nep-sbm New Economics Papers
on Small Business Management
Issue of 2016‒10‒09
twenty papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Entrepreneurial Human and Social Capital in Small Businesses in Vietnam - An Extended Analysis - By Souksavanh VIXATHEP; Nobuaki MATSUNAGA
  2. A Portrait of Firms that Invest in R&D By Lucia Foster; Cheryl Grim; Nikolas Zolas
  3. Openness and environmental innovation: Does time-horizon matter? By MOTHE Caroline; NGUYEN Thi Thuc Uyen
  4. Business Owners, Employees and Firm Performance By Maliranta, Mika; Nurmi, Satu
  5. Innovation Policies and New Regional Growth Paths: A place-based system failure framework By Grillitsch, Markus; Trippl, Michaela
  6. R&D heterogeneity and its implications for growth By Sigurd Mølster Galaasen; Alfonso Irarrazabal
  7. Financial Constraint and Productivity: Evidence from Canadian SMEs By Shutao Cao; Danny Leung
  8. Entrepreneurship after displacement: The transition and performance of entrepreneurial ventures created after displacement By Nyström, Kristina
  9. The impact of resource efficiency measures on performance in small and medium-sized enterprises By Horbach, Jens
  10. Financial constraints and the failure of innovation projects By José García-Quevedo; Agustí Segarra-Blasco; Mercedes Teruel
  11. Innovative public-private partnership to support Smart City: the case of “Chaire REVES” By Laurent Dupont; Laure Morel; Claudine Guidat
  12. Within and Between Firm Trends in Job Polarization: Role of Globalization and Technology By Pekkala Kerr, Sari; Maczulskij, Terhi; Maliranta, Mika
  13. Do Financial Frictions Explain Chinese Firms’ Saving and Misallocation By Xu Tian; Dan Lu; Yan Bai
  14. Protecting innovation through patents and trade secrets: Determinants and performance impacts for firms with a single innovation By Crass, Dirk; Garcia Valero, Francisco; Pitton, Francesco; Rammer, Christian
  15. "Financial Constraint, Entrepreneurship and Sectoral Migrations " By Pierrick Baraton; Florian Léon
  16. Entrepreneurial role models, fear of failure, and institutional approval of entrepreneurship: A tale of two regions By Wyrwich, Michael; Stuetzer, Michael; Sternberg, Rolf
  17. Female Entrepreneurship, Access to Credit, and Firms' Performance in Senegal By Abdoulaye Seck; Fatoumata Lamarana Diallo; Founty Alassane Fall; KARAMOKO CAMARA; Ndeye Khadidiatou Mouhamed DIOP; Abdelkrim Araar
  18. Gazelles and muppets in the City: Stock market listing, risk sharing, and firm growth quantiles By Cosimo Abbate; Alessandro Sapio
  19. The Effect of Innovation Box Regimes on Income Shifting and Real Activity By De Simone, Lisa; Lester, Rebecca
  20. What kind of entrepreneurs start high productivity businesses? By Maliranta, Mika; Nurmi, Satu

  1. By: Souksavanh VIXATHEP (Graduate School of Economics, Kyoto University); Nobuaki MATSUNAGA (Graduate School of International Cooperation Studies, Kobe University)
    Abstract: Entrepreneurship is viewed as an important mechanism for economic development. It helps entrepreneurs overcome most of the constraints in businesses, encourages innovation, and contributes to employment generation and welfare improvement. The paper addresses the issue of entrepreneurial contribution to economic development at the micro level in Vietnam. The study examines the impact of entrepreneurial human capital on firm's performance (value added, total factor productivity (TFP)) in micro and small enterprises (MSEs). The analysis reveals that owner's formal education (up to upper secondary education) contributes to enhancement of firm value added and TFP in micro businesses. Entrepreneur's technical specialization, including advanced vocational training, university and post-graduate education, enhances performance of small enterprises, but shows some sign of over-education for micro businesses. Accumulated entrepreneurial experience, in form of occupation and self-employment experience, proves crucial for firm performance. Geographical advantages favoring MSEs located in the major metropolitan areas and sectoral advantages favoring 'trade and services' prove to be significant. The findings highlight the importance of human capital in nurturing entrepreneurship and fostering economic development at the micro-level.
