nep-sbm New Economics Papers
on Small Business Management
Issue of 2020‒02‒03
fourteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. National and international R&D support programmes and technology scouting in European small and medium enterprises (SMEs) By Radicic, Dragana
  2. The role of R&D-intensive clusters for regional competitiveness By Reinhold Kosfeld; Timo Mitze
  3. Technology & Knowledge Transfer For Entrepreneurship At Informatics & Business Institute Darmajaya Bandar Lampung By Sanusi, Anuar; , yulmaini; Yusendra, Aria Eka
  4. Financial constraints and intangible investments. Do innovative and non-innovative firms differ? By Sandro Montresor; Antonio Vezzani
  6. Knowledge flows between science and industry and how to measure them By Diekhof, Josefine; Eckl, Verena; Krieger, Bastian; Licht, Georg; Nguyen, Thu-Van; Peters, Bettina; Rammer, Christian; Stenke, Gero
  7. Subsidized to change? The impact of R&D policy on regional technological diversification By Lars Mewes; Tom Broekel
  8. The Labor Market Value of Experience from Temporary Self-employment By Lougui, Monia; Broström, Anders
  9. Sustainability traps: patience and innovation By Christos Karydas; Evangelos V. Dioikitopoulos
  10. Productivity convergence trends within Russian industries: firm-level evidence By Evguenia Bessonova; Anna Tsvetkova
  11. Effects of subsidizing the firstemployee - Empirical evidencefrom Finland By Annika Nivala
  12. "Fine...I'll do it myself": Lessons from self-employment grants in a long recession period By Stjepan Srhoj; Ivan Zilic
  13. Exploring the Determinants of Productivity Growth in Italian Regions: a Kaldorian Perspective By Matteo Deleidi; Walter Paternesi Meloni; Luigi Salvati; Francesca Tosi
  14. Business Performance and Heterogeneity among Islamic Microfinance Clients: Evidence from Pakistan By Joana Silva Afonso; Joe Cox; Andy Thorpe

  1. By: Radicic, Dragana
    Abstract: This paper evaluates the effectiveness of national and international R&D support programmes on firms' technology scouting, defined as firms' use of external knowledge sources. Drawing on a unique dataset on R&D support programmes for small and medium-sized enterprises (SMEs) operating in both manufacturing and service sectors across 28 European countries, this study reports treatment effects estimated by the copula-based endogenous switching model, which takes into account unobserved firm heterogeneity. Empirical results indicate that R&D support programmes have heterogenous effects on technology scouting, whereby a crowding out effect arises in the case of a short-run scouting, while additional effect are mostly reported for strategic external knowledge sourcing. Moreover, our results suggest that unfavourable, crowding out, effects could be reduced, if not eliminated, by a random distribution of public funding.
    Keywords: Technology scouting,External knowledge search,European SMEs,copula-based endogenous switching model
    Date: 2019
  2. By: Reinhold Kosfeld (University of Kassel); Timo Mitze (Southern University of Denmark)
    Abstract: Modern cluster theory provides reasons for positive external effects that accrue from the interaction of spatially proximate firms operating in common and related fields of economic activity. In this paper, we examine the impact of R&D-intensive clusters as a key factor of regional competitiveness on productivity and innovation growth. In analogy to the industry-oriented concepts of related and unrelated variety (Frenken, Van Oort, Verburg 2007), we differentiate between effects of cluster specialisation and diversity. The identification of R&D-intensive clusters is based on a hybrid approach of qualitative input-output analysis and spatial scanning (Kosfeld and Titze 2017). Our empirical study is conducted for a panel of German NUTS-3 regions in 2001-2011. To comprehensive account for specialisation and diversity effects of clustering we adopt a spatial econometric approach, which allows us to identify these effects beyond the geographical boundaries of a single region. After controlling for regional characteristics and unobserved heterogeneity, a robust ‘cluster strength’ effect (i.e. specialization) on productivity growth is found within the context of conditional convergence across German regions. With regard to the underlying mechanisms, we find that the presence of a limited number of R&D-intensive clusters in specific technological fields is most strongly linked to higher levels of regional productivity growth. While we also observe a positive effect of cluster strength on innovation growth once we account for spatial spillovers, no significant effects of ‘cluster diversity’ can be identified. This indicates that some but not all cluster-based regional development strategies are promising policy tools to foster regional growth processes.
