nep-sbm New Economics Papers
on Small Business Management
Issue of 2020‒03‒16
29 papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Measuring the "doing-using-interacting mode" of innovation in SMEs - A qualitative approach By Alhusen, Harm; Bennat, Tatjana; Bizer, Kilian; Cantner, Uwe; Horstmann, Elaine; Kalthaus, Martin; Proeger, Till; Sternberg, Rolf G.; Töpfer, Stefan
  2. The Rise of Domestic Capital Markets for Corporate Financing By Abraham,Facundo; Cortina Lorente,Juan Jose; Schmukler,Sergio L.
  4. Industry connection in Europe and North America By Bajgar, Matej; Berlingieri, Giuseppe; Calligaris, Sara; Criscuolo, Chiara; Timmis, Jonathan
  5. Does participation in knowledge networks facilitate international market access? The case of offshore wind By Maria Tsouri; Jens Hanson; Håkon Endresen Normann
  6. Enterprising Women in Southern Africa: When Does Land Ownership Matter? By Brixiova, Zuzana; Kangoye, Thierry; Tregenna, Fiona
  7. The Effects of Pollution and Business Environment on Firm Productivity in Africa By Soppelsa,Maria Edisa; Lozano Gracia,Nancy; Xu,L. Colin
  8. Financial Constraints and Small and Medium Enterprises: A Review By Bakhtiari, Sasan; Breunig, Robert; Magnani, Lisa; Zhang, Jacquelyn
  9. The Determinants of Micro, Small and Medium Enterprises’ (MSMEs) Performance in Nigeria: Evidence from Business Enterprise Survey By Emmanuel, Zachariah; Anga, Rosemary A.; Isa, Charity G.
  10. Family Firms and Contractual Institutions By Iacovone,Leonardo; Maloney,William F.; Tsivanidis,Nick
  11. Do Corrupt Local Governments Inhibit Entrepreneurship? A Contextual Analysis of Start-Ups in Swedish Municipalities By Wittberg, Emanuel; Erlingsson, Gissur
  12. Determinantes del emprendimiento en el Pais Vasco By García Riazuelo, Alvaro
  13. A toolkit of policies to promote innovation By Van Reenen, John; Bloom, Nicholas; Williams, Heidi
  14. Firm Dynamics, Job Outcomes, and Productivity : South African Formal Businesses, 2010-14 By Aterido,Reyes; Hlatshwayo,Ayanda; Pieterse,Duncan; Steenkamp,Andre
  15. Financial constraints, factor combination and Gibrat's law in Africa By Florian Leon; Samuel Monteiro
  16. Innovation union: costs and benefits of innovation policy coordination By Borota, Teodora; Defever, Fabrice; Impullitti, Giammario
  17. The Effect of Immigration on Business Dynamics and Employment By Pia M. Orrenius; Madeline Zavodny; Alexander T. Abraham
  18. How to better align the U.K.’s corporate tax structure with national objectives By Peter Spencer; Peter Smith; Paulo Santos Monteiro
  19. Buying and Selling Entrepreneurial Assets By Kankanamge, Sumudu; Gaillard, Alexandre
  20. Innovation in Digital Ecosystems: Challenges and Questions for Competition Policy By Frederic Marty; Thierry Warin
  21. Doing Well by Doing Good? Community Development Venture Capital By Anna Kovner
  22. High-growth Firm Shares in Austrian Regions: The Role of Economic Structures By Klaus S. Friesenbichler; Werner Hölzl
  23. The heterogeneous impact of market size on innovation: evidence from French firm-level exports By Aghion, Philippe; Bergeaud, Antonin; Lequien, Matthieu; Melitz, Marc
  24. Incubation in India – A Multilevel Analysis By Sharma, Supriya; Vohra, Neharika
  25. Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms By Howell, Sabrina T.; Brown, J. David
  26. Microentrepreneurship in Developing Countries By Jayachandran, Seema
  27. The Effects of Corporate Taxes on Small Firms By Harju, Jarkko; Koivisto, Aliisa; Matikka, Tuomas
  28. Marketplace Lending of SMEs By Doulas J. Cumming; Lars Hornuf
  29. The Rise of Star Firms : Intangible Capital and Competition By Ayyagari,Meghana; Demirguc-Kunt,Asli; Maksimovic,Vojislav

  1. By: Alhusen, Harm; Bennat, Tatjana; Bizer, Kilian; Cantner, Uwe; Horstmann, Elaine; Kalthaus, Martin; Proeger, Till; Sternberg, Rolf G.; Töpfer, Stefan
