nep-sbm New Economics Papers
on Small Business Management
Issue of 2018‒08‒20
twenty-two papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Fostering place-based innovation and internationalization – the new turn in German technology policy By Dohse, Dirk; Fornahl, Dirk; Vehrke, Julian
  2. Productivity of Slovenian Firms By Polona Domadenik; Bojan Ivanc; Denis Marinšek
  3. The impact of firm performance on the business transfer mode By Kay, Rosemarie; Pahnke, André; Schlepphorst, Susanne
  4. Financial Frictions, Cyclical Fluctuations and the Innovative Nature of New Firms By Christoph Albert; Andrea Caggese
  5. Is Equity Crowdfunding a Good Tool for Social Enterprises? By Stefano Cosma; Alessandro G. Grasso; Francesco Pagliacci; Alessia Pedrazzoli
  6. The IT Revolution and the Globalization of R&D By Lee G. Branstetter; Britta M. Glennon; J. Bradford Jensen
  7. Bidding against the odds? The impact evaluation of grants for young micro and small firms during the recession By Stjepan Srhoj; Bruno Škrinjarić; Sonja Radas
  8. Innovation clusters effects on adoption of a general purpose technology under uncertainty By Iritié, B. G. Jean Jacques
  9. The art hub in the World Heritage Site, Georgetown: a case study of creative sector entrepreneurship in the context of gentrification By Chen, Shih-Yu; Piterou, Athena; Khoo, Suet Leng; Chan, Jin H.
  10. Does Outward Foreign Investment Matter for Canadian Productivity? Evidence from Greenfield Investments By Naveen Rai; Lena Suchanek; Maria Bernier
  11. Public Contracting for Private Innovation: Government Expertise, Decision Rights, and Performance Outcomes By Joshua R. Bruce; John M. de Figueiredo; Brian S. Silverman
  12. Addressing the innovation gap: Lessons from the Stairway to Excellence (S2E) project By Nida Kamil Ozbolat; Nicholas Harrap
  13. Every cloud has a silver lining: micro-level evidence on the cleansing effects of the portuguese financial crisis By Daniel A. Dias; Carlos Robalo Marques
  14. Determinants of the Survival Ratio for De Jure Standards: AI-related technologies and interaction with patents By TAMURA Suguru
  15. Centers of Gravity: The Effect of Stable Shared Leadership in Top Management Teams on Firm Growth and Industry Evolution By Rajshree Agarwal; Serguey Braguinsky; Atsushi Ohyama
  16. Expanding Access to Finance for Small-Scale Businesses By World Bank Group
  17. The Persistent Effects of Entry and Exit By Aubhik Khan; Julia Thomas; Tatsuro Senga
  18. Structural Changes in the Duration of Bull Markets and Business Cycle Dynamics By João Cruz; João Nicolau; Paulo M.M. Rodrigues
  19. Guiding investments in place-based development. Priority setting in regional innovation strategies By Gunter Clar
  20. Innovation and the Patterns of Trade: A Firm-Level Analysis By Ana Maria Santacreu; Liliana Varela
  21. Capital Structure and the Choice of Enterprise Form: theory and history By Timothy Guinnane; Jakob Schneebacher
  22. Is Intrapreneurship Scalable? The Challenge Of Managing A Massive Internal Startup Call By Sophie Hooge; Cédric Dalmasso; Frédéric Garcias

  1. By: Dohse, Dirk; Fornahl, Dirk; Vehrke, Julian
    Abstract: Since the mid-1990s German technology policy has experienced a paradigmatic shift from standard grant schemes towards a region-oriented and competition-based R&D policy. Currently, a new policy experiment, the InterClust contest, is under way, trying to simultaneously foster place-based innovation, R&D internationalization and the internationalization of innovative places. The current paper analyses the new policy, relating it to the recent literatures on heterogeneous firms and on cluster-life cycles, and presents results from a firm survey performed in 21 winner regions of InterClust. Findings show that the new funding scheme takes insights from recent theoretical developments into account and addresses important impediments to firm and cluster internationalization. Although it is too early for an overall assessment, it is argued that the long-term impact will critically depend on the inflow of heterogeneous knowledge and the strength of intra-regional mobilization effects.