    Keywords: Industry clusters, regional competitiveness, cluster specialisation, cluster diversity, correlated random effects model
    JEL: L16 R11 R15
    Date: 2020
  3. By: Sanusi, Anuar; , yulmaini; Yusendra, Aria Eka
    Abstract: One important role of universities nowadays, is to develop the entrepreneurial culture. This article discusses on knowledge and technology transfer to society especially in developing entrepreneurship initiative and strategies (IPTEKS bagi Kewirausahaan/IbK), and also strengthening technology and business incubator (INKUBITEK) in IBI Darmajaya, one of leading university from Bandar Lampung, Indonesia to develop young entrepreneurs from among universities students and alumni. The program objectives are to improve entrepreneurship motivation of students and alumni, develop skills and proficiency for students and alumni in mastering management, business strategies, and manage the business environment, and also mentoring effective entrepreneurial business as the new business owner. The activities from the program consist of good corporate governance in business, entrepreneur training, training in an effective business plan, marketing apprentice and volunteer, field visit on developing business on Lampung, business execution and management consultancy, provision of capital for the business owner, and business mentoring from the well-established business player on Lampung.
    Date: 2017–12–10
  4. By: Sandro Montresor (School of Advanced Studies, Gran Sasso Science Institute); Antonio Vezzani (Roma Tre University)
    Abstract: We investigate the extent to which financial constraints hamper the firms’ investment in intangibles. Drawing on the extant literature, we maintain that a distinction should be kept between innovators and non-innovators. Moreover, we argue that such a distinction should be investigated along the whole spectrum of intangibles firms invest and by addressing the risks of reverse causality and simultaneity bias in the relationship. Through an original quasi-panel extension of a recent European Innobarometer survey, we estimate two sets of recursive bivariate probit models – for innovative and non-innovative firms’ investments – from which interesting results emerge. Financial barriers hamper the investment of both kinds of firms only for R&D, design, and organisation and business processes. With respect to other intangibles, instead, financial barriers act only on innovators (or non-innovators) or are even absent. Furthermore, the hampering role of financial barriers distributes differently across different intangibles between innovators and non-innovators.
    Keywords: &D, intangibles, innovation, financial barriers.
    JEL: O30 O32 O33
    Date: 2019–12
  5. By: Muhammad Meki (Post-doctoral research fellow in development economics at Pembroke College, University of Oxford)
    Abstract: Access to finance is often listed as one of the most important constraints on the expansion of small firms in low-income countries. However, several recent studies reveal that most microcredit-funded businesses rarely grow beyond subsistence-level entrepreneurship. Other evidence shows that cash and capital grants have delivered high returns to some microenterprises, and that small changes to contract structure can have a long-term effect on investment and profits. In this paper, I investigate the potential of ‘microequity’ contracts, which can be viewed as lying at some point on a spectrum between credit and grants, and provide a more flexible form of capital with performance-contingent repayments and a greater sharing of risk and reward. I present results from work with two of the largest microfinance institutions in Pakistan to investigate the effects of microequity contracts on microenterprises. In the first part of the paper, I describe an artefactual field experiment, designed using a simple model of investment choice under different financial contracts. This is tested with microenterprise owners who are part of a related field experiment that provides them with shared-ownership financing to expand their business. Results reveal that equity-financed microenterprise owners chose investment options with a greater expected profit than those under debt financing, with heterogeneity analysis suggesting a larger effect for the most riskaverse individuals, who also exhibit a stronger preference for equity contracts when offered a choice. In the final part of the paper, I describe qualitative insights for why most microfinance institutions do not implement microequity products, using a field survey and manager interviews, which reveal the practical implementation challenges due to costly state verification, adverse selection into profit-sharing contracts and moral hazard caused by inappropriately-tailored sharing ratios
    Date: 2019–09–20
  6. By: Diekhof, Josefine; Eckl, Verena; Krieger, Bastian; Licht, Georg; Nguyen, Thu-Van; Peters, Bettina; Rammer, Christian; Stenke, Gero
    Abstract: The exchange of knowledge between science and industry has been a focus of innovation research and policy for many decades. New developments in the way technologies are generated, shared, and transferred into new products, services, and business models are currently re-emphasising science-industry interactions. Main drivers are the emergence of open innovation models, the increased internationalisation of innovation processes, the rise of digital platforms, new modes of governance in public research, and the enlarged role of disruptive innovations. At the same time, the measurement of knowledge flows is still limited, and indicators on recent trends in science-industry interaction are lacking. This limits innovation policy in monitoring changes and addressing challenges. A conference in October 2019 in Berlin brought together industry representatives, researchers, and policy makers to discuss these developments and how the measurement of science-industry links could be improved. This policy brief summarises key trends in science-industry collaborations, presents existing indicators and discusses ways to improve our indicator system on knowledge flows between science and industry in order to better inform policy.