    Keywords: entrepreneurship; human capital; social capital; small business; Vietnam
    JEL: C01 D22 L26
    Date: 2015–04
  2. By: Lucia Foster; Cheryl Grim; Nikolas Zolas
    Abstract: We focus on the evolution and behavior of firms that invest in research and development (R&D). We build upon the cross-sectional analysis in Foster and Grim (2010) that identified the characteristics of top R&D spending firms and follow up by charting the behavior of these firms over time. Our focus is dynamic in nature as we merge micro-level cross-sectional data from the Survey of Industrial Research and Development (SIRD) and the Business Research & Development and Innovation Survey (BRDIS) with the Longitudinal Business Database (LBD). The result is a panel firm-level data set from 1992 to 2011 that tracks firms’ performances as they enter and exit the R&D surveys. Using R&D expenditures to proxy R&D performance, we find the top R&D performing firms in the U.S. across all years to be large, old, multinational enterprises. However, we also find that the composition of R&D performing firms is gradually shifting more towards smaller domestic firms with expenditures being less sensitive to scale effects. We find a high degree of persistence for these firms over time. We chart the history of R&D performing firms and compare them to all firms in the economy and find substantial differences in terms of age, size, firm structure and international activity; these differences persist when looking at future firm outcomes.
    Date: 2016–01
  3. By: MOTHE Caroline; NGUYEN Thi Thuc Uyen
    Abstract: The antecedents of environmental innovation and the impact of openness on technological innovation have been well studied, yet the role of external knowledge search remains largely unknown. This study explores whether six dimensions of open search (external R&D, acquisition, R&D cooperation, and three types of external information sourcing) enhance firms? environmental innovation (EI) when used either sporadically or persistently. It shows that the temporal dimension of openness matters. Persistent open knowledge search efforts are associated with a firm?s propensity to introduce EI, more so than sporadic search. Furthermore, the different types of knowledge search have heterogeneous effects on different types of EI. It also shows that persistent innovation is more relevant in the case of radical EI.
    Keywords: Environmental innovation; Incremental/radical; Openness; Persistence; Search
    Date: 2016–10
  4. By: Maliranta, Mika; Nurmi, Satu
    Abstract: Abstract The novel Finnish Longitudinal OWNer-Employer-Employee (FLOWN) database was used to analyze how the characteristics of owners and employees relate to firm performance as determined by labor productivity, survival and employment growth. Focusing on the role of the owner’s formal education and previous experience as an employee, the results show that previous experience in a high-productivity firm strongly predicts high productivity and probability of survival for the entrepreneur’s new firm. This can be interpreted as evidence of knowledge spillover through labor mobility. Strikingly, firms established in times of intensive excess job reallocation were found to exhibit superior productivity performance in the later phases of their life cycles.
    Keywords: Entrepreneurship, ownership, firm performance, human capital, diffusion of knowledge
    JEL: L25 L26 J24 J62 O33
    Date: 2016–10–06
  5. By: Grillitsch, Markus (CIRCLE, Lund University); Trippl, Michaela (Department of Geography and Regional Research, University of Vienna)
    Abstract: Regional economies are increasingly facing the challenge to renew their economic structures and generate innovations that break existing development paths. This calls for new innovation policy approaches that are well equipped to foster the modernisation of existing industries and nurture the development of new ones. The aim of this chapter is to provide a comprehensive place-based system failure framework for an innovation policy design that is suitable to initiate and support economic renewal processes in different region-specific contexts. Our framework rests on three pillars. The first one draws a distinction between barriers that relate to rigidities of the current industrial, knowledge and institutional structures on the one hand and impediments that hinder the emergence of new development paths on the other hand. The second conceptual cornerstone differentiates between various forms of new path development, namely path upgrading, modernization, branching, importation and new path creation. Third, to capture varying regional characteristics, we distinguish between thin, thick and specialised and thick and diversified regions. Our conceptual discussion demonstrates that each region type suffers from particular combinations of barriers to structural change. This offers a sound basis for assessing which types of new path development are most likely to occur in thin, thick and specialised and thick and diversified regions and for identifying promising policy approaches to fashion regional structural change in various regional contexts.