    Keywords: industrial clusters,knowledge spillovers,technology policy
    JEL: O30 R11
    Date: 2018
  2. By: Polona Domadenik; Bojan Ivanc; Denis Marinšek
    Abstract: We analyse productivity differences across non-financial Slovenian firms over the period 1994-2015. In particular, we investigate the impact of different factors (including size, ownership, investment activity and industry characteristics) on firms' total factor productivity (TFP), competitiveness and internationalisation. Large corporates appear to have the highest level of TFP, more than 50% above the average, and show stronger TFP growth. Exporting firms also show higher TFP growth than other firms, particularly after the recent crisis. Using a complete database of R&D subsidies over 1998-2015, the paper identifies R&Dintensive firms and investigates the impact of R&D investment on productivity and profitability. It is found that subsidies did not significantly increase firm-level productivity, once size, industry and year effects are taken into account. This could be because, during the recession (2009-2015), subsidies were granted to firms in difficulties.
    JEL: D22 D24 L25
    Date: 2018–03
  3. By: Kay, Rosemarie; Pahnke, André; Schlepphorst, Susanne
    Abstract: This paper analyzes the impact of family firms' past and future economic viability on the incumbents' decision on the business transfer mode. Using the German IAB Establishment Panel and estimating logistic regression models we show that the decision on the business transfer mode rather depends on the expected future performance than on the past one. Moreover, family businesses that are exclusively managed by their owners are more likely to be planning an intra-family succession. However, ambiguity about the future performance overrides the original intention and induces the incumbents to sell the business.
    Keywords: family businesses,business succession,transfer mode,performance
    JEL: L25 L26 M2
    Date: 2018
  4. By: Christoph Albert (UPF and Barcelona GSE); Andrea Caggese (Pompeu Fabra University)
    Abstract: How do financial factors and cyclical fluctuations affect the innovative content of new businesses? This paper answers this question by combining a multi-country entrepreneurial level dataset with country level business cycle data and sector level information on technology. Our main data source is the Global Entrepreneurship Monitor dataset, which is a multi-country multi-year survey of entrepreneurial decisions. We merge this dataset with a country specific business cycle indicator (GDP growth) and a financial crisis indicator from Laeven and Valencia (2013). Finally, we also combine it with two sector level indicators: an external financial dependence indicator (Kroszner et al, 2007) and an indicator of intangibility (share of intangible over total assets, see Falato et al, 2014, and Caggese and Perez, 2018). We use the dataset to identify three types of startups which are likely to be innovative and/or with high growth potential: i) Businesses started to provide a new product or service. ii) Startups for which the new entrepreneur is expecting high employment growth (controlling for country effects). iii) Startups in high-intangible industries, which should have higher growth potential given the more innovative content of intangible technologies. We control for country fixed effects, as well as for individual characteristics such as age, education and income group, and we find that all startups, but especially startups with high growth potential, were much more procyclical in the presence of the financial crisis. That is, the financial crisis reduced significantly more startups with high growth potential than the other types, especially in countries with greater contraction in output. Importantly we also show that startups with high growth potential were strongly negatively affected by the financial crisis only in industries classified as with high external financial dependence. In other words, we find evidence strongly consistent with the hypothesis that financial frictions affected the composition of business startups during the financial crisis, reducing the incentives of entrepreneurs to start riskier and more innovative businesses with more growth potential.
    Date: 2018
  5. By: Stefano Cosma; Alessandro G. Grasso; Francesco Pagliacci; Alessia Pedrazzoli
    Abstract: Equity crowdfunding is an emerging financing tool that can help social start-ups and firms to bring people and resources together around a project. This paper focuses on equity crowdfunding. We look at this as a complementary financing channel useful for promoting innovation and social change by paring down the traditional features of financial investment. Our unique dataset regards all the Italian Equity Crowdfunding campaigns launched by different platforms on the Italian equity crowdfunding market from 2013 to 2018. Our aim is twofold: a) to describe some characteristics of the Italian Equity crowdfunding market; b) to describe the characteristics of the social firms which have had recourse to equity crowdfunding, in order to investigate which factors influence the campaign’s success. The results suggest that social firms’ investment offerings are not different from those of non-social ones, but so far, the Italian equity crowdfunding market does not seem suitable for supporting the financial needs of this type of firm, on the side of either investors or firms.
