nep-sbm New Economics Papers
on Small Business Management
Issue of 2017‒01‒29
fifteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Design, innovation and firm performance in European firms By Sandro Montresor; Antonio Vezzani
  2. Innovation Effects on Employment in High-Tech and Low-Tech industries: Evidence from Large International Firms within the Triad By Aldieri, Luigi; Vinci, Concetto Paolo
  3. Country level efficiency and national systems of entrepreneurship: a data envelopment analysis approach By Esteban Lafuente; László Szerb; Zoltan J. Acs
  4. Reversed Citations and the Localization of Knowledge Spillovers By Ashish Arora; Sharon Belenzon; Honggi Lee
  5. Joint and Cross-border Patents as Proxies for International Technology Diffusion By Chia-Lin Chang; Michael McAleer; Ju-Ting Tang
  6. How Antitrust Enforcement Can Spur Innovation: Bell Labs and the 1956 Consent Decree By Fackler, Thomas A.; Nagler, Markus; Schnitzer, Monika; Watzinger, Martin
  7. Employment protection and entrepreneurship : Unpacking the effects of employment protection legislation on the allocation of entrepreneurial activity in society By W.J. Liebregts; F.C. Stam
  8. Quantile regression for Panel data: An empirical approach for knowledge spillovers endogeneity By Aldieri, Luigi; Vinci, Concetto Paolo
  9. Fostering Productivity for Income Convergence in the Czech Republic By Falilou Fall; Christine Lewis
  10. Determinants of small business survival: The impacts of capital intensity and the collateral value of fixed assets By Guimarães Barbosa, Evaldo
  11. The impact of research collaboration on academic performance: An empirical analysis for Russian Universities By Aldieri, Luigi; Kotsemir, Maxim; Vinci, Concetto Paolo
  12. Why Do Companies Hold Cash? By Gianni La Cava; Callan Windsor
  13. SME funding without banks? On the interplay of banks and markets By Franke, Günter; Krahnen, Jan Pieter
  14. Asymmetric information and the securitization of SME loans By Albertazzi, Ugo; Bottero, Margherita; Gambacorta, Leonardo; Ongena, Steven
  15. Market Knowledge: Evidence from Importers By Aksel Erbahar

  1. By: Sandro Montresor (Kore University of Enna, IT); Antonio Vezzani (JRC)
    Abstract: This paper provides some new theoretical speculations and empirical evidence on the relationship between design, innovation and economic performance at the firm level. We posit that design investments may provide firms with a higher capacity of introducing product/process innovations, but that the ensuing economic performance is rather associated to the role of design within the firm. Moreover, once controlled for the firm’s non-technological innovativeness and other knowledge-production inputs, the role of design does also relate to the introduction of innovative products and/or processes. We provide a systematic empirical test for these arguments on a sample of more than 12,000 European firms from the last EC Innobarometer survey. The econometric estimates are consistent with our expectations. However, while a higher innovativeness is also associated with a non-systematic resort to design, a higher innovation-based performance is coupled with an increasingly more central role of design, providing this is at least non-occasional. Innovations do actually look “design-led” overall, but innovating successfully apparently requires the firm to retain such a driver central to its business model.
    Keywords: Design, Innovation, Firm performance
    JEL: O31 O32 O33
    Date: 2017–01
  2. By: Aldieri, Luigi; Vinci, Concetto Paolo
    Abstract: In this paper we investigate the role of financial shocks, such as the economic crisis since 2006, in the reallocation process of employment flows in high-tech and low-tech industries. The contributions of the paper to the literature are threefold. First, a general framework of employment growth is estimated by using a dataset made of 879 large international firms observed for the period 2002-2010 and localized in three economic areas: USA, Japan and Europe. Second, we develop a database merging the firms’ data with EPO patents data. In particular, the innovation variable is proxied by the R&D capital stock. Third contribution to the literature is to analyse the extent to which the economic crisis may affect the sensitivity of employment with respect to own innovation but also with respect to outside innovation, the R&D spillovers, in high-tech and low-tech industries. The empirical results suggest some important and significant results. This comparative finding could be the source of relevant industrial policy implications.
    Keywords: Regional economics; Innovation; R&D spillovers; employment
    JEL: J20 O31 O33 R1
    Date: 2017–01
  3. By: Esteban Lafuente; László Szerb; Zoltan J. Acs
    Abstract: This paper tests the efficiency hypothesis of the knowledge spillover theory of entrepreneurship. Using a comprehensive database for 63 countries for 2012, we employ data envelopment analysis to directly test how countries capitalize on their available entrepreneurial resources. Results support the efficiency hypothesis of knowledge spillover entrepreneurship. We find that innovation-driven economies make a more efficient use of their resources, and that the accumulation of market potential by existing incumbent businesses explains country-level inefficiency. Regardless of the stage of development, knowledge formation is a response to market opportunities and a healthy national system of entrepreneurship is associated with knowledge spillovers that are a prerequisite for higher levels of efficiency. Public policies promoting economic growth should consider national systems of entrepreneurship as a critical priority, so that entrepreneurs can effectively allocate resources in the economy.