    Abstract: The 'doing-using-interacting mode' of innovation (DUI) is considered an important component of innovative activity. It describes informal innovative activities and thus complements the 'science-technology-innovation mode' (STI) based on research and development. While empirical measurement of the STI mode is well established, proxies for measuring DUI activities are still underdeveloped and no consensus has emerged concerning which intra- and extra-firm processes primarily constitute the DUI mode and how they should be measured. Based upon 81 in-depth interviews with German SMEs and regional innovation consultants, we propose a comprehensive set of 47 indicators comprising both established and new DUI processes for future empirical measurement. We argue that this measurement approach can lead to a more holistic understanding and ultimately quantifiable measurement of DUI innovativeness, which can guide further research and policymaking.
    Keywords: DUI,Innovation indicators,learning processes,modes of innovation,STI
    JEL: O3 O30 O31 R10
    Date: 2019
  2. By: Abraham,Facundo; Cortina Lorente,Juan Jose; Schmukler,Sergio L.
    Abstract: During the past decades, firms from emerging economies have significantly increased the amount of financing obtained in capital markets. Whereas the literature argues that international markets have been an important contributor to this process, the role of domestic markets is mostly unknown. By examining the case of East Asia, this paper shows that domestic markets have been a key driver of the observed trends in capital market financing since the early 2000s. As domestic markets developed, more and smaller firms gained access to equity and corporate bond financing. Domestic markets also helped some corporations to diversify funding sources and obtain domestic currency financing. Policy reforms following the Asian Financial Crisis accompanied the growth of domestic markets. Part of the reforms were aimed at developing domestic capital markets for small and medium-size enterprises. Although these markets have developed significantly, they still serve relatively few corporations, albeit from new sectors.
    Date: 2019–05–07
  3. By: Francesco Crespi; Serenella Caravella
    Abstract: The study focuses on the impact exerted on private R&D expenditures by regular and innovative public procurement when taken in combination or insolation with supply-push measures. The econometric analysis relies on a pulled sample of 4,206 Italian manufacturing firms observed between 2010-2014. The empirical exercise confirms previous evidences on the relevance of technology-push instruments in sustaining firms’ innovativeness. On the contrary, the ability of public procurement activities in shaping innovative investments is found to depend on a number of instances related to: i) the adoption of contemporaneous supply side measures; ii) the inclusion of innovative demand in procurement contracts. The analysis provides important suggestions with respect to the potential effectiveness of demand-side tools when implemented in weak administrative and innovation systems, as in the Italian case. Moreover, it is shown that the design of the policy mix matters, and its effectiveness improves when demand-side and supply-side instruments are jointly implemented.
    Keywords: Demand-pull policies, Public Procurement, Policy-mix, Non-parametric analysis.
    JEL: H57 O25 O38
    Date: 2020–02
  4. By: Bajgar, Matej; Berlingieri, Giuseppe; Calligaris, Sara; Criscuolo, Chiara; Timmis, Jonathan
    Abstract: This report presents new evidence on industry concentration trends in Europe and in North America. It uses two novel data sources: representative firm-level concentration measures from the OECD MultiProd project, and business-group-level concentration measures using matched OrbisWorldscope-Zephyr data. Based on the MultiProd data, it finds that between 2001 and 2012 the average industry across 10 European economies saw a 2-3-percentage-point increase in the share of the 10% largest companies in industry sales. Using the Orbis-Worldscope-Zephyr data, it documents a clear increase in industry concentration in Europe as well as in North America between 2000 and 2014 of the order of 4-8 percentage points for the average industry. Over the period, about 3 out of 4 (2-digit) industries in each region saw their concentration increase. The increase is observed for both manufacturing and non-financial services and is not driven by digital-intensive sectors.