    Keywords: equity crowdfunding; sustainability; social enterprises; entrepreneurial finance
    JEL: G23 G24
    Date: 2018–02
  6. By: Lee G. Branstetter; Britta M. Glennon; J. Bradford Jensen
    Abstract: Since the 1990s, R&D has become less geographically concentrated, and has seen especially fast growth in emerging markets. One of the distinguishing features of the R&D globalization phenomenon is its concentration within the software/IT domain; the increase in foreign R&D has been largely concentrated within software and IT-intensive multinationals, and new R&D destinations are also more software and IT-intensive multinationals than traditional R&D destinations. In this paper we document three important phenomena: (1) the globalization of R&D, (2) the growing importance of software and IT to firm innovation, and (3) the rise of new R&D hubs. We argue that the shortage in software/IT-related human capital resulting from the large IT- and software-biased shift in innovation drove US MNCs abroad, and particularly drove them abroad to “new hubs” with large quantities of STEM workers who possessed IT and software skills. Our findings support the view that the globalization of US multinational R&D has reinforced the technological leadership of US-based firms in the information technology domain and that multinationals’ ability to access a global talent base could support a high rate of innovation even in the presence of the rising (human) resource cost of frontier R&D.
    JEL: F23 O32 O57
    Date: 2018–06
  7. By: Stjepan Srhoj; Bruno Škrinjarić; Sonja Radas
    Abstract: Impact evaluations of entrepreneurship policies targeting young firms have been somewhat neglected thus far in the literature. While most research studies focus on the impact of research and development (R&D) grants, a larger percentage of young firms would benefit from grants that assist them in other activities. In this paper we examine the impact of small business development grants on survival and performance of young firms. We study this topic in the context of a long recession in Croatia (2009 to 2014), which makes it possible to better observe the effect of the public instrument intervention. As the grants were too small to produce any direct effects, the positive effects were achieved indirectly through enabling young firms to get bank loans, either by means of certification effect or because of behavoral additionality which raised their ability to apply for loans. The results show positive impact on firm survival after the recession.
    Keywords: Grants, recession, young firms, survival, firm performance, bank loans
    JEL: H25
    Date: 2018–07
  8. By: Iritié, B. G. Jean Jacques
    Abstract: This paper analyzes the effect of innovation clusters on the adoption of a gen- eral purpose technology (GPT) and on firms R&D investment levels in im- perfect information situation. To do this, we developed a theoretical model of vertical relation, described as a four-step game between an upstream firm providing innovative GPT and an innovative downstream associated sector, integrator of this technology. The downstream sector ignores the quality of the GPT and we model the innovation cluster as a coordination mode of firms, improving the probability of the downstream firm to receive information about the quality of the GPT technology. Then, we determine firms equilibria (prices and technological qualities) and we showed that the effect of innovation clus- ters on the choice of qualities, the adoption behavior, levels of investment in R&D as well as that social welfare depends on the quality of R&D activities carried out before the establishment of the cluster and a threshold effect or cluster critical mass; if the critical mass in terms of information sharing and interaction is not reached, the cluster may have negative effects. In other words, the consensual idea of expected positive effects of innovation clusters must be put into perspective.
    Keywords: innovation clusters,general purpose technology,technology adoption,technology complementarity,uncertainty,critical mass
    JEL: C02 D82 D83 L15 O3
    Date: 2017
  9. By: Chen, Shih-Yu; Piterou, Athena; Khoo, Suet Leng; Chan, Jin H.
    Abstract: This research examines the role of an art organisation, which operates largely as a social enterprise, in responding to the issues of gentrification and the resulting displacement of communities embodying the local culture in Georgetown, Malaysia. The case study art hub has developed into an internationally acclaimed space for innovative ventures including an art gallery and units for arts, craft and food entrepreneurs. The research method includes first stage questionnaire and in-depth interviews to understand the managing strategies and innovation practices. With their innovative business strategies, the art organisation forms an extended network with the local art community and is positioned as the focal point in a mini entrepreneurial ecosystem. Through the case study in Georgetown, Malaysia, the research contributes to the understanding of the strength and challenges of innovative social entrepreneurship for cultural and creative organisations.
