nep-sbm New Economics Papers
on Small Business Management
Issue of 2018‒08‒27
fifteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Fostering rural women nonfarm household enterprises financing through local groups By Guloba, Madina; Sarah Ssewanyana; Elizabeth Birabwa
  2. R&D cooperation in SMEs: the direct effect and the moderating role of human capital By Cantabene, Claudia; grassi, iacopo
  3. Assessing the Effects of Simple and Complex Innovation Strategies on the Performance of Firms in the Philippines By Connie Bayudan-Dacuycuy; Lora Kryz C. Baje
  4. Patents to Products: Innovation and Firm Performance By David Argente; Douglas Hanley; Salome Baslandze; Sara Moreira
  5. Low literacy levels likely to impede rural women’s success in business By Guloba, Madina; Sarah Ssewanyana; Elizabeth Birabwa
  6. Beyond the Arrow effect: a Schumpeterian theory of multi-quality firms * By Hélène Latzer
  7. Public R&D Support and Firms' Performance: A Panel Data Study By Nilsen, Øivind Anti; Raknerud, Arvid; Lancu, Diana-Cristina
  8. Barriers to Reallocation and Economic Growth: the Effects of Firing Costs By Toshihiko Mukoyama; Sophie Osotimehin
  9. Industry 4.0 and the SME: a technology-focused review of the empirical literature By Alexandre Moeuf; Samir Lamouri; Robert Pellerin; Romain Eburdy; Simon Tamayo
  10. The Virtual is Reality! On Physical and Virtual Space in Software Firms’ Knowledge Formation By Aslesen, Heidi Wiig; Martin, Roman; Sardo, Stefania
  11. Sectoral and regional distribution of export shocks: What do two hundred thousand UK firm observations say? By Rafal Kierzenkowski; Peter Gal; Gabor Fulop; Dorothee Flaig; Frank van Tongeren
  12. Foreign Competition and Domestic Innovation: Evidence from U.S. Patents By David Autor; David Dorn; Gary Pisano; Gordon Hanson; Pian Shu
  13. The Multiple Roles of Demand in Regional Development A Conceptual Analysis By Martin, Hanna; Martin, Roman; Zukauskaite, Elena
  14. Strategien kleiner und mittlerer Betriebe in angespannten Arbeitsmarktlagen. Eine Untersuchung am Beispiel der niedersächsischen Ernährungswirtschaft By Margarian, Anne; Lankau, Matthias; Lilje, Alena
  15. Dispersion in Financing Costs and Development By Tiago Cavalcanti; Bruno Martins; Cezar Santos; Joseph Kaboski

  1. By: Guloba, Madina; Sarah Ssewanyana; Elizabeth Birabwa
    Abstract: Rural women entrepreneurs in Uganda continue to face multiple challenges that impede their enterprise growth and expansion, despite pragmatic interventions from government and non-state actors to enhance entrepreneurship. Uganda’s female managed nonfarm household enterprises continue to be micro, informal and face bottlenecks to access high credit to grow their business as they do not have the necessary collateral that formal credit institutions demand. Hence, many resort to borrowing from locally managed community or village credit associations to start or grow their businesses and yet, these financing mechanisms are limited. The Uganda Women Entrepreneurship Programme (UWEP) should therefore ensure that the distribution of funds is equitable taking into consideration the heterogeneities across spatial areas, region, education level and size of business enterprise.
    Date: 2017–04–28
  2. By: Cantabene, Claudia; grassi, iacopo
    Abstract: We analyze the determinants of R&D cooperation for SMEs in Italy. We introduce in the literature human capital as one of the main determinants of R&D cooperation, concentrating on its moderating role, and specifically focusing on the high-tech sector. Using an extremely rich dataset, we improve the literature, building robust explanatory variables, and disaggregating the cooperation by partner. We find that human capital facilitates cooperation, but its moderating role depends on the type of disaggregation and/or the partner.