    Keywords: regional innovation policy; place-based system failures; regional structural change; new regional industrial path development
    JEL: O33 O38 R11 R58
    Date: 2016–10–04
  6. By: Sigurd Mølster Galaasen (Norges Bank (Central Bank of Norway)); Alfonso Irarrazabal (Norwegian Business School (BI))
    Abstract: This paper quantifies the determinants of heterogeneity in R&D investment and its implications for growth. Using a panel of Norwegian manufacturing firms we document a negative correlation between R&D intensity and firm size, driven mainly by small firms with high R&D intensity. We estimate a Schumpeterian growth model with heterogeneous firms, that differ with respect to innovation efficiency. The estimated model fits the shape of the R&D investment distribution as well as the negative correlation between R&D intensity and firm size. A larger selection effect contribution to aggregate growth is found when we include R&D moments in the estimation. Finally, we study the link between firm heterogeneity and R&D subsidies, and show that the growth effects of subsidies depend crucially on how the policy influences the equilibrium distribution of firms.
    Keywords: R&D, Heterogeneous Firms, Subsidies, Growth
    JEL: L11 O3 O4
    Date: 2016–09–29
  7. By: Shutao Cao; Danny Leung
    Abstract: The degree to which financial constraint is binding is often not directly observable in commonly used business data sets (e.g., Compustat). In this paper, we measure and estimate the likelihood of a firm being constrained by external financing using a data set of small- and medium-sized Canadian firms. Our measure separates the need for financing from the degree of constraint, conditional on the need for financing. We find that firm size, the current-debt-to-asset ratio and cash flow are robust indicators that can be used as a proxy for financial constraint. The total debt-to-asset ratio is not, however, a statistically significant indicator of financial constraint. In addition, firms with higher cash flow are less likely to need external financing and to be constrained if they do need it. We then estimate firm-level total factor productivity by taking into account the measured likelihood of binding financial constraint. Estimates of the coefficients for labour and capital in the structural estimation of the production function can be downward-biased if financial constraint is omitted, because production inputs are negatively correlated with the likelihood of being constrained by external financing. This in turn leads to an upward bias of total factor productivity estimates, which is about 4 per cent according to our estimation.
    Keywords: Firm dynamics, Productivity
    JEL: D24 G32 L25
    Date: 2016
  8. By: Nyström, Kristina (Center of Excellence for Science and Innovation Studies (CESIS), Division of Entrepreneurship and Innovation, Department of Industrial Economics and Management, The Royal Institute of Technology, & The Ratio Institute, Stockholm Sweden.)
    Abstract: According to Hoetker and Agarwal (2007), research on knowledge transfers related to business closures is scarce. This paper intends to fill the knowledge gap on the transition to entrepreneurship after a business closure. This paper studies which employees are most likely to start an entrepreneurial venture after being affected by a displacement. Furthermore, following e.g., Hyttinen and Maliranta (2008) and Sørensen (2007), this study investigates the link between former workplace characteristics, such as the size and age of the former workplace, and the transition into entrepreneurship. In the second part of the analysis, the performance of the entrepreneurial ventures started by employees after displacement are explored as it relates to survival, employment and profitability. The empirical setting employs an employer–employee matched dataset coving all displaced employees in Sweden during 2001-2010. The empirical findings suggest that employees displaced from smaller firms are more likely to transition to entrepreneurship, Employing a Cox proportional hazard model to study the survival of these companies shows that new firms generated by displaced employees from small establishments are more viable. Furthermore, individuals who took part in labor market polices have a higher probability of becoming entrepreneurs, although these firms tend to show lower survival rates, which indicates that these transitions are necessity based. As for the performance of the business, the empirical findings suggest modest growth in terms of employment, turnover and operating profit for the vast majority of entrepreneurial ventures started after displacement.