    Keywords: creative enterprise; innovative entrepreneurship; sustainable entrepreneurship; relational aspects of ingenuity; boundary work and networking
    Date: 2018–07–01
  10. By: Naveen Rai; Lena Suchanek; Maria Bernier
    Abstract: This paper seeks to understand how outward foreign direct investment (FDI) affects the productivity of Canadian firms. We estimate the impact of outward greenfield investment on measures of firm-level productivity using FDI data from roughly 2,000 Canadian firms and more than 4,000 outward FDI projects over the 2003–14 period. Combining matching techniques with a difference-in-difference approach, we find that firms that invest abroad tend to see more important productivity gains one to two years after the investment, compared with firms that are otherwise similar but remain domestic, suggesting that outward investment has beneficial implications for investing firms. Further, panel regression analysis at the provincial level shows that an increase in the number of outward investment projects is found to be associated with higher productivity growth, particularly for investments in OECD countries. The result suggests that learning or technological spillover effects are particularly important when investing in countries close to the home country’s technological frontier.
    Keywords: Firm dynamics; Productivity
    JEL: D24 F21 F23
    Date: 2018
  11. By: Joshua R. Bruce; John M. de Figueiredo; Brian S. Silverman
    Abstract: We examine how the U.S. Federal Government governs R&D contracts with private-sector firms. The government chooses between two contractual forms: grants and cooperative agreements. The latter provides the government substantially greater discretion over, and monitoring of, project progress. Using novel data on R&D contracts and on the geo-location and technical expertise of each government scientist over a 12-year period, we test implications from the organizational economics and contracting literatures. We find that cooperative agreements are more likely to be used for early-stage projects and those for which local government scientific personnel have relevant technical expertise; in turn, cooperative agreements yield greater innovative output as measured by patents, controlling for endogeneity of contract form. The results are consistent with multi-task agency and transaction-cost approaches that emphasize decision rights and monitoring.
    JEL: H11 H57 L14 L24 L33 O32
    Date: 2018–06
  12. By: Nida Kamil Ozbolat (European Commission - JRC); Nicholas Harrap (European Commission - JRC)
    Abstract: There is a considerable territorial disparity in terms of research and innovation (R&I) performance within Europe between EU15 and EU13 Member States (MSs) . The two biggest European funds, European Structural and Investment Funds (ESIF) and Horizon 2020 (H2020), aim at supporting the development of European competitiveness, growth, knowledge generation and as well as closing the innovation gap and promoting research excellence across Europe. Smart Specialisation Strategies (S3) play a key role in fostering an efficient and inclusive Research and Innovation (R&I) ecosystem by creating the right framework for focused investments based on selected high value added priorities and a shared vision of territorial development. Also, the European Commission's project Stairway to Excellence (S2E) is focussed on the provision of assistance to EU MSs and Regions with emphasis on promoting R&I excellence and maximising the specific value added of S3 investments such as the capacity building to support for R&I activities and exploitation of research results for raising the overall social/economic impact. This report summarises the main outcomes of the activities undertaken by the S2E team during the initial phase of the project from June 2014 to January 2017). It focuses on the S2E Country Reports – produced by the national independent experts and provided analysis on the optimal use of key European R&I funds – and the Joint Statements of S2E National Events – an outcome of national events covering the issues and main conclusions - as well as the other analytical work of the project. By picking those issues and actions common to more than one country and frequently mentioned, the main bottlenecks and possible policy actions to address these issues are summarised within three dimensions; namely, quality of R&I governance, capacity building, and innovation and commercialisation. This analysis and particularly the policy recommendations offer solutions for these issues that can also contribute to closing the innovation gap in Europe, which is demonstrated by the annual European Innovation Scoreboard comparing the performance of the EU MSs.
    Keywords: Innovation gap, Research Excellence, Innovation, European Funding, Smart Specialisation, ESIF, Horizon 2020, Cohesion Policy, Stairway to Excellence, S2E
    Date: 2018–07
  13. By: Daniel A. Dias; Carlos Robalo Marques
    Abstract: Using firm level data, we show that the Portuguese financial crisis had, overall, a cleansing effect on productivity. During the crisis, aggregate productivity gains, both in manufacturing and services, came from relatively higher contributions of entry and exit of firms and from reallocation of resources between surviving firms. At the microlevel, we find that the crisis reduced the probability of survival for high and low productivity firms, but hit low productivity firms disproportionately harder, in line with the cleansing hypothesis. The correlation between productivity and employment growth in manufacturing and services strengthened, but the correlation between productivity and capital growth in the service sector weakened. We attribute this result in part to structural sectoral differences, but mainly to the large negative demand and credit shocks that affected mainly the nontradable services sub-sector. We also find that the probability of exit increased disproportionately for firms operating in more financially dependent industries, but there is no evidence of a scarring effect on productivity stemming from changing credit conditions.
