nep-sbm New Economics Papers
on Small Business Management
Issue of 2019‒08‒19
twelve papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Exit of Small Businesses: Differentiating between Insolvency, Voluntary Closures and M&A By Peng XU
  2. The Effect of Fiscal Incentives on Business R&D By Bucci, Valeria
  3. The creation of start-up companies, a matter of dispositions? By Marion Flécher
  4. Sustaining Economic Development By Prof. Joseph Nnanna
  5. Innovation and Self-Employment By Tommaso Ciarli; Mattia Di Ubaldo; Maria Savona
  6. Integration in Global Value Chains and Employment in Europe By Filippo Bontadini; Rinaldo Evangelista; Valentina Meliciani; Maria Savona
  7. Technological Learning and Innovation Gestation Lags at the Frontier of Science: from CERN Procurement to Patents By Andrea, Bastianin; Paolo, Castelnuovo; Massimo, Florio; Anna, Giunta
  8. Diminishing Role of Young Manufacturing Plants as Drivers of Growth By Kim, Minho
  9. Innovation et recherche dans la mode et le luxe : exploration de champs d’innovation et programmes de recherche By Benjamin Cabanes
  10. Small And Medium Entreprise Policy Reforms And Formalization Performance In Nigeria By Friday K. Ohuche
  11. The Internal Spatial Organization of Firms: Evidence from Denmark By Acosta, Camilo; Lyngemark, Ditte Håkonsson
  12. Government R&D Support for SMEs: Policy Effects and Improvement Measures By Lee, Sungho

  1. By: Peng XU
    Abstract: In this paper, we examine the determinants of M&A, voluntary business closure and bankruptcy of mature SMEs in Japan between 2002 and 2015, using nested logit models. We show that high leverage and extremely poor operating performance are major reasons for exits in the cases of voluntary closures or bankruptcies, while firms involved in M&A are less leveraged and profitability is not as poor as for exited firms. Consistent with previous studies on internal capital markets, group firms or subsidiaries are more likely to be involved in M&A and less likely to go bankrupt. Bankrupt firms have more debt but low cash holdings in comparison with voluntarily closures. Additionally, smaller firms with aging entrepreneur founders are more likely to voluntarily close their businesses, probably due to lack of successors. Our results are driven by independent SMEs.
    Date: 2019–07
  2. By: Bucci, Valeria
    Abstract: This paper analyses the determinants of business R&D choices. In particular, it provides new empirical evidence on the effectiveness of fiscal policies aimed at driving companies to invest in R&D activity. By computing two very accurate proxies for firm-specific tax savings achievable when investing in R&D, and by exploiting exogenous changes in fiscal legislation in Italy, this study investigates if fiscal considerations affect companies’ choice to invest in R&D and how much to spend in such activity. The empirical analysis is based on an unbalanced panel data set composed of 163 Italian companies, covering the years 2004-2010. A two-step approach has been implemented, by combining a probit and a tobit estimation model. The results deliver strong empirical evidence that fiscal incentives significantly affect business R&D choices, by one side, increasing companies’ likelihood to invest in R&D, and, by the other, fostering companies’ R&D expenditure.
    Keywords: Innovation, R&D, Fiscal Incentives, Marginal Tax Savings
    JEL: H25 H32 O32 O38
    Date: 2019–04–18
  3. By: Marion Flécher (IRISSO - Institut de Recherche Interdisciplinaire en Sciences Sociales - Université Paris-Dauphine)
    Abstract: This article aims to study the process of creation of start-up companies, that are expected to bear an innovative business with high growth potential. It aims to understand the modes of socialization to the entrepreneurial career, regarding to the dispositions of start-ups' founders. This contribution will highlight the social and gender inequalities that shape the process of creation of start-up companies.
    Abstract: Nous nous proposons de nous intéresser aux start-ups, ces jeunes entreprises censées croitre rapidement en proposant une activité innovante sur des marchés à fort potentiel de croissance. Il s'agira de comprendre les modes d'engagement dans la carrière entrepreneuriale à l'aune des dispositions et des socialisations primaires et secondaires des entrepreneur-es de start-ups. Cette entrée par les dispositions nous permettra de mettre en évidence les inégalités à l'œuvre dans le processus de création de start-ups, en termes de rapports sociaux de genre et de rapports sociaux de classe.
