nep-sbm New Economics Papers
on Small Business Management
Issue of 2020‒04‒27
seventeen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Learning in foreign and domestic value chains – The role of opportunities and capabilities By Rene Belderbos; Christoph Grimpe
  2. R&D or R vs. D? Firm Innovation Strategy and Equity Ownership By James Driver; Adam Kolasinski; Jared Stanfield
  3. The difficult relationship between the consultancy market and SMEs: inspiring insights from the case of Drôme By Elisa Salvador; Hassan El Asraoui; Mylene Akbaraly
  4. Organization and geography of global R&D and innovation activities: insights from qualitative research on leading corporate R&D investors By Mafini Dosso; Paulina Ramirez
  5. Are New Shopping Centers Drivers of Development in Large Metropolitan Suburbs? The Interplay of Agglomeration and Competition Forces. By Mihaescu, Oana; Korpi, Martin; Öner, Özge
  6. Opening Up for Managing Business and Societal Challenges By Solomon Darwin; Henry Chesbrough; Sea Matilda Bez; Chiara Eleonora de Marco; Dieudonnee Cobben
  7. Patents to Products: Product Innovation and Firm Dynamics By David Argente; Salomé Baslandze; Douglas Hanley; Sara Moreira
  8. R&D investment under financing constraints By Giebel, Marek; Kraft, Kornelius
  9. Do Standards Improve the Quality of Traded Products? By Disdier, Anne-Célia; Gaigné, Carl; Herghelegiu, Cristina
  10. Can government intervention make firms more investment-ready? A randomized experiment in the Western Balkans By Dautović, Ernest; Cusolito, Ana Paula; McKenzie, David
  11. Entrepreneuriat et créativité : du détournement à la création de valeur By Jean-Luc Gaffard
  12. Resilience in the periphery: What an agency perspective can bring to the table By Kurikka, Heli; Grillitsch, Markus
  13. Entrepreneurship and the fight against poverty in US Cities By Lee, Neil; Rodríguez-Pose, Andrés
  14. Economic modelling to evaluate Smart Specialisation: an analysis on research and innovation targets in Southern Europe By Javier Barbero; Olga Diukanova; Carlo Gianelle; Simone Salotti; Artur Santoalha
  15. The value of publicly available, textual and non-textual information for startup performance prediction By Kaiser, Ulrich; Kuhn, Johan M.
  16. Complementary Inter-Regional Linkages and Smart Specialization: an Empirical Study on European Regions By Pierre-Alexandre Balland; Ron Boschma
  17. Sinking or swimming in the cluster labour pool? A firm-specific analysis of the effect of specialized labour By Nils Grashof

  1. By: Rene Belderbos; Christoph Grimpe
    Abstract: We suggest that the benefits of learning in international value chains for firms’ innovation performance are heterogeneous and depend on the specific source of learning (customers, suppliers, or competitors), whether these sources are based in countries that are technologically advanced or less advanced (learning opportunities), on technology leadership (learning capabilities) on the part of the focal firm, and on the simultaneous learning that occurs from domestic firms. Using direct survey evidence on learning and innovation by German firms, we confirm that technology leaders benefit from advanced foreign customer and supplier learning, that technology laggards benefit from less advanced foreign customer learning and advanced foreign competitor learning, and that both leaders and laggards benefit from domestic customer learning. The findings suggest a tradeoff between the opportunities to learn from foreign or domestic customers.
    Keywords: learning from internationalization, innovation, technology leadership
    Date: 2020–04–16
  2. By: James Driver; Adam Kolasinski; Jared Stanfield
    Abstract: We analyze a unique dataset that separately reports research and development expenditures for a large panel of public and private firms. Definitions of “research” and “development” in this dataset, respectively, correspond to definitions of knowledge “exploration” and “exploitation” in the innovation theory literature. We can thus test theories of how equity ownership status relates to innovation strategy. We find that public firms have greater research intensity than private firms, inconsistent with theories asserting private ownership is more conducive to exploration. We also find public firms invest more intensely in innovation of all sorts. These results suggest relaxed financing constraints enjoyed by public firms, as well as their diversified shareholder bases, make them more conducive to investing in all types of innovation. Reconciling several seemingly conflicting results in prior research, we find private-equity-owned firms, though not less innovative overall than other private firms, skew their innovation strategies toward development and away from research.