    JEL: D24 E32 L25 O47
    Date: 2018
  14. By: TAMURA Suguru
    Abstract: In this study, I focus on the characteristics of standardized technologies and the effective terms of regional de jure standards for discussing the effectiveness of their management system. Namely, the focus is on the total cost of ownership of standards. To this end, I analyze the determining factors considering the Japanese Industrial Standards of approximately 14,000 cases. I conduct a semi-parametric survival analysis to study the determinants of the effective term. The results demonstrate that the technological category and type of technical standards (e.g., product and design) significantly affect the effective term. International standards, legislative use, and standard essential patents are also shown to have significant influence on the effective term. Moreover, the technological category of artificial intelligence (AI)-related standards is established, and the effective term of AI-related technology is found to be significantly shorter. These findings contribute to better designing of the global and regional standards management processes, which in turn will contribute to improvements in the efficiency of global and regional innovation systems.
    Date: 2018–08
  15. By: Rajshree Agarwal; Serguey Braguinsky; Atsushi Ohyama
    Abstract: We study the processes of firm growth in the evolution of the Japanese cotton spinning industry during 1883-1914 by integrating strategy and historical approaches and utilizing rich quantitative firm-level data and detailed business histories. The resultant conceptual model highlights growth outcomes of path dependencies as firms evolve across periods of single vs. shared leadership, establish stability in shared leadership, or experience repeated discord-induced TMT leader departures. While most firms do not experience smooth transitions to stable shared TMT leadership, a focus on value creation, in conjunction with talent recruitment and promotion, enabled some firms to achieve stable shared leadership in spite of discord-induced departures, engage in long term expansion, and emerge as “centers of gravity” for output and talent in the industry.
    JEL: L2 L25 L26 M12 M13 N85
    Date: 2018–06
  16. By: World Bank Group
    Keywords: Finance and Financial Sector Development - Microfinance Finance and Financial Sector Development - Access to Finance Private Sector Development - Small and Medium Size Enterprises Finance and Financial Sector Development - Payment Systems & Infrastructure
    Date: 2017–01
  17. By: Aubhik Khan (Ohio State University); Julia Thomas (Ohio State University); Tatsuro Senga (Queen Mary University of London)
    Abstract: We develop a model with endogenous entry and exit in an economy subject to aggregate total factor productivity shocks that are non-stationary. Firms exhibit a life-cycle consistent with data and our model economy reproduces both their size and age distribution. In this setting, persistent shocks to aggregate total factor productivity growth rates endogenously drive long term reductions in business formation. The economic consequences of this persistent decline in entry grows over time. In our model, individual firms vary in both the permanent and transitory components of their total factor productivity and in their capital stock. Capital adjustment is subject to one period time-to-build and involves both convex and nonconvex costs. Our dynamic stochastic general equilibrium model involves an aggregate state that includes a distribution of firms over total factor productivity and capital. Changes in this distribution, following aggregate shocks to the common component of TFP, drive persistent fluctuations in aggregate economic activity. We show that equilibrium movements in firms' stochastic discount factors, following persistent shocks to TFP growth, imply long-run declines in the value of entry. The resulting fall in the number of firms propagates a reduction in economic activity. This slows down the recovery. We apply our model to understanding the last decade of economic activity in the U.S. This period began with a large recession followed by a period of slow economic growth. At the same time there was a persistent reduction in the new business formation. Our dynamic stochastic general equilibrium analysis is consistent with relatively small reductions in the level of total factor productivity, as seen in the last recession, and large reductions in GDP and Business Fixed Investment. Moreover, the recovery from such a large recession is slowed by a persistent reduction in firm entry.
    Date: 2018
  18. By: João Cruz; João Nicolau; Paulo M.M. Rodrigues
    Abstract: This paper tests for structural changes in the duration of bull regimes of adjusted market capitalization stock indexes comprehending 18 developed and emerging economies, using a novel approach introduced by Nicolau (2016); and investigates whether the structural changes detected in the bull markets' duration are connected to the business cycle. Interestingly, the results show that structural changes in the duration of bull market regimes seem to anticipate periods of economic recession. The results provide statistically significant evidence that decreases in bull markets duration do not occur independently from economic crises, as 13 out of the 18 markets considered in our sample verify such decreases at least 12 months prior to the occurrence of an economic crisis. Additionally, these structural changes seem to affect smaller companies first, and then the larger ones. The association between decreases in the bull market regimes' duration and economic crises is possibly a consequence of the financial markets' leading behavior over the economy, with these structural changes serving as proxies for decreasing confidence in the financial markets, which naturally affects economic stability.
