nep-sbm New Economics Papers
on Small Business Management
Issue of 2019‒08‒26
twelve papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Passive Versus Active Growth: Evidence from Founder Choices and Venture Capital Investment By Christian Catalini; Jorge Guzman; Scott Stern
  2. The Impact of State-Level R&D Tax Credits on the Quantity and Quality of Entrepreneurship By Catherine Fazio; Jorge Guzman; Scott Stern
  3. Entrepreneurship over the Business Cycle in the United States: A Decomposition By Fossen, Frank M.
  4. Influential factors of initiating open innovation collaboration between universities and SMEs: Systematic Literature Review By Hezam Haidar; Karine Evrard Samuel; Jean-François Boujut
  5. Export activity, innovation and institutions in Southern European nascent entrepreneurship By Marques, Helena
  6. Balancing Exploration and Exploitation at Different Stages of High-tech Start-up Development: Evidence from Russia By Shirokova, G.; Karpinskaia, E.
  7. Exploration/exploitation and Firm Performance Relationship: Literature Review By Belikova, A.
  8. Collaborative knowledge creation: Evidence from Japanese patent data By Tomoya Mori; Shosei Sakaguchi
  9. Geopolitical Risk and R&D investment By Wei-Fong Pan
  10. What drives the location choice of new manufacturing plants in Germany? By Krenz, Astrid
  11. Dividend Policy Decisions and Ownership Concentration: Evidence from Thai Public Companies By Connelly, Thomas; Wolff, Christian C
  12. Skill Gap, Mismatch, and the Dynamics of Italian Companies’ Productivity By Fanti, Lucrezia; Guarascio, Dario; Tubiana, Matteo

  1. By: Christian Catalini; Jorge Guzman; Scott Stern
    Abstract: This paper develops a novel approach for assessing the role of passive learning versus a proactive growth orientation in the entrepreneurial growth process. We develop a simple model linking early-stage founder choices, venture capital investment and skewed growth outcomes such as the achievement of an IPO or significant acquisition. Using comprehensive business registration data from 34 US states from 1995-2004, we observe that firms that register in Delaware or obtain intellectual property such as a patent or trademark are far more likely to ultimately realize significant equity growth, and these choices also predict early-stage venture capital investment. Moreover, the estimated probability of receiving venture capital as reflected in early-stage founder choices predicts growth even for firms that do not receive venture capital. We use these findings to estimate bounds on the fraction of proactive versus passive firms among firms that ultimately achieve significant equity growth. While nearly half of all firms that achieve modest equity growth (> $10M) are consistent with passive learning (as they neither make early-stage founder choices nor receive venture capital), 78% of firms experiencing an equity growth event greater than $100M are associated with active founder choices and/or venture capital investment, and these firms are concentrated in geographic hubs such as Silicon Valley. Finally, our approach offers a novel approach for estimating the private returns to venture capital, matching on founder choices rather than demographics; consistent with prior studies, venture-backed firms are approximately 5X more likely to grow, with heterogeneity across location and time period.
    JEL: L25 L26
    Date: 2019–07
  2. By: Catherine Fazio; Jorge Guzman; Scott Stern
    Abstract: The acceleration of start-up activity is often cited as a rationale for the R&D tax credit, a key innovation policy instrument adopted increasingly by US states over the past quarter century. While there is a strong empirical base linking the R&D tax credit to increased R&D expenditures and innovation, prior work has not provided causal evidence that this policy effects the rate of formation and growth potential of new businesses. This paper combines data from the US Startup Cartography Project with the Panel Database on Incentives and Taxes to implement a difference-in-differences estimate of the impact of the R&D tax credit on the quantity and quality-adjusted quantity of entrepreneurship. Our key finding is that the R&D tax credit is associated with a significant long-term impact on both the overall quantity and quality-adjusted quantity of entrepreneurship, with the bulk of the effect materializing more than five years after the policy is enacted. These findings stand in contrast to an analysis of the adoption of state-level investment tax credits. There, we observe no long-term impact on the quantity of entrepreneurship but a marked decline in the rate of formation of growth-oriented startups over time. Combined with other evidence regarding the efficacy of R&D tax credits in spurring innovative investment, our results shed light on the potential for this fiscal policy to also stimulate the formation of growth-oriented start-ups.
    JEL: H25 L26
    Date: 2019–07
  3. By: Fossen, Frank M. (University of Nevada, Reno)
    Abstract: Entry rates into self-employment increase during recessions and decrease during economic upswings. I show that this is mostly explained by the higher unemployment rate during a recession, together with the fact that at all times, unemployed persons have a relatively high propensity to become entrepreneurs out of necessity because they do not find paid employment. I use econometric decomposition techniques to quantify these effects based on the monthly matched US Current Population Survey before, during and after the Great Recession. I also document that this counter-cyclical pattern of entrepreneurial entry strongly applies to unincorporated entrepreneurship, but only weakly to incorporated entrepreneurship. This highlights the association of unincorporated and incorporated entrepreneurship with necessity and opportunity entrepreneurship, respectively. The results are useful for policy-makers and practitioners to understand, forecast and act on the different types of entrepreneurial activities that are to be expected over the business cycle.
