nep-sbm New Economics Papers
on Small Business Management
Issue of 2017‒12‒18
fourteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Does manufacturing stir up innovation? By Alex Coad; Antonio Vezzani
  3. The Effect of Firm Entry on Capacity Utilization and Macroeconomic Productivity By Huw Dixon; ANTHONY SAVAGAR
  4. Trading firms and trading costs in services: Firm-level analysis By Dorothée Rouzet; Sebastian Benz; Francesca Spinelli
  5. Access to Finance Constraint and SMEs Functioning in Ghana By Nyanzu, Frederick; Quaidoo, Matthew
  6. Entry barriers and their macroeconomic impact in the EU: an assessment using QUEST III By Cristiana Benedetti-Fasil; Miguel Sanchez-Martinez; Peder Christensen
  7. An ecosystem in the air? The instance of start-ups and the arrival of the LGV SEA in Bordeaux By Nathalie Gaussier; Claude Lacour
  8. Quantile Approach for Distinguishing Agglomeration from Firm Selection in Stata By KONDO Keisuke
  9. Innovation Trends and Industrial Renewal in Finland and Sweden 1970-2013 By Kander, Astrid; Taalbi, Josef; Oksanen, Juha; Sjöö, Karolin; Rilla, Nina
  10. Investments, financial constraints in non-quoted Swedish Firms By Dastory, Linda; Eklund, Johan; Numminen, Emil
  11. How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe By Katalin Bodnár; Ludmila Fadejeva; Stefania Iordache; Liina Malk; Desislava Paskaleva; Jurga Pesliakaite; Nataša Todorovic Jemec; Peter Tóth; Robert Wyszynski
  12. The potential and impact of ICT-enabled Social Innovation to promote social investment in the EU By Gianluca Misuraca; Giulio Pasi; Maria Cesira Urzi Brancati
  13. Why do manufacturing firms produce services? Evidence for the servitization paradox in Belgium By Catherine Fuss; Pierre Blanchard; Claude Mathieu
  14. Platforms to business relations in online platform ecosystems By Nestor Duch-Brown

  1. By: Alex Coad (CENTRUM Católica Graduate Business School, Pontificia Universidad Católica del Perú, Lima, Perú); Antonio Vezzani (European Commission - JRC)
    Abstract: Because of its positive contribution to employment and economic growth, the EU has set a manufacturing target of 20%. This could also boost R&D, productivity and exporting. Our analyses do not find empirical evidence that a large manufacturing sector has a direct influence on exporting activity or productivity growth. We find a positive association between manufacturing and R&D investment. The EU manufacturing strategy could help reaching the 3% R&D intensity target. However, the link between manufacturing and R&D depends on the industrial structure of a country. Support to new high-tech sectors should be coupled with actions to encourage technological upgrade in existing ones.
    Keywords: Manufacturing, R&D, exporting, productivity, industrial policy, industrial renaissance
    Date: 2017–11
  2. By: Baum, Christopher F (Department of Economics, Boston College, Chestnut Hill, MA and Department of Macroe- conomics, DIW Berlin); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Nabavi, Pardis (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper studies firms' capability to recombine internal and local knowledge. It measures the outcome in terms of total productivity growth.Using Swedish data on commuting time for face-to-face contacts across all 290 municipalities, we employ a time sensitive approach for calculating localized knowledge within a municipality and and its close neighbors. Internal knowledge is captured by register data on firms' innovation intensity. The two sources of knowledge are modeled in a production function setting by discrete composite variables with different combinations of input factors. Applying the model on Swedish firm level panel data, we find strong evidence of differences in the capacity to benefit from external knowledge among persistent innovators, temporary innovators and non-innovators. The results are consistent regardless of whether innovation efforts are measured in terms of the frequency of patent applications or the level of R&D investment.
