nep-sbm New Economics Papers
on Small Business Management
Issue of 2019‒09‒16
twenty-two papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. R&D and firm resilience during bad times By Maria Garcia-Vega; Oscar Vicente-Chirivella
  2. Does the eclectic framework explain the new start-ups? By Mercedes Gumbau
  3. Gender Differences in Self-employment Duration: the Case of Opportunity and Necessity Entrepreneurs By Adela Luque; Maggie R. Jones
  4. Knowledge subsystem By Karbowski, Adam
  5. Helping SMEs internationalise through trade facilitation By Javier López González; Silvia Sorescu
  6. Animate the cluster or subsidize collaborative R&D? A multiple overlapping treatments approach to assess the impact of the French cluster policy By Mar, M.; Massard, N.
  7. Public Funding and Corporate Innovation By Mathias Beck; Martin Junge; Ulrich Kaiser
  8. Green Public Procurement and the Innovation Activities of Firms By Vera Zipperer
  9. Are Foreign Stem PhDs More Entrepreneurial? Entrepreneurial Characteristics, Preferences and Employment Outcomes of Native and Foreign Science & Engineering PhD Students By Michael Roach; Henry Sauermann; John Skrentny
  10. Access to finance constraints in adopting latest technologies for business production in small- and medium-sized enterprises (SMEs) By Mohammed Ali Kafaji
  11. R&D and firm resilience during bad times By Apoorva Gupta
  12. Role of Transformational Leadership and Transactional Leadership on Organization Innovation By Ploychompoo Kittikunchotiwut
  14. Innovation union: Costs and benefits of innovation policy coordination By Teodora Borota; Fabrice Defever; Giammario Impullitti
  15. Participation and benefits of SMEs in GVCs in Southeast Asia By Javier López González; Laura Munro; Julien Gourdon; Emanuele Mazzini; Andrea Andrenelli
  16. Visibility of technology and cumulative innovation: Evidence from trade secrets laws By Ganglmair, Bernhard; Reimers, Imke
  17. The Impact of Social Capital Capabilities on Performance of Small and Medium Enterprises in Thailand By SUMITTRA JIRAWUTTINAN
  18. Why do R&D-intensive firms participate in standards organizations? The role of patents and product-market position By Justus Baron; Cher Li; Shukhrat Nasirov
  19. Maneuvering in Poor Visibility : How Firms Play the Ecosystem Game when Uncertainty is High By Brice Dattée; Oliver Alexy; Erkko Autio
  20. The effects of business accelerators on venture performance: evidence from start-up Chile By Gonzalez-Uribe, Juanita; Leatherbee, Michael
  21. Location, industry structure and (the lack of) locally specific knowledge: On the diverging development of rural areas in Germany's East and West By Anne Margarian; Christian Hundt
  22. Biased beliefs, costly external finance, and firm behavior : A Unified theory By Li, Delong; Lu, Lei; Mu, Congming; Yang, Jinqiang

  1. By: Maria Garcia-Vega; Oscar Vicente-Chirivella
    Abstract: In this paper, we empirically investigate how technology transfers from universities to private firms influence firm innovativeness. Using data on R&D acquisitions from universities of more than 10,000 Spanish firms for the period 2005-2013 and applying propensity score matching techniques and DiD estimations, we find that technology transfers from universities strongly increase firm innovativeness. We next explore heterogeneous effects in order to analyse whether these gains are mediated by firm size and the business cycle. Our results suggest that the contribution of universities to firm innovation is particularly important for small firms, during the whole business cycle and it goes beyond its direct effect on innovation: We find that technology transfers from universities generate positive spillovers and enhance firms’ internal R&D capabilities. Our results suggest that the knowledge generated by universities makes an important contribution to economic growth through technology transfers, which makes firms more innovative. Hence, knowledge creation by universities provides an important public good.
    Keywords: Universities, Technology Transfers, Innovation, Firms
    Date: 2019
  2. By: Mercedes Gumbau (University of Valencia)
    Abstract: Based on the eclectic theory, the paper analyzes which are the basic factors leading to the creation of new start-ups in society. It is argued that an ecosystem prone to entrepreneurship must own opportunities created by market conditions, human capital and resources such as access to capital or R & D and technology. Stability and economic growth act positively on the expectations of people who are in the situation of deciding whether or not to create the company they are projecting. But at the same time, macroeconomic conditions such as the behavior of demand or the degree of economic stability affect the context in which entrepreneurs identify opportunities and decide if they are going to undertake. Given this reverse causality, econometric estimations are carried out using panel data techniques, instrumental variables and simultaneous three-phase equations. Regional data are used in Spain over the period 2008-2014. The results also show that entrepreneurship of the small companies, as well as those of low technology sectors, is directly related to the availability of credit. And the entrepreneurship rate of large companies or high technological intensity is explained by the resources available to companies such as the availability of R & D capital or human capital as well as industrial diversity or demographic composition. Implications from the findings are discussed.