    Keywords: industry concentration; business dynamics; measurement
    JEL: D40 L11 L25
    Date: 2019–10
  5. By: Maria Tsouri (TIK Centre for Technology Innovation and Culture, University of Oslo, Oslo, Norway); Jens Hanson (TIK Centre for Technology Innovation and Culture, University of Oslo, Oslo, Norway); Håkon Endresen Normann (TIK Centre for Technology Innovation and Culture, University of Oslo, Oslo, Norway)
    Abstract: This article explores the effects of knowledge network participation on firms` international market access. We use a unique dataset comprising Norwegian firm data on RD&D (research, development and demonstration) and market participation in offshore wind. The empirical results show that participating in pilot and demonstration projects positively affects firms’ presence in international markets, while we do not observe the same positive effect for R&D projects. However, the econometric evidence shows that increasing extents of international collaborators, particularly from countries with home markets, contributes to a positive effect of R&D project participation on market access, while negative effects are observed for domestic collaborators. The results suggest that transnational knowledge linkages constitute an important mechanism for international market access, especially for countries with weak or absent domestic markets. We suggest that RD&D policy design could benefit from ensuring international collaboration, particularly with partners in countries with domestic markets, and support for demonstration activities.
    Date: 2020–03
  6. By: Brixiova, Zuzana (University of Economics Prague); Kangoye, Thierry (African Development Bank); Tregenna, Fiona (University of Johannesburg)
    Abstract: Limited access to finance is one of the major barriers for women entrepreneurs in Africa. This paper presents a model of start-ups in which firms' sales and profits depend on their productivity and access to credit. However, due to the lack of collateral assets such as land, female entrepreneurs have more constrained access to credit than do men. Testing the model on data from the World Bank Enterprise Surveys in Eswatini, Lesotho, and Zimbabwe, we find land ownership to be important for female entrepreneurial performance in terms of sales levels. This finding suggests that the small Southern African economies would benefit from removing obstacles to women's land tenure and enabling financial institutions to lend against movable collateral. While land ownership is linked with higher sales levels, it seems less critical for sales growth and innovation where access to short term loans for working capital seems to be key.
    Keywords: entrepreneurial sales, innovation, credit, land, gender, Africa
    JEL: G21 L26 D24 O17
    Date: 2020–01
  7. By: Soppelsa,Maria Edisa; Lozano Gracia,Nancy; Xu,L. Colin
    Abstract: This paper explores the links between city competitiveness and air pollution and the business environment. Because competitive cities not only attract more productive firms, but also facilitate their business, the paper look at firm performance as a proxy for city competitiveness. It focuses on African firms, because this region is developing fast and experiencing increasing pollution levels and the effects of agglomeration economies. The analysis finds two interesting results. First, the negative association between air pollution and firm performance can be seen at lower than expected levels of pollution. Second, the effects of capacity agglomeration on labor productivity growth are stronger compared to other regions. These findings suggest that cities in this region should address pollution issues soon, as they continue to grow fast and pollution levels are becoming an increasing concern.
    Date: 2019–04–30
  8. By: Bakhtiari, Sasan (Department of Industry, Innovation and Science Australia); Breunig, Robert (Australian National University); Magnani, Lisa (Macquarie University, Sydney); Zhang, Jacquelyn (Australian National University)
    Abstract: We review the literature on financial constraints and the performance of small and medium enterprises (SMEs). We consider the important role that SMEs play in the economies of Australia and the Organisation for Economic Cooperation and Development. We examine the role of financial constraints in SME growth, with emphasis on business cycles and credit access. We discuss issues that SMEs face in accessing financial resources for expansion. We look at the literature that evaluates the impact of financial constraints on key outcomes: employment, productivity and wages. We review key policy debates and consider where government involvement might be appropriate.
