between the declared innovation strategy and export states of Polish companies. Utilizing the classification of Hobday, Rush & Bessant (2004) and controlling for the significance of innovation (firm or market) level, we show that innovatively passive firms have, ceteris paribus, a significantly lower probability of obtaining exporter status. The introduction of innovations at ad hoc manner has a positive however statistically insignificant effect. Only permanent innovators or creative firms enjoy a clear and robust increase in their exporting probability potential. It simply pays off to be innovative. At the same time, our results support the postulates by Altomonte et al. (2013), on the close connection between innovation and internationalization extents.
    Keywords: Innovation, Innovation strategy; Internationalization; Trade; Firms survey; Logit modelling
    JEL: F14 C83 C21 D22 L25
    Date: 2016–06
  3. By: Amornkitvikai, Yot (Asian Development Bank Institute); Harvie, Charles (Asian Development Bank Institute)
    Abstract: This study sheds light on small and medium-sized enterprise (SME) financing and its performance in Thailand. It elaborates on the key sources of finance existing for Thai manufacturing SMEs and their importance for SME performance as measured by technical efficiency, export performance, and technological innovation. This study also examines the key factors enhancing SME access to external finance. Our results confirm that retained earnings are crucial to increase SME technical efficiency, but loans from unlicensed moneylenders deteriorate their export performance. For external finance, government-owned specialized financial institutions (SFIs) play a leading role in enhancing SME technical efficiency and export performance, but the results from the survey reveal that few Thai manufacturing SMEs actively seek external finance from these institutions. Foreign commercial banks also help enhance SME technical efficiency. The results show that larger SMEs have superior performance as measured by export performance and technological innovation performance. The results also reveal that financial institutions in Thailand still rely on collateral-based lending and SME financial transparency through audited financial statements to reduce asymmetric information and adverse selection costs.
    Keywords: Thailand; manufacturing; SME; specialized financial institution; exports; export performance; technical efficiency; technology; innovation; market access; human resources; credit; financing; banks; business loans; collateral; interest rate
    JEL: D22 D24 G20 L25 L60
    Date: 2016–06–23
  4. By: Lindholm-Dahlstrand, Asa (CIRCLE, Lund University); Andersson, Martin (CIRCLE, Lund University); Carlsson, Bo (CIRCLE, Lund University)
    Abstract: There is a need for a conceptual approach that, with reference to explicit micro-level mechanisms and processes of industrial dynamics, articulates the role and function of entrepreneurial experimentation in innovation systems. This paper develops the concept of ‘entrepreneurial systems of innovation’ to address this gap in the literature. We argue that entrepreneurial experimentation comprises both ‘technical’ and ‘market’ experimentation, and that entrepreneurship must be conceptualized in terms of its function in innovation systems rather than as an outcome. At the systems level, the central function of entrepreneurial experimentation is to foster creation, selection and scaling-up of innovations. Spinoffs and acquisitions are proposed as examples of micro-mechanisms that give rise to system-wide entrepreneurial experimentation. Interaction between established organizations and new innovative entrants, through spinoffs and acquisitions, is an important characteristic of vibrant entrepreneurial systems of innovation.
    Keywords: entrepreneurship; experimentation; innovation systems; new technology-based firms; entrepreneurial systems of innovation; scaling up; growth
    JEL: L22 L26 O31 O33
    Date: 2016–06–22
  5. By: Hiona Balfoussia (Bank of Greece); Heather D. Gibson (Bank of Greece)
    Abstract: We explore whether the sensitivity of firm-level investment to cash-flow, typically associated with an external financing premium, is time-varying and in particular whether it varies with overall financial conditions. We find that financial conditions have indeed played a significant role in corporate investment decisions over recent years, rendering financing constraints even more binding. This finding appears to be robust to a number of control variables and robustness tests. Moreover, the impact of credit conditions is not uniform across firms, but rather it varies depending on firm size and leverage, with constrained firms being substantially more likely to condition their investment decisions on overall credit conditions. Our results cast new light on the interplay between financial and real cycle downturns and underline the need for monetary, fiscal and macroprudential policy to be countercyclical with respect to financial conditions.