    Keywords: Innovation strategies; localized knowledge; patents; TFP growth; panel data
    JEL: C23 O31 O32
    Date: 2017–12–12
  3. By: Huw Dixon (Cardiff University); ANTHONY SAVAGAR (University of Kent)
    Abstract: This paper argues that firm entry causes endogenous fluctuations in macroeconomic productivity through its effect on incumbent firms’ capacity utilization. The analysis shows that imperfect competition causes long-run excess entry leading to many small firms each with excess capacity. Since entry occurs slowly, macroeconomic shocks are initially borne by these incumbents who respond by altering their capacity utilization. As they vary utilization efficiency changes because of non-constant returns to scale and this aggregates to affect the economy’s productivity. In the long run, entry occurs and new firms dissipate the shock, which alleviates incumbents’ alteration in capacity. Therefore the endogenous productivity effect is temporary.
    Date: 2017
  4. By: Dorothée Rouzet; Sebastian Benz; Francesca Spinelli
    Abstract: This report presents evidence on how services trade restrictions influence the decisions and performance of firms engaged in international markets, drawing on micro-data from Belgium, Finland, Germany, Italy, Japan, Sweden, the United Kingdom, and the United States. It first describes the patterns of services exports and affiliate sales at the firm level, uncovering a number of stylised facts about the firms engaged in international trade in services, their choices of modes of supply and the links between services trade and manufacturing activities. The report then relates these outcomes to services trade policy barriers in destination markets as measured by the OECD STRI. It demonstrates that complex and restrictive regulatory environments limit the volume of services that firms are able to trade as well as the number of firms that engage with those markets. Hence services trade restrictions reflect not only ad valorem trade costs, but also fixed and sunk costs. Such barriers do not affect all firms equally. Restrictive services trade regulations disproportionately discourage SMEs. Size, productivity and previous exporting experience appear to be decisive factors in dealing with at-the-border and behind-the-border trade barriers. Finally, the cost of regulatory compliance is lower for foreign-owned firms with headquarters located in the export destination country and for firms that trade bundles of services and manufacturing products, than it is for pure services exporters.
    Keywords: competition, firm-level data, foreign affiliates, productivity, regulation
    JEL: D22 F13 F14 L22 L25 L8 L9
    Date: 2017–12–12
  5. By: Nyanzu, Frederick; Quaidoo, Matthew
    Abstract: Well-functioning small and medium enterprises (SMEs) are a fundamental part of the economic fabric in developing countries, and play a crucial role in contributing to GDP growth, reducing unemployment as well as furthering innovation and prosperity. Unfortunately, they are strongly restricted in accessing the capital that they require to grow, expand and function, with nearly half of SMEs in developing countries rating access to finance as a major constraint. This paper examines the link between access to finance and SMEs functioning in Ghana. The study resorts to the current World Bank Enterprise Survey data released for Ghana (2013); and using chi-square, logit and ordered logit analysis, it finds out that access to credit is a major constraint of SMEs in Ghana with implications for their functioning and growth. The study recommends, therefore, that governments should create the enabling environment for SMEs to function effectively by providing financing avenues and improving access to financing.
    Keywords: Financial Constraint, Small and Medium Enterprises, Functioning, Ghana
    JEL: G20 M20
    Date: 2017–12
  6. By: Cristiana Benedetti-Fasil (European Commission – JRC); Miguel Sanchez-Martinez (European Commission - JRC); Peder Christensen (European Commission - JRC)
    Abstract: Entry barriers make markets less contestable and thereby reduce competition, resulting in lower TFP, GDP and employment growth. Following the Lisbon strategy, Member States increasingly adopted measures to reduce the costs of starting a business. This paper quantifies the macroeconomic impact of such policies and identifies the main structural characteristics still driving the differences across Member States. In general, countries with high entry barriers and a less developed R&D sector seem to benefit proportionally more from a reduction of the so-called red tape barriers. Growth of GDP, TFP and employment could be further enhanced by also improving access to finance. Countries with a more developed R&D sector experience stronger growth in the long run when the reduction of the red tape barriers is accompanied by an improved access to finance.