    Keywords: small and medium enterprises (SME), firm financial constraints, government business assistance, employment, wages, productivity, innovation
    JEL: D22 L25
    Date: 2020–01
  9. By: Emmanuel, Zachariah; Anga, Rosemary A.; Isa, Charity G.
    Abstract: In this paper, we provide new evidence on the determinants of business enterprise performance by combining the structure conduct performance, efficiency structure and business environment factors. In particular, we focus on the major determining factors of MSMEs performance in Nigeria. We further account for possible regional variation in MSMEs performance using a cross sectional Ordinary Least Squares (OLS) with fixed effects. The latest 2014 World Bank Enterprise Survey (WBES) data for Nigeria was used and the results obtained shows that skilled labor, capital intensity, age, size, foreign ownership, percentage of export, research & development as well as bribe payment have a positive impact on MSMEs performance. Although, bribe payment is positive, it is not significant to MSME performance. This is because bribery does not translate to outright performance, rather it is a form of illegal extortion from MSMEs by government officials in order to allow them remain in business. On the other hand, the study found degree of competition, poor electricity supply, high insecurity and difficulty in accessing finance as major setbacks to MSMEs performance in Nigeria. While we found skilled labor, age of enterprise and size to contribute significantly to MSMEs performance, contrary to some findings in the literature, we found capital intensity, foreign ownership, firm’s export, bribe payment, research & development, degree of competition, outage intensity, insecurity and difficulty in obtaining finance to be insignificant to MSMEs performance in Nigeria.
    Keywords: MSMEs, Performance, Enterprise survey, Regional effect, Nigeria
    JEL: L25 L26 N87
    Date: 2019–08–01
  10. By: Iacovone,Leonardo; Maloney,William F.; Tsivanidis,Nick
    Abstract: This paper offers new evidence on the relationship between contractual institutions, family management, and aggregate performance. The study creates a new firm-level database on management and ownership structures spanning 134 regions in 11 European countries. To guide the empirical analysis, it develops a model of industry equilibrium in which heterogeneous firms decide between family and professional management when the latter are subject to contracting frictions. The paper tests the model's predictions using regional variation in trust within countries. Consistent with the model, the finding show that there is sorting of firms across management modes, in which smaller firms and those in regions with worse contracting environments are more likely to be family managed. These firms are on average 25 percent less productive than professionally managed firms, and moving from the country with the least reliable contracting environment to the most increases total factor productivity by 21.6 percent. Family management rather than ownership drives these results.
    Date: 2019–04–03
  11. By: Wittberg, Emanuel (Institute for Analytical Sociology); Erlingsson, Gissur (Centre for Local Government Studies)
    Abstract: Does corruption affect the incentives for potential entrepreneurs to start businesses? The traditional view holds that entrepreneurship is inhibited. However, a few recent studies indicate the contrary, supporting a ‘grease the wheels’ perspective. In a novel approach to this question, we combine a local government corruption index and individual-level register data on start-ups in a low-corruption setting: Sweden. We disaggregate the analysis to individual entrepreneurs, focus on corruption in local institutions and hypothesize that local corruption deters potential entrepreneurs. Our findings are twofold. First, rejecting the ‘grease the wheels’ hypothesis, local corruption has a strong local deterring effect on potential entrepreneurs. Second, a minority of entrepreneurs relocate their start-ups from home unicipalities to elsewhere. However, contrary to expectations, relocaters could embody ‘non-productive’ or ‘destructive’ entrepreneurship: they migrate from relatively low-corrupt to relatively high-corrupt municipalities. While migrating is uncommon, and the effect is weak, it nonetheless indicates that relocaters are attracted to conditions where rent-seeking opportunities are present.