    Keywords: R&D cooperation; subsidy; firm behavior; human capital; moderating effect
    JEL: C23 C25 H32 O32
    Date: 2018–07–13
  3. By: Connie Bayudan-Dacuycuy; Lora Kryz C. Baje
    Abstract: Innovation is the synergistic use of resources, technology, capital, and information to achieve growth at different levels of the economy. Many studies abroad have already supported the hypothesis that innovation leads to a good firm performance and long-term economic growth. In the Philippines, some studies already analyzed the effects of simple innovations on firm performance. However, emerging literature shows that complex innovation strategies have bigger impacts than simple ones. This paper analyzes the effects of simple and complex innovations on labor productivity and employment growth. Results show that there is no single best innovation strategy that a firm must undertake. However, if firms are constrained by their budget, a simple innovation will help in improving labor productivity and, to some extent, employment growth. Firms that do not face cost issues can benefit more from adopting a complex innovation strategy. In addition, several specific types of complex innovation strategies can be adapted depending on whether the firm aims to increase its employment or to boost its labor productivity.
    Keywords: labor productivity, Philippines, innovation, employment growth, simple innovation, complex innovation
    Date: 2018
  4. By: David Argente (University of Chicago); Douglas Hanley (University of Pittsburgh); Salome Baslandze (EIEF - Einaudi Institute for Economics a); Sara Moreira (Northwestern University)
    Abstract: What do standard patent-based innovation measures capture? Using the unique match of firms’ patenting activities and their product introduction in the con sumer goods sector, we study the relationship between patents and innovation. Our current results indicate that both at the extensive margin and the intensive margin, patents (and citations-adjusted patents) are strongly associated with higher product introduction as well as product destruction and hence larger re allocation at the firm level. We provide additional evidence that this association is at least partly causal. Firms that are patenting also introduce products of higher quality, enjoy larger sales and hold more diverse set of products. We disentangle the effect of patents on product versus process innovation, distinction that has been hard to measure from standard data sources. We find that the effect of patenting on product creation is larger for smaller firms, while the process innovation seems more pronounced in larger firms. Textual analysis of patents and product descriptions sheds additional light on the exact transmission of innovation embedded in the patents into specific product creation.
    Date: 2018
  5. By: Guloba, Madina; Sarah Ssewanyana; Elizabeth Birabwa
    Abstract: Being literate is a prerequisite in business management and sustainability. While evidence shows that Uganda’s entrepreneurial potential is high globally, female entrepreneurs were still being presented with limited opportunities to expand their business and few tried to increase or independently manage their enterprises. Education levels for women especially in rural areas and among the youth is still low and hence most likely to miss out of government programmes that aim to uplift their livelihoods such as those targeting income enhancement amidst agricultural shortfalls. Programmes must offer mixed approaches in enterprise business chain and emphasis on adult literacy programmes along entrepreneurship is vital for rural business sustainability.
    Keywords: Agribusiness, Labor and Human Capital
    Date: 2017–04–28
  6. By: Hélène Latzer (CEREC - Université Saint-Louis - Bruxelles, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper introduces multi-quality firms within a Schumpeterian framework. Featuring non-homothetic preferences and income disparities in an otherwise standard quality-ladder model, we show that the resulting differences in the willingness to pay for quality among consumers generate both positive investments in R&D by industry leaders and positive market shares for more than one quality, hence allowing for the emergence of multi-product firms within a vertical innovation framework. This positive investment in R&D by incumbents is obtained with complete equal treatment in the R&D field between the incumbent patentholder and the challengers: in our framework , the incentive for a leader to invest in R&D stems from the possibility for an incumbent having innovated twice in a row to efficiently discriminate between rich and poor consumers displaying differences in their willingness to pay for quality. We hence exemplify a so far overlooked demand-driven rationale for innovation by incumbents. Such a framework also makes it possible to analyze the impact of inequality both on long-term growth and on the allocation of R&D activities between challengers and incumbents. We find that an increase in the income gap positively impacts an econ-omy's growth rate, partly shifting R&D activities from challengers to incumbents. On the other hand, a greater income concentration is detrimental for growth, diminishing both the incumbents' and the challengers' R&D activities.