    Keywords: Entry barriers, innovation, economic growth, macroeconomic modelling
    Date: 2017–11
  7. By: Nathalie Gaussier; Claude Lacour
    Abstract: According to the economic, institutional and political agents, the arrival of the High Speed Line South Europe Atlantic LGV SEA in Bordeaux would trigger or boost a \"Bordeaux regional entrepreneurial ecosystem\". This present paper examines this concept of ecosystem and offers to show its main characteristics, stressing the part played by start-ups, and assessing the economic and spatial logics involved. In a first part, the point is to understand to what extend the start-ups that politicians claim to be the spear-heads of those ecosystems, would constitute new stakes of operating in ecosystems. The survey enables to re-examine the concepts of ecosystem and of entrepreneurial system, to place them into prospect in the frame of regional science and of models of regional development. In a second part, we highlight the characteristic elements of this bordelais ecosystem, using what we call its fundamental DNA: the bordelais entrepreneurial ecosystem is grounded on numerous start-ups whose nature as well as personal and spatial components put into question the emergence of new forms of organization and relationships with the major companies and research laboratories.
    Keywords: Ecosystem, start-up, entrepreneurial system, creative creation
    JEL: L26 M13 P00 R10 R58
    Date: 2017
  8. By: KONDO Keisuke
    Abstract: Firms and workers, on average, are more productive in larger cities. One possible explanation which has been studied for a long time is that firms and workers in larger cities benefit from agglomeration economies. Another possible explanation is that the higher concentration of economic activities in larger cities forces tougher competition, and less productive firms cannot survive there. To distinguish agglomeration from firm selection, Combes et al. (2012, "The productivity advantages of large cities: Distinguishing agglomeration from firm selection," Econometrica, vol. 80) newly propose a quantile approach. This paper introduces the estquant command that implements their quantile approach in Stata. Our Monte Carlo experiments emphasize the importance of simultaneously considering agglomeration and selection.
    Date: 2017–03
  9. By: Kander, Astrid (Department of Economic History, Lund University); Taalbi, Josef (Department of Economic History, Lund University); Oksanen, Juha; Sjöö, Karolin; Rilla, Nina
    Abstract: We examine trends in innovation output for two highly ranked innovative countries: Finland and Sweden (1970-2013). Our novel dataset, collected using the LBIO (literature-based innovation output) method, suggests that the innovation trends are positive for both countries, despite an extended downturn in the 1980s. The findings cast some doubt on the proposition that the current stagnation of many developed countries is due to a lack of innovation and investment opportunities. Our data show that Finland catches up to, and passes, Sweden in innovation output in the 1990s. In per capita terms, Finland stays ahead throughout the period. We find that the strong Finnish performance is largely driven by innovation increase in just a handfull of industries. Both countries saw a rise in innovation during the dot-com era and the structural changes that followed. Since 2000 however, Sweden has outperformed Finland in terms of total innovations, especially in machinery and ICT, while the Finnish rate of innovation has stabilized. We suggest that these patterns may be explained by different paths of industrial renewal.
    Keywords: innovation; literature-based innovation output; industrial renewal; structural decomposition; structural change
    JEL: N14 O30 O47
    Date: 2017–12–06
  10. By: Dastory, Linda (Royal Institute of Technology); Eklund, Johan (Department of Industrial Economics, Blekinge Inst of Technology); Numminen, Emil (Department of Industrial Economics, Blekinge Inst of Technology)
    Abstract: Using panel data from 10 573 non-quoted Swedish SMEs over the period 2006-2014, we examine how dependent investments made by Swedish SMEs are of internally generated cash-flows. To control for investment opportunities, we use an accelerator model. Applying a static accelerator model our result shows that, investment levels are in fact affected by the availability of internal funding. It takes between 2-2.5 years for the capital stock to adjust to shocks in demand. As the speed of the adjustment rate increases firms’ investment levels become more dependent on internal funding, indicating high adjustment costs. Finally, as firms become larger their investment level becomes less dependent on internal funding, indicating that it may be easier for larger firms to attract external funding.
    Keywords: Non-quoted SMEs; Cash flow; Investments; Financial Constraints; Accelerator model.