    Keywords: Entrepreneurship; Start-ups; Corruption; Local government; Destructive entrepreneurship
    JEL: D73 L26
    Date: 2020–03–09
  12. By: García Riazuelo, Alvaro
    Abstract: In this document, the Global Entrepreneur Monitor database is used to carry out a descriptive and comparative analysis of the different determinants of entrepreneurship for the Autonomous Community of the Basque Country. To analyze these determinants we will use econometric analysis, trying to find the relationship of the entrepreneurship and a number of variables. The results obtained show that the rate of entrepreneurship in the Basque Country is significantly lower tan the Spanish average, while the differences between men and women do not appear significant. Finally, a set of recommendations will be made with the aim of trying to improve the rate of entrepreneurship and therefore the economic growth of the region.
    Keywords: Emprendimiento, GEM data, País Vasco.
    JEL: L26 R10
    Date: 2020–03–04
  13. By: Van Reenen, John; Bloom, Nicholas; Williams, Heidi
    Abstract: Economic theory suggests that market economies are likely to under-provide innovation due to the public good nature of knowledge. Empirical evidence from the US and other advanced economies supports this idea. We summarize the pros and cons of different policy instruments for promoting innovation and provide a basic “toolkit” describing which policies are most effective, based on our reading of the evidence. In the short-run, R&D tax credits or direct public funding seem the most productive, but in the longer-run increasing the supply of human capital (e.g. relaxing immigration rules or expanding university STEM admissions) are likely more effective.
    Keywords: R&D; intellectual property; tax; competition
    JEL: O31 O32
    Date: 2019–07
  14. By: Aterido,Reyes; Hlatshwayo,Ayanda; Pieterse,Duncan; Steenkamp,Andre
    Abstract: The formal private sector has a key role to play in fostering growth and reducing unemployment in South Africa?strengthening its performance is therefore critical. This paper looks at firm behaviour, firm entry and exit, job outcomes, and productivity dynamics using firm-level administrative data for South Africa. It is the first paper to benchmark employment and productivity dynamics against various comparator countries for which similar analysis has been undertaken. The paper finds that South Africa has an aged private sector with low firm dynamism and characterized by large firms that hold a large share of employment and revenue, although they are not as productive as micro firms and pay lower wages on average. The paper also finds that job creation is concentrated predominantly in incumbent firms, which are old and large, and job creation from entry and exit is negligible. The static and dynamic productivity decompositions raise a concern that although productive efficiency is gained, it is at least in part at the expense of labor. Large firms are not exploiting economies of scale, and particularly unproductive large firms may drive the weak performance of the private sector. Relatively high wages in South Africa could be partly explained by the inefficient use of labor and negative correlation between productivity and size. Likewise, these larger firms could be responsible for the negative direct impact on jobs of firms raising productivity.
    Date: 2019–03–21
  15. By: Florian Leon (FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Samuel Monteiro (I&P - Investisseurs et Partenaires)
    Abstract: This paper investigates the validity of Gibrat's law in sub-Saharan Africa using data from 22,495 firms operating in 45 African countries. Results indicate that Gibrat's law does not hold in Africa, i.e. small firms create more jobs than their larger counterparts do. We point out that the usual explanations (such as diminishing returns, the learning process, and the minimum efficient size) do not explain this finding. We present a new explanation based on firm access to capital. According to our hypothesis, employment growth among small firms in Africa is faster because small firms adopt labor-intensive and capital-saving technology to expand their business activities. SMEs have a lower capital-labor factor because in order to grow, they tend to overuse labor and underuse capital due to financial constraints., hence their greater job growth momentum. Different econometric tests provide support to our hypothesis. Specifically, we prove that the negative relationship between firm size and growth is mitigated for firms with access to credit.