    Keywords: Growth,Innovation,Income inequality
    Date: 2016–10
  7. By: Nilsen, Øivind Anti (Norwegian School of Economics); Raknerud, Arvid (Statistics Norway); Lancu, Diana-Cristina (Statistics Norway)
    Abstract: We analyse all the major sources of direct and indirect R&D subsidies in Norway in the period 2002-2013 and compare their effects on individual firms' performance. Firms that received support are matched with a control group of firms that did not receive support using a combination of stratification and propensity score matching. Changes in performance indicators before and after support in the treatment group are compared with contemporaneous changes in the control group. We find that the average effects of R&D support among those who obtained grants and/or subsidies are positive and significant in terms of performance indicators related to economic growth: value added, sales revenue and number of employees. The estimated effects are larger for start-up firms than incumbent firms when the effects are measured as relative effects (in percentage points), but smaller when these effects are translated into level effects. Finally, we do not find positive effects on return to total assets or productivity for firms who received support compared with the control group.
    Keywords: public policy, firm performance, treatment effects, stratification, propensity score matching, productivity
    JEL: C33 C52 D24 O38
    Date: 2018–06
  8. By: Toshihiko Mukoyama (Department of Economics, Georgetown University); Sophie Osotimehin (Department of Economics, University of Virginia)
    Abstract: We study how factors that hinder the reallocation of inputs across firms influence aggregate productivity growth. We extend Hopenhayn and Rogerson's (1993) general equilibrium firm dynamics model to allow for endogenous innovation. We calibrate the model using US data, and then evaluate the effects of firing taxes on reallocation, innovation, and aggregate productivity growth. In our baseline specification, we find that firing taxes reduce overall innovation and productivity growth. We also show that firing taxes can have opposite effects on the entrants' innovation and the incumbents' innovation, and thus the overall outcome depends on the relative strengths of these forces.
    Keywords: Innovation, R&D, Reallocation, Firing costs
    JEL: E24 J24 J62 O31 O47
    Date: 2018–08–13
  9. By: Alexandre Moeuf (Quartz - Laboratoire Quartz - ENSEA - Ecole Nationale Supérieure de l'Electronique et de ses Applications - SUPMECA - Institut supérieur de mécanique de Paris - EISTI - Ecole Internationale des Sciences du Traitement de l'Information); Samir Lamouri (Arts et Métiers ParisTech); Robert Pellerin (EPM - École Polytechnique de Montréal); Romain Eburdy; Simon Tamayo (MINES ParisTech - École nationale supérieure des mines de Paris, CAOR - Centre de Robotique - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University)
    Abstract: The concept of Industry 4.0 has many advantages for Small and Medium-sized Enterprises (SME) in relation to other industrial management methods such as Just-In-Time or MRPII. Its adoption can be achieved through the use of many technologies. However, these technologies are not well mastered by SMEs. In order to identify the difficulties encountered by SMEs, this article presents an analysis of the exploitation of the different means of realization of the industry 4.0. From a scientific literature review, we show disparities in the exploitation of different technological group. Among the important elements, we note a sub-consideration of the data generated as a source of added value for SMEs, an under-exploitation of certain means of realization and a lack of expertise in SMEs that slows penetration of certain technological groups. The exploitation of the different technologies is often approached individually and targeted, which leads us to conclude that the concept of industry 4.0 is not approached from the angle of industrial management strategy.
    Keywords: SME,Industry 40,Production Planning and Control
    Date: 2017–10–11
  10. By: Aslesen, Heidi Wiig (BI Norwegian Business School); Martin, Roman (Gothenburg University); Sardo, Stefania (BI Norwegian Business School)
    Abstract: To understand how knowledge is created, it is necessary to unwrap the role played by the physical and virtual spaces in knowledge exchange and formation. The extant research offers interesting findings when it comes to the relationships among regional institutional and organizational characteristics, innovation, and firms’ abilities to link up to global knowledge sources. A focus on the role of informal and low-cost mechanisms, both regional and global, has extended our understanding of their role in knowledge formation. However, the physical space has dominated the discussion in the literature on sources of knowledge formation, while the virtual space has seldom been addressed. The inclusion of the virtual space, both as an interaction space and as a different and complementary dimension, makes it possible to gain new insights into knowledge formation in a digitalizing world. Based on in-depth interviews with small and medium-sized software companies in two urban agglomerations in Norway and Sweden, this paper explores the use of physical and virtual spaces. The findings show that these spaces interact and mutually influence each other. The world is not ‘flattening’ due to ongoing digitalization. Rather, urban agglomerations are still important places in which these spaces are optimized and unified.