    JEL: C12 C22
    Date: 2018
  19. By: Gunter Clar
    Abstract: Optimising priority setting for higher returns on investment. As the Structural Funds (ESIF) constitute a large part of the EU budget, considerable contributions to the overall EU2020 Growth Strategy are expected. In the 2014-2020 programming period, there is a strong focus on Research and Innovation (R&I) with the aim to boost ESIF impact on competitiveness and broader benefits (public and private returns) across the EU. Towards this larger aim, R&I Strategies for Smart Specialisation (RIS3) are means to concentrate investments in place-based, innovation-oriented activities, which are well positioned vis-Ã -vis global value chains, and also related to territorial or sectoral strategies with other regions. Recent assessments show that the concentration of investments towards this goal has not everywhere been optimally achieved, which is often traced back to the types of priorities selected. At first sight, this can be attributed to the nature of the strategy processes, the innovation actors involved, and their methodological and strategic competences. Looking deeper, especially where Managing Authorities and ESIF applicants/recipients had little former experience with R&I priority setting, weaknesses lie in understanding state-of-the-art concepts underlying R&I strategies, in applying the broad spectrum of R&I support tools, and in the ability to guide a range of R&I related interaction processes continually and competently. Against this backdrop, the report sets out to synthesise the dispersed knowledge on a range of issues relevant for the success of priority setting processes and practices in innovation policies and strategies. Outlining changing contexts, rationales and approaches of priority setting in R&I policies leads to the "new prioritisation logic" guiding RIS3 exercises. This is followed by two main lines aiming to facilitate improved priority setting: better understanding the wider innovation policy context of RIS3, and making better use of Strategic Policy Intelligence (SPI) and other support tools (including learning from private sector strategies) to structure and guide policy cycles, and to implement place-appropriate policy mixes. Evidence (case studies) on effective priority setting processes in RIS3-type exercises and policy recommendations complete the report.
    Keywords: Priority setting, Regional innovation strategies, Place-based policies
    Date: 2018–07
  20. By: Ana Maria Santacreu (Federal Reserve Bank of Saint Louis); Liliana Varela (University of Warwick)
    Abstract: What are the effects of trade liberalizations on firms' innovation incentives? What types of a firm's innovations are more affected by these liberalizations: product or process innovation, basic or fundamental innovation? How do changes in a firm's innovation activities after trade liberalizations affect a country's patterns of trade? We examine these questions both empirically and theoretically, through the lenses of a quantifiable model of trade and innovation. Recent empirical studies have found that trade liberalizations substantially affect firms' innovation activities (see Bloom, Draca, and Van Reenen (2015), Autor et al (2016), Coelli, Moxnes and Ulltveit-Moe (2016)). However, there is no consensus on the direction of the effect on innovation. Bloom, Draca, and Van Reenen (2015) and Coelli, Moxnes and Ulltveit-Moe (2016) find that declines in trade frictions increase innovation, whereas Autor el al. (2016) find that trade liberalization reduces firms' patens and R&D expenses. The ambiguity of these results shows the need of structural models to understand the channels through which trade affects firms' incentives to innovate. These models can quantify the importance of the market size and foreign competition channels embedded in trade liberalizations, and rationalize the ambiguity of the empirical findings. Moreover, these models can shed light on the effect that changes in firms' innovation incentives has on a country's patterns of trade. Our first contribution is empirical. We provide empirical evidence on the effect that the accession of China to the WTO in the early 2000s had on the innovation activities of French firms. In particular, we break down innovation activities by categories and study what activities were more affected by changes in trade frictions. We merge three datasets reporting information on firms' R&D and innovation activities, trade and balance sheets over the period 1993-2016. Our R&D data comes from the national survey on firms' R&D and innovation activities and reports information on R&D expenditures, patents, product and process innovation, basic and fundamental innovation, area of research, among others. The custom and balance sheet data provide information on all firms' exports and imports by country destination and origin, sales, capital, and employment. These extensive datasets allow us to build detailed measures of the different activities involved in the innovation process over a long panel, and to measure firms' exposure to the Chinese trade shock. Our second contribution is theoretical. We develop and quantify a model of trade, innovation and firms' dynamics to explain our empirical findings. From a theoretical perspective, the effect of a decline in