nep-sbm New Economics Papers
on Small Business Management
Issue of 2019‒02‒25
fifteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Do young innovative companies create more jobs? Evidence from Pakistani textile firms By Wadho, Waqar; Goedhuys, Micheline; Chaudry, Azam
  2. Agglomeration Economies and the Firm TFP: Different Effects across Industries By Martin Gornig; Alexander Schiersch
  3. Structural transformation in Africa: New technologies, resurgent entrepreneurship and the revival of manufacturing By Naude, Wim
  4. Investment climate, outward orientation and manufacturing firm productivity: New empirical evidence By Mai Nguyen; Marie-Ange Veganzones-Varoudakis
  5. Job creation in Colombia vs the U.S.: “up or out dynamics” meets “the life cycle of plants”. By Marcela Eslava; John C. Haltiwanger; Alvaro Pinzón
  6. Government institutions and the dynamics of urban growth in China By Rodríguez-Pose, Andrés; Zhang, Min
  7. Immigrant Entrepreneurs and Innovation in the U.S. High-Tech Sector By J. David Brown; John S. Earle; Mee Jung Kim; Kyung Min Lee
  8. The impact of the French policy mix on business R&D: How geography matters By Benjamin Montmartin; Marcos Herrera; Nadine Massard
  9. The Internationalization of R&D By Ali-Yrkkö, Jyrki; Pajarinen, Mika
  10. Econometric study on the impact of EU loan guarantee financial instruments on growth and jobs of SMEs By Bertoni, Fabio; Brault, Julien; Colombo, Massimo G.; Quas, Anita; Signore, Simone
  11. New Entrepreneurial Learning Phase I Evaluation By Mikia Manley; Margaret Sullivan; Karina Edouard; Eric Brower; Jonathan Ladinsky; Hanzhi Zhou
  12. SMEs Sector: A Key Driver to the Egyptian Economic Development By Abdel bary, Amr
  13. Company Profits in Italy By Massimo Del Gatto; Fadi Hassan; Gianmarco I.P. Ottaviano; Fabiano Schivardi
  14. The effects of cultural policy on nascent cultural entrepreneurship: A Bayesian nonparametric approach to longitudinal mediation By Andrej Srakar; Marilena Vecco
  15. Firms' Exports, Volatility and Skills: Evidence from France By Maria Bas; Pamela Bombarda; Sébastien Jean; Gianluca Orefice

  1. By: Wadho, Waqar (Lahore School of Economics); Goedhuys, Micheline (UNU-MERIT); Chaudry, Azam (Lahore School of Economics)
    Abstract: Using unique innovation survey data collected among a homogenous sample of firms active in the textiles and apparel sector in Pakistan, this paper analyses the role of innovation for employment growth. In particular, it develops and tests the hypothesis that innovation is conducive to employment creation, and that this is especially the case for smaller and younger firms, supporting the hypothesis that young innovative companies grow faster by engaging in riskier and more radical innovation to catch up with incumbent firms. We find empirical evidence for these hypotheses, which is robust to different model specifications and estimation techniques and to different measures of innovation. Young innovative companies also perform well in absolute employment creation making them interesting from a policy perspective.
    Keywords: Technological innovation, Firm growth, Employment growth, Quantile regression, Textiles, Pakistan
    JEL: L25 L26 L67 O30 O53
    Date: 2019–01–11
  2. By: Martin Gornig; Alexander Schiersch
    Abstract: This paper analyzes the effect of agglomeration economies on firms’ total factor productivity. We propose the use of a control function approach to overcome the econometric issue inherent to the two-stage approach commonly used in the literature. Estimations are conducted separately for four industry groups, defined by technological intensity, to allow for non-uniform effects of agglomeration economies on firms given their technological level. In addition, R&D is included to account for the firms’ own efforts to foster productivity through creating and absorbing knowledge. Finally, radii as well as administrative boundaries are used for defining regions. The results confirm differences in the strength and even in the direction of agglomeration economies: While urban economies have the largest effect on TFP for firms in high-tech industries, they have no effect on TFP in low-tech industries. For firms in the latter industries, however, the variety of the local economic structure has an impact, while this is irrelevant for the TFP of firms in high-tech industries. Only localization economies have a positive and significant effect on TFP throughout, but the effect increases with technological intensity of industries. Throughout, R&D is also found to have a positive effect that increases with technological intensity.