    Keywords: Knowledge spillover theory; GEDI; GEM; Efficiency; Data envelopment analysis; Clusters
    JEL: C4 L20 M13 O10
    Date: 2016–12
  4. By: Ashish Arora; Sharon Belenzon; Honggi Lee
    Abstract: Spillover of knowledge is considered to be an important cause of agglomeration of inventive activity. Many studies argue that knowledge spillovers are localized based on the observation that patents tend to cite nearby patents disproportionately. Specifically, patent citations are interpreted as mapping the transmission of knowledge from the cited invention to the citing invention. The localization of patent citations is therefore taken as evidence that such knowledge transmission is also localized. Localization of knowledge transmission, however, may not be the only reason for why patent citations are localized. Using a set of citations that are unlikely to be associated with knowledge transmission from the cited to the citing invention, we present evidence that challenges the view that localization of citations is driven by localized knowledge transmission. Though localized knowledge transmission may well exist, it is unlikely to be captured by patent citations
    JEL: O32 O34
    Date: 2017–01
  5. By: Chia-Lin Chang (Department of Applied Economics Department of Finance National Chung Hsing University, Taiwan.); Michael McAleer; Ju-Ting Tang
    Abstract: With the advent of globalization, economic and financial interactions among countries have become widespread. Given technological advancements, the factors of production can no longer be considered to be just labor and capital. In the pursuit of economic growth, every country has sensibly invested in international cooperation, learning, innovation, technology diffusion and knowledge, and outward direct investment. In this paper, we use a panel data set of 40 countries from 1981 to 2008 and a negative binomial model, using a novel set of cross-border patents and joint patents as proxy variables for technology diffusion, in order to investigate such diffusion. The empirical results suggest that, if it is desired to shift from foreign to domestic technology, it is necessary to increase expenditure on R&D for business enterprises and higher education, exports and technology. If the focus is on increasing bilateral technology diffusion, it is necessary to increase expenditure on R&D for higher education and technology. It is also found that outward foreign direct investment has no significant impact on either joint or cross-border patents, whereas inward foreign direct investment has a significant negative impact on cross-border patents but no impact on joint patents. Moreover, government expenditure on higher education has a significant impact on both cross-border and joint patents.
    Keywords: International technology diffusion, Exports, Imports, Joint patent, Cross-border patent, R&D, Negative binomial panel data.
    JEL: F14 F21 O30 O57
    Date: 2016–12
  6. By: Fackler, Thomas A.; Nagler, Markus; Schnitzer, Monika; Watzinger, Martin
    Abstract: We study the 1956 consent decree against the Bell System to investigate whether patents held by a dominant firm are harmful for innovation and if so, whether compulsory licensing can provide an effective remedy. The consent decree settled an antitrust lawsuit that charged Bell with having foreclosed the market for telecommunications equipment. The terms of the decree allowed Bell to remain a vertically integrated monopolist in the telecommunications industry, but as a remedy, Bell had to license all its existing patents royalty-free. Thus, the path-breaking technologies developed by the Bell Laboratories became freely available to all US companies. We show that in the first five years compulsory licensing increased follow-on innovation building on Bell patents by 17%. This effect is driven mainly by young and small companies. Yet, innovation increased only outside the telecommunications equipment industry. The lack of a positive innovation effect in the telecommunications industry suggests that market foreclosure impedes innovation and that compulsory licensing without structural remedies is ineffective in ending it. The increase of follow-on innovation by small and young companies is in line with the hypothesis that patents held by a dominant firm act as a barrier to entry for start-ups. We show that the removal of this barrier increased long-run U.S. innovation, corroborating historical accounts.
    Keywords: Antitrust; Compulsory Licensing; innovation; Intellectual Property
    JEL: K21 L40 O3 O33 O34
    Date: 2017–01
  7. By: W.J. Liebregts; F.C. Stam
    Abstract: Labor market institutions enable and constrain particular behaviors on the labor market and beyond. We take a closer look on employment protection legislation (EPL), and its unintended effects on entrepreneurial activity. We unpack the effects of EPL by disentangling the two mechanisms of the severance pay and notice period, and analyze the effects of these mechanisms on the allocation of entrepreneurial activity across employment and self-employment. This study uses multilevel analyses to examine the separate effect of the two main elements of EPL on an individual’s occupational status. In general, the severance pay is found to be negatively related to entrepreneurial employees, whereas the notice period shows a positive relationship. The opposite is true for the effects on self-employed individuals.