trade frictions depends on two forces: (i) a market size effect, and ii) a foreign competition effect. The first effect increases investment in innovation, as firms benefit from serving a larger market. The second effect decreases the incentives to innovate, as firms face larger competition from abroad. In this case, the direction of the evolution of comparative advantage determines whether a firm finds it or nor profitable to invest in innovation. Which force dominates determines whether the net effect on innovation after a trade liberalization is positive, negative or neutral. One sector-sector models of Ricardian trade without knowledge spillovers predict that decreases in trade frictions have negligible effects on innovation since the market effect cancels out the foreign competition effect (see Atkeson and Bustein (2010) and Buera and Oberfield (2017)). A recent attempt to model these channels has been done by Sampson (2016), Somale (2016), and Cai, Li and Santacreu (2017), among others, by introducing sectoral linkages in production and knowledge spillovers to previous models of trade and innovation. These papers do not model explicitly the role of the firm in taking innovation, export, entry and exit decisions. Our model builds on Atkeson and Burstein (2010) and Atkeson and Burstein (2017). Atkeson and Burstein (2010) develop a model of trade and innovation without knowledge spillovers, in which innovation is modeled as the introduction of new products in the economy. We augment their model by adding knowledge spillovers and process and product innovations of incumbent firms as in Atkeson and Burstein (2017), who study the effect of innovation policies in a closed economy. In the model, the dynamics of productivity are driven endogenously by innovation of entering forms and product and process innovation of incumbent firms. Changes in trade costs have a direct effect on both product and process innovation in the economy. Our model allows us to disentangle the role of the market size effect and the foreign competition effect on these results. Furthermore, changes in innovation translate into changes in productivity, which in turn has an effect on the patterns of trade of the economy. We calibrate the model to data on innovation and trade for French firms during the period 1996-2016. We then perform a counterfactual exercise that consists of a reduction in trade frictions between China and France, and analyze quantitatively the effect that such trade reform has on innovation and the patterns of trade. Our paper provides a unified framework of trade and innovation at the firm level that allows us to obtain aggregate implications of trade liberalizations.
    Date: 2018
  21. By: Timothy Guinnane (Economic Growth Center, Yale University); Jakob Schneebacher (Oxford University)
    Abstract: A considerable theoretical and empirical literature studies the corporation's capital structure. Economists have paid less attention to capital structure in other enterprise forms such as partnerships, which typically operate under different legal constraints and appeal to smaller enterprises. Yet partnerships were the dominant business organization for the period in which wealthy countries first experienced long-run economic growth, and they remain quantitatively significant in some important economies today. We use a series of simple models to study several aspects of the partnership's choice of capital structure. We show that common features of partnerships reflect the difficulty of raising capital for ventures whose prospects are hard to judge. We also consider the implications of a rule in partnership law that prevents limited partners from playing a role in management, and the implications of the partnership form for projects subject to hold-up.
    Date: 2018–01
  22. By: Sophie Hooge (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Cédric Dalmasso (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Frédéric Garcias (IAE Lille - Institut d'Administration des Entreprises - Lille - Université de Lille, Sciences et Technologies)
    Abstract: Intrapreneurship has long been identified as a means to increase the ability of firms to innovate. But can it, beyond exceptional champions, serve as a basis for the development of an innovation function capable of producing sustained radical innovation? In practice, the space of " deviance " left to collaborators for local initiatives favors more problem solving than radical innovation, and duos of champions & sponsors are too few to transform the firm. Can new collaborative technologies, including corporate social networks, that are increasingly used to organize " crowd-based " idea generation processes within firms, help to scale-up intrapreneurship processes? In this article, we analyze a large-scale initiative deployed in a major French bank, Société Générale: the " Internal Startup Call " that involved both collaborators and the top-management team. Through a case study based on collaborative research, we analyze the disruptive potential and the limits associated with this challenge implemented this year during the bank.
    Keywords: top-management team, Innovation contest, Radical innovation,Intrapreneurship
    Date: 2018–06–30

This nep-sbm issue is ©2018 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.