    Keywords: investment;financial conditions; euro area firms
    JEL: E22 E44 E50
    Date: 2016–06
  6. By: Schlepphorst, Susanne; Schlömer-Laufen, Nadine
    Abstract: Die vorliegende Studie untersucht auf Basis von Befragungsdaten die zentralen Merkmale schnell wachsender Unternehmen mit mindestens 10 Beschäftigten sowie die Determinanten ihres Wachstums. Insbesondere kleinere und Unternehmen in den ersten Phasen des Unternehmenslebenszyklus aus dem Verarbeitenden Gewerbe zählen zu dieser Unternehmensgruppe. Der Großteil von ihnen weist eine kontinuierlich positive Umsatz- bzw. Beschäftigtenentwicklung im Zeitraum 2012 bis 2015 auf. Die Studie belegt auch, dass zwar Eigentums- und Führungsstrukturen keinen generellen Einfluss auf das schnelle Wachstum ausüben, spezifische Verhaltensweisen wie die Inkaufnahme eines höheren Investitionsrisikos für höhere Renditen jedoch das schnelle Wachstum von Familienunternehmen forcieren. Die Chance auf schnelles Wachstum wird durch Aktivitäten im Bereich Forschung und Entwicklung erhöht, während das Verfolgen von gemeinwohlorientierten Zielen die Wahrscheinlichkeit, schnell zu wachsen, schmälert.
    Abstract: On the basis of survey data, this study analyses the pivotal characteristics of fast growing firms with 10 employees at minimum as well as the determinants of their growth. The smaller ones, companies at the early stages of the life cycle and the ones located in the manufacturing sector belong to this specific group of companies. The majority among them grows continuously in turnover and employment in the period between 2012 and 2015. The results further reveal that ownership and management structures do not generally influence fast growth, but specific behaviours including the acceptance of higher risks for gaining higher profits enhance the fast growth of family firms. Beyond that companies that engage in research and development activities are more likely to grow fast. Pursuing goals that serve the common good, however, reduce the chances for fast growth.
    Keywords: schnell wachsende Unternehmen,Familienunternehmen,Wachstumsdeterminanten,Gazellen,high growth firms,family businesses,determinants of growth,gazelles
    JEL: L25 L26
    Date: 2016
  7. By: Modeste Dayé (CRED, University of Namur); Romain Houssa (CRED, University of Namur); Paul Reding (CRED, University of Namur)
    Abstract: This paper presents the salient factors that characterize important aspects of firms’ access to external finance in developing countries. Cross-country data show that micro, small and medium-sized enterprises (MSMEs) face more external financing constraints in Low Income Countries than in their rich counterparts. To explain this fact we distinguish both demand and supply factors underlying external financing constraints. We then argue for a catalytic role that development cooperation can play in alleviating these constraints. We present an illustration based on the policy instruments that have been used by development cooperation. Our particular interest is to document how well the Belgium Development Cooperation support of MSMEs compares to that provided by four other European countries: France, Germany, The Netherlands, and Sweden. We conclude with a discussion on the critical policy issues as regards the effectiveness of these interventions.
    Keywords: MSME, external finance, DFI, information asymmetry
    JEL: G23 O16 Y10
    Date: 2015–06
  8. By: Czarnitzki, Dirk; Delanote, Julie
    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
    JEL: C14 C30 O38
    Date: 2016
  9. By: Enrique Moral-Benito (Banco de España)
    Abstract: It is a well-known empirical regularity that small firms are less productive than large firms. However, does size cause productivity or vice versa? Using matching methods, I find that productivity shocks are followed by significant increases in size defined by employment. In contrast, size shocks are not followed by productivity gains at the firm level. This finding casts doubt on the conventional wisdom that aggregate productivity in Spain is driven by a firm size distribution biased towards small firms in comparison with other developed countries. According to my findings, low firm-level productivity might play a crucial role in shaping the Spanish firm size distribution.
