nep-sbm New Economics Papers
on Small Business Management
Issue of 2016‒11‒20
fifteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Corruption, innovation and firm growth: Firm-level evidence from Egypt and Tunisia By Goedhuys, Micheline; Mohnen, Pierre; Taha, Tamer
  2. “Breakthrough innovations: The impact of foreign acquisition of knowledge" By Damián Tojeiro-Rivero; Rosina Moreno; Erika Badillo
  3. Disentangling the processes of firm growth and R&D investment By Alexander Coad; Nicola Grassano
  4. Entrepreneurial Spillovers over Space and Time By Frank M. Fossen; Thorsten Martin
  5. Estimating territorial business R&D expenditures using corporate R&D and patent data By Petros Gkotsis; Hector Hernandez; Antonio Vezzani
  6. New Business Formation and Incumbents' Perception of Competitive Pressure By Javier Changoluisa; Michael Fritsch
  7. Entrepreneurship in the Shadows: Wealth Constraints and Government Policy By Tumen, Semih
  8. RIO COUNTRY REPORT 2015: United States By Charles Wessner
  9. Patents, exhibitions and markets for innovation in the early twentieth century: Evidence from Turin 1911 International Exhibition By Domini, Giacomo
  10. Patent Assertion Entities in Europe: Their impact on innovation and knowledge transfer in ICT markets By Nikolaus Thumm; Garry Gabison
  11. Competitive Strategies: A New Perspective on the Internationalization of the Czech Enterprises By Šárka Zapletalová
  12. RIO Country Report 2015: Israel By Abraham Garcia Torres
  13. On the Direction of Innovation By Francesco Squintani; Hugo A. Hopenhayn
  14. From unemployment to self-employment: the role of entrepreneurship training By Marios Michaelides; Scott Davis
  15. Improving access to finance: which schemes best support the emergence of high-growth innovative enterprises? A mapping, analysis and assessment of finance instruments in selected EU Member States By Robert Gampfer; Jessica Mitchell; Blagoy Stamenow; Jana Zifciakova; Koen Jonkers

  1. By: Goedhuys, Micheline (UNU‐MERIT); Mohnen, Pierre (UNU-MERIT, and Maastricht University); Taha, Tamer (UNU-MERIT)
    Abstract: Using recently collected firm-level data from Egypt and Tunisia, this paper explores the effect of institutional obstacles and corruption on the innovative behaviour of firms and their effect on firms' employment growth. We estimate the micro-level interactions between corruption and institutional obstacles and test the hypothesis that corruption 'greases the wheels' of firm performance when bureaucratic procedures are more severe and hampering innovation. Accounting for endogeneity and simultaneity, the paper uses a conditional recursive mixed-process model (CMP). The results show that corruption has a direct negative effect on the likelihood that a firm is an innovator, but a positive effect when interacted with institutional obstacles. This provides support for the hypothesis that corruption serves as a mechanism to bypass the bureaucratic obstacles related to obtaining the necessary business permits and licences for product innovation. These effects also resonate into firm growth, through their effect on product innovation.
    Keywords: Innovation, corruption, employment growth, Egypt, Tunisia
    JEL: L25 D73
    Date: 2016–10–11
  2. By: Damián Tojeiro-Rivero (AQR Research Group-IREA. University of Barcelona. Av.Diagonal 696; 08034 Barcelona, Spain.); Rosina Moreno (AQR Research Group-IREA. University of Barcelona. Av.Diagonal 696; 08034 Barcelona, Spain.); Erika Badillo (AQR Research Group-IREA. University of Barcelona. Av.Diagonal 696; 08034 Barcelona, Spain.)
    Abstract: Based on the Spanish Technological Innovation Panel, this paper explores the role of R&D offshoring on innovation performance from 2004 to 2013. Specifically, we focus our attention on the impact of different types of offshoring governance models on the profitability of developing breakthrough innovations. Using a novel methodology for panel data sets, we control for the heterogeneity of firms as well as for the sample selection and endogeneity. Our study provides evidence that firms developing breakthrough innovations tend to benefit more from the external acquisition of knowledge than those engaged in incremental innovations. We also find evidence that acquiring knowledge from firms outside the group is more profitable than doing so with firms within the group. Moreover, the external acquisition of knowledge tends to present a higher return on breakthrough innovation in the case of taking such knowledge from the business sector rather than from universities or research institutions. Finally, the recent financial crisis has led to an increase in the return of the foreign acquisition of knowledge on the generation of breakthrough innovations.
    Keywords: Endogeneity; Panel data; R&D offshoring; Spanish firms; Sample selection; Technological and organizational space. JEL classification:
    Date: 2016–11
  3. By: Alexander Coad (European Commission – JRC); Nicola Grassano (European Commission – JRC Innovation)
    Abstract: What are the secrets for stimulating R&D investment and job creation? This question is of central importance for the EU Innovation Union strategy. This policy brief applies a new econometric technique to the EU Industrial R&D Scoreboard data on the world's top R&D investors, to highlight the key role of sales growth (instead of profits growth) as the engine of R&D investment and job creation.
