nep-sbm New Economics Papers
on Small Business Management
Issue of 2016‒09‒25
eighteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Barriers to Innovation in Indian Small and Medium-Sized Enterprises By Pachouri, Anshul; Sharma, Sankalp
  2. Financial constraints and public funding for eco-innovation: Empirical evidence on European SMEs By Grazia Cecere; Nicoletta Corrocher; Maria Luisa Mancusi
  3. Better, Faster, Stronger: Global Innovation and Trade Liberalization By Coelli, Federica; Moxnes, Andreas; Ulltveit-Moe, Karen-Helene
  4. Long run effect of public grants on the R&D investment: A non-stationary panel data approach By Álvarez, Inmaculada C.; Kao, Chihwa; Romero-Jordán, Desiderio
  5. Der Stellenwert nicht-technologischer Neuerungen im Innovationsgeschehen der mittelständischen Wirtschaft By Maaß, Frank; May-Strobl, Eva
  6. Patterns of local R&D cooperation of foreign subsidiaries in an intermediate country: innovative and structural factors By Antonio García Sánchez; José Molero Zayas; Ruth Rama
  8. Bridging the “Missing Middle” between Microfinance and Small and Medium-Sized Enterprise Finance in South Asia By Shankar, Savita
  9. Government Debt and the Returns to Innovation By Massimiliano Croce, Mariano; Nguyen, Thien Tung; McGregor Raymond, Steve; Schmid, Lukas
  10. Interclustering: innovate through diversification. The case of the Aerospace Valley competitiveness cluster in Aquitaine region By Julien Ambrosino; Jérémy Legardeur; Amélie Demanet; Philippe Lattes
  11. Measures, Drivers and Effects of Green Employment : evidence from US local Labor Markets, 2006-2014 By Francesco Vona; G. Marin; D. Consoli
  12. Islamic finance for SMES By Elasrag, Hussein
  13. Sector dynamics and demographics of top R&D firms in the global economy By Pietro Moncada-Paternò-Castello
  14. Credit Surety Fund: A Credit Innovation for Micro, Small, and Medium-Sized Enterprises in the Philippines By Maningo, Gary V.
  15. The spillover effects of innovative ideas on human capital By Baris Alpaslan; Abdilahi Ali
  16. Biodiversity and economy: new management and accounting approaches, tools and practices By Ciprian Ionescu; Hélène Leriche; Michel Trommetter
  17. Cognitive Biases and Entrepreneurial Under-Diversification By E. M. Cervellati; P. Pattitoni; M. Savioli
  18. Testing for localization: A new approach By MURATA, Yasusada; NAKAJIMA, Ryo; TAMURA, Ryuichi

  1. By: Pachouri, Anshul (Asian Development Bank Institute); Sharma, Sankalp (Asian Development Bank Institute)
    Abstract: Innovation plays a critical role in shaping the industrial and firm competitiveness of any nation. Innovation is often discussed in the setting of developed countries, but the rise of emerging economies such as India has generated a new interest in understanding innovation in developing economies. This paper aims to study and present the current state of innovation in small and medium-sized enterprises (SMEs) in India. The focus of the paper is to bring out the key barriers SMEs face in the innovation process in the context of the existing government policy. India, being a developing nation, has its own set of unique situations and challenges that impede the innovation potential of SMEs operating in it. Many of these barriers are related to public policy, funding constraints, shortage of skilled research and development (R&D) workforce, and weak linkages between institutions and the firms, among others.
    Keywords: SME innovation; innovation policy framework; public policy barriers; innovation potential
    JEL: G20 G28 O38
    Date: 2016–09–22
  2. By: Grazia Cecere; Nicoletta Corrocher; Maria Luisa Mancusi (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: Financial constraints have an important impact on the development of eco-innovations, but their effect varies according to the type of funds taken into account. This article studies the impact of the lack of funds on the development of eco-innovations, distinguishing between internal, external and public funds. In particular, we investigate the interaction between public funding, on the one hand, and internal and other external sources of funding. The empirical analysis is based upon a sample of European SMEs belonging to different sectors that are involved in products, processes and organizational eco-innovations. Our results show that a lack of internal funding always decreases the probability to introduce eco-innovations, while the lack of private external funds does not appear to hinder the development of eco-innovations. Interestingly, we find that access to public funds or incentives is effective in improving a firm’s ability to introduce eco-innovations, but only when the firm is not short of funds (either from internal or external sources), thus suggesting that public funds are somewhat complementary to other funds. Further analysis shows that these effects are mostly relevant in small firms.
    Keywords: eco-innovations, public funding, financial constraints, SMEs.