    Keywords: Total factor productivity, manufacturing firms, agglomeration economies, spatial concentration, structural estimation
    JEL: R11 R12 R15 D24
    Date: 2019
  3. By: Naude, Wim (UNU-MERIT, and Maastricht University)
    Abstract: In this paper I argue that manufacturing is still important for structural transformation in Africa. Despite failing to industrialize in the past, there may be a new window of opportunity. This is due to the convergence of new technologies of the Fourth Industrial Revolution (4IR) and a resurgence of start-up entrepreneurship. In this light I (i) show why manufacturing is vital for African economies, (ii) critically analyze the nature and impact, both in terms of opportunities and risks, of the new technologies associated with the 4IR for Africa; (iii) describe the resurgence of tech start-up entrepreneurship in Africa and (iv) call for policy support in the form of complimentary investments and regulations to allow entrepreneurs to utilize opportunities and to minimize threats. The paper show that a new narrative for African structural transformation is possible.
    Keywords: Technology, industry 4.0, entrepreneurship, development, Africa
    JEL: O33 O14 O55 L52 L26
    Date: 2018–11–30
  4. By: Mai Nguyen (KU Leuven - Katholieke Universiteit Leuven); Marie-Ange Veganzones-Varoudakis (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Drawing on the World Bank Enterprise Surveys (WBES), we revisit the link between investment climate and firm productive performance for a panel of enterprises surveyed twice in 70 developing countries and 11 manufacturing industries. We take advantage of the surveys done at different times in an increasing number of economies, to tackle the endogeneity issue which has been seen as a problem in previous studies. We also use pertinent econometric techniques to address other biases inherent in the data, in particular measurement errors, missing observations, and multicollinearity. Our results reinforce previous findings by validating, with a larger than usual sample of countries and industries, the importance of a larger set of environment variables. We show that infrastructure quality (Infra), information and communication technologies (ICT), skills and experience of the labor force (H), cost of and access to financing (Fin), security and political stability (CrimePol), competition (Comp) and government relation (Gov) contribute to firms' and countries' different performances. The empirical analysis also illustrates that firms which chose an outward orientation have higher productivity levels. Nevertheless, outward oriented enterprises are, at the same time, more sensitive to investment climate limitations. These findings have important policy implications by showing which dimensions of the business environment, in which industry, could help manufacturing firms to be more competitive in the present context of increasing globalization.
    Keywords: Investment climate,Outward orientation,Manufacturing,Total factor productivity,Firm survey data.
    Date: 2019–02–11
  5. By: Marcela Eslava; John C. Haltiwanger; Alvaro Pinzón
    Abstract: There is growing consensus that a key difference between the U.S. and developing economies is that the latter exhibit slower employment growth over the life cycle of the average business. At the same time, the rapid post entry growth in the U.S. is driven by an “up or out dynamic”. We track manufacturing establishments in Colombia vs. the US and find that slower average life cycle growth in Colombia is driven by a less enthusiastic contribution of extraordinary growth plants and less dynamic selection of young underperforming plants. As a consequence, the size distribution of non-micro plants exhibits more concentration in small-old plants in Colombia, both in unweighted and employment-weighted bases. These findings point to a shortage of high-growth entrepreneurship and a relatively high likelihood of long-run survival for small, likely unproductive plants, as two key elements at the heart of the development problem. An extreme concentration of resources in micro plants is the other distinguishing feature of the Colombian manufacturing sector vis a vis the US.
    JEL: O14 O47
    Date: 2019–02
  6. By: Rodríguez-Pose, Andrés; Zhang, Min
    Abstract: Economic growth in China in recent decades has largely rested on the dynamism of its cities. High economic growth has coincided with measures aimed at improving the efficiency of local governments and with a mounting political drive to curb corruption. Yet the connection between government institutions and urban growth in China remains poorly understood. This paper is the first to look into the connection between government efficiency and corruption, on the one hand, and urban growth in China, on the other and to assess what is the role of institutions relative to more traditional factors for economic growth in Chinese cities. Using panel data for 283 cities over the period between 2003 and 2014, the results show that urban growth in China is a consequence of a combination of favourable human capital, innovation, density, local conditions, foreign direct investment (FDI), and, city-level government institutions. Both government quality - especially for those cities with the best governments - and the fight against corruption at the city level have a direct effect on urban growth. Measures to tackle corruption at the provincial level matter in a more indirect way, by raising or lowering the returns of other growth-inducing factors.