    Keywords: gender,entrepreneurship,socialization,entrepreneurial dispositions,social inequalities,entrepreneuriat,socialisation,dispositions entrepreneuriales,genre,inégalités sociales
    Date: 2019–03–13
  4. By: Prof. Joseph Nnanna (Development Bank Of Nigeria)
    Abstract: This paper astutely argues the importance of Micro, Small and Medium Enterprises (MSMEs) in the growth of economies globally. Specifically, in the United States, according to the Small Business Administration (SBA), small businesses make around 53% of United States employer firms, 63% of net new private-sector jobs, 48.5% of private-sector employment.
    Keywords: Economic Growth,Sustainable Development, Micro Small Medium Enterprises.
    JEL: R10
    Date: 2018–06
  5. By: Tommaso Ciarli (SPRU, Science Policy Research Unit, University of Sussex. UK); Mattia Di Ubaldo (Department of Economics, University of Sussex, UK); Maria Savona (SPRU, Science Policy Research Unit, University of Sussex, UK)
    Abstract: The paper adds to the literature on innovation and employment by looking at the relationship between R&D investments and the rise of alternative work arrangements, particularly selfemployment (SE). A literature review on the determinants of the emergence of non-standard work, alternative work arrangements and self-employment if offered first. The contributions that have looked at SE in relation to innovation strategies is surprisingly limited. General trends of SE in Europe are considered. The empirical contribution is focused on the analysis of local labour markets in the UK (Travel-To-Work-Areas, TTWAs), where their initial concentration of routinized and non-routinized jobs is considered. The probability that an individual shifts from paid employment to either unemployment or self-employment over the period 2001-13, as linked to changes in R&D investments in the TTWA is empirically accounted for. Results show that overall R&D has negligible effects on the probability of workers to become selfemployed. R&D increases the probability of moving from unemployment to paid employment, especially in routinized areas, and reduces the permeability between routinised and nonroutinised workers. Also, a non-negligible increase in the probability that a routinized worker becomes SE as a result of R&D increase is found in low routinised local labour markets, but not in highly routinised areas. The paper sheds new lights on the effect of R&D on employment and self-employment in areas with different degrees of routinization, and adds to the discussion on the more general raise of alternative work arrangements in Europe by disentangling the characteristics of self-employment as resulting from R&D investments.
    Keywords: R&D, employment, unemployment, self-employment, routinized local labour markets
    JEL: J6 O3 O32
    Date: 2019–08
  6. By: Filippo Bontadini (SPRU, University of Sussex, UK/OFCE, Nice); Rinaldo Evangelista (University of Camerino); Valentina Meliciani (University Luiss Guido Carli, Department of Management); Maria Savona (SPRU, University of Sussex, UK)
    Abstract: This chapter aims at revisiting the empirical evidence on the recent trends of countries’ integration in global value chains in Europe. It investigates two potential sources of unbalances that these processes might relate to: (i) the sectoral specialization of the patterns of international fragmentation, whether high technology manufacturing or knowledge intensive services (KIBS); (ii) the occupational categories that have benefited or been penalized by these trends. A rich empirical mapping of these trends in the European countries is provided, based on OECD ICIO and EU ISCO data. The results on the overall and sectoral-specific trends of integration in GVCs and the associated changes in the shares of managers and manual workers show a dual-speed and qualitatively different integration patterns in Europe, with Eastern European (EE) countries rapidly integrating in high tech manufacturing, and the core of western countries strengthening their mutual integration in the KIBS area. Despite the relatively “good quality” integration of EE countries, the evidence does not seem to reveal a mirroring upgrading of employment structures. While this empirical contribution does not attempt to identify causal relationships, the picture provided in the chapter shows that, overall, integration in GVC seems to reproduce and perhaps exacerbate the initial asymmetries in the sectoral and employment structure, with manual workers occupation reducing overall and knowledge intensive occupations concentrating in western Europe.