    Keywords: labor market institutions, employment protection legislation, severance pay, notice period, entrepreneurial employee activity, self-employment
    Date: 2016–09–28
  8. By: Aldieri, Luigi; Vinci, Concetto Paolo
    Abstract: The aim of this paper is to investigate the extent to which knowledge spillovers effects are sensitive to different levels of innovation. We develop a theoretical model in which the core of spillover effect is showed and then we implement the empirical model to test for the results. In particular, we run the quantile regression for panel data estimator (Baker, Powell and Smith, 2016), to correct the bias stemming from the endogenous regressors in a panel data sample. The findings identify a significant heterogeneity of technology spillovers across quantiles: the highest value of spillovers is observed at the lowest quartile of innovation distribution. The results might be interpreted to provide some useful implications for industrial policy strategy
    Keywords: Innovation; Spillovers; Quantile regression; Knowledge diffusion
    JEL: C21 O32 O33
    Date: 2017–01
  9. By: Falilou Fall; Christine Lewis
    Abstract: Over the past two decades, the income level of the Czech Republic has converged considerably towards the OECD average. However, after the 2008 global crisis, the convergence process stalled. Shortfalls in labour productivity have developed and are mainly structural. Policies are needed to foster domestic sources of productivity growth. Better targeting of government R&D support and more focused innovation policies that would be aided by a streamlining of policy institutions and interventions are necessary. In particular, tailored policies to increase knowledge-based capital (skills, management capacity, collaboration, etc.) are necessary to increase Czech firms’ productivity. Also, resource reallocation should be facilitated by reforming framework conditions. In particular, bankruptcy rules, competition and regulation policies, access to finance and SME taxation need to be improved to boost SMEs' growth and productivity. Stimuler la productivité pour favoriser la convergence des revenus dans la République tchèque Au cours des deux dernières décennies, le niveau de revenu de la République tchèque s’est nettement rapproché de la moyenne de l’OCDE. Toutefois, après la crise mondiale de 2008, ce processus de convergence a marqué un coup d’arrêt. La productivité n’a pas progressé autant qu’attendu, principalement pour des raisons structurelles. Il est dès lors nécessaire de mettre en place des politiques publiques pour stimuler les sources internes de hausse de la productivité. Rationaliser les institutions chargées de l’élaboration de ces politiques aiderait à mieux cibler le soutien public à la R D et à affiner les politiques de l’innovation. En particulier, des politiques spécifiquement conçues pour développer le capital intellectuel (compétences, capacité de direction, collaboration, etc.) s’imposent pour accroître la productivité des entreprises tchèques. Par ailleurs, il conviendrait de faciliter la réaffectation des ressources en réformant les conditions-cadres en vigueur. En particulier, les règles en matière de faillite, les politiques en matière de concurrence et de réglementation, l’accès aux financement et la fiscalité des PME doivent être améliorés pour accélérer la croissance des petites et moyennes entreprises et doper leur productivité.
    Keywords: innovation, labour productivity, R&D tax incentives, skill mismatch
    JEL: H25 J24 O38 O47 O52
    Date: 2017–01–25
  10. By: Guimarães Barbosa, Evaldo
    Abstract: The major claim of this article is twofold, that is, that fixed assets in small manufacturing enterprises in developing countries have to be seen with respect to two roles. The first is capital intensity. The second is the collateral value of these assets. The former is associated with the small manufacturing firms’ hazard of exit in a U-shaped fashion. The latter takes up a wave-shaped relationship. Failure in the extant empirical literature to fit a binomial specification for capital intensity results in either a negative or a positive relationship, or even, lack of statistical significance. All these three outcomes are the results of a misguided attempt to fit an “artificial” monotonic specification to an actual U-shaped relationship. The trinomial specification for the collateral value of the small manufacturing enterprises’ fixed assets has never been attempted. Thus, the present article proposes a new framework for the study of the impact of the small manufacturing enterprises’ fixed assets investment strategy upon their hazard of exit.