    Keywords: R&D investment, firm growth, SVAR, sales growth, industrial dynamics
    JEL: O33 O31 C10
    Date: 2016–11
  4. By: Frank M. Fossen; Thorsten Martin
    Abstract: Entrepreneurship is a local and dynamic phenomenon. We jointly investigate spatial spillovers and time persistence of regional new business formation. Using panel data from all 402 German counties for 1996-2011, we estimate dynamic spatial panel models of business creation in the high-tech and manufacturing industries. We consider regions of different sizes and systematically search for the most suitable spatial weighting matrices. We find substantial spatial spillovers as well as time persistence of start-up activity, especially in the high-tech industry. This indicates that entrepreneurship is deeply rooted in regions and underlines the importance of local entrepreneurship culture for new business formation.
    Keywords: Entrepreneurship, new business formation, spatial spillovers, path dependency, persistence, spatial panel
    JEL: L26 C23 R12 O30
    Date: 2016
  5. By: Petros Gkotsis (European Commission - JRC); Hector Hernandez (European Commission - JRC); Antonio Vezzani (European Commission - JRC)
    Abstract: This note describes a methodology to estimate territorial business R&D expenditure funded by the business sector, using R&D and patent data from top R&D investing companies. Since company data are available with a short delay, the aim is to provide timeliness estimations for business R&D in anticipation of its publication by official statistics. The estimation is made for worldwide industrial R&D expenditures, breaking down figures for main world regions and focusing on the EU and its top member states. The industrial coverage comprises main innovative industries, focusing on manufacturing and knowledge intensive services.
    Keywords: industrial R&D, innovation, BERD, estimation
    Date: 2016–11
  6. By: Javier Changoluisa (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We investigate the relationship between new business formation and the level of competitive pressure perceived by manufacturing incumbent establishments. The perceived pressure of competition is stronger the higher the level of entries in the respective industry. This relationship holds not only for start-ups located in the same region of the incumbent, but also for start-ups across all regions of Germany. The productivity level of an incumbent moderates the extent of the perceived competitive pressure from start-ups. Highly productive incumbents are less threatened by new business formation. Such a moderating effect cannot be found for incumbent size and regional population density.
    Keywords: New business formation, competitive pressure, regional competition, incumbent firms, manufacturing industries
    JEL: L26 L60 D20 O12 R11
    Date: 2016–11–14
  7. By: Tumen, Semih (Central Bank of Turkey)
    Abstract: I develop a dynamic model of forward-looking entrepreneurs, who decide whether to operate in the formal economy or informal economy and choose how much to invest in their businesses, taking government policy as given. The government has access to two policy tools: taxes on formal business activity and enforcement (or policing) discouraging informality. The main focus of the paper is on transitional dynamics under different initial wealth levels. Whether an initially small business will be trapped in the informal economy and remain small forever or grow quickly and become a large formal business depends on tax and enforcement policies. High tax rates accompanied by loose enforcement – which is mostly the case in less-developed countries (LDCs) – induce tax avoidance, discourage investment in formal businesses, and drive the entrepreneurial activity toward the informal sector even though the initial wealth level is high. Lowering taxes on formal activity joined with strict enforcement can help reducing the magnitude of poverty traps in LDCs.
    Keywords: investment, government policy, informal economy, entrepreneurship, wealth constraints
    JEL: E21 E26 L26 O17
    Date: 2016–10
  8. By: Charles Wessner (Georgetown University, USA)
    Abstract: RIO R&I International Country Reports analyse and assess the research and innovation system, including the main challenges, framework conditions, regional R&I systems, and international co-operation.
    Keywords: USA, Country Report, Research and Innovation, RIO, policy analysis
    Date: 2016–11
  9. By: Domini, Giacomo (UNU-MERIT, and University of Siena)
    Abstract: This work contributes to the recent literature on international exhibitions, and on the use of data from these events as a proxy for innovation in economic history. In particular, it investigates the nature of international exhibitions, the role they played in the early twentieth century, the reasons why economic agents attended them, the relationship between exhibition data and patent data, and their suitability for measuring innovation. To do so, it makes an in-depth analysis of the International Exhibition held in Turin in 1911, and it matches a new database, built from the catalogue of this event, with data about patents granted in Italy. It is found that exhibiting and patenting did mostly occur separately, as exhibitions mainly worked as markets for products, which attracted firms, while patents were primarily taken out by individuals, most of whom might not be interested in that function. Yet, the presence is observed of a qualified niche of independent inventors, using the exhibition as a market for ideas, i.e. to advertise their findings to a selected public of potential investors, buyers or licensees.
