nep-sbm New Economics Papers
on Small Business Management
Issue of 2019‒12‒16
nine papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Business Angel Investment, Public Innovation Funding and Firm Growth By Ali-Yrkkö, Jyrki; Pajarinen, Mika; Ylhäinen, Ilkka
  2. Mergers and Innovation Portfolios By José Luis Moraga-González; Evgenia Motchenkova; Saish Nevrekar
  3. Effects of Minimum Wage on Import and Innovation: Theory and Evidence from China By Chu, Angus C.; Furukawa, Yuichi; Kou, Zonglai; Liu, Xueyue
  4. New evidence on determinants of IP litigation: A market-based approach By Dirk Czarnitzki; Kristof Van Criekingen
  5. Trust and R&D Investments: Evidence from OECD Countries By Ndubuisi, Gideon
  6. Endogenous Hours and the Wealth of Entrepreneurs By Wellschmied, Felix; Yurdagul, Emircan
  7. Credit Guarantees and Zombie Firms By Scott Wilbur
  8. Birds of a feather flock together and get money from the crowd By Valeria Venturelli; Giovanni Gallo; Alessia Pedrazzoli

  1. By: Ali-Yrkkö, Jyrki; Pajarinen, Mika; Ylhäinen, Ilkka
    Abstract: Abstract In recent years, business angels have invested in a few hundred Finnish firms annually. The target firms are mainly young and small: 75% of them employ fewer than 10 workers and are less than 8 years old. These firms are most likely to be found in the ICT and professional service industries and manufacturing. Although many angel-funded firms have faster employment growth compared to matched nonfunded firms, the average growth rates do not significantly differ when we control for receiving public innovation funding and other firm characteristics. As many as 75% of the firms funded by business angels have also received public innovation funding in some phase, and 57% have received it before angel funding. However, no robust indication was found that combining these two sources of funds would give an extra boost to growth.
    Keywords: Business angels, Innovation subsidies, R&D, Firm growth
    JEL: D22 G24 G30 L53 O31
    Date: 2019–12–04
  2. By: José Luis Moraga-González (Vrije Universiteit Amsterdam); Evgenia Motchenkova (Vrije Universiteit Amsterdam); Saish Nevrekar (Universidad Carlos III de Madrid)
    Abstract: This paper studies mergers in markets where firms invest in a portfolio of research projects of different profitability and social value. The portfolio nature of the investment problem brings about novel insights on the external effects of firms’ investments. The investment of a firm in one project imposes a negative business-stealing externality on the rival firms because it lowers the probability they win the innovation contest for that project; however, the investment of a firm in one project also exerts a positive business-giving externality on the rival firms because it increases the likelihood they win the contest for the alternative project.
    Keywords: innovation portfolios, R&D contests, mergers
    JEL: O32 L13 L22 O31
    Date: 2019–12–08
  3. By: Chu, Angus C.; Furukawa, Yuichi; Kou, Zonglai; Liu, Xueyue
    Abstract: This study explores the heterogeneous effects of minimum wage on innovation of different types of firms. Using firm-level data in China, we find that a higher minimum wage is associated with more innovation by importing firms but less innovation by non-importing firms. To interpret these empirical findings, we develop an open-economy R&D-based growth model and find that a higher minimum wage reduces innovation of firms that use domestic inputs but increases innovation of firms that import foreign inputs. Intuitively, when a higher minimum wage reduces employment, importing firms respond by importing more inputs, which have technology spillovers and enhance their innovation.
    Keywords: innovation; minimum wage; imports; knowledge spillovers
    JEL: E24 F43 O31
    Date: 2019–11
  4. By: Dirk Czarnitzki; Kristof Van Criekingen
    Abstract: We contribute to the economic literature on patent litigation by taking a new perspective. In the past, scholars mostly focused on specific litigation cases at the patent level and related technological characteristics to the event of litigation. However, observing IP disputes suggests that not only technological characteristics may trigger litigation suits, but also the market positions of firms, and that firms dispute not only about single patents but often about portfolios. Consequently, this paper examines the occurrence of IP litigation cases in Belgian firms using the 2013 Community Innovation Survey with supplemental information on IP litigation and patent portfolios. The rich survey information regarding firms’ general innovation strategies enables us to introduce market-related variables such as sales with new products as well as sales based mainly on imitation and incremental innovation. Our results indicate that when controlling for firms’ IP portfolio, the composition of turnover in terms of innovations and imitations has additional explanatory power regarding litigation propensities. Firms with a high turnover from innovations are more likely to become plaintiffs in court. Contrastingly, firms with a high turnover from incremental innovation and imitation are more likely to become defendants in court, and, moreover, are more likely to negotiate settlements outside of court.