    Keywords: Displacements; exit. Entrepreneurship; Labor mobility
    JEL: J63 L26
    Date: 2016–09–30
  9. By: Horbach, Jens
    Abstract: The profitability of green investment is crucial for the diffusion of the resulting technologies but the knowledge about these effects is still limited. Positive performance effects may be based on cost savings stemming from the introduction of cleaner production processes connected with lower material and/or energy use. The present paper empirically analyzes the effects of environmentally active behavior on the performance of a firm. The analysis is based on the 2013 wave of the Eurobarometer data for small and medium-sized firms (SME's). The analysis for SME's seems to be interesting because small firms might be especially affected by the costs of environmental measures as the introduction of resource efficiency measures are costly in the short run. The results of a bivariate probit model show that a high amount in investment in resource efficiency measures triggers the overall performance of the firm. A high selfperceived greenness of the firm and a high share of green employment are positively correlated to performance. In fact, not all measures in improving resource efficiency are connected with positive performance effects: An increased use of renewables leads to a higher performance whereas measures to reduce water consumption are negatively correlated to turnover development.
    Keywords: eco-innovation,bivariate probit model,SME
    JEL: C35 O33 Q55
    Date: 2016
  10. By: José García-Quevedo (IEB, Universitat de Barcelona); Agustí Segarra-Blasco (GRIT, Universitat Rovira i Virgili); Mercedes Teruel
    Abstract: Theoretical and empirical approaches have stressed the existence of financial constraints in firms’ innovative activities. Although a large number of innovation projects are abandoned before their completion, the empirical evidence has focused on the determinants of innovation while failed projects have received little attention. This paper analyses the role of financial obstacles on the likelihood of abandoning an innovation project by using panel data of potential innovative Spanish firms for the period 2005–2013. Our analysis differentiates between internal and external barriers on the probability of abandoning a project and we examine whether the effects are different depending on the stage of the innovation process. Controlling for potential endogeneity, we use a bivariate probit model to take into account the simultaneity of financial constraints and the decision to abandon an innovation project. Our results show that financial constraints most affect the probability of abandoning an innovation project during the concept stage.
    Keywords: barriers to innovation, failure of innovation projects, financial constraints
    JEL: O31 D21
    Date: 2016–09
  11. By: Laurent Dupont (ERPI - Equipe de Recherche sur les Processus Innovatifs - UL - Université de Lorraine); Laure Morel (ERPI - Equipe de Recherche sur les Processus Innovatifs - UL - Université de Lorraine); Claudine Guidat (ERPI - Equipe de Recherche sur les Processus Innovatifs - UL - Université de Lorraine)
    Abstract: Purpose-French universities can play a key role in generating Smart City approach through an innovative Public-Private Partnership dedicated to urban transformation. Methodology-We led an action-research study for five years with several research and pedagogic projects including users or citizens. Findings-The paper points out main factors of Smart City development. It also presents shared demonstrators’ characteristics including industrial scale, sustainability and citizens’ participation. Practical implications-University of Lorraine diversification strategy through the “Chaire REVES” supported by public and private partners. Social implications-At regional level, industrial-university-territorial partnerships could tackle both societal and economical issues “with”, “for”, and “by” citizens. Originality/value-Based on the Living Lab concept our case study shows a concrete regional university strategy involving: user-centric design, collaborative processes, citizens’ workshops and new financial and organizational answers enabling collaboration between private companies and public institutions. Our paper also argues that innovative public and private partnership involving users are necessary for developing smart cities.