    Date: 2019
  7. By: Lars Mewes; Tom Broekel
    Abstract: Previous research shows ample evidence that regional diversification is strongly path-dependent, as regions are more likely to diversify into related than unrelated activities. In this paper, we ask whether contemporary innovation policy in form of R&D subsidies intervenes in the process of regional diversification. We focus on R&D subsidies and assess if they cement existing path-dependent developments, or if they help in breaking these by facilitating unrelated diversification. To investigate the role of R&D policy in the process of regional technological diversification, we link information on R&D subsidies with patent data and analyze the diversification of 141 German labor-market regions into new technology classes between 1991 and 2010. Our findings suggest that R&D subsidies positively influence regional technological diversification. In addition, we find significant differences between types of subsidy. Subsidized joint R&D projects have a larger effect on the entry probabilities of technologies than subsidized R&D projects conducted by single organizations. To some extent, collaborative R&D can even compensate for missing relatedness by facilitating diversification into unrelated technologies.
    Keywords: regional technological diversification, relatedness, innovation, policy, R&D subsidies
    JEL: O31 O33 O38
    Date: 2020–01
  8. By: Lougui, Monia (Ratio & Centre of Excellence for Science and Innovation Studies (CESIS)); Broström, Anders (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper explores the evaluation of experience from self-employment on the Swedish labor market. Specifically, we analyze the wage remuneration of individuals moving from a spell in self-employment to regular employment as compared to a control group of individuals without such experience. To tackle the challenge of estimating the average effect of treatment, we seek to reduce unobserved heterogeneity across groups by only considering individuals moving into self-employment after being displaced in the context of employer exit, and setting up the control group to consist of individuals moving from the same exiting firms into new employment. To further ensure similarity on key observables with the treated group, we select the control group through coarsened exact matching. Our results demonstrate that the average treatment effect is positive. In further exploration, we find evidence suggesting that this effect is at least partially driven by self-employment experiences being positively evaluated for jobs requiring general and managerial skills rather than industry-specific expertise.
    Keywords: Entrepreneurship valuation; Labor market mobility; Entry wage; Firm closure; Necessity entrepreneurship
    JEL: E24 J30 J60 L26 M13
    Date: 2020–01–28
  9. By: Christos Karydas (Center of Economic Research (CER-ETH), ETH Zurich, Switzerland); Evangelos V. Dioikitopoulos (King's Business School, Group of Economics, King's College London, UK)
    Abstract: This paper argues that the joint relation between long-term orientation, environmental quality and innovation plays a key role in explaining environment-poverty traps. Based on empirical observations, we allow for the subjective discount rate to negatively depend on environmental quality in an R&D-driven endogenous growth model with local pollution externalities. Our model reconciles two empirical facts: i) multiple equilibria of economic and environmental development; ii) opposite responses to technological improvements depending on the initial equilibrium. Our results suggest that -- in addition to traditional policies such as development aid and technology transfer -- policies that aim at improving both the economic and the environmental dimension of sustainability, should also focus on changing individuals' long-term views in countries that face weak environmental conditions.
    Keywords: Endogenous growth, innovation, time preference, environmental poverty traps, economic poverty traps
    JEL: D90 E21 O13 O44 Q55 Q56
    Date: 2020–01
  10. By: Evguenia Bessonova; Anna Tsvetkova
    Abstract: The paper focuses on trends in the convergence of labour and multifactor productivity in Russia. Using firm-level data for the 2011-2016 period, we obtain the following result: low-productivity firms grow faster than high-productivity ones. Despite this, the initial gap between the most and the least productive firms in the Russian economy is so wide that it is hardly possible to overcome in the short term. Moreover, we find that this gap has increased over the 2011-2016 period, suggesting divergence in productivity levels of Russian firms. To verify the divergence within narrowly defined industries, we also use the stochastic frontier analysis. Our estimates confirm divergence in most industries.
    Keywords: productivity gap, beta-convergence, sigma-convergence, stochastic frontier analysis.