    Keywords: entrepreneurship
    Date: 2019–07
  3. By: Adela Luque; Maggie R. Jones
    Abstract: A strand of the self-employment literature suggests that those “pushed” into self-employment out of necessity may perform differently from those “pulled” into self-employment to pursue a business opportunity. While findings on self-employment outcomes by self-employed type are not unanimous, there is mounting evidence that performance outcomes differ between these two self-employed types. Another strand of the literature has found important gender differences in self-employment entry rates, motivations for entry, and outcomes. Using a unique set of data that links the American Community Survey to administrative data from Form 1040 and W-2 records, we bring together these two strands of the literature. We explore whether there are gender differences in self-employment duration of self-employed types. In particular, we examine the likelihood of self-employment exit towards unemployment versus the wage sector for five consecutive entry cohorts, including two cohorts who entered self-employment during the Great Recession. Severely limited labor-market opportunities may have driven many in the recession cohorts to enter self-employment, while those entering self-employment during the boom may have been pursuing opportunities under favorable market conditions. To more explicitly test the concept of “necessity” versus “opportunity” self-employment, we also examine the wage labor attachment (or weeks worked in the wage sector) in the year prior to becoming self-employed. We find that, within the cohorts we examine, there are gender differences in the rate at which men and women depart self-employment for either wage work or non-participation, but that the patterns are dependent on pre self-employment wage-sector attachment and cohort effects.
    Keywords: Self-employment, gender differences, gender, entrepreneurship, necessity entrepreneur, opportunity entrepreneur, self-employment duration, Great Recession.
    JEL: J15 J20 J24 L26 M13
    Date: 2019–09
  4. By: Karbowski, Adam
    Abstract: The aim of this chapter is to conduct the empirical study of the institutional setup of the knowledge subsystem in Central Eastern and Western Europe. Based on the data provided by OECD, Eurostat, ECB and World Bank, the list of innovation, R&D and education indicators has been prepared and used for the purpose of empirical analysis. Based on the subspace clustering method (the ORCLUS algorithm) and the selected set of institutional indicators, the following clusters have been identified. Cluster 1 or “stuck in the middle” comprises two countries, i.e. Slovenia and Italy. Cluster 2, dubbed “aspiring”, encompasses thirteen EU economies including all but one CEE countries as well as Greece, Portugal and Spain. Cluster 3 is made up of ‘developed patent oriented’ economies (Germany, Austria, Denmark, the Netherlands, Sweden and Finland). Cluster 4 – ‘developed innovation oriented’ economies – was found to include four countries, i.e. United Kingdom, Ireland, France and Belgium. We identified two basic types of knowledge subsystems. The first is a developed knowledge subsystem with two variants (oriented at patenting and traineeships, represented e.g. in Germany, or oriented at industry and services’ innovation and tertiary education, to be found e.g. in the UK). The second type is a developing knowledge subsystem with two variants (average in terms of patenting with a relatively strong traineeship program, such as e.g. in Slovenia, or relatively weak in all measures, seen e.g. in Bulgaria).
    Keywords: Knowledge,Central and Eastern Europe
    JEL: O3 P1
    Date: 2019
  5. By: Javier López González (OECD); Silvia Sorescu (OECD)
    Abstract: Small and medium-sized enterprises (SMEs) play an important role in generating economic activity and employment in developing and developed countries. However, partly due to remaining at-the-border trade costs, SMEs continue to be less represented in international trade – as direct exporters or importers – than larger firms. Drawing on cross-country data from the World Bank Enterprise Survey (WBES), together with the OECD Trade by Enterprise Characteristics (TEC), this paper looks at the relationship between the trade facilitation environment – as measured through the OECD Trade Facilitation Indicators (TFIs) – and various measures of international engagement of SMEs. While there are differentiated impacts across firm size for different trade facilitation areas, the analysis shows that firms of all sizes across both developed and developing economies benefit from improvements in the overall trade facilitation environment, helping them export and import. However, on aggregate, smaller firms benefit more from improvements in the overall trade facilitation environment relative to large firms. The analysis also suggests that some trade facilitation measures matter more in addressing fixed versus variable costs for SMEs and provides some guidance as to what trade facilitation policy reforms might be prioritised.