    Keywords: Collaborative innovation, Public-Private Partnership, sustainable urban transformation, diversification strategy, shared demonstrator,Smart City, Living Lab
    Date: 2015
  12. By: Pekkala Kerr, Sari; Maczulskij, Terhi; Maliranta, Mika
    Abstract: This paper analyzes occupational polarization within and across firms using comprehensive matched employer-employee panel data from Finland. The occupational distribution in Finland has been polarizing over the last few decades, with mid-level production and clerical jobs eroding while low-skill service occupations and high-skill specialist occupations gain share. We find that the phenomenon is taking place within existing firms, as well as due to firm entry and exit. Service jobs are increasing through the entry-exit dynamics, but also via establishment level restructuring among continuing firms. Routine jobs, including mid-level plant operating jobs, are being destroyed both among continuing firms and at the entry-exit margin. The share of high-level occupations increases largely within continuing firms. Within the continuing firms the job polarization appears to be related to the trade of goods and services, as well as the outsourcing of tasks. Firms with high R&D expenditures and ICT use are more prone to lay off process and production workers.
    Keywords: Job polarization, offshoring, international trade, firm, establishment, technology, R&D, ICT
    JEL: J24 J31 O33
    Date: 2016–10–03
  13. By: Xu Tian (University of Rochester); Dan Lu (the University of Rochester); Yan Bai (University of Rochester)
    Abstract: This paper uses Chinese firm-level data to quantify financial frictions in China and asks to what extent they can explain firms’ saving and capital misallocation. We first document features of the data, in terms of firm dynamics and financing. Relatively smaller firms have lower leverage, face higher interest rates and operate with a higher marginal product of capital. We then develop a heterogeneous-firm model with two types of financial frictions, default risk and a fixed cost of issuing loans. We estimate the model using evidence on the firm size distribution and financing patterns and find that financial frictions can explain aggregate firm saving, the co-movement between saving and investment across firms, and around 60 percent of the dispersion in the marginal product of capital (MPK). The endogenous financial frictions, however, generate a negative MPK-size relationship, which has important implications for total factor productivity losses.
    Date: 2016
  14. By: Crass, Dirk; Garcia Valero, Francisco; Pitton, Francesco; Rammer, Christian
    Abstract: This paper tests a number of hypotheses on the use and effectiveness of patents and trade secrets designed to protect innovation. While previous studies have often considered patents and trade secrets as substitutes for one another, we investigate the complementary role of the two protection methods. We identify protection strategies for single innovation firms and hence overcome the assignment problem of existing empirical studies, i.e. whether firms using both protection methods do so for the same innovation or for different innovations. Employing firm panel data from Germany, we find fairly few differences between the determinants for choosing secrecy and patenting. Single innovators that combine both strategies, 39% of the group, tend to aim at a higher level of innovation and act in a more uncertain technological environment. Firms combining both protection methods yield significantly higher sales with new-to-market innovations. Using only secrecy has slightly stronger positive impacts on firm profitability.
    Keywords: Patents,Trade Secrets,Performance Impacts,Single Innovation
    JEL: O31 O32 O34
    Date: 2016
  15. By: Pierrick Baraton (CERDI - University of Auvergne); Florian Léon (CREA, Université du Luxembourg)
    Abstract: Using an original database of over 3,000 micro and small enterprises (MSEs) that were micro finance institution (MFI) clients in Madagascar over the period of 2008-2014, we observe that around one third of these entrepreneurs switched business sectors in the first five years after starting their business. We find that the probability of an entrepreneur's changing sectors is highly correlated with the size of the first loan obtained from the MFI. This result survives multiple robustness checks, including treatment for endogeneity and attrition. We interpret this finding in terms of financial constraint: a lack of financing prevents an entrepreneur from initially investing in his first choice sector, causing him to change sectors only when he has become financially able to do so. This result challenges the classic distinction made between necessity entrepreneurs" and "opportunity entrepreneurs" and raises important questions concerning entrepreneurial talent allocation.
