nep-sbm New Economics Papers
on Small Business Management
Issue of 2016‒11‒27
fifteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. “Breakthrough innovations: The impact of foreign acquisition of knowledge” By Damián Tojeiro-Rivero; Rosina Moreno; Erika Badillo
  2. Innovation, creative destruction and structural change: Firm-level evidence from European Countries By Dachs, Bernhard; Hud, Martin; Koehler, Christian; Peters, Bettina
  3. Knowledge Licensing in a Model of R&D-Driven Endogenous Growth By Vahagn Jerbeshian
  4. Employment effects of innovations over the business cycle: Firm-level evidence from European countries By Dachs, Bernhard; Hud, Martin; Koehler, Christian; Peters, Bettina
  5. EU corporate R&D intensity gap: Structural features calls for a better understanding of industrial dynamics By Pietro-Moncada- Paternò-Castello
  6. Firm Size Distribution and Employment Fluctuations: Theory and Evidence By Görg, Holger; Henze, Philipp; Jienwatcharamongkhol, Viroj; Kopasker, Daniel; Molana, Hassan; Montagna, Catia; Sjöholm, Fredrik
  7. Spillover from the haven: Cross-border externalities of patent box regimes within multinational firms By Schwab, Thomas; Todtenhaupt, Maximilian
  8. Management Practices and Productivity in Germany By Broszeit, Sandra; Fritsch, Ursula; Görg, Holger; Laible, Marie-Christine
  9. The Impact of Consumer Credit Access on Employment, Earnings and Entrepreneurship By Kyle Herkenhoff; Gordon Phillips; Ethan Cohen-Cole
  10. The workforce composition of young firms and product innovation: Complementarities in the skills of founders and their early employees By Müller, Bettina; Murmann, Martin
  11. Does Managerial Capital also Matter Among Micro and Small Firms in Developing Countries? By Axel Demenet
  12. Measuring network proximity of regions in R&D networks By Iris Wanzenböck
  13. The Determinants of TFP Growth in the Portuguese Manufacturing Sector By Daniel Gonçalves; Ana Martins
  14. Enterprise credit, household credit and growth: New evidence from 126 countries By Florian Léon
  15. The Impact of Emerging Market Competition on Innovation and Business Strategy By Lorenz Kueng; Nicholas Li; Mu-Jeung Yang

  1. By: Damián Tojeiro-Rivero (AQR-IREA, University of Barcelona); Rosina Moreno (AQR-IREA, University of Barcelona); Erika Badillo (AQR-IREA, University of Barcelona)
    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
  2. By: Dachs, Bernhard; Hud, Martin; Koehler, Christian; Peters, Bettina
    Abstract: The shift of employment from lower to higher productive firms is an important driver for structural change and industry dynamics. We investigate this reallocation in terms of employment gains and losses from innovation. New employment created by product innovation may be offset by employment losses in related products, known as 'cannibalisation' or 'business stealing' effects in the literature, by employment losses from process and organisational innovation and by general productivity increases. The paper investigates this effect empirically with a large dataset from the European Community Innovation Survey (CIS). We find that employment gains and losses increase with technology intensity of the sector. High-technology manufacturing shows the strongest employment gains and losses from innovation, followed by knowledge-intensive services, low-technology manufacturing and less knowledge-intensive services. The net contribution of innovation to employment growth is mostly positive, an exception being manufacturing industries in recession periods.
    Keywords: innovation,employment,reallocation,technology intensity,compensation effect,displacement effect,cannibalisation effect
    JEL: O33 J23 C26 D2
    Date: 2016
  3. By: Vahagn Jerbeshian
    Abstract: I model knowledge (patent) licensing and evaluate intellectual property regulation in an endogenous growth framework where the engine of growth is in-house R&D performed by high-tech firms. I show that high-tech firms innovate more and economic growth is higher when there is knowledge licensing, and when intellectual property regulation facilitates excludability of knowledge, than when knowledge is not excludable and there are knowledge spillovers among high-tech firms. However, the number of high-tech firms is lower, and welfare is not necessarily higher, when there is knowledge licensing than when there are knowledge spillovers.
    Keywords: knowledge licensing; in-house R&D; intellectual property regulation; endogenous growth; welfare;
    JEL: O31 O34 L16 L50 O41
    Date: 2016–06
  4. By: Dachs, Bernhard; Hud, Martin; Koehler, Christian; Peters, Bettina
    Abstract: A growing literature investigates how firms' innovation input reacts to changes in the business cycle. However, so far there is no evidence whether there is cyclicality in the effects of innovation on firm performance as well. In this paper, we investigate the employment effects of innovations over the business cycle. Our analysis employs a large data set of manufacturing firms from 26 European countries over the period from 1998 to 2010. Using the structural model of Harrison et al. (2014), our empirical analysis reveals four important findings: First, the net effect of product innovation on employment growth is pro-cyclical. It turns out to be positive in all business cycle phases except for the recession. Second, product innovators are more resilient to recessions than non-product innovators. Even during recessions they are able to substitute demand losses from old products by demand gains of new products to a substantial degree. As a result their net employment losses are significantly lower in recessions than those of non-product innovators. Third, we only find resilience for SMEs but not for large firms. Fourth, process and organizational innovations displace labor primarily during upturn and downturn periods.