    JEL: O31 Q55 G38
    Date: 2016–07
  3. By: Coelli, Federica; Moxnes, Andreas; Ulltveit-Moe, Karen-Helene
    Abstract: This paper estimates the effect of trade policy during the Great Liberalization of the 1990s on innovation in over 60 countries using international firm-level patent data. The empirical strategy exploits ex-ante differences in firms' exposure to countries and industries, allowing us to construct firm-specific measures of tariffs. This provides asource of variation that enables us to establish the causal impact of trade policy on innovation. Our results suggest that trade liberalization has economically significant effects on innovation and, ultimately, on technical change and growth. According to our estimates, about 7 percent of the increase in knowledge creation during the 1990s can be explained by trade policy reforms. Furthermore, we find that the increase in patenting reflects innovation, rather than simply more protection of existing knowledge. Both improved market access and more import competition contribute to the positive innovation response to trade liberalization.
    Keywords: innovation; patents; trade liberalization
    JEL: F0 F1 F13 F6
    Date: 2016–09
  4. By: Álvarez, Inmaculada C.; Kao, Chihwa; Romero-Jordán, Desiderio
    Abstract: From a macroeconomic point of view, the relationship between R&D investment and growth is well-known. At a firm level, extensive literature exists that analyzes the determinants behind R&D investment decision-making –basically comprising economic and financial factors-. Using cointegration techniques, the aim of this paper is analyze the long run effect of public grants on R&D investment for the Spanish case. Classifying the sample according to cointegration, we eliminate the possible existence of spurious correlation using the most suitable econometric techniques. Results in the long-run show that sales possesses a high pro-cyclical component with an elasticity of approximately 0.6. Subsidies generate additionality with an elasticity ranging from 0.17 to 0.2. Nevertheless, the capacity to promote investment for each euro of public funds is greater than the tax credit, with elasticities which can reach 0.7. In addition it worth highlight that we observe a higher impact of subsidies in cointegrated firms that are those with more investment in I+D.
    Date: 2016
  5. By: Maaß, Frank; May-Strobl, Eva
    Abstract: Der Mittelstand gilt als innovativ und anpassungsfähig, jedoch wird eine zunehmende Innovationslücke konstatiert. Für diese Studie wurde die Innovationsbeteiligung des Mittelstands/ der KMU unter besonderer Berücksichtigung der nicht-technologischen Neuerungen auf Ba-sis der Community Innovation Surveys analysiert. Dabei wurde deutlich, dass nicht-technologische Innovationen weiter verbreitet sind als technologische Innovationen. Folglich gibt die Einschränkung auf technologische Innovationen ein unvollständiges Bild vom Innovations-geschehen im Mittelstand. Nicht-technologische Innovationen dienen der Vorbereitung tech-nologischer Innovationen, vor allem aber begleiten sie diese. Sie zielen insbesondere auf eine Steigerung der Unternehmenseffizienz. Allerdings belegt diese Studie auch, dass nicht-technologische Innovationen abhängig von der Unternehmensgröße, der Branche und auch der Gruppenzugehörigkeit sind: So sind eigenständige KMU seltener innovativ als solche die zu einer Unternehmensgruppe gehören. Dagegen unterscheiden sich große mittelständische Unternehmen in dieser Hinsicht nicht von anderen Großunternehmen.
    Abstract: Although the German Mittelstand is usually considered as inventive and flexible, a growing innovation gap seems to open up. Based on the CIS-datapool, this study analyses the innovation participation of Mittelstand companies/SMEs with a special focus on non-technological innovations. It becomes clear that non-technological innovation is more widespread than technological innovation. A restriction to technological innovations underestimates the innovation dynamics of Mittelstand companies/SMEs. Non-technological innovations pave the way for technological innovations, above all they often accompany them. They particularly aim at increasing business efficiency. Non-technological innovations depend on enterprise size, industry and also on the affiliation to an enterprise group. Independent SMEs are less innovative than those which are part of a group, whereas large Mittelstand companies do not differ from other large enterprises.
    Keywords: KMU,Mittelstand,nicht-technologische Innovationen,Deutschland,SME,German Mittelstand,non-technological Innovation,Germany
    JEL: L25 O31
    Date: 2016
  6. By: Antonio García Sánchez (Instituto Complutense de Estudios Internacionales (ICEI). Universidad Complutense de Madrid.); José Molero Zayas (Instituto Complutense de Estudios Internacionales (ICEI). Universidad Complutense de Madrid.); Ruth Rama (Instituto Complutense de Estudios Internacionales (ICEI). Universidad Complutense de Madrid.)