    JEL: D92 E22
    Date: 2017–12–12
  11. By: Katalin Bodnár (Magyar Nemzeti Bank); Ludmila Fadejeva (Latvijas Banka); Stefania Iordache (Banca Nationala a Romaniei); Liina Malk (Eesti Pank); Desislava Paskaleva (Bulgarian National Bank); Jurga Pesliakaite (Lietuvos Bankas); Nataša Todorovic Jemec (Banka Slovenije); Peter Tóth (Národná banka Slovenska); Robert Wyszynski (Narodowy Bank Polski)
    Abstract: We study the transmission channels for rises in the minimum wage using a unique firm-level dataset from eight Central and Eastern European countries.Representative samples of firms in each country were asked to evaluate the relevance of a wide range of adjustment channels following specific instances of rises in the minimum wage during the recent post-crisis period. The paper contributes to the literature by presenting the reactions of firms to rises in the minimum wage as a combination of strategies, and evaluates the relative importance of those strategies. Our findings suggest that the most popular adjustment channels are cuts in non-labour costs, rises in product prices, and improvements in productivity. Cuts in employment, which is the adjustment channel most commonly studied in the empirical literature, is less popular and occurs mostly through reduced hiring rather than direct layoffs. Our study also provides evidence of potential spillover effects that rises in the minimum wage can have on firms without minimum wage workers. Finally, we analyse the different firm-level characteristics that drive the choice of adjustment strategies.
    Keywords: minimum wages, adjustment channels, firm survey
    JEL: D22 E23 J31
    Date: 2017–12
  12. By: Gianluca Misuraca (European Commission - JRC); Giulio Pasi (European Commission - JRC); Maria Cesira Urzi Brancati (European Commission - JRC)
    Abstract: This report presents the results of the JRC-led research on ‘ICT-enabled Social Innovation to support the implementation of the Social Investment Package’ (IESI) conducted in partnership with the Directorate General for Employment, Social Affairs and Inclusion. The IESI research is set out to help policymakers and practitioners use ICT-enabled social innovation to modernise welfare systems, provide better and more efficient social services, and ultimately increase the wellbeing and quality of life of citizens. The original research design, its theoretical framework and empirical findings contribute to the growing scientific interest on ICT-enabled social innovation in the field of social policy reforms, within the scope of the implementation of the social investment approach. Based on the analysis of evidence gathered through a documented collection of initiatives across the EU, the research also advances a proposal for developing a methodological framework to assess the social and economic impact of ICT enabled social innovation. The approach proposed is expected to support policymakers and relevant stakeholders in designing, monitoring and evaluating ICT-enabled social innovation initiatives, which could be transferred, scaled-up and replicated across Europe. Insights from the research contribute to the policy debate on the implementation of the European Pillar of Social Rights and the future of the Welfare State in the EU.
    Keywords: ICT-enabled social innovation, social investment, social policy innovation
    JEL: O38 O52
    Date: 2017–11
  13. By: Catherine Fuss (Economics and Research Department, NBB); Pierre Blanchard (UPEC); Claude Mathieu (UPEC)
    Abstract: The increasing role of services in GDP results from the growing share of service industries, but also from the fact that firms produce services along with goods. This paper investigates the determinants of service provision by manufacturing firms. First, it develops a model of differentiated products with, on the demand side, complementarities between the firm’s goods and services, and, on the supply side, rivalry in the allocation of expertise between the production of goods and the provision of services. Second, it provides an econometric assessment of the determinants of servitization for manufacturing firms, using a fractional Probit model with heterogeneity, controlling for endogeneity with respect to unobserved firm characteristics. Both the theoretical model and empirical estimates point to a non-linear relationship between servitization and firm productivity. The relationship is further shaped by the sector environment as well as intrinsic characteristics of the goods and services supplied.
    Keywords: Services, multi-product firms, firm behavior, Total Factor Productivity, panel data analysis, non linear model.
    JEL: D24 D29 L11 L22 L23 L25
    Date: 2017–11
  14. By: Nestor Duch-Brown (European Commission – JRC)
    Abstract: This report presents evidence on the relationship between online platforms and businesses using these platforms to reach consumers or conduct their operations. First, we review the literature on vertical relationships both from a classic approach and from a multi-sided market perspective. Second, we use survey data to explain the factors behind firms’ choice of online channel. Third, we explore the results of a survey passed to firms using platforms to understand their concerns about the behaviour of some of these online gatekeepers. Finally, we offer some conclusions.
    Keywords: digital single market, data economy, online platforms, multi-sided markets
    JEL: D23 K11 K12 L86
    Date: 2017–12

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