    Keywords: China; cities; Corruption; Economic Growth; government efficiency
    JEL: O43 R11 R58
    Date: 2019–02
  7. By: J. David Brown; John S. Earle; Mee Jung Kim; Kyung Min Lee
    Abstract: We estimate differences in innovation behavior between foreign versus U.S.-born entrepreneurs in high-tech industries. Our data come from the Annual Survey of Entrepreneurs, a random sample of firms with detailed information on owner characteristics and innovation activities. We find uniformly higher rates of innovation in immigrant-owned firms for 15 of 16 different innovation measures; the only exception is for copyright/trademark. The immigrant advantage holds for older firms as well as for recent start-ups and for every level of the entrepreneur’s education. The size of the estimated immigrant-native differences in product and process innovation activities rises with detailed controls for demographic and human capital characteristics but falls for R&D and patenting. Controlling for finance, motivations, and industry reduces all coefficients, but for most measures and specifications immigrants are estimated to have a sizable advantage in innovation.
    JEL: F22 J15 J6 L26 O3 O31
    Date: 2019–02
  8. By: Benjamin Montmartin (Observatoire français des conjonctures économiques); Marcos Herrera (Universidad Nacional de Salta); Nadine Massard (Université Grenoble Alpes)
    Abstract: Based on a spatial extension of an R&D investment model, this paper measures the macroeconomic impact of the French R&D policy mix on business R&D using regional data. Our measure takes into account not only the direct effect of policies but also indirect effects generated by the existence of spatial interaction between regions. Using a unique database containing information on the levels of various R&D policy instruments received by firms in French NUTS3 regions over the period 2001–2011, our estimates of a spatial Durbin model with structural breaks and fixed effects reveal the existence of a negative spatial dependence among R&D investments in regions. In this context, while a-spatial estimates would conclude that all instruments have a crowding-in effect, we show that national subsidies are the only instrument that is able to generate significant crowding-in effects. On the contrary, it seems that the design, size and spatial allocation of funds from the other instruments (tax credits, local subsidies, European subsidies) lead them to act (in the French context) as beggar-thy-neighbor policies.
    Keywords: Policy mix evaluation; R&D investment; Spatial panel; French NUTS 3 regions
    JEL: H25 O31 O38 C23
    Date: 2018–12
  9. By: Ali-Yrkkö, Jyrki; Pajarinen, Mika
    Abstract: Abstract The aim of this paper is to broaden the knowledge concerning the development of Finnish firms’ innovation activities. The results show that during 2008–2017 the share of overseas R&D has risen. Currently, 14–25% of Finnish firms’ total R&D are conducted overseas. If Nokia is taken into account, the share of overseas R&D rises to 53–65%. Furthermore, the results suggest that Finnish firms invest approximately Eur 1.8 billion in innovation activities outside the traditional R&D definition.
    Keywords: Research, Development, R&D, Company, BERD, Internationalization, Globalisation
    JEL: O31 O32
    Date: 2019–02–15
  10. By: Bertoni, Fabio; Brault, Julien; Colombo, Massimo G.; Quas, Anita; Signore, Simone
    Abstract: This working paper investigates the economic effects of guaranteed loans granted under the EU programmes MAP and CIP on SMEs' growth in Italy, the Benelux and the Nordic countries (Denmark, Finland, Norway and Sweden) from 2002 to 2016. In these macro-regions, the facilities supported 174,107 loans to SMEs, for a total of EUR 15.58bn. Using a sample of these loans with corresponding firm-level data, this study estimates the average treatment effect on firms' growth, profitability, assets intangibility and survival. The analysis compares beneficiary SMEs to similar firms that were not supported by the programmes, identified through coarsened exact matching (CEM) and propensity score matching (PSM). Overall, guaranteed loans are found to positively affect the growth in assets (+19.6 percentage points over the two years after the end of the signature year), sales (+14.8 percentage points), employment (+16.9 percentage points) and the share of intangible assets (+1 percentage point). No significant effect on profits is observed. Beneficiary SMEs also have lower bankruptcy rates compared to control firms. Consistent with the literature on financing constraints, positive effects are stronger for smaller, younger SMEs. Treatment effects are more pronounced in the Benelux and Nordic countries, mostly due to the sample composition of treated firms in each macro-region.
    Keywords: EIF,credit guarantees,credit constraints,real effects,small and medium-sized enterprises
    JEL: G2 H25 O16
    Date: 2019
  11. By: Mikia Manley; Margaret Sullivan; Karina Edouard; Eric Brower; Jonathan Ladinsky; Hanzhi Zhou
    Abstract: This report is the first annual report for the Ewing Marion Kauffman Foundation's evaluation of the New Entrepreneurial Learning initiative, which currently encompasses the FastTrac and 1 Million Cups (1MC) programs.
    Keywords: entrepreneurship, foundation, business, performance measurement
    JEL: J
  12. By: Abdel bary, Amr
    Abstract: The focus of this paper is the discussion of the competitiveness facing SMEs in the global business environment by examining the opportunities and supports from the government. The purpose of this paper is to review the experiences of some countries that have benefited greatly from SME development and have been able to achieve high economic growth rates. On the other hand, presented the problems facing the Egyptian economy in order to achieve rapid growth rates at the level of small and medium enterprises and finally propose the strategies that can contribute effectively to the development of these projects.