    Keywords: virtual space; knowledge sources; geographical proximity; software firm; Norway; Sweden
    JEL: L86 O30 O31
    Date: 2018–08–17
  11. By: Rafal Kierzenkowski; Peter Gal; Gabor Fulop; Dorothee Flaig; Frank van Tongeren
    Abstract: This study explores the impact of export shocks on firms and re-aggregates results to derive distributional effects on sectors and regions. In a first step, firm level data are used to assess the empirical relationship between exports and three outcome variables – labour productivity, employment and wages. In a second step, an illustrative set of changes in trading relationships generate sectoral export shocks, which are simulated with the OECD METRO model of trade and subsequently fed into micro-level estimates. The method developed in this study can be applied to other countries, conditional on the availability of data. As an initial case study, the analysis is for the United Kingdom which has weak regional productivity outside London, partly related to sectoral and trade specialisation. In particular, the most productive regions are specialised in knowledge-intensive services and are more intensive in tradable services. The results suggest limited impacts of export shocks on sectoral employment, except for car and truck manufacturing, consistent with a high integration of the sector with European value chains. Labour productivity and wages are negatively affected across most sectors, but the effects are smaller on the services sector relative to the goods sector. Given that services activities are concentrated in more productive regions, these regions are more resilient to shocks. The United Kingdom has a strong comparative advantage in services sectors and promoting the opening of global services markets would be an important way to offset potential negative impacts of export shocks on the other sectors of the economy.
    Keywords: employment, European Union, exports, firms, productivity, regions, sectors, United Kingdom, wages
    JEL: D24 F14 F16 J21 J3 R12
    Date: 2018–08–08
  12. By: David Autor (Massachusetts Institute of Technology); David Dorn (University of Zurich); Gary Pisano; Gordon Hanson (University of California, San Diego); Pian Shu (Georgia Institute of Technology)
    Abstract: The competitive shock to the U.S. manufacturing sector spurred by rising China import competition could either catalyze or stifle innovation. Using three distinct sources of variation to identify rising trade exposure, we provide a causal analysis of the effect of surging import competition on U.S. innovative activities. Applying a novel internet-based matching algorithm to map all U.S. utility patents granted by 2013 to firm-level data, and carefully accounting for the shifting concentration of patenting activity across sectors, we document a robust, negative impact of rising Chinese competition on firm-level and technology class-level patent production. Accompanying this fall in innovation, global employment, sales, profitability, and R&D expenditure all decline within trade-exposed firms. The trade-induced contraction along all margins of adjustment and for all measures of valuation suggest that the primary response of firms to greater import competition is to scale back their global operations.
    Date: 2018
  13. By: Martin, Hanna (Karlstad University,); Martin, Roman (Gothenburg University); Zukauskaite, Elena (Halmstad University)
    Abstract: This paper contributes to the literature on new regional industrial path development by highlighting the multiple roles that demand can play in regional development. We develop a conceptual framework relating different roles of demand to different types of new path development. Based on the literature on regional development, we differentiate among the role of demand as anonymous consumer, sophisticated buyer, active co-developer, public procurer, and norm and value setter. These roles influence different types of new path development, including path extension, path renewal and new path creation. New path development can be triggered by changing norms and values in the society (e.g. environmental concerns and the growing demand for cleaner technologies), public procurement for innovation (governments demand new products or services and thereby steer economic development) or by users modifying existing products or developing novel solutions that are not yet on the market (e.g. user innovations). In order to foster a new industrial growth path in a region, local firms need to sustain, establish and grow their market shares, focusing on the role of anonymous consumers. The various roles of demand, as well as its effect on new path development, depend on the geographical context. Changes of demand in one region might contribute to path extension, path renewal or new path creation in other regions. We argue that taking a nuanced view toward demand will add a novel dimension to the debate on new path development.