    Keywords: firm-level data, productivity, size distribution
    JEL: L11 L25 D24
    Date: 2016–07
  10. By: Schubert, Torben; Baier, Elisabeth; Rammer, Christian
    Abstract: In this paper we analyze the conditions under which firms decide to offshore innovation. We consider the role of internal technological capabilities and technological dynamism in the firm environment, distinguishing speed and uncertainty of technological change. Using unique data from the German Innovation Survey we find that while high speed of technological change tends to drive innovation offshoring, high uncertainty about future technology developments results in more innovation offshoring only for firms with low internal technological capabilities. Firms with high technological capabilities instead are less likely to offshore innovation when uncertainty is high. We argue that these differences in offshoring behaviour reflect differing strategic objectives. We show that for firms with low technological capabilities asset augmentation is more important while for firms with high technological capabilities asset exploitation is more important. When faced by high technological uncertainty firms with low technological capabilities offshore innovation strategically in order to reduce uncertainty by augmenting their asset base. For firms with high technological capabilities asset augmentation is less important. When faced by high technological uncertainty they prefer to innovate onshore in order to keep stronger control of their key assets.
    JEL: O32 F21 F23 L22
    Date: 2016
  11. By: TAKAMURA Shizuka
    Abstract: This paper examines the various factors of companies which utilize female and foreign employees, using panel data of listed Japanese companies. Japanese female employees are usually recruited in the same manner as male employees; on the other hand, foreign employees are recruited in different ways and at different times. Although the situations of female employees and foreign employees are different, common factors seem to exist which promote and impede the utilization of both groups. The estimation results from the panel analysis show that the female and foreign proportion among regular employees has fallen as the duration of male employees' employment period has risen, and that has increased in accordance with the job posting system. Long-term employment is a solid underpinning of Japanese human resource management and the principle of organizational norm which is constructed mainly based on Japanese male employees in a relatively predictable environment. Meanwhile, an enhanced flexible workplace environment tends to promote the utilization of female and foreign employees, and the negative effects of Japanese firms' human resource management are not denied as a whole. Since utilizing a diverse group of employees with a variety of skills and knowledge is important for creating innovative ideas, it would be beneficial for companies to review their human resource management practice.
    Date: 2016–06
  12. By: He, Ming (Division of Economics, Xi'an Jiaotong-Liverpool University); Chen, Yang (Division of Economics, Xi'an Jiaotong-Liverpool University); Schramm, Ronald M. (Division of Economics, Xi'an Jiaotong-Liverpool University)
    Abstract: We use a spatial autoregressive model to study the determinants of firm-level productivity growth using longitudinal data on China's electric apparatus industry over the period of 1999-2007. Factors considered include technological spillover, R&D and export behavior, agglomeration economies, and public expenditure. We propose modifications to Kelejian and Prucha's (1998) FE-2SLS procedure and Mutl and Pfaffermayr's (2011) RE-FG2SLS procedure to cope with the technical difficulties with our unbalanced panel. Statistical evidence strongly favors the fixed effects model over the random effects model. According to our estimates, there are large and signiffcant technological spillovers among firms. Individually, firms benefit from their own R&D and export activities. Market competition and public expenditure in the local and neighboring jurisdictions are found to be important determinants to productivity. Our model also provides direct evidence that the technological spillover effects attenuate rapidly in spatial distance. Finally, the inter-regional spillover effects are found to be more pronounced and more significant on urban districts or jurisdictions with smaller geographical areas. Geographic proximity to neighbors and special administrative role jointly contribute to this observation.