    Keywords: Global value chains, offshoring, KIBS, High-tech manufacturing, employment, skills
    JEL: J24
    Date: 2019–08
  7. By: Andrea, Bastianin; Paolo, Castelnuovo; Massimo, Florio; Anna, Giunta
    Abstract: This paper contributes to the literature on the impact of Big Science Centres on technological innovation. We exploit a unique dataset with information on CERN’s procurement orders to study the collaborative innovation process between CERN and its industrial partners, mostly European firms. Since 19 out of the 23 Member Countries of CERN belong to the EU, public procurement for innovation through CERN can be seen as factor contributing to European innovation policies. After a qualitative discussion of case studies, survival and count data models are estimated; the impact of CERN procurement on suppliers’ innovation is captured by the number of patent applications. The fact that firms in our sample received their first order over a long time span (1995-2008) delivers a natural partition of industrial partners into “suppliers” and “not yet suppliers”. This allows estimating the impact of CERN on the hazard to file a patent for the first time and on the number of patent applications, as well as the time needed for these effects to show up. We find that a “CERN effect” does exist: being an industrial partner of CERN is associated with an increase in the hazard to file a patent for the first time and in the number of patent applications. These effects require a significant “gestation lag” in the range of five to eight years, pointing to a relatively slow process of absorption of new ideas.
    Keywords: Big Science; CERN; innovation; public procurement; patents; gestation lags.
    JEL: C21 C23 H57 L39 O31
    Date: 2019–04
  8. By: Kim, Minho
    Abstract: Korea's aggregate productivity growth in the manufacturing industry is on the decline, considerably influenced by the slowing productivity growth of young plants. A particularly sharp decline has been observed in the high-tech industry over the past three years. As such, government support programs need to aim at promoting growth and driving innovation and the numerous targets for support programs should be streamlined towards young innovative firms. The criteria for such firms should involve private sector investment in order to enhance the effectiveness of the programs. - Advanced countries are making renewed efforts to enhance innovation and competitiveness in manufacturing while concerns are growing in Korea over the industry's waning competitiveness. - This study analyzed the changes in the productivity growth of young manufacturing plants and proposed measures to improve the government's entrepreneurship support policy. - Young firms serve as a driving force for job creation and economic growth. - The share of young plants in the manufacturing industry has continued to decline, pointing to a weakening of Korea's economic dynamism. - The manufacturing industry's aggregate productivity growth has declined, particularly over the past three years. - Young plants account for nearly half of the aggregate productivity growth on average in manufacturing while their value-added share is only 13%. - The productivity growth of young plants has decreased over the past decade, diminishing its role as a growth engine. - The stagnating growth of young plants is a bigger factor to their declining productivity growth than the falling number of new entries. - The productivity growth of young plants in the high-tech industry, which has the highest R&D intensity, posted sharp decreases. - Industries with high R&D intensity have been the driving force behind the productivity growth of the manufacturing industry for two decades. But, the last three years have seen a steep decline in the productivity growth of the high-tech industry. - Although the average productivity of young plants is high, their contribution to aggregate productivity growth has declined due to their shrinking share of the industry. - While streamling the targets for the support programs towards innovative firms, the government should refrain from selecting and supporting firms directly and reform regulations that hinder entrepreneurship and the growth of innovative firms. - The government's verification process should be abolished and innovative firms should be defined as young venture capital firms or R&D firms. - Restructuring government programs should be based on objective project evaluations.
    Date: 2018
  9. By: Benjamin Cabanes (MINES ParisTech - École nationale supérieure des mines de Paris)
    Date: 2019–03
  10. By: Friday K. Ohuche (Governors Department, Central Bank of Nigeria)
    Abstract: In this study we employ the “Difference Principle” approach to evaluate the costs and benefits of firms transiting from an informal to formal sector (Formalization). We focus on both the differential impacts and effectiveness of policy reforms such as microfinance policy and other related micro-enterprise policies aimed at attracting informal firms into the formal sector. Introduction of Institutional reforms presupposes that firms in the informal sector maximizes a given welfare condition which acts as an incentive to formalize.