    Keywords: Small firms; Business survival determinants; Capital intensity; collateral value of fixed assets; Cox regression
    JEL: M21
    Date: 2017–01–26
  11. By: Aldieri, Luigi; Kotsemir, Maxim; Vinci, Concetto Paolo
    Abstract: The aim of this paper is to investigate the impact of external research collaborations on the scientific performance of academic institutions. Data are derived from the international SCOPUS database. We consider the number of citations of publications to evaluate university performance in Russia. To this end, we develop a non-overlapping generations model to evidence the theoretical idea of research externalities between academic institutions. Moreover, we implement different empirical models to test for the effect of external scientific collaborations on the institutional research quality. The results confirm an important positive impact of co-authoring process
    Keywords: Academic institutions; Productivity; Research externalities
    JEL: D20 I21
    Date: 2017–01
  12. By: Gianni La Cava (Reserve Bank of Australia); Callan Windsor (Reserve Bank of Australia)
    Abstract: Over the past quarter century, Australian companies have been increasingly holding assets in the form of currency and deposits, or 'cash', rather than investing in other productive assets. This reflects a global trend and raises the question of whether Australian companies now hold 'too much' cash. Despite Australian non-financial companies holding high levels of cash by international standards, we find little evidence that the increase has been 'excessive'. Instead, we find that the rise in corporate cash is mostly due to changes over time in observable company characteristics, including an apparent increase in the growth opportunities of publicly listed companies (as proxied by Tobin's Q). We also find some evidence of 'cohort effects' as Australian companies are more likely to be 'born', or come into existence, today in industries that have relatively high levels of cash, such as information technology, pharmaceuticals and biotechnology. We also find evidence that public companies hold more cash than private companies, on average. This is consistent with agency conflicts between owners and managers playing a role in corporate decisions to hold cash. Overall, we find that, in the face of financing frictions, some Australian companies have speculative and precautionary motives for holding cash. It follows that high levels of corporate cash do not necessarily indicate a weak outlook for corporate investment but might, in some cases, actually imply more investment opportunities.
    Keywords: cash; private companies; financing frictions; agency costs
    JEL: G30 G32
    Date: 2016–05
  13. By: Franke, Günter; Krahnen, Jan Pieter
    Abstract: The Capital Markets Union-project of the European Commission aims for an increase of market-based debt financing of small and medium-sized enterprises (SMEs), complementing bank lending. In this essay we argue that rather than focussing on pure non-bank lending, a reasonable mix of bank- and market-based financing should be considered. Banks are said to have a comparative advantage in critical lending functions such as credit screening, debtor monitoring and debt renegotiation. All forms of lending require a persistent skin-in-the-game of critical players in order to be effective. The regulator should insist on full disclosure of skin-in-the-game, thereby improving capital allocation and reducing systemic risks.
    Keywords: SME,funding,capital markets,lending instruments,banks
    Date: 2016
  14. By: Albertazzi, Ugo; Bottero, Margherita; Gambacorta, Leonardo; Ongena, Steven
    Abstract: Using credit register data for loans to Italian firms we test for the presence of asymmetric information in the securitization market by looking at the correlation between the securitization (risk-transfer) and the default (accident) probability. We can disentangle the adverse selection from the moral hazard component for the many firms with multiple bank relationships. We find that adverse selection is widespread but that moral hazard is confined to weak relationships, indicating that a strong relationship is a credible enough commitment to monitor after securitization. Importantly, the selection of which loans to securitize based on observables is such that it largely offsets the (negative) effects of asymmetric information, rendering the overall unconditional quality of securitized loans significantly better than that of non-securitized ones. Thus, despite the presence of asymmetric information, our results do not accord with the view that credit-risk transfer leads to lax credit standards.
    Keywords: Adverse Selection; moral hazard; Securitization; SME loans
    JEL: D82 G21
    Date: 2017–01
  15. By: Aksel Erbahar (Erasmus School of Economics and Tinbergen Institute, The Netherlands)
    Abstract: Previous firm-level literature established that there are substantial costs of entry into new export markets. Chaney (2014) opens the black-box of entry costs by building a dynamic network model of international trade where firms acquire customers in new destinations through their existing customers in other destinations. Following his conjecture, this paper examines whether firms use their existing suppliers in a destination to find their first clients in those markets. I use a disaggregated dataset on Turkish firms' exports and imports for the 2003-08 period, and investigate the effect and the channels that import experience might have on export entry. By identifying import experience using instrumental variables, and shutting down productivity channels with firm-year fixed effects, I find that having a supplier in the destination country raises the probability of exporting to that country by 5.5 percentage points on average, revealing a "market knowledge" phenomenon. The paper's main contribution to the literature is finding for the first time that firms' country-specific import experience increases the likelihood of exporting to that country. Digging further to explore heterogeneous effects, I find that this effect increases with the destination country's size, proximity, language similarity, and the size of its Turkish community. Moreover, the strength of the firm's relationship with its supplier as proxied by several variables such as the share of imported products that are differentiated increases the probability of export market entry.
    Keywords: market entry; export diversification; learning by importing; networks
    JEL: F1 F14 F61 L20
    Date: 2017–01–23

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