    Keywords: exporting, importing, inclusive trade, SMEs, trade costs, trade facilitation
    JEL: D22 F13 F14 L11 L25
    Date: 2019–09–11
  6. By: Mar, M.; Massard, N.
    Abstract: This paper examines the effectiveness of the French competitiveness cluster policy on participating SMEs in terms of innovation and economic performance. Using an original dataset, we construct different measures of treatment with crossover designs. The findings indicate substantial additionality effects on R&D and employment and weak or insignificant effects on other types of economic performance. While only adhering to clusters induces much stronger positive impacts on SMEs than only participating in R&D collaborative projects, the policy is most effective when the two treatments are simultaneously used. To achieve its impact on SMEs, the cluster policy should not overlook low-cost instruments such as animation actions and common services.
    JEL: C14 C21 O32 O38
    Date: 2019
  7. By: Mathias Beck (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Martin Junge (Ministry of Higher Education and Science, Copenhagen, Denmark); Ulrich Kaiser (University of Zurich Department of Business Administration Chair for Entrepreneurship)
    Abstract: We review and condense the body of literature on the economic returns of public R&D on private R&D and find that: (i) private returns to R&D appear to be large and larger than the returns to alternative investments; (ii) private R&D and R&D subsidies are positively correlated and there is no evidence for crowding out; (iii) R&D cooperation increases private R&D; (iv) there appear to exist complementarities between alternative sources of funding; (v) the mobility of R&D workers, particularly of university scientists, is positively related to innovation; (vi) there are many university spin-offs but these are no more successful than non-university spin-offs; (vii) universities constitute important collaboration partners and (viii) clusters enhance collaboration, patents and productivity. Key problems for economic policy advice are that the identification of causal effects is problematic in most studies and that little is known about the optimal design of policy measures.
    Keywords: Keywords: R&D subsidies, R&D tax credits, cooperation, labor mobility, returns to R&D, university spin-offs, R&D clusters, public-private knowledge transfer
    JEL: C54 J6 I28 O3 L52
    Date: 2018–01
  8. By: Vera Zipperer
    Abstract: This paper provides first empirical insights on the relationship between green public procurement (GPP) and firms' innovation activities. Considering that the public sector is a large buyer in the economy, public procurement is able to work as demand-pull factor for new products and thus innovations - given that the procurement is aimed at such objectives. GPP is specifically implemented to contribute to more sustainable production and consumption. Using a novel firm-level dataset, this paper analyses whether GPP is able to trigger innovation activities within firms, and if so, whether these innovations are environmental innovations or not. The results show some support for a demand-pull effect of GPP on the probability of general product innovations but no conclusive evidence is found for environmental innovations.
    Keywords: Green public procurement, Innovation, Demand-pull, Community innovation survey
    JEL: H57 O38 Q55 Q58
    Date: 2019
  9. By: Michael Roach; Henry Sauermann; John Skrentny
    Abstract: Prior research has shown that immigrants make important contributions to US innovation and are more likely than natives to become entrepreneurs. However, there is little evidence on how foreign and native high-skilled workers differ prior to entering the workforce. Moreover, little attention has been paid to distinguishing between founders and employees who join startups. We draw on a longitudinal survey of over 5,600 foreign and native STEM PhD students at U.S. research universities to examine entrepreneurial characteristics and career preferences prior to graduation, as well as founding and employment outcomes after graduation. First, we find that foreign PhD students differ from native PhD students with respect to individual characteristics typically associated with entrepreneurship such as risk tolerance, a preference for autonomy, and interest in commercialization. Second, foreign PhD students are more likely to express intentions to become a founder or a startup employee prior to graduation. Third, despite their entrepreneurial career interests, foreign PhDs are less likely to become founders or startup employees in their first industry job after graduation. These patterns call for future research on factors that enable or constrain foreign STEM workers from realizing their entrepreneurial career aspirations.