    Abstract: We attempt to contribute to a better understanding of cooperative innovation patterns of foreign subsidiaries (FS) in Spain as a representative intermediate country, going deeply into three main aspects: firstly, a sectoral taxonomy which combines international technological dynamism and revealed technological advantage as a way to understand such patterns. Secondly we focus our attention on innovative intensive subsidiaries, assuming they are the most important ones for hosting countries. Thirdly, we combine innovation and structural-competitive variables to explain local cooperation. We found more intense cooperation of FS with local agents in dynamic specialization sectors, as well as the fact that this is mostly carried out in a complementary mode with inner knowledge capabilities of the companies. Cooperative activities are influenced by economicstructural factors of the Spanish economy, particularly in highly innovative companies. Cooperative strategies of domestic firms might also have an influence on those of foreign subsidiaries.
    Date: 2016
  7. By: Jaan Masso; Priit Vahter
    Abstract: This paper investigates knowledge spillovers through labour mobility from multinational enterprises (MNEs) to domestic firms. Despite the recent increased interest in this particular channel of MNE spillovers, there is a need to understand how such effects of managerial labour mobility from MNEs function in more detail. Based on employer-employee level data from Estonia, we find that higher firm and individual-level performance associated with hiring MNE-experienced managers and top specialists especially tends to reflect the export experience of these employees. A channel for how these spillovers function appears to be the increase in the propensity to export by domestic firms. The contribution of external international experience is especially strong in the first stages of the internationalisation of a firm and for entry into nearby markets. There is no evidence of the effects of MNE experience on the intensity of exports.
    Keywords: multinational enterprise, knowledge spillovers, export entry, labour mobility
    JEL: F10 F23 J62
    Date: 2016
  8. By: Shankar, Savita (Asian Development Bank Institute)
    Abstract: With maturity in the microfinance market in South Asia, it is observed that some microfinance members’ needs grow beyond the boundaries of traditional microfinance group loans. In addition, there are other small enterprises whose needs are not met by microfinance institutions or commercial banks. It is important to address the financing needs of these firms given their employment potential, and hence this issue is on the policy agenda of the three countries studied in this paper: India, Bangladesh, and Pakistan. Drawing on interviews with chief executives of lending organizations and desk research, this paper reviews the options currently available to such firms in each country, the lending models being used, and recent policy initiatives to promote them. Based on the country experiences, the features of successful lending models for this segment and the specific challenges that need to be addressed are summarized and conclusions drawn.
    Keywords: microfinance in South Asia; lending models; microfinance group loans; missing middle
    JEL: L22 L25 O16
    Date: 2016–09–20
  9. By: Massimiliano Croce, Mariano (University of North Carolina); Nguyen, Thien Tung (Ohio State University); McGregor Raymond, Steve (University of North Carolina); Schmid, Lukas (Duke University)
    Abstract: Elevated levels of government debt raise concerns about their effects on long-term growth prospects. This study shows that (i) high-R&D firms are more exposed to government debt and pay higher expected returns than low-R&D firms; and (ii) higher levels of the debt-to-GDP ratio predict higher risk premia for high-R&D firms. Furthermore, rises in the cost of capital for innovation-intensive firms are associated with declines in subsequent R&D activity and economic growth. We study these findings in a production-based asset pricing model with endogenous innovation. By accounting for fiscal and political risk, our model reproduces several aspects of the empirical evidence.
    JEL: C62 F31 G12
    Date: 2016–05
  10. By: Julien Ambrosino (Aerospace Valley, ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA), IMS - Laboratoire de l'intégration, du matériau au système - Université Sciences et Technologies - Bordeaux 1 - Institut Polytechnique de Bordeaux - CNRS - Centre National de la Recherche Scientifique, Agence de Développement et d'Innovation); Jérémy Legardeur (ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA), IMS - Laboratoire de l'intégration, du matériau au système - Université Sciences et Technologies - Bordeaux 1 - Institut Polytechnique de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Amélie Demanet (Agence de Développement et d'Innovation); Philippe Lattes (Aerospace Valley)
    Abstract: At the regional level, as in Aquitaine region, or at national and European levels, interclustering offers new opportunities to collaborate between clusters/clusters and their respective members. The interclustering steps identified in the literature start usually by exchanging best practices between members and cluster leaders to move towards the setting up collaborative innovation projects with a cross-sectoral dimension. In the case of major clusters, the abundance of technologies identified in the perimeter can limit the impact in its institutional scope. Technological diversification then appears as a new opportunity to foster cross-fertilization between market applications and complementary themes. The number of projects since 2010 in connection with Aerospace Valley competitiveness cluster seems to confirm our assumptions.