    Date: 2020–04
  3. By: Elisa Salvador (ESSCA - Groupe ESSCA); Hassan El Asraoui (IESEG School of Management Lille); Mylene Akbaraly (IESEG School of Management Lille)
    Abstract: Small and medium-sized enterprises (SMEs) play an important role in the economy, but their specific status brings several difficulties that large firms do not have to face. Among others, the literature underlines a market gap in SME consultancy services, with a weak demand from SME managers. The aim of this article is to understand actual SMEs' "practices and perceptions" of the consultancy market and thus to provide some recommendations about how external consultants could adapt their services to foster, meet, and maintain the demand of SMEs. The research focuses on actors located in the department of Drôme, France. Descriptive statistics from a questionnaire and a cluster analysis highlight the role played by a long-lasting relationship and a specialisation in the sector of activity of the SME. Trust, experience and expertise seem to be the keywords. Consultants have to be able to provide unique and creative solutions that are strictly linked to the consultants' commitment of gaining SMEs' trust and building strong ties and networking in order to overcome the distrust and autonomy propensity of SMEs.
    Keywords: SMEs,consultancy market,trust,questionnaire,cluster analysis
    Date: 2019
  4. By: Mafini Dosso (European Commission - JRC); Paulina Ramirez
    Abstract: This study examines the on-going structural changes in the international organisation of corporate R&D and innovative (RDI) activities. Insights are mainly drawn from interviews made to innovation representatives and managers of large R&D-investing companies in 2017 in the frame of the European Commission’s project – Industrial Research and Innovation Monitoring and Analysis –. The research intends to complement the quantitative evidence available in the project on the worldwide leading corporate R&D investors in order to better characterize the on-going fragmentation of R&D and innovation activities. The study suggests directions for mapping innovation value chains beyond research and inventive activities and carries out important conceptual and policy implications for the configurations and sustainability of innovation systems in Europe.
    Keywords: R&D and innovation value chains, MNEs, top R&D investors, interviews, qualitative research
    Date: 2020–04
  5. By: Mihaescu, Oana (HUI Research); Korpi, Martin (The Ratio Institute); Öner, Özge (University of Cambridge)
    Abstract: We investigate to which extent shopping centers drive local economic development by studying how distance to newly established shopping centers affects the performance of incumbent firms, located in the suburbs of the three Swedish major metropolitan areas Stockholm, Gothenburg, and Malmö, 2000-2016. We use a regression setup with around 27,000 firm-year observations and explore the possible heterogeneity imposed on the results from two main elements of spatial economics theory: the size of the new retail area and the distance from the new retail area to the analyzed incumbents. We observe a clear difference in the direction of the effects of large versus small shopping centers. While competition forces are much stronger in the case of the establishment of large shopping centers, yielding a negative 5% on incumbent firm revenue and negative 3% on firm employment, results indicate the opposite pattern for smaller shopping centers; with firm revenue and firm employment increasing 4% and 3%, respectively. Moreover, we also observe that both agglomeration and competition effects attenuate sharply with distance from the new entrant, confirming one of the central premises of retail location theory. Finally, we observe that the geographical scope of the effects is much wider in the case of larger shopping centers, with estimates becoming statistically insignificant at about 9-10 km from the new entry, as compared to 3-4 km in the case of smaller retail centers.
    Keywords: Shopping centers; firm performance; retail location; agglomeration effects; competition; attenuation of effects
    JEL: D22 L25 P25 R11 R12
    Date: 2020–04–14
  6. By: Solomon Darwin; Henry Chesbrough; Sea Matilda Bez (Labex Entreprendre - UM - Université de Montpellier); Chiara Eleonora de Marco; Dieudonnee Cobben
    Abstract: Firms submitted corporate challenges relating to digital business models across several industries, and a community of academic experts and open innovation practitioners solve it. Challenge #1: SAP (Conducting "Horizon 3" transformational experiments through learning fast/fail fast approaches) Challenge #2: SALESFORCE (Expanding through the creation of ecosystems in new unchartered markets) Challenge #3: SIEMENS (Creating data-richness through the formation of IoT and digitalization partnerships) Challenge #4: ERICSSON (Creating new business opportunities leveraging emerging 5G technologies) Challenge #5: PNO (Overcoming bottlenecks that block the successful use of open innovation within organizations) The following report details description of the discussions conducted during each industry session and the specific solutions emerged from the audience brainstorming and already briefly presented to the companies at the end of each session. Moreover, we provide a short presentation of more general recommendations that result from a cross-analysis of all the companies presenting their challenges at WOIC 2019, but go beyond them and can be considered by industry at large, and concern: a. Innovation Platform and Ecosystem b. Data and Other Infrastructures c. Understanding the Problems and Contexts d. Company Ambassadors
    Keywords: Open-Innovation,Innovation Platform,Ecosystem,Data Management,Company Ambassadors
    Date: 2020–02–14
  7. By: David Argente; Salomé Baslandze; Douglas Hanley; Sara Moreira
    Abstract: We study the relationship between patents and actual product innovation in the market, and how this relationship varies with firms’ market share. We use textual analysis to create a new data set that links patents to products of firms in the consumer goods sector. We find that patent filings are positively associated with subsequent product innovation by firms, but at least half of product innovation and growth comes from firms that never patent. We also find that market leaders use patents differently from followers. Market leaders have lower product innovation rates, though they rely on patents more. Patents of market leaders relate to higher future sales above and beyond their effect on product innovation, and these patents are associated with declining product introduction on the part of competitors, which is consistent with the notion that market leaders use their patents to limit competition. We then use a model to analyze the firms' patenting and product innovation decisions. We show that the private value of a patent is particularly high for large firms as patents protect large market shares of existing products.