    Keywords: Small and Medium Enterprises (SMEs),Challenges,Competitiveness,SME Development
    Date: 2019
  13. By: Massimo Del Gatto; Fadi Hassan; Gianmarco I.P. Ottaviano; Fabiano Schivardi
    Abstract: We provide insights into the macro and microeconomic underpinnings of company profitability developments in Italy. We show that the average ROA (returns on assets) of Italian companies declined slightly between 1993 and 2005 and then contracted sharply during the economic crisis before starting a slow recovery in 2013. While the pattern in Italy before 2009 was very similar to the pattern in Germany; during the crisis it became more similar to the pattern in Spain, with both countries performing relatively worse than Germany and France. This decline appears to be attributable to a fall in productivity, rather than a rise in labour costs. Indeed, notwithstanding the substantial deterioration that began in 2000, unit labour costs (labour costs over value added) in Italy are still lower than in Germany, France and Spain. Within Italy, we document large cross-sectional differences. Micro firms and firms located in the South are tend to exhibit the lowest ROA, while the ROA of firms from the North-West dropped dramatically between the mid-1990s and 2010. Interestingly, firms with the highest innovation intensity (measured by intangibles over total assets) tend not to have the highest ROA, particularly if they are small and operating in low-tech and/or low competition sectors. We interpret our results in terms of ‘active’ (based on innovation and higher expenditure on intermediate goods and labour) and ‘passive’ (based on cost control) business models, with the latter exemplified by domestic and usually small-sized and family-owned firms. From this perspective, subsidising innovation could treat the symptom rather than the disease. Instead, medium-tolong term policies should focus on increasing the share of firms with ‘active’ business models. Our econometric analysis suggests possible instruments: increasing the efficiency of the market for corporate control; reducing the government ownership of firms; increasing the degree of competition in sectors where barriers are still present; and improving the effectiveness of the education system to raise the human capital endowment available to businesses.
    JEL: G3 L1 L2 O3
    Date: 2019–02
  14. By: Andrej Srakar (Institute for Economic Research, Faculty of Economics, University of Ljubljana, Slovenia); Marilena Vecco (Burgundy School of Business – Université Bourgogne Franche-Comté)
    Abstract: Despite the topic of nascent entrepreneurship receiving quite extent in coverage in the scientific literature there is very few, if any, knowledge on the characteristics of nascent firms in the cultural and creative sector. In this article we use Amadeus database for a sample of firms from 28 European Union countries in the period 2007-2016, to study the effects of cultural policy on nascent entrepreneurship. We model the effects as a mediation problem and show that while cultural policy has an effect on general performance of cultural firms it is mediated through its indirect effect on nascent cultural and creative firms and mediation happens with time delay. This finding is robust to numerous cultural policy variables, definitions of nascent entrepreneurship, performance indicators and model specifications. The article also implements and discusses a Bayesian nonparametric (BNP) approach to longitudinal mediation analysis (using Bayesian additive regression trees used on cross-lagged panel modelling of the Baron-Kenny approach to mediation) which is to our knowledge the first application of BNP in longitudinal mediation in statistical and econometric literature. We conclude by policy and research recommendations and reflections.
    Keywords: Nascent cultural entrepreneurship, cultural policy, longitudinal mediation, Baron-Kenny approach, BART, Amadeus
    Date: 2019–02
  15. By: Maria Bas; Pamela Bombarda; Sébastien Jean; Gianluca Orefice
    Abstract: Inequalities between workers of different skills have been growing in the era of globalization. Firms’ internationalization mode has an impact on job stability. Exporting firms are not only exposed to different foreign shocks, they also pay skill-intensive fixed costs to serve foreign markets. This implies that, for larger exporters, the labor demand for skilled workers is expected to be less volatile than for unskilled workers. In this paper we study the relationship between firms’ export activity and job stability across employment skills. Relying on detailed firm-level data from France for the period 1996-2007, we show that firms with higher export intensity exhibit a lower volatility of skilled labor demand relative to the volatility of unskilled labor demand. Our identification strategy is based on an instrumental variable approach to provide evidence on the causal effect of the export performance of the firm on the volatility of employment of different skills. Our findings suggest that exporting increases the stability of skilled jobs, but feeds the precariousness of unskilled ones.
    Keywords: exports, employment volatility, skilled labor, firm-level data
    JEL: F10 F16 L25 L60
    Date: 2019

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