    Keywords: IP litigation, patenting, innovation, imitation
    Date: 2018–04
  5. By: Ndubuisi, Gideon
    Abstract: This paper contributes to the literature on the innovation effect of social trust by analyzing the mechanisms linking social trust and R&D Investments. High social trust level can ease firms’ credit constraints by reducing moral hazards and information asymmetries problems which make raising external capital difficult and expensive for firms. It can also reduce relational risks that expose firms to ex-post holdup or outright intellectual property expropriation. Using data from 20 OECD countries, I test these mechanisms by evaluating whether more external finance dependent and relational risks vulnerable sectors exhibit disproportional higher R&D investments in countries with high social trust level. The empirical results confirm that high social trust level encourages investments in R&D. Importantly, the results indicate that sectors which depend more on external finance and those sectors that are more vulnerable to relational risks experience a relatively greater increase in R&D investments in countries with high social trust. The results underline access to external credit and reduction in relational risks as causal pathways linking social trust and R&D investment.
    Keywords: Social Trust, Innovation; R&D Investments; Relational Risks; Credit Constraints
    JEL: A13 O17 O31 O43
    Date: 2019–11
  6. By: Wellschmied, Felix (Universidad Carlos III de Madrid); Yurdagul, Emircan (Universidad Carlos III de Madrid)
    Abstract: US entrepreneurs typically work long hours in their firms and these hours form a large part of the firms' labor input. This paper studies the role of endogenous owner hours in shaping the wealth distribution among entrepreneurs. We introduce owners' endogenous labor supply into a model of entrepreneurial choice and financial frictions. The model fits well the levels and the dispersion of wealth among entrepreneurs. Long owner hours incentivize poor, highly productive individuals to be owners and help the most productive owners to accumulate large quantities of wealth. On net, owners working long hours decreases the median owner wealth and increase wealth dispersion among owners. Differently, the ability to work sufficiently short hours incentivizes owners to run low productivity firms with high wealth to income ratios. Finally, alternative calibrations ignoring the endogenous labor supply of owners lead to owners that are much richer than in the data and overstate the effect of financial frictions in the economy.
    Keywords: entrepreneurship, wealth accumulation, labor supply, firm dynamics
    JEL: E23 J22 J23 L26
    Date: 2019–11
  7. By: Scott Wilbur (Yale University [New Haven], FFJ - Fondation France-Japon de l'EHESS - EHESS - École des hautes études en sciences sociales)
    Abstract: In recent years and particularly since the global financial crisis, zombie firms—unprofitable businesses supported by financial relief—have generated widespread concern due to their purported harm to economic vitality. Economic studies hold that zombie firms impede the normal flow of capital and human resources to healthy businesses, and thereby defy creative destruction and hurt investment and employment growth. But what causes zombie firms to occur? Addressing this question from a political economy perspective, this paper investigates a novel hypothesis about the role of credit guarantees in supporting weak firms. The results of a case study of small and medium-sized enterprises (SME) in Japan in the 1990s and 2000s suggest that Japan's credit guarantee system may indeed have contributed to numerous zombies among this firm category. However, evidence also suggests that these firms tended to quickly escape from zombie status, calling into question the negative connotation of the zombie firm concept.
    Keywords: economic performance,institutional change,Japan,political economy,public policy,social policy
    Date: 2019–11
  8. By: Valeria Venturelli; Giovanni Gallo; Alessia Pedrazzoli
    Abstract: In constructing online alternative finance instruments as a new form of financial democratization and financial inclusion, this article aims at verifying the presence of similarity effect in equity crowdfunding investments. Discussion focuses on ethnic and gender similarity between the seekers and investors that sustained the project. Our analysis is based on 5,996 personal investors that have participated in 81 equity crowdfunding campaigns, on Crowdcube, a British equity crowdfunding platform from 2011 and 2016. Results show that in equity crowdfunding gender and ethnic similarities play different role based on investors’ characteristics - gender, ethnicity and the combination of two. In particular, ethnic similarity positively influence the level of amount invested by both female and male investors belonging to an ethnic minority. Even if female investors tend to prefer male company, their preference changes if a female proponent belonging to an ethnic minority runs the company. From a practical perspective, our findings shed new light on how individual characteristics can be important factor in financing situations. Results allow entrepreneurs and equity crowdfunding platforms to understand better potential investor behaviour and highlights the role of equity crowdfunding as tool for minorities’ financial inclusion and women entrepreneur empowerment.
    Keywords: equity crowdfunding, entrepreneurial finance, ethnicity, gender, similarity effect
    JEL: G02 G11 M13
    Date: 2019–12
  9. By: Hadiwijaya, Hendra; , Febrianty
    Abstract: This study aimed to determine the effect of Absorptive Capacity and Knowledge Sharing on the performance of womenowned SMEs group. The sample of this research was female business actor who joined in Alisah Khadijah group of ICMI Palembang as many as 138 business actors. Analysis of this research used Structural Equation Modeling (SEM) program with Lisrel Program. The result showed that Absorptive Capacity and Knowledge Sharing variable had positive and significant influence on Performance of SME group incorporated in Alisah Khadijah ICMI Palembang. Absorptive Capacity variable had more dominant influence on Performance than Knowledge Sharing variable
    Date: 2018–05–31

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