    Keywords: Firm growth,Job creation,Gibrat's law,Africa,Financial constraint
    Date: 2019–12–28
  16. By: Borota, Teodora; Defever, Fabrice; Impullitti, Giammario
    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 cooperation 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 theroy; international policy coordination; EU integration; FDI spillovers
    JEL: O41 O31 O38 F12 F42 F43
    Date: 2019–08
  17. By: Pia M. Orrenius; Madeline Zavodny; Alexander T. Abraham
    Abstract: Immigration, like any positive labor supply shock, should increase the return to capital and spur business investment. These changes should have a positive impact on business creation and expansion, particularly in areas that receive large immigrant inflows. Despite this clear prediction, there is sparse empirical evidence on the effect of immigration on business dynamics. One reason may be data unavailability since public-access firm-level data are rare. This study examines the impact of immigration on business dynamics and employment by combining U.S. data on immigrant inflows from the Current Population Survey with data on business formation and survival and job creation and destruction from the National Establishment Time Series (NETS) database for the period 1997 to 2013. The results indicate that immigration increases the business growth rate by boosting business survival and raises employment by reducing job destruction. The effects are largely driven by less-educated immigrants.
    Keywords: immigration; business dynamics; firm entry; firm exit; job creation; job destruction
    JEL: J15 J61 L25
    Date: 2020–02–28
  18. By: Peter Spencer; Peter Smith; Paulo Santos Monteiro
    Abstract: Successive Chancellors have been keen to lower corporation tax to help UK business and attract inward direct investment. Starting with Nigel Lawson in his budget of 1984, the mainstream corporation rate has been progressively lowered and tax breaks for investment and other expenditures progressively withdrawn. However, it is now clear that these reforms have had untoward effects. They removed a bias towards investment but left a strong bias towards debt finance, which was accentuated by Gordon Brown’s abolition of Advance Corporation Tax (ACT) in the 1997 Budget. They have favoured service industry at the expense of capital-intensive manufacturing industry and so added to the imbalances in the economy caused by globalisation. Moreover, the latest literature on economic growth, reviewed in the Appendix, suggests that effect of industrial investment on productivity has been seriously underestimated. That is because the conventional analysis upon which these reforms have been based, focuses on the return on investment for the individual firm and neglects the benefits for the wider economy and in particular the gains from knowledge spillovers. These spillovers largely stem from the complementarities between R&D, innovation and investment and the way that new ideas and practices spread from organisations that invest and innovate to others. This synergy means that supporting capital investment can have the same effect on long-run growth as subsidizing R&D. However, because capital is easier to monitor than the production of intangible knowledge, supporting investment is less vulnerable to agency problems and gaming. Although the fiscal system recognises the importance of innovation for economic growth by supporting R&D, this is an argument for subsidising investment as well as research. Moreover, support for investment would help ensure that UK innovations build factories and jobs here rather than overseas. Moreover, by favouring debt over equity, the corporate tax system discourages knowledge creation. That is because intangible assets such as knowledge and expertise are difficult to finance with a corporate tax and capital structure that is tilted towards debt. Proposals for the reform of corporate taxation have aimed at achieving tax neutrality by removing the bias towards debt finance. However, these proposals neglect important innovation externalities, which mean that we should also be tilting tax relief towards investment. We would do this by using savings from reducing debt interest relief to restore capital allowances on industrial plant and machinery, which the empirical evidence shows, plays a key role in the growth of a knowledge-based economy.
    Date: 2020–03
  19. By: Kankanamge, Sumudu; Gaillard, Alexandre
    Abstract: This paper introduces a theory of entrepreneurial assets transfer consistent with empirical evidence and centered around a business for sale market that values firms based on their intangible assets. We consider the key endogenous entrepreneurial choices to purchase, found, sell or liquidate business assets and the equilibrium price designed to capture both the intertemporal and the intangible value of a firm. We distinguish earlystage and mature firms as the latter are less likely to fail, make higher profits and face less stringent financial constraints. We argue that maturity translates the intangible value of a firm. We discipline our model using U.S. surveys and a new dataset of business selling transactions. We show that the absence of the business for sale market leads to a severe drop in aggregate output. Then, decomposing the effects of maturity, we show how they shape aggregate outcomes and wealth concentration.