    Abstract: A l'échelle régionale, comme en Aquitaine, ou au niveau national et européen, l'interclustering offre de nouvelles opportunités de collaborations aux pôles de compétitivité et aux clusters et à leurs adhérents respectifs. Les étapes identifiées dans la littérature à propos de l'interclustering débutent le plus souvent par l'échange de bonnes pratiques entre membres et animateurs de clusters pour tendre vers le montage de projets collaboratifs d'innovation avec une dimension trans-sectorielle. Dans le cas des pôles de compétitivité majeurs, l'abondance des technologies identifiées au sein du périmètre peut limiter l'impact à l'intérieur de son champ d'action institutionnel. La diversification technologique parait alors comme une nouvelle opportunité pour susciter la fertilisation croisée entre des applications marché et des thématiques complémentaires. Le nombre de projets réalisés depuis 2010 en lien avec pôle Aerospace Valley semble confirmer nos hypothèses en ce sens.
    Keywords: cluster,innovation,collaborative projects,competitiveness cluster,diversification,interclustering,projets collaboratifs,clusters,pôle de compétitivité
    Date: 2016–07–07
  11. By: Francesco Vona (OFCE Sciences PO et SKEMA Business School); G. Marin (IRCrES-CNR); D. Consoli (INGENIO CSIC-UPV)
    Abstract: This paper explores the nature and the key empirical regularities of green employment in US local labor markets between 2006 and 2014. We construct a new measure of green employment based on the task content of occupations. Descriptive analysis reveals the following: 1. the share of green employment oscillates between 2 and 3 percent, and its trend is strongly pro-cyclical; 2. green jobs yield a 4 percent wage premium; 3. despite moderate catching-up across areas, green jobs remain more geo- graphically concentrated than similar non-green jobs; and 4. the top green areas are mostly high-tech. As regards the drivers, changes in environ- mental regulation are a secondary force compared to the local endowment of green knowledge and resilience in the face of the great recession. To assess the impact of moving to greener activities, we estimate that one additional green job is associated with 4.2 (2.4 in the crisis period) new jobs in non-tradable activities in the local economies.
    Keywords: Green employment, local labor market, environmental regulation, environmental technologies, local multipliers
    JEL: J23 O33 Q52 R23
    Date: 2016–07
  12. By: Elasrag, Hussein
    Abstract: Small and Medium Enterprises (SMEs) make up the bulk of the economic tissue of the economy. In developing countries, they represent the majority of employment, including female employment. Investing in SMEs is a long-term and smart strategy, with sustainable returns that multiply across regions, countries and societies. SMEs constitute the overwhelming majority of firms. Globally, SMEs make up over 95% of all firms, account for approximately 50% of GDP and 60%–70% of total employment, when both formal and informal SMEs are taken into account. This amounts to between 420 million and 510 million SMEs, 310 million of which are in emerging markets. Promoting access to finance for SMEs has been on the global reform agenda since the global financial crisis.The purpose of this paper is to investigate the opportunities of development and growth as well as the main challenges to Islamic finance for SMEs. This paper will help to deepen understanding of the concepts of Islamic finance as well as SMEs. In addition to evaluate how Islamic financial institutions can support SMEs.
    Keywords: Small and Medium Enterprises ,Islamic finance,Islamic financial institutions
    JEL: G2 G21
    Date: 2016–09–22
  13. By: Pietro Moncada-Paternò-Castello (European Commission – JRC)
    Abstract: This paper investigates the sectoral dynamics of the major economies during the last decade through the lens of the top 1000 R&D investors worldwide and looks at how firms’ demographics are related to sector distribution. In doing so, it contributes to the literature on the EU corporate R&D intensity gap as well as on that on industrial dynamics. Contrary to the common understanding, the results show that in the EU the distribution of R&D among sectors has changed more than in the USA, which has experienced a shift mainly towards ICT-related sectors. In both the EU and the USA the pace of R&D change is slower than in the emerging economies. Furthermore, the EU has been better able than the USA and Japan to maintain its world share of R&D investment. Even more interestingly, the results show that age is strongly related to the sector (and dominant technology) in which firms operate. This suggests that focusing on sector (technological) dynamics could be even more relevant from a policy perspective than focusing only on young leading innovators. In fact, EU firms are less able to create or enter new high-tech sectors in a timely way and fully exploit the growth opportunities offered by first mover advantages.