    Keywords: entrepreneurship, business cycle, Great Recession, unemployment, opportunity, necessity, decomposition
    JEL: L26 J22 J23 M13
    Date: 2019–07
  4. By: Hezam Haidar (G-SCOP - Laboratoire des sciences pour la conception, l'optimisation et la production - UJF - Université Joseph Fourier - Grenoble 1 - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INPG - Institut National Polytechnique de Grenoble - UGA - Université Grenoble Alpes - CNRS - Centre National de la Recherche Scientifique, CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS - Centre National de la Recherche Scientifique - UPMF - Université Pierre Mendès France - Grenoble 2 - UGA - Université Grenoble Alpes); Karine Evrard Samuel (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS - Centre National de la Recherche Scientifique - UPMF - Université Pierre Mendès France - Grenoble 2 - UGA - Université Grenoble Alpes); Jean-François Boujut (GILCO - Gestion Industrielle Logistique et Conception - INPG - Institut National Polytechnique de Grenoble)
    Abstract: Academia-Industry collaboration is increasingly seen as an essential engine of local economic development and the open innovation model is a key element in such collaboration. The aim of this paper is to explore the existing literature in a systematic way to identify the factors that influence decision makers to start an open innovation collaborations between universities and SMEs. The review shows that open innovation' in the context of university-Industry is receiving more and more attention. The majority of the existing research focus on knowledge and technology transfer. We used the Content Analysis method to analyze the final sample, the findings fall into four categories of factors: Organizational Structure, External Resources, Performance Indicators and Proximity. The article concludes with suggestions for future research.
    Keywords: SMEs,open innovation,university-Industry collaboration,early-stage development knowledge and technology transfer,systematic review
    Date: 2019–06–25
  5. By: Marques, Helena
    Abstract: This paper studies the role of personal characteristics, perceptual variables and country-level conditioning (financial environment, government quality and support, education quality and entrepreneurship know-how, innovation environment and support, business infrastructure, entrepreneurial culture and society, and gender roles) in explaining the export propensity and intensity of nascent entrepreneurs in four Southern European countries (Portugal, Spain, Italy and Greece), using Total Early-stage Entrepreneurial Activity (TEA) data from the Global Entrepreneurship Monitor (GEM) dataset in 2003-2010. Due to the nascent nature of the business, export activity is starting or about to start at the time of the survey and, for that reason, it cannot be studied using theoretical frameworks based on productivity heterogeneity, which has not yet been measured. In this sample of nascent businesses, there is no evidence of a selection effect into exporting and the individual-level factors influencing export propensity and intensity are identical. The most relevant individual-level variables facilitating export activity are new products, new technology, graduate education, and entrepreneurship networks. The most relevant country-level factors facilitating export activity are the availability of funding, the national government's macroeconomic support, and the support for new technology.
    Keywords: entrepreneurship,exporting,innovation,institutions,Southern Europe
    JEL: F14 J24 L26 O43
    Date: 2019
  6. By: Shirokova, G.; Karpinskaia, E.
    Abstract: This study attempts to reveal the role of exploration and exploitation employment and balancing both during new venture creation process. Using longitudinal multiple case-study strategy, it tracks a vivid flow of start-up decisions and actions in-depth and over time through the series of rich interviews with founders of ten Russian high-tech start-ups and combines gained process data with the analysis start-up dynamics. As a result, a theoretical model of the relationship between exploration-exploitation and firm performance at key initial stages of development is created. This model contributes to the clarification of organizational adaptation concepts through the venture creation logics and entrepreneurial leadership processes.
    Keywords: organizational adaptation, exploration, exploitation, start-up development, performance,
    Date: 2019
  7. By: Belikova, A.
    Abstract: Despite the considerable amount of studies on exploration and exploitation and their relationship with firm performance, there is no common point of view regarding the phenomena. This work is aimed at a critical review of scientific works on the identified issues based on the empirical analysis of factors influencing exploration and exploitation as well as the relationship between exploration and exploitation and firm performance, classification of the main approaches for investigation of this scientific problem, and suggesting directions for further research. Using the systematic literature review method the author has analyzed 143 articles from 19 leading journals in the area of management, business, and entrepreneurship in the period from 1991 to 2019. As a result, the main research directions were distinguished, which investigate (1) formation of exploration and exploitation in organizations, (2) the direct relationship between exploration and exploitation and firm performance; (3) moderators, and (4) mediators in the relationship between exploration and exploitation and firm performance. Moreover, based on the analysis of the literature, the author classified approaches for exploration and exploitation definition. The author highlights the following perspective research directions: (1) investigation of the institutional environment influence on both formation factors and relationship between exploration / exploitation and firm performance, (2) investigation of exploration and exploitation in the context of small and medium business and (3) analysis of the stages of business structures development through exploration and exploitation phenomena.