    Keywords: Entrepreneurship, Business transfers, Intangible Assets
    JEL: E21 E23 J24
    Date: 2020–02
  20. By: Frederic Marty; Thierry Warin
    Abstract: Digital ecosystems development is characterized by a paradox in terms of innovation. At no time in history has the pace of innovation been so fast and never before have third-party firms been able to benefit so much for their own innovations from their integration into a keystone player’s ecosystem. However, such a keystone player may be encouraged to implement non-cooperative strategies to capture the innovations developed by its own complementors. Such strategies may be detrimental to trading partners, innovation and consumers. This article aims to analyse these two possible effects of the development of digital ecosystems on innovation and to infer recommendations in terms of competition policy to counteract the detrimental effects that may result from potential unbalanced co-opetitive situations.
    Keywords: Innovation,Competition,Digital Ecosystems,Keystone Player,Co-Opetition,
    JEL: L12 L13 L25 L41
    Date: 2020–02–17
  21. By: Anna Kovner (Harvard University; Federal Reserve Bank)
    Abstract: In a new working paper, Josh Lerner and I explore how the venture capital (VC) model can be harnessed to achieve socially targeted ends by examining the investment record of community development venture capital (CDVC) firms. Our results are mixed. Investments made by CDVC firms are less likely to succeed than are investments made by traditional VC firms. This lower probability of success persists even after controlling for the fact that CDVC firms invest in industries and geographies that have, on average, lower success rates. However, we do find that CDVC firms have the benefit of bringing traditional VC firms to underserved regions; controlling for the presence of traditional VC investments, we find that each additional CDVC investment draws an additional 0.06 new traditional VC firms to a region.
    Keywords: Community Development; Venture Capital
    JEL: G2 G3
  22. By: Klaus S. Friesenbichler; Werner Hölzl
    Abstract: This paper explores the structural determinants of high-growth firm shares in Austrian regions. The regional level of analysis allows to uncover regularities which are not detectable in firm-level studies. We find that lower mobility barriers, firm exits and technological opportunities, measured by digitalisation intensities, and, to a lesser extent, agglomeration effects are associated with a larger share of high-growth firms. The results suggest that comparisons of shares of high-growth firms across countries and regions should consider differences in the industrial structures together with the often-emphasised differences in policies and regulations.
    Keywords: high growth firms, industrial structure, ICT, Austria, variety, NUTS-3
    Date: 2020–03–12
  23. By: Aghion, Philippe; Bergeaud, Antonin; Lequien, Matthieu; Melitz, Marc
    Abstract: We analyze how demand conditions faced by a firm impacts its innovation decisions. To disentangle the direction of causality between innovation and demand conditions, we construct a firm-level export demand shock which responds to aggregate conditions in a firm’s export destinations but is exogenous to firm-level decisions. Using exhaustive data covering the French manufacturing sector, we show that French firms respond to exogenous growth shocks in their export destinations by patenting more; and that this response is entirely driven by the subset of initially more productive firms. The patent response arises 3 to 5 years after a demand shock, highlighting the time required to innovate. In contrast, the demand shock raises contemporaneous sales and employment for all firms, without any notable differences between high and low productivity firms. We show that this finding of a skewed innovation response to common demand shocks arises naturally from a model of endogenous innovation and competition with firm heterogeneity. The market size increase drives all firms to innovate more by increasing the innovation rents; yet by inducing more entry and thus more competition, it also discourages innovation by low productivity firms.
    Keywords: innovation; export; demand shocks; patents
    JEL: D21 F13 F14 F41 O30 O47
    Date: 2019–10
  24. By: Sharma, Supriya; Vohra, Neharika
    Abstract: This chapter undertakes a multi-level analysis of incubation in India with an objective to assess the landscape of incubation, the role and impact of incubators on startups, and understand challenges faced both by incubators and incubatees. Secondary data from 284 incubators across India and four largest incubator support schemes, survey of 22 incubation centres funded by a support scheme, and in-depth interviews of incubated entrepreneurs were collected and analysed. The purpose, objectives, processes and success metrics of incubators specific to Indian context are discussed. Contributions from this chapter will be useful to researchers, policy makers and incubation champions. The chapter may be of particular relevance to countries that are developing strong startup and incubation ecosystems.