    Date: 2016–03–03
  13. By: Amador, João; Nagengast, Arne J.
    Abstract: We show that credit supply shocks have a strong impact on firm-level as well as aggregate investment by applying the methodology developed by Amiti and Weinstein (2013) to a rich dataset of matched bank-firm loans in the Portuguese economy for the period 2005 to 2013. We argue that their decomposition framework can also be used in the presence of small firms with only one banking relationship as long as they account for only a small share of the total loan volume of their banks. The growth rate of individual loans in our dataset is decomposed into bank, firm, industry and common shocks. Adverse bank shocks are found to impair firm-level investment in all firms in our sample, but in particular for small firms and those with no access to alternative financing sources. For the economy as a whole, granular shocks in the banking system account for around 20-40% of aggregate investment dynamics. JEL Classification: E32, E44, G21, G32
    Keywords: banks, credit dynamics, firm-level data, investment, portuguese economy
    Date: 2016–06
  14. By: Erno Tornikoski (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Christophe Bonnet (GDF - Gestion, Droit et Finance - Grenoble École de Management (GEM)); Bérangère Deschamps (UGA IAE - Institut d'Administration des Entreprises - Grenoble - UGA - Université Grenoble Alpes); Gilles Lecointre (Gilles Lecointre PME Conseils); Mickael Buffart (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM))
    Abstract: This document reports the situational analysis of business transfer ecosystem in France as it stands in early 2015. In France there are no dedicated public datasets about ownership transfers. Ownership transfers can be deduced from different sources (e.g. Insee, Infogreffe, Diane, etc.), which result slightly different numbers about realized business transfers. Depending on the source, there are around 50 000 potential firms to be transferred each year in France (including all sizes, types, and industries). The French statistic organism (INSEE) does not count the creation of holding to the purpose of buying a target as transfers but as creations from scratch. Some of the key actors of the SME ownership transfer market carry out surveys about the ecosystem. For example, CNCFA and Epsilon Research survey the ownership transfer market each year since 2010. DG Tresor (governmental organization), Groupe BPCE (private bank), CRA (National association for SME transfers), and BPI France (a public investment bank) also publish reports and studies about ownerships transfers in France. The material for this report comes from these above secondary sources and interviews with some of the key actors in the SME ownership transfer market. The interviewed actors were AFIC (Association Français des Investisseurs pour la Croissance), CCI (Chamber of Commerce and Industry), CNCFA (Syndicat des Professionnels des Fusions et Acquisitions), CRA (Cédants et Repreneurs d’Affaires), CGPME (Confédération générale des petites et moyennes entreprises), and Reseau Entreprendre Isère. The interviews were carried out by the authors of this report. Each interview produced a mini-case about an actor in the SME markets. The mini-cases can be found from the appendixes of this report. To put the business transfers in its proper context, there were around 3.14 million firms (non-agricultural) in France in 2011, of which 243 were big, 5 000 mid-size, 138 000 SMEs, and 3 million micro-firms. On average there are 500-550 000 new entries (of which around 5% employ more than one person) and 50-60 000 exists each year in France.
    Keywords: business transfer ecosystem, France
    Date: 2015–05–27
  15. By: Lara Abdel Fattah; Sylvain Barthélémy; Nadine Levratto; Benjamin Trempont
    Abstract: This paper aims at bringing evidence on firm survival after bankruptcy. Instead of considering survival as a binary variable we take into account the duration of the reorganization procedure. We follow a sample of French firms throughout their restructuring process and document factors influencing the reorganization outcome. Based on the existing theoretical and empirical literature on the link between firm ownership structure and performance, we particularly focus on the influence of firm affiliation to a business group and business groups’ characteristics. Using a Cox proportional hazards model and a Random Forests model, we find that firm structural and financial characteristics have a strong power to explain survival at different time horizons, however, very few of firm financial characteristics used previously for bankruptcy prediction are useful for predicting the final outcome of reorganization once a reorganization plan is voted. In addition, we show that firm ownership structure proxied by firm affiliation to a business group and business group characteristics has no significant influence on the outcome and duration of reorganization.
    Keywords: reorganization, bankruptcy, survival, business groups, Cox model, Random Forests.
    JEL: G33 K20 C14
    Date: 2016
  16. By: Tobias Ketterer; Andrés Rodríguez-Pose
    Abstract: The debate on whether institutions or geography prevail in driving economic growth has been rife (e.g. Sachs 2003 vs. Rodrik et al. 2004). Most of the empirical analyses delving into this debate have focused on world countries, whose geographical and institutional conditions differ widely. Subnational analyses considering groups of countries with, in principle, more similar institutional and geographical conditions have been limited and tended to highlight that geography is more important than institutions at subnational level. This paper aims to address whether this is the case by investigating how differences in institutional and ‘first-nature’ geographical conditions have affected economic growth in Europe’s regions in the period 1995-2009. In the analysis we use a newly developed dataset including regional quality of government indicators and geographical charactersitics and employ 2-SLS and IV-GMM estimation techniques with a number of regional historical variables as instruments. Our results indicate that at a regional level in Europe institutions rule. Regional institutional conditions – and, particularly, government effectiveness and the fight against corruption – play an important role in shaping regional economic growth prospects. This does not imply, however, that geography is irrelevant. There is evidence of geographical factors affecting regional growth, although their impact is dwarfed by the overriding influence of institutions.
    Keywords: Regional economic growth, institutions, geography, quality of government, NUTS-2 regions, Europe
    JEL: R11 O11 O43
    Date: 2016–06

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