    Keywords: innovation,employment,business cycle,resilience,Europe
    JEL: O33 J23 C26 D2
    Date: 2016
  5. By: Pietro-Moncada- Paternò-Castello (European Commission – JRC)
    Abstract: In order to achieve the 3% target in R&D intensity and boost its competitiveness and job creation, the EU needs to adapt its industrial structure and increase the weight of high R&D intensive sectors. A focus on creating the conditions for firm creation and growth in "new-emerging innovative sectors" (NEIS) is recommended.
    Keywords: EU private R&D intensity gap, industrial dynamics, firms demographics, comparative analysis, EU R&D policy
    Date: 2016–11
  6. By: Görg, Holger (Kiel Institute for the World Economy); Henze, Philipp (University of Kiel); Jienwatcharamongkhol, Viroj (University of Nottingham); Kopasker, Daniel (University of Aberdeen); Molana, Hassan (University of Dundee); Montagna, Catia (University of Aberdeen); Sjöholm, Fredrik (Lund University)
    Abstract: This paper studies the effect of the firm-size distribution on the relationship between employment and output. We construct a theoretical model, which predicts that changes in demand for industry output have larger effects on employment in industries characterised by a distribution that is more skewed towards smaller firms. Industry-specific shape parameters of the firm size distributions are estimated using firm-level data from Germany, Sweden and the UK, and used to augment a relationship between industry-level employment and output. Our empirical results align with the predictions of the theory and confirm that the size distribution of firms is an important determinant of the relationship between changes in output and employment.
    Keywords: firm distribution, firm size, employment, fluctuations
    JEL: E20 E23 L20
    Date: 2016–11
  7. By: Schwab, Thomas; Todtenhaupt, Maximilian
    Abstract: This paper analyzes externalities of patent box regimes in Europe. Tax reductions in foreign affiliates of a firm that also provide a profit shifting opportunity reduce the user cost of capital and thereby increase domestic investment. We test this mechanism for the case of research activity. By combining information on patents, firm ownership data and specific characteristics of patent box regimes, we show that patent box regimes without nexus requirements for tax-efficient reallocation of patent profits induce positive spillovers within multinational groups. The implementation of a patent box in a country one of the foreign affiliates of a firm resides, increases domestic research activity by about 74 percent or 2 percent per implied tax rate differential. Furthermore, our findings suggest that patent boxes generate negative spillovers on average patent quality. This has important implications for international tax policy and the evaluation of patent box regimes.
    Keywords: patent box,spillover,corporate taxation,innovation
    JEL: F23 H25 O31
    Date: 2016
  8. By: Broszeit, Sandra (Institute for Employment Research (IAB), Nuremberg); Fritsch, Ursula (Kiel Institute for the World Economy); Görg, Holger (Kiel Institute for the World Economy); Laible, Marie-Christine (Institute for Employment Research (IAB), Nuremberg)
    Abstract: Based on a novel dataset, the "German Management and Organizational Practices" (GMOP) Survey, we calculate establishment specific management scores following Bloom and van Reenen as indicators of management quality. We find substantial heterogeneity in management practices across establishments in Germany, with small firms having lower scores than large firms on average. We show a robust positive and economically important association between the management score and establishment level productivity in Germany. This association increases with firm size. Comparison to a similar survey in the US indicates that the average management score is lower in Germany than in the US. Overall, our results point towards lower management quality being at least in part to blame for the differences in aggregate productivity between Germany and the US.
    Keywords: management practices, firm performance, labor productivity, GMOP, MOPS
    JEL: D24 L2 M2
    Date: 2016–11
  9. By: Kyle Herkenhoff; Gordon Phillips; Ethan Cohen-Cole
    Abstract: How does consumer credit access impact job flows, earnings, and entrepreneurship? To answer this question, we build a new administrative dataset which links individual employment and entrepreneur tax records to TransUnion credit reports, and we exploit the discrete increase in consumer credit access following bankruptcy flag removal. After flag removal, individuals flow into self-employment. New entrants earn more, borrow significantly using unsecured and secured consumer credit, and are more likely to become an employer business. In addition, after flag removal, non-employed and self-employed individuals are more likely to find unemployment-insured "formal" jobs at larger firms that pay greater wages. These estimates imply that firms believe previously bankrupt workers are 3.8% less productive than non-bankrupt workers, on average. These results suggest that consumer credit access matters for each stage of entrepreneurship and that credit-checks may be limiting formal sector employment opportunities.