    Keywords: exploration, exploitation, firm performance, literature review,
    Date: 2019
  8. By: Tomoya Mori; Shosei Sakaguchi
    Abstract: This paper presents micro-econometric evidence for collaborative knowledge creation at the level of individual researchers. The key determinant for developing new ideas is the exchange of differentiated knowledge among collaborators. To stay creative, inventors seek opportunities to shift their technological expertise to unexplored niches by utilizing the differentiated knowledge of new collaborators. Furthermore, a more active recombination of collaborators by an inventor facilitates the selection of collaborators to raise the amount of differentiated knowledge from their collaborators.
    Date: 2019–08
  9. By: Wei-Fong Pan (Department of Economics, University of Reading)
    Abstract: Although most empirical studies conclude that uncertainty delays firms' investments based on real options theory, empirical evidence regarding the impact of uncertainty on innovation is mixed. This study examines the impact of geopolitical risk (GPR) on corporate research and development (R&D) investment using newly developed indices. We find a negative relationship between GPR and R&D investment. The R&D investment rapidly drops and rebounds several quarters after high GPR. The impact of GPR is most significant for high-tech firms, small firms, and firms with high growth options. However, when GPRs are realised, these significant and negative effects disappear. These results are shown to be robust after controlling for firm characteristics, macroeconomic environment, other uncertainty measures, time, and alternative GPR and R&D measures, as well as considering the simultaneity and endogeneity issues. Overall, our study suggests that GPR plays a key role in determining R&D investment.
    Keywords: R&D, Political uncertainty, Geopolitical risk, Innovation
    JEL: D80 H56 O31
    Date: 2019–07
  10. By: Krenz, Astrid
    Abstract: About 30 years after German reunification a persistent gap in different firm performance measures exists between East and West Germany. In this paper I focus on the differences in new German manufacturing plants' location choices across the German district-free cities and districts and investigate its regional determinants. For that purpose, I construct a novel, rich regional- and firm-level dataset based on the Official Firm Statistics from the German Federal Statistical Office and the Offices of the Laender. The analysis provides first time evidence how in particular the location decision of firms in the German economy is influenced by regional road infrastructure as well as regional structural funding. The effects are economically important and significant. The results reveal that a 10 percent increase in firm agglomeration increases the odds of a new plant to locate in the region by 12 percent. A 10 percent decrease of travel time on roads increases the odds of a plant to locate by 4 percent in overall Germany, by 7.6 percent among East German regions and by 26.5 percent in particular for large plants in the East German regions. A 10 percent larger population increases the odds to locate by 8.7 percent. A 10 percent increase in regional structural funding for infrastructure purposes increases the odds to locate in a region in East Germany by 8.3 percent in particular for large plants. Policy implications emerge that address in particular the improvement of infrastructure and support to reap off benefits that arise from agglomeration externalities.
    Keywords: firm location choice,regional road infrastructure,Germany,agglomeration economies,regional structural funding,East-West gap,conditional logit,nested logit
    JEL: D22 L25 R11 R12
    Date: 2019
  11. By: Connelly, Thomas; Wolff, Christian C
    Abstract: In this paper we examine the relationship between ownership concentration and dividend policy for Thai publicly listed companies. High family ownership firms have higher dividend payouts than low family ownership firms, which we interpret to mean high family ownership firms follow a more rational dividend policy. This finding is consistent with the prediction that agency conflicts between the managers and shareholders are lower at firms with a controlling shareholder. The evidence is robust through different econometric specifications, robust when the level used to determine the extent of family ownership (family control) is lowered to 10 percent of the outstanding shares, and robust to the inclusion of the ownership wedge as a proxy for the severity of agency conflicts.
    Keywords: agency conflicts; control; Family ownership; Payout policy
    JEL: G30 G35
    Date: 2019–07
  12. By: Fanti, Lucrezia; Guarascio, Dario; Tubiana, Matteo
    Abstract: Relying on a unique integrated database, this work explores the relationship between labour productivity, on one side; intensity and characteristics of companies’ skills need and degree of skill mismatch, on the other. The analysis focuses on a representative sample of Italian limited liability companies observed during the years 2012, 2014 and 2017. First, companies acknowledging the need to update their knowledge base display a higher productivity vis-à-vis other firms. Second, when it comes to the skill need distinguished by competence/knowledge domains (management, STEM, social and soft skills, technical operatives and humanities) it emerges that companies looking for technical operative and social skills show lower labour productivity as compared to other firms. On the contrary, companies characterized by a need in managerial, STEM or humanities-related skills show higher productivity. Third, the ability to match the skill need via new hiring is always positively correlated with firms’ productivity. This result is confirmed across all the adopted specifications.
    Keywords: labour productivity,skill mismatch,firm-level heterogeneity,knowledgebase,organizational capabilities
    JEL: D22 D80 J24
    Date: 2019

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