    Keywords: Small and Medium Enterprises, Difference Principle Approach, Policy.
    JEL: R10
    Date: 2018–06
  11. By: Acosta, Camilo; Lyngemark, Ditte Håkonsson
    Abstract: While multi-establishment firms are an important part of the economy, little is known about their spatial organization. In this article, we study how the location and the occupational composition of establishments within firms has changed during the last 36 years. Using Danish administrative employer-employee data, we present a series of stylized facts regarding the spatial internal organization of firms. We show that the average number of establishments at the firm level increased by 36% during this period. Moreover, the average distance of the establishments and workers to their headquarters has increased by more than 200%. These changes are mainly driven by increases in the average distance of production workers and business service workers, and a higher use of the latter. Finally, we show that the ratio of managers to production and clerical workers within firms has increased, in particular in establishments located in the largest urban municipalities. After presenting the facts, we briefly discuss some of the mechanisms that could be behind these changes.
    Keywords: Spatial organization, agglomeration, multi-establishment firms, occupational composition
    JEL: J20 L22 L23 R00 R30
    Date: 2019–07–16
  12. By: Lee, Sungho
    Abstract: The government's R&D grant for SMEs has risen to 3 trillion won a year, placing Korea second among OECD nations. Indeed, analysis revealed that government support has not only expanded corporate R&D investment and registration of intellectual property rights but has also increased investment in tangible and human assets and marketing. However, there has been a lack of improvements found in the value added, sales and operating profit because the recipient selection system, which relies solely on the qualitative assessments of technology experts was ineffective. Nevertheless, if a predictive model was properly applied to the system, the causal effect on the value added could increase by more than two fold. Accordingly, to develop such a model, it is important to focus on the economic performance rather than the technical achievements. Also, more policy experiments should be conducted on small firms and a phased approach for R&D financing should to be adopted (① grant → ② equity investment → ③ loan). - Korea's R&D subsidy for SMEs has risen to approx. 3 trillion won a year, making Korea the second largest spender among OECD nations. - The SBIR, the main R&D support program for SMEs in the US, is structured in three phases. - The US case shows that the small lump sum grants for a large number of small firms is more effective than large funds for a few mid-sized firms. - The Korean government's corporate R&D support mostly targets medium-sized development activities, not small-scaled exploratory research. - Current corporate R&D support which is evaluated by the number of registered patents and publications must be reformed. - The scalability of intangible assets is as important as the economies of scale of tangible assets. - In all indicators, recipients exhibited much better performance than nonrecipients at the time of support. - In most performance indicators, recipients stand lower than non-recipients in terms of growth. The former even posted negative growth in operating profit and R&D investment. - This study estimated the causal effects using the two-step approach which integrates the nonparametric matching method and parametric regression model. - The government's R&D support contributed to SMEs' debt and equity financing, and firms expanded their investment in capabilities/ assets such as intellectual properties, relational assets, tangible assets and human capital. - Using the funding, firms invested more in capabilities/ assets, but it did not lead to improving the value added, operating profit and sales growth. - Firms with high growth prospects were selected as recipients in a smaller proportion while those with low growth prospects were selected as recipients in a larger proportion, making the value added growth of recipients lower than the average. - Estimation of the heterogenous causal effects on the value added increments found a positive effect only in the top four deciles. - If the support given to those with negative treatment effect was redistributed, this could double the positive effect. - In keeping pace with the flexibility in corporate R&D practices, the government needs to explore an operating system in which an active exchange of feedback takes place between R&D experiments and market verification. - This study suggests reforming the existing recipient selection practice which is solely based on the qualitative evaluation by technology experts, and promoting the use of the predictive model and a phased expansion of policy experiments. - Evaluations should target economic performance, not publications, IP rights and R&D amount, and a selection model should be developed to optimize the evaluation results. - In accordance to risks associated with the respective stages of R&D and commercialization, the government needs to choose the most suitable financing methods among grants, equity investment and loan support. - More free contests should be offered.
    Date: 2018

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