    JEL: D24 E22 O47
    Date: 2019–10
  11. By: Annika Nivala (University of Turku)
    Abstract: This paper studies the effects of a first employee wage subsidy imple-mented in parts of Finland in 2007–2011 using the universe of Finnishfirms. The subsidy, amounting to 30% of the wage costs of the firstemployee in the first year and 15% in the second, was targeted to en-trepreneurs without hired employees. The target group accounts forover half of the firm population. Comparing the firms in the eligiblearea to firms in the neighboring ineligible area, I find precisely esti-mated zero effect on the probability of becoming an employer and otherfirm outcomes. The zero average effect seems to be due to low take-upof the subsidy highlighting the role of take-up in effectiveness of busi-ness subsidies. Sole proprietor, large and new firms were more likelyto use the subsidy and the subsidized firms seemed to grow more incomparison to eligible firms that did not use the subsidy.
    Keywords: Business subsidies, Wage subsidies, Firm behavior, Labor demand, Entrepreneurship, Small Business
    JEL: H25 H32 J23 J38 M51
    Date: 2019–12
  12. By: Stjepan Srhoj (University of Dubrovnik); Ivan Zilic (The Institute of Economics, Zagreb)
    Abstract: This paper evaluates the effect of a self-employment grant scheme for unemployed individuals-designed to ease the first 12 months of business operation-on firm growth, survival, and labor market re-integration in Croatia in the 2010-2017 period. Grants offered a moderate amount of finances (up to 50% of average annual gross salary) and absorbed only 5% of funds allocated to active labor market policies, but accounted for 10% of new firms opened throughout the years. We use the universe of unemployment episodes and the universe of unlimited and limited liability firms to document the effect of self-employment grants both causally and descriptively. Exploiting longitudinal structure of unemployment episodes dataset, we find that individuals who finish their spell with a grant have a significantly lower probability of returning to unemployment. Also, we find that limited liability firms opened via a grant have lower growth potential and worse survival profile, while unlimited liability firms-even though a sizable portion of them closes after a required 12-month grant period-have a more favorable survival profile. While these results are in line with the rest of the empirical literature on the self-employment grants, we also find that the effectiveness of these grants has increased throughout the years, indicating towards the direction of institutional learning.
    Keywords: self-employment grant, evaluation, unemployment, firm performance
    JEL: J68 M13 H25 H43
    Date: 2020–01
  13. By: Matteo Deleidi; Walter Paternesi Meloni; Luigi Salvati; Francesca Tosi
    Abstract: The promotion of regional convergence is at the heart of the European cohesion policy,although how to stimulate it still is a debated question in the economic theory. Endorsing a Kaldorian perspective, we investigate the determinants of labour productivity in Italian regions by applying Panel Structural VAR modelling to 1981-2013 data. By esplicitly considering the endogeneity among the studied variables, we find that labour productivity is stimulated by output growth and capital accumulation. Our findings bear important implications in terms of policy advice, leading to the conclusion that considerable public investment is necessary to stimulate economic growth and productivity especially in economically depressed areas, like the Italian Mezzogiorno.
    Keywords: Labour productivity; Technical progress; Investment; Regional differentials; Panel SVAR
    JEL: C33 O18 O47 R11
    Date: 2020–01
  14. By: Joana Silva Afonso (Portsmouth Business School); Joe Cox (Portsmouth Business School); Andy Thorpe (Portsmouth Business School)
    Abstract: This paper explores the features and consequences of heterogeneity among clients of the largest Islamic microfinance institution in Pakistan, identifying differences in business and household outcomes between sub-groups of borrowers. The research is based on a longitudinal survey conducted between 2015 and 2017 of 500 new clients of the institution, providing a unique dataset of low-income entrepreneurs applying for interest-free microcredit loans. The data was analysed using t-tests to establish baseline differences between borrowers, and regression analysis to explore variations in business and household outcomes over the period. Evidence of significant heterogeneity was found among entrepreneurs at the time of the baseline survey. The longitudinal analysis shows that management experience was positively associated with business growth, but no significant association was found for gender, poverty level and credit experience and these variables were not found to associate with significant variation in employment creation. Nevertheless, the analysis does demonstrate a greater reduction in household poverty levels among those entrepreneurs that were poorer at the time of the baseline survey. Additionally, there was a general decrease of savings frequency over the sample period, particularly among female entrepreneurs.
    Keywords: Islamic Microfinance, Entrepreneurship, Client Heterogeneity, Impact, Pakistan
    Date: 2020–01–24

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