    JEL: D04 D1 D12 D14 D22 D31 D83 E2 E21 G23 G3 G33 K35 K36 L22 M5 M52 O16
    Date: 2016–11
  10. By: Müller, Bettina; Murmann, Martin
    Abstract: We investigate the extent to which complementarities between technical and business skills of founders and employees matter for the generation of market novelties by new ventures. Using data about German start-ups, we find that there are no complementarities between technical and business skills within the group of founders, but that there are significant complementarities between technically trained founders and employees who have business skills. This suggests that the innovation potential of start-ups by technically trained founders is best explored by hiring employees who are trained in business. However, a reverse relationship does not exist: There are no complementarities between founders with business skills and employees with technical skills.
    Keywords: Entrepreneurship,Innovation,Human Capital,Skills,Complementarity
    JEL: J24 L23 L26 M13 M51 Q31
    Date: 2016
  11. By: Axel Demenet (DIAL, UMR 225, IRD, Paris, France, PSL Research University, Université Paris-Dauphine, LEDa, Paris, France)
    Abstract: The lack of managerial capital was recently put forward as a constraint for developing countries firms (Bruhn et al., 2010). While established for large and medium firms, its importance for micro enterprises has yet to be proven: evidence found in Development Economics and Entrepreneurial Studies is, at best, mixed. This paper uses a panel of Vietnamese micro, small and medium enterprises to investigate this question in a comparative manner. The data let building a multidimensional measure of Managerial Capital, and allows consistent estimates of firm-level productivity. Even though bias might still affect the estimation of the average influence of managerial capital on productivity, I am able to show that this influence is as important for micro firms as it is for medium ones.
    Keywords: informal sector, microenterprises, household business, managerial capital, entrepreneurship
    JEL: O17 M1
    Date: 2016–10
  12. By: Iris Wanzenböck
    Abstract: This paper proposes a new measure for assessing the network proximity between aggregated units, based on disaggregated information on the network distance of actors. Specific focus is on R&D network structures between regions. We introduce a weighted version of the proximity measure, related to the idea that direct and indirect linkages carry different types of knowledge. Here, first-order proximity arising from direct cross-regional linkages is to be distinguished from higher-order network proximity resulting from indirect linkages in the R&D network. We use an macroeconomic application where we analyse the productivity effects of R&D network spillovers across regions to illustrate the usefulness of a proximity measure specifically developed for aggregated units.
    Keywords: network proximity, aggregated networks, first-order proximity, higher-order proximity, R&D networks, knowledge spillovers
    Date: 2016–11
  13. By: Daniel Gonçalves (Gabinete Estratégia e Estudos Ministério Economia / Office for Strategy and Studies - Ministério da Economia / Ministry of Economy); Ana Martins (Gabinete Estratégia e Estudos Ministério Economia / Office for Strategy and Studies - Ministério da Economia / Ministry of Economy)
    Abstract: Given the linkage between Total Factor Productivity growth and economic growth, it becomes relevant to understand, at the firm level, which are the main determinants of such growth path. We use an extensive panel data covering Portuguese manufacturing firms, between 2010 and 2014, in order to assess which are the main determinants of the Total Factor Productivity. Through a second stage estimation we present a fixed-effects model that captures different dimensions of firm level characteristics that impact TFP growth, suggesting policy recommendations amid the model’s results. Our results show that age and debt influence negatively TFP growth, whereas size, exports and training expenses prompt TFP growth.
    Keywords: Total Factor Productivity, LEVPET, Industry
    JEL: D22 D24
    Date: 2016–11
  14. By: Florian Léon (CREA, Université du Luxembourg)
    Abstract: This paper attempts to distinguish the effects of household and enterprise credit on Economic growth. To do so, I create a new, hand-collected database covering 143 countries over the period 1995-2014 (126 countries are employed for econometric analysis). Estimation results confirm recent evidence documenting the absence of the effect of total credit to growth. Findings also show that household credit has a negative effect on growth, but I fail to provide robust support for a positive effect of business credit.
    Keywords: Financial development, Household credit, Enterprise credit, Economic growth
    JEL: E44 G21 O16
    Date: 2016
  15. By: Lorenz Kueng; Nicholas Li; Mu-Jeung Yang
    Abstract: How do firms in high-income countries adjust to emerging market competition? We estimate how a representative panel of Canadian firms adjusts innovation activities, business strategies, and exit in response to large increases in Chinese imports between 1999 and 2005. On average, process innovation declines more strongly than product innovation. In addition, initially more differentiated firms that survive the increase in competition have better performance ex-post, but are ex-ante more likely to exit. Differentiation therefore does not ensure insulation against competitive shocks but instead increases risk.
    JEL: F14 L2 O3
    Date: 2016–11

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