    Keywords: Entrepreneurship, Financial constraint, firm dynamics, Madagascar
    JEL: L26 M13 O16 O55
    Date: 2016
  16. By: Wyrwich, Michael; Stuetzer, Michael; Sternberg, Rolf
    Abstract: Studies on the influence of entrepreneurial role models (peers) on the decision to start a firm ar-gue that entrepreneurial role models in the local environment (1) provide opportunities to learn about entrepreneurial tasks and capabilities, and (2) signal that entrepreneurship is a favorable career option thereby reducing uncertainty that potential entrepreneurs face. However, these studies remain silent about the role of institutional context for these mechanisms. Applying an ex-tended sender-receiver model, we hypothesize that observing entrepreneurs reduces fear of fail-ure in others in environments where approval of entrepreneurship is high while this effect is signif-icantly weaker in low approval environments. Taking advantage of the natural experiment from recent German history and using data from the Global Entrepreneurship Monitor Project (GEM), we find considerable support for our hypotheses.
    Keywords: Fear of failure, role models, peer effect, entrepreneurial intentions, Global Entrepreneurship Mon-itor, East Germany
    JEL: D1 L26 M13 P20 R23 Z13
    Date: 2016
  17. By: Abdoulaye Seck; Fatoumata Lamarana Diallo; Founty Alassane Fall; KARAMOKO CAMARA; Ndeye Khadidiatou Mouhamed DIOP; Abdelkrim Araar
    Abstract: Despite an increase in the share of female-owned existing and new start-up firms in Senegal, there is still a wide belief that female entrepreneurs are discriminated against in the credit market. This paper empirically investigates such gender-based discrimination, and the extent to which it might be translated into lower efficiency. Using firm-level data and a methodological approach that consists of the data envelopment analysis, an endogenous switching regression and a propensity score matching, the paper finds no evidence to support the common wisdom that women are discriminated in the credit market. In addition, to the extent that they benefit from credit, female reap equal returns from the funds, efficiency-wise. These results do not however call for the abandonment of gender-biased public policies aiming at promoting access to credit and entrepreneurship, but suggest they be grounded on more robust footings such as managers’ education, firms’ ownership, sectorial activities with respect to capital intensity, and geographical locations.
    Keywords: Gender, access to credit, firms’ efficiency, Senegal.
    JEL: G21 J16 L25
    Date: 2015
  18. By: Cosimo Abbate; Alessandro Sapio
    Abstract: Financialization is persuading academics and policy-makers that the growth of SMEs can be unleashed by promoting their quotation on stock markets. Is that true? Answering this can give clues on the functions that stock markets actually perform in the financialized world. The market may allow collecting finance for productive investments, or mainly provide firms with opportunities for value extraction. It may work as a selection device or as a risk-sharing mechanism. In this paper, we test hypotheses linking the shape of the firm growth rates distribution to stock market functions, through quantile regressions. We use a sample of UK manufacturing companies listed on AIM, a junior segment of the London Stock Exchange, and comparably small and young unlisted companies. We find that the operating revenues and total assets of AIM-listed gazelles grow faster than for their unlisted peers, after controlling for lagged values of size, age, and growth. Yet, there is a loss reinforcing effect for companies listed on the AIM. After controlling for endogeneity by estimating instrumental variable quantile treatment effect (IVQTE), our findings dismiss the existence of a treatment effect of public quotation and are consistent with the stock market attracting relatively risky companies.
    Keywords: Firm growth; Quantile regression; Stock market; Financialization
    Date: 2016–04–10
  19. By: De Simone, Lisa (Stanford University); Lester, Rebecca (Stanford University)
    Date: 2016
  20. By: Maliranta, Mika; Nurmi, Satu
    Abstract: The Finnish economy is suffering from a prolonged hollow in productivity. For a solid bounce, arguably Finland would need new high productivity firms. To analyze where entrepreneurs of such firms come from and what they are like, we have constructed a novel Finnish Longitudinal OWNer-Employer-Employee (FLOWN) database. Here we focus on limited liability companies with one dominant owner who works in her own firm and who has hired at least one additional employee. We find that these entrepreneurs typically have previous experience as an employee in another high productivity firm and, moreover, this is strongly positively associated with her current firm’s higher productivity and survival probability. In addition, a strong link between the productivity performance and the owner’s formal university education in a technical field is established. These findings are robust to controlling for a number of entrepreneur and employee attributes. Finally, we find that firms that were founded in times of intensive job reallocation currently had superior productivity performance.
    Date: 2016–10–06

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