    Keywords: patents, inventions, international exhibitions, markets for innovation, Italy
    JEL: N74 O31 O33
    Date: 2016–11–01
  10. By: Nikolaus Thumm (European Commission - JRC); Garry Gabison (European Commission - JRC)
    Abstract: Patent assertion has become a common practice in shaping the balance between technology creation and technology dissemination in the Information and Communication Industry (ICT). The importance of this practice for the functioning of ICT markets has given rise to new entities that enforce patents but do not utilise the patented technology, commonly referred to as patent assertion entities (PAEs). This study provides an overview of patent assertion practices and of PAEs in Europe, taking into consideration their impact on innovation and technology transfer in European ICT markets.
    Keywords: Patenting, patent assertion entities, patent trolls, innovation
    Date: 2016–10
  11. By: Šárka Zapletalová (Department of Business Economics and Management, School of Business Administration, Silesian University)
    Abstract: The entrance of an enterprise on the market itself allows for a significant business opportunity. The entrance and activities of entrepreneurial subjects on the international markets can be complicated owing to a number of factors that are given by the environment on one hand, and by the position and situation of the entrepreneurial subject itself on the other hand. The companies that decide to enter international entrepreneurship must be aware both of entrepreneurship opportunities and risks, which are inseparably connected with entrepreneurship. Entrepreneurial activities on international markets bring significant changes in strategy and strategic management of enterprise and are conditioned by them as well. This paper aims to investigate the competitive strategies of Czech companies on the international markets at the first foreign entrance. The paper is based on data collected in interviews with managers and founders of Czech enterprises. The companies included in the study are those that have already undertaken internationalization activities and are incorporated in the Czech Republic. Strategies of the Czech enterprises have been researched using the method of questioning: the main primary data collection instrument was a questionnaire-interview.
    Keywords: Czech enterprises, internationalization, international markets, Porter’s competitive strategy, strategy
    JEL: F23 M16
    Date: 2016–10–26
  12. By: Abraham Garcia Torres
    Abstract: The 2015 series of RIO Country Reports analyse and assess the policy and the national research and innovation system developments in relation to national policy priorities and the EU policy agenda with special focus on ERA and Innovation Union. The executive summaries of these reports put forward the main challenges of the research and innovation systems.
    Keywords: Israel, country report, policy analysis, R&I, research and innovation
    Date: 2016–11
  13. By: Francesco Squintani (University of Warwick); Hugo A. Hopenhayn (University of California Los Angeles)
    Abstract: Research on the efficiency of innovation markets is usually concerned on whether the level of R&D firm investment is socially optimal. Instead, this paper studies whether R&D resources are employed optimally across research areas. Under weak assumptions, we find that competitive equilibrium innovative efforts are biased excessively into high returns areas. This form of market inefficiency is a novel result, and would take place even if innovators' profits coincided with the social value of innovations. We first demonstrate it in a simple, fundamental model. Then we embed our analysis in a canonical dynamic framework directly comparable with extant R&D models, and precisely identify the features of R&D competition that lead to the market failure we identify.
    Date: 2016
  14. By: Marios Michaelides; Scott Davis
    Abstract: This paper uses data from the Growing America Through Entrepreneurship (GATE) program to assess the effectiveness of providing self-employment training to unemployed workers during a period of moderate unemployment and during the Great Recession. Results show that self-employment training can significantly improve the short-term self-employment and overall employment rates of unemployed workers, with effects on self-employment persisting for long periods after program entry. Although it appears unlikely that self-employment training may improve self-employment earnings, there is evidence that some participants may achieve higher salary and total earnings when the labor market is relatively strong. Based on these findings, we conclude that self-employment training can potentially be an effective short-term reemployment strategy, regardless of the overall economic conditions, but it is unlikely to help unemployed workers improve their long-term employment and earnings outcomes.
    Keywords: Great Recession; Self-employment; Small business; Training; Unemployment; Program evaluation.
    JEL: J6 H4
    Date: 2016–11
  15. By: Robert Gampfer (European Commission - JRC); Jessica Mitchell (European Commission - JRC); Blagoy Stamenow (European Commission - JRC); Jana Zifciakova (European Commission - JRC); Koen Jonkers (European Commission - JRC)
    Abstract: This Science for Policy Report describes national support instruments to improve access to finance for high-growth innovative enterprises and analyses available evidence for their effectiveness and economic impact on beneficiary companies. The analysis covers Germany, Finland, Lithuania, Poland and the United Kingdom.
    Keywords: SME, access to finance, financial instruments, policy evaluation, Germany, Poland, United Kingdom, Lithuania, Finland, venture capital, fund-of-funds, guarantee schemes
    Date: 2016–11

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.
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