    JEL: I23 J0 J24 J44 J48 O3
    Date: 2019–09
  10. By: Mohammed Ali Kafaji (Alfaisal University)
    Abstract: The small and medium-sized enterprises (SMEs) play crucial role in supporting the economies of developing countries. However, with globalization and open market trends, SMEs need to compete with new entrants to maintain their market share and growth. The degree of technology adaptation and level of process sophistication help the SMEs to achieve their targeted level of growth through improvement of business effectiveness and efficiency. Access to finance is a critical success factor in such endeavor and supports the SMEs to alleviate growth constraints. This paper presents research data on the degree that access to finance impacts the abilities of SMEs to grow through improvement of process sophistication for enhanced business production. The raw data was gathered from over 400 firms independently using one unified assessment tool over a period of five years. This data is then analyzed using inferential statistics through one-way analysis of variance (ANOVA) to evaluate and compare the average scores associated with the research variables. Furthermore, the post hoc analysis is applied to assess the extent and direction of variation in the scores and moderated across different years. The results showed that the adopted level of process sophistication is positively correlated with the availability of technology with limited role played by access to finance. These relationships are discussed and analyzed in the context of local market growth, sophistication, financial capabilities, and financial facilities. The research aims to assist SME stakeholders and governing bodies in recognizing the impact of changes on macroeconomic scale from SMEs growth and sustainability perspectives.
    Keywords: Small and medium-sized enterprises; Access to finance; Process sophistication; Business technologies.
    JEL: A19 F36 L22
    Date: 2019–06
  11. By: Apoorva Gupta
    Abstract: Can being innovative help firms to shield themselves from the disruptive effects of a crisis? Using firm-level data for the Spanish manufacturing sector, this paper finds that innovative firms suffered considerably less compared to non-innovative firms during the Great Recession. This effect is explained by innovative firms differentiating their products to adapt to an unexpected rapid decline in economic activity. The data does not support alternative mechanisms such as reduction in marginal cost of production with process innovation, better access to capital, difference in labour moving costs, or higher technological diversification for innovative firms. The results provide evidence of the role of R&D in making firms dynamically capable and resilient to large negative shocks, adding another element to its well established role of facilitating growth through innovation and learning.
    Keywords: R&D, crisis, resilience, product differentiation, dynamic capability
    Date: 2019
  12. By: Ploychompoo Kittikunchotiwut (Mahasarakham Business School)
    Abstract: This study investigates the mediating effect of entrepreneurial orientation on the relationship between transformational leadership, transactional leadership, and organizational innovation. The data were collected by using a questionnaire from 135 software industry in Thailand. We use structural equations modeling (SEM) to explore the mediating effect of entrepreneurial orientation on a positive relationship between transformational leadership, organizational innovation directly and indirectly through the construct. The mediating effect of entrepreneurial orientation on a positive relationship between transactional leadership, organizational innovation directly and indirectly through the construct.
    Keywords: Transformational Leadership, Transactional Leadership, Entrepreneurial Orientation, Organizational Innovation
    JEL: L14 M10 O32
    Date: 2019–07
  13. By: Inga Ivanova (National Research University Higher School of Economics); Oivind Strand (National Research University Higher School of Economics); Loet Leydesdorff (National Research University Higher School of Economics)
    Abstract: The innovation capacity of Norwegian innovation system, according Triple Helix model of innovations approach, is analyzed in terms of mutual information among geographical, sectorial, and size distributions of firms as dimensions of probabilistic entropy. Negative entropies can be considered as a consequence of synergy among these dimensions. Three different techniques for evaluation of temporal synergy evolution are used: R/S analysis, DFT, and geographical synergy decomposition. The calculations are based on data for all Norwegian firms registered between 2002 and 2014. The results suggest that the synergy at the level of both the country and its seven regions show non-chaotic oscillatory behavior and resonate in a set of natural frequencies.
    Keywords: knowledge base, innovations, triple helix, cyclic processes
    JEL: O10 O30 R11
    Date: 2019
  14. By: Teodora Borota; Fabrice Defever; Giammario Impullitti
    Abstract: In this paper, we document large heterogeneity in innovation policy and performance between old and new EU member states, and present firm-level evidence on the close link between foreign direct investment (FDI) spillovers and eastern European firms' innovation. Guided by these facts and motivated by the pressing debate on further EU integration, we build a two-region endogenous growth model to analyse the gains from innovation policy cooperation in an economic union. The two regions, the West (the old members) and the East (the new post-2004 members), feature firms competing in innovation for market leadership, are integrated via free trade and costly technology transfer via FDI and have different innovation performance and policy. Calibrating the model to reproduce key features of the EU economy, we compare the outcomes of an East-West R&D subsidy war with a coop- eration scenario with unified subsidy across regions, and obtain three main results. First,we find that the dynamic gains spurring from the impact of cooperation on the economy's growth rate are sizable and substantially larger than the static gains obtained internalising the strategic motive for subsidies. Second, our model suggests that the presence of FDI and multinational production alleviates the strategic motive and increases the gains from cooperation. Third, separating FDI and innovation policy generates larger gains from cooperation, a policy complementarity driven by the knowledge spillovers carried by FDI.