    Date: 2020–03–05
  25. By: Howell, Sabrina T. (New York University); Brown, J. David (U.S. Census Bureau)
    Abstract: This paper examines how employee earnings at small firms respond to a cash flow shock in the form of a government R&D grant. We use ranking data on applicant firms, which we link to IRS W2 earnings and other U.S. Census Bureau datasets. In a regression discontinuity design, we find that the grant increases average earnings with a rent-sharing elasticity of 0.07 (0.21) at the employee (firm) level. The beneficiaries are incumbent employees who were present at the firm before the award. Among incumbent employees, the effect increases with worker tenure. The grant also leads to higher employment and revenue, but productivity growth cannot fully explain the immediate effect on earnings. Instead, the data and a grantee survey are consistent with a backloaded wage contract channel, in which employees of financially constrained firms initially accept relatively low wages and are paid more when cash is available.
    Keywords: earnings inequality, rent sharing, R&D grants, regression discontinuity design
    JEL: G32 G35 J31 J41
    Date: 2020–01
  26. By: Jayachandran, Seema (Northwestern University)
    Abstract: This article reviews the recent literature in economics on small-scale entrepreneurship ("microentrepreneurship") in low-income countries. Major themes in the literature include the determinants and consequences of joining the formal sector; the impacts of access to credit and other financial services; the impacts of business training; barriers to hiring; and the distinction between self-employment by necessity and self-employment as a calling. The article devotes special attention to unique issues that arise with female entrepreneurship.
    Keywords: small businesses, female entrepreneurship, self-employment, informal sector
    JEL: L26 J16 J24
    Date: 2020–01
  27. By: Harju, Jarkko; Koivisto, Aliisa; Matikka, Tuomas
    Abstract: We study the impact of corporate taxes on firm-level investments, total output and input usage by exploiting a 4.5 percentage-point corporate tax rate cut in Finland in 2014. We use detailed administrative data and a differences-in-differences method comparing small corporations (tax rate cut) to similar partnerships (no change in tax incentives). We find no significant investment responses. However, we observe an increase in annual sales and variable costs, suggesting that corporate tax rates have an effect on business activity. The effects are driven by entrepreneurs who actively work in their firm, suggesting that the tax cut increased entrepreneurial effort.
    Keywords: corporate taxation, investments, business activity, small firms, Social security, taxation and inequality, Business regulation and international economics, G31, G38, H21, H25,
    Date: 2020
  28. By: Doulas J. Cumming; Lars Hornuf
    Abstract: Peer-to-business lending refers to online platforms facilitating loans from individuals to smalland medium-sized enterprises (SMEs). We conjecture that easy-to-understand risk ratings conveyed by the platform play a pronounced role in influencing the borrowing success of SMEs and that more sophisticated financial information and adverse selection are largely absent in these markets. We introduce a dataset of 414 SME marketplace loans and 8,236 online loan days to test these propositions. The data examined provide strong support for the importance of simple platform ratings in influencing investor behavior, while the effect of more detailed financial information is less pronounced.
    Keywords: debt crowdfunding, entrepreneurial finance, digital platforms
    JEL: G21 G24 G32
    Date: 2020
  29. By: Ayyagari,Meghana; Demirguc-Kunt,Asli; Maksimovic,Vojislav
    Abstract: There is a divergence in the returns of top-performing firms and the rest of the economy, especially in industries that rely on a skilled labor force, raising concerns about their market power. This paper shows that the divergence is explained by the mismeasurement of intangible capital. Compared with other firms, star firms produce more per dollar of invested capital, have higher growth, innovation, and productivity and are not differentially affected by exogenous competitive shocks. Their pricing power supports their high intangible capital investment. Some exceptional firms may pose concerns due to their potential to foreclose competition in the future.
    Date: 2019–04–29

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