    Keywords: Corporate R&D, sector dynamics, firms’ age, EU R&D intensity deficit
    JEL: O30 O32 O38 O57
    Date: 2016–09
  14. By: Maningo, Gary V. (Asian Development Bank Institute)
    Abstract: Micro, small, and medium-sized enterprises are a backbone of the Philippine economy. One factor that hinders the growth of these enterprises is their difficulty in accessing finance from banks and other financial institutions. The Credit Surety Fund (CSF) was established to help these enterprises and other organizations become creditworthy and bankable. The CSF is a credit guarantee program initiated by the Bangko Sentral ng Pilipinas that enables enterprises and cooperatives to gain easier access to loans from banks without providing collateral. The CSF pools contributions from cooperatives and nongovernment organizations, local government units, institutions such as the Development Bank of the Philippines, the Land Bank of the Philippines, the Industrial Guarantee and Loan Fund, and other organizations. In this way, it is a public–private partnership that links the key players of the economy to empower enterprises and cooperatives.
    Keywords: credit Surety Fund; public–private partnerships; credit innovation; credit guarantee programs
    JEL: G21 G24 G32
    Date: 2016–09–22
  15. By: Baris Alpaslan; Abdilahi Ali
    Abstract: This paper extends a two-period Overlapping Generations model of endogenous growth where the interactions between public infrastructure, human capital with R&D activities, and growth are studied. The paper makes two important contributions. First, it accounts for the spillover effect of the stock of ideas on learning which in turn promotes the production of innovative technologies. In doing so, it brings to the fore a two-way interaction between human capital and innovation. The paper then applies various econometric methods which confirm the above theoretical thesis. Second, the solutions of the model emphasise the important role public spending on infrastructure, human capital and R&D can play in promoting economic growth. In order to study the transitional dynamics of the model and to illustrate the impact of public policy, the model is calibrated using the average data for low-income countries and a sensitivity analysis is reported under different parameter configurations. The findings of the numerical analysis show that trade-offs in the allocation of public spending may inevitably emerge. In particular, investment in public infrastructure at the expense of spending on R&D is less likely to succeed in promoting economic growth, whereas it may be more effective to foster growth through an offsetting cut in another productive component, namely, education. In light of these potential trade-offs, governments in low-income countries need to use their limited budgets as part of holistic measures in order to achieve efficient outcomes.
    Keywords: Infrastructure, Human Capital, Innovation, Government Policy
    JEL: H54 J24 O31 O38
    Date: 2016–09
  16. By: Ciprian Ionescu (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes, UGA - Université Grenoble Alpes); Hélène Leriche (Orée. Entreprises, territoires et environnement); Michel Trommetter (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes, INRA - Institut National de la Recherche Agronomique)
    Abstract: This work belongs to a research process which has started 10 years ago and whose targets are, on the one hand to show that economic activities ar not only a source of impacts but that they depend first and foremost on biodiversity and ecosystem services, and on the other hand, to co-build approaches which aim at managing these relationships of interdependence, not as a constraint, but as a challenge within the strategy of economic actors.
    Keywords: Environmental accounting,Biodiversity,Biodiversity Protection,Ecosystem,Ecosystemic services,Firm,Environmental Economics
    Date: 2016–06
  17. By: E. M. Cervellati; P. Pattitoni; M. Savioli
    Abstract: Cognitive biases lead entrepreneurs to overinvest in their own companies, over exposing themselves to idiosyncratic risk. Our novel theoretical model explains entrepreneurial under-diversification by measuring the amount of potential bias in entrepreneurs’ portfolio allocations brought about by overconfidence and over optimism. Simulation analyses based on our model allow us calculating the implicit levels of overconfidence and over optimism from observable portfolio choices. Finally, using a unique dataset including cross-regional data on Italian entrepreneurs and a structural equation modeling approach, we test the effect of overconfidence and over optimism on entrepreneurs’ portfolio allocations. Consistent with our theoretical predictions, we find a positive relationship between overconfidence and entrepreneur investments in their own companies. On the other hand, the role of over optimism seems to be negligible.
    JEL: G02 G11 L26
    Date: 2016–09
  18. By: MURATA, Yasusada; NAKAJIMA, Ryo; TAMURA, Ryuichi
    Abstract: Recent empirical studies document that knowledge spillovers attenuate and industry localization decays with distance. It is thus imperative to detect localization accurately especially at short distances. We propose a new approach to testing for localization that corrects the first-order bias at and near the boundary in existing methods while retaining all desirable properties at interior points. Employing the NBER U.S. Patent Citations Data File, we illustrate the performance of our localization measure based on local linear density estimators. Our results suggest that the existing kernel density methods and regression approaches can be substantially biased at short distances.
    Keywords: localization, knowledge spillovers, local linear density, boundary bias, micro-geographic data
    JEL: R12 O31
    Date: 2016–08

This nep-sbm issue is ©2016 by João Carlos Correia Leitão. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.