    Keywords: Optimal innovation policy, growth theory, international policy coordination, EU integration, FDI spillovers.
    Date: 2019
  15. By: Javier López González (OECD); Laura Munro (OECD); Julien Gourdon (OECD); Emanuele Mazzini (OECD); Andrea Andrenelli (OECD)
    Abstract: Although global value chain (GVCs) participation in Southeast Asia has been growing, little is known about whether the benefits from participation are accruing to larger firms or if small and medium sized enterprises (SMEs), which make up the majority of companies and employ the bulk of the domestic workforce, are also able to take advantage of the new opportunities on offer. This paper uses detailed firm level data from Southeast Asian countries to split the OECD Trade in Value Added database and map how SMEs have been participating in GVCs. It then identifies the benefits associated with this participation and looks into the policy levers that can help make GVC participation in the region more inclusive. It suggest that policy makers focus on: i) reducing trade costs that hit SMEs hardest; including tariffs, trade agreements and trade facilitation; ii) creating an enabling environment to promote domestic linkages so that SMEs can create partnerships with larger firms and multinationals to export indirectly; and iii) reducing non-tariff measures that are especially onerous for SMEs through wider ASEAN regulatory harmonisation and adopting more flexible rules of origin.
    Keywords: Global Value Chains (GVCs), multinationals, Non-Tariff Measures (NTMs), Rules of Origin (RoO), Small and Medium-sized Enterprises (SMEs), trade in value added
    JEL: D22 F13 F14 L11 L25
    Date: 2019–09–11
  16. By: Ganglmair, Bernhard; Reimers, Imke
    Abstract: We use exogenous variation in the strength of trade secrets protection to show that a relative weakening of patents (compared to trade secrets) has a disproportionately negative effect on the disclosure of processes - inventions that are not otherwise visible to society. We develop a structural model of initial and follow-on innovation to determine the effects of such a shift in disclosure on overall welfare in industries characterized by cumulative innovation. We find that while stronger trade secrets encourage investment in R&D, they may have negative e ects on overall welfare - the result of a significant decline in follow-on innovation.
    Keywords: cumulative innovation,disclosure,self-disclosing inventions,Uniform Trade Secrets Act
    JEL: D80 O31 O34
    Date: 2019
  17. By: SUMITTRA JIRAWUTTINAN (Mahasarakham Business School)
    Abstract: The main aim of this study is to test the effect between social capital capabilities and SME performance via entrepreneurial capability as mediating variable on the relationship. The model is verified by collecting data from 340 small and medium enterprises in Thailand and mail survey questionnaire is used as instrument. The statistical analysis for testing the hypothesis is OLS multiple regression analysis. The results showed that four dimensions of social capital capabilities (network capability, trust, communication and collaboration) have positive effect on entrepreneurial capability and SME performance. All dimensions of social capital capabilities can explain predication of entrepreneurial capability at 40.70% and SME performance at 38.90 %. In addition, two independent variables such as trust and collaboration are fully support hypotheses. Overall, this study contributes to SME manager by exploring that social capital capabilities and entrepreneurial capability can be achieved SME performance
    Keywords: Social Capital Capabilities; Entrepreneurial Capability; SME performance, Small and Medium Enterprises
    Date: 2019–07
  18. By: Justus Baron; Cher Li; Shukhrat Nasirov
    Abstract: This paper examines the determinants of participation of R&D-intensive firms in standards development. Using data on R&D spending, patent, and trademark activities of the world's largest corporate R&D investors and their membership of standards organizations, we find a highly robust positive association between a firm's R&D spending and its participation in standards development. However, the causal effect of R&D spending on membership of standards organizations is conditional upon the firm's patent and/or product-market position, and varies across different types of standards organizations. More specifically, a strong patent position amplifies the effect of R&D spending on participation in standards-developing organizations, while a strong product-market position strengthens the impact of R&D spending on participation in the organizations that promote established standards. Finally, we also show that policy changes that increase the value of patents, such as variations in the preferential tax treatment of patent-related revenue, induce R&D-intensive firms to intensify their participation in standards organizations.