    Keywords: regional development; demand; innovation; new path development
    JEL: O10 O30 R11 R58
    Date: 2018–08–17
  14. By: Margarian, Anne; Lankau, Matthias; Lilje, Alena
    Abstract: This report summarises the results of the sub-project “Local strategies for economic development” of the European Research Project TRUSTEE that ran from 2014 to 2016. Against the background of the expected scarcity of professional workers, the Lower Saxon food industry is used as an example to show how local job markets impact mainly small and medium size enterprises (SMEs) in terms of strategies and developments (1); to what extent businesses can achieve independence from the local job market (2); how the businesses, on their part, influence the local job markets (3). The study design includes three core elements: In the summer 2015 a standardized survey was carried out in the food industry in Lower Saxony with 200 responding firms. In autumn 2015 and winter 2015/16 workshops on the topic of professional staff needs were organized, documented and afterwards evaluated in a rural and in a more urban region of Lower Saxony. Finally, interviews were conducted with participants on the regional continuing education landscape in selected lower Saxon regions in the early summer 2016. The regional workshops have shown that the job market actors in the case study regions see their development as limited due to the declining number of available qualified labour. Particularly affected were meat processing firms and large companies which require special qualifications and undertake large growth steps. Efforts to improve the situation are undertaken including the improvement of the attractiveness of jobs and training offers, international recruiting, improvement of internal staff development and increased cooperation between the different employment institutions and the companies. However, the preparedness or the ability to contribute, particularly in small businesses, is often low because of their limited management resources. The example of the participating large businesses has, however, shown that businesses with adequate resources can become partially independent from limited job markets due to their greater attractiveness as employers. One requirement is that they do not rely upon the advantages of their size. On the other hand, due to their specific qualification requirements and greater growth steps, sometimes they are also strongly affected by a scarcity of local professionals. The study of the regional continuing education landscape has shown that the regional further training offerings are not so much adapted to the specific needs of local businesses in either a qualitative or quantitative perspective, but rather much more influenced by the individual targeting of the employment administration, by the presence or absence of chambers of commerce and other providers and by the competition between providers. The desire and ability of smaller businesses from low-technology sectors like the food processing industry to have a targeted impact on the further training offerings is quite low. The main focus of the report is on an extensive presentation of the survey results. These confirmed that the business development is much more strongly affected by firm-level determinants than by the local environment. Free resources and established leadership structures favour the establishment of effective management measures and routines, which, for their part lead to successful communication in the company and an according transfer of knowledge and innovative ability. Only in very small businesses can a lack in formal structure be compensated partially with spontaneous communication. From the different requirements on business management originates a critical growth threshold for small businesses, where new management competence and new staff have to be acquired. If this is successful, the positive development is less likely to be slowed by a shortage in the labour market because growing businesses have fewer recruitment problems than do stagnated or shrinking businesses. Thus structural change due to labour market development tends to be faster and more to the favour of more competitive businesses. Small businesses in rural regions with lower competitive pressure can possibly have more opportunity to overcome the critical growth threshold than do small businesses in urban centres, but only when they succeed in developing their internal labour market. Here, targeted support of continuing education and business consulting provide a toehold for help within the framework of the existing system.
    Keywords: Crop Production/Industries, Labor and Human Capital
    Date: 2017
  15. By: Tiago Cavalcanti (University of Cambridge); Bruno Martins (Banco Central do Brasil); Cezar Santos (Fundacao Getulio Vargas); Joseph Kaboski (University of Notre Dame)
    Abstract: We study how dispersion in financing costs and financial contract enforcement affect entrepreneurship, firm dynamics and economic development in an economy in which financial contracts are imperfectly enforced. We use employee-employer administrative linked data combined with data on financial transactions of all formal firms in Brazil to show how interest rate spreads vary with firm size, age and loan characteristics, such as loan size and loan maturity. We present a model of economic development based on a modified version of Buera, Kaboski, and Shin (2011) which are consistent with those facts and provide evidence on the effects of financial reforms on economic development. Eliminating dispersion in financing costs leads to more credit and higher output due to cheaper credit for productive agents with low assets. Moreover, abstracting from heterogeneity in interest rate spreads understates the impacts of financial reforms that improve the enforcement of credit contracts.
    Date: 2018

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