    Keywords: standards organizations, R&D expenditure, patents, trademarks
    Date: 2019
  19. By: Brice Dattée (emlyon business school); Oliver Alexy; Erkko Autio
    Abstract: Innovation ecosystems are increasingly regarded as important vehicles to create and capture value from complex value propositions. While current literature assumes these value propositions can be known ex-ante and an appropriate ecosystem design derived from them, we focus instead on generative technological innovations that enable an unbounded range of potential value propositions, hence offering no clear guidance to firms. To illustrate our arguments, we inductively study two organizations, each attempting to create two novel ecosystems around new technological enablers deep in their industry architecture. We highlight how ecosystem creation in such conditions is a systemic process driven by coupled feedback loops, which organizations must try to control dynamically: firms first make the switch to creating the ecosystem following an external pull to narrow down the range of potential applications; then need to learn to keep up with ecosystem dynamics by roadmapping and preempting, while simultaneously enacting resonance. Dynamic control further entails counteracting the drifting away of the nascent ecosystem from the firm's idea of future value creation and the sliding of its intended control points for value capture. Our findings shed new light on strategy and control in emerging ecosystems, and provide guidance to managers on playing the ecosystem game.
    Date: 2018–04–20
  20. By: Gonzalez-Uribe, Juanita; Leatherbee, Michael
    Abstract: Do business accelerators affect new venture performance? We investigate this question in the context of Start-Up Chile, an ecosystem accelerator. We focus on two treatment conditions typically found in business accelerators: basic services of funding and coworking space, and additional entrepreneurship schooling. Using a regression discontinuity design, we show that schooling bundled with basic services can significantly increase new venture performance. In contrast, we find no evidence that basic services affect performance on their own. Our results are most relevant for ecosystem accelerators that attract young and early-stage businesses and suggest that entrepreneurial capital matters in new ventures.
    JEL: N0 R14 J01
    Date: 2018–04–01
  21. By: Anne Margarian (Thuenen Institute of Rural Studies, Braunschweig); Christian Hundt (Thuenen Institute of Rural Studies, Braunschweig)
    Abstract: Some rural regions in Western Germany have experienced a very positive economic development in terms of employment and incomes in the past decade. This development, however, is in sharp contrast to the the enduring economic lag of many rural regions in Eastern Germany. This paper seeks to find out, to what extent these differences in employment development can be explained by sectoral patterns and region-specific capacities and capabilities. We employ an extended shift-share regression model that explains the employment development in German districts between 2007 and 2016. The model differentiates between Western and Eastern German regions as well as between urban and rural regions by means of spatial location effects. This specification helps us to capture both: the historically evolved differences inherent in the socialist and capitalist past of Eastern and Western Germany and the varying economic environments in urban and rural areas. The extended shift-share regression confirms that simple industry effects, i.e. linear effects of industry shares, only explain a small part of the differences in employment development between rural regions. Most deviations are instead captured in the competitive share effects (CSE) that represents how employment development in a region systematically deviates from the average development of its industries at national level. Further analyses of the CSE reveal that the manufacturing sector, despite its general loss in employment shares, is of crucial importance for rural prosperity. In this regard, the apparent disadvantage of rural districts in Germany’s East can be explained by a lack of locally specific, complementary immobile production capacities and capabilities for manufacturing. These locally specific skills develop endogenously. Urban districts in the East, in contrast, do not have to rely on endogenous factors alone but may overcome their historical disadvantage if they manage to exploit their agglomeration advantages in order to attract knowledge intensive industries and high-skilled workers.
    Keywords: rural regions, urban regions, East Germany, West Germany, employment development, structural change, industry structure, spatial externalities, shift share regression
    JEL: O14 O18 R11
    Date: 2019–09
  22. By: Li, Delong; Lu, Lei; Mu, Congming; Yang, Jinqiang
    Abstract: Overconfidence and overextrapolation are two behavioral biases that are pervasive in human thinking. A long line of research documents that such biases influence business decisions by distorting managers' expected productivity. We propose a new mechanism in which the biases change firms' precautionary motives when external financing is costly, finding that the influences of biases on investment, payouts, and refinancing are stronger for financially weaker firms. Moreover, biased and rational firms display di erential responses to economic booms and busts holding financial positions constant. Our work illustrates that managerial traits, when interacting with imperfect capital markets, drive firm dynamics in business cycles.
    JEL: E32 G31 G32 G35
    Date: 2019–09–09

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