    Keywords: patent value; productivity; creative destruction; patents; product innovation; growth
    JEL: O3 O4
    Date: 2020–04–17
  8. By: Giebel, Marek; Kraft, Kornelius
    Abstract: This paper tests for the sensitivity of R&D to financing constraints conditional on restrictions in external financing. Financing constraints of firms are identified by an exogenously calculated rating index. Restrictions in external financing are determined by (i) the specific time period (crisis vs. non-crisis) and (ii) the balance sheet strength of the firm's main bank in terms of bank capital. Results of difference-in-differences estimations utilizing three time periods: 2002-2006 (pre-crisis) 2007-2009 (crisis) and 2010-2012 (post-crisis) support the theoretical prediction that financing constraints affect R&D. Moreover, we find that the effect of firm financing constraints is more intense (i) in times of stress on financial markets and (ii) when the firm faces restrictions in external financing. Additionally, our results indicate that on average the effect does not persist over time.
    Keywords: R&D investment,financing constraints,credit rating,financial crisis,bank capital,external financing of innovation
    JEL: G01 G21 G24 G30 O16 O30 O31 O32
    Date: 2020
  9. By: Disdier, Anne-Célia; Gaigné, Carl; Herghelegiu, Cristina
    Abstract: Quality-focused non-tariff measures are increasingly adopted by policy makers to address market failures. This paper tests for their selection and quality effects in a context of information asymmetry regarding product attributes. Our theory reveals that the enforcement of quality standards (QSs) induces the exit of low-quality firms but also that of some high-quality ones. The overall quality effect is therefore ambiguous. Using French firm data, we find that the QSs imposed by destination countries increase the probability, volume and value of exports of high-productivity medium-quality firms at the expense of low-productivity high-quality firms. QSs improve the average quality of exported consumption goods.
    Keywords: Firm exports, Quality standards, Information asymmetry
    Date: 2018–12
  10. By: Dautović, Ernest; Cusolito, Ana Paula; McKenzie, David
    Abstract: Innovative firms with good ideas may still struggle to fine-tune them to the stage where they can attract outside funding. We conduct a five-country randomized experiment that tests the impact of an investment readiness program. Firms then pitched their ideas to independent judges. The program resulted in a 0.3 standard deviation increase in the investment readiness score. Two years later, the average impacts on firm investment outcomes are positive, but small in magnitude, and not statistically significant. Larger and statistically significant impacts on receiving outside funding occur for smaller firms, and for firms with lower likelihoods of otherwise being funded. JEL Classification: L26, M2, M13, O1
    Keywords: entrepreneurship, equity investment, innovation, randomized controlled trial, start-ups
    Date: 2020–04
  11. By: Jean-Luc Gaffard (Institut Universitaire de France, OFCE Sciences Po, Université Côte d’Azur, CNRS, GREDEG, Skema Business School)
    Abstract: The nature of the innovations carried out, the way in which scientific and technical knowledge are exploited, the use made of the creative spirit, depend on the entrepreneur’s ability to design an organisation capable of creating sufficiently robust information channels. This is the yardstick by which to judge entrepreneurial behaviour, the pace imposed by finance, the way human resources are allocated. The reality of creativity lies in the choice between rent-seeking and productive innovation, between impatient and patient finance, between flexibility and rigidity in labour markets. This is an organizational and institutional choice.
    Keywords: Créativité, engagement, entrepreneuriat, innovation
    JEL: D21 D23 D47 J53 L26
    Date: 2020–03
  12. By: Kurikka, Heli (Tampere University); Grillitsch, Markus (CIRCLE, Lund University)
    Abstract: In this chapter, we study the relationship between regional economic resilience and agency. Especially since the 2008 recession, regional resilience has raised a lot of interest in economic geography. However, the resilience research has focused mostly on the structural perspective and the role of agency has gained less attention. Intentional and purposeful human actions can have an effect on regional development trajectories especially in a crisis situation. Economic crises typically are critical junctures where a variety of paths are possible and where the choices, strategies, and actions may have a decisive effect on the future. We are interested in the influence of change agency on different kinds of resilience outputs, especially regional adaptability. Different types of change agency play their own roles in constructing regional resilience. Innovative entrepreneurs are transforming or creating new economic activities through the novel combination of knowledge and resources. Institutional entrepreneurs are actors that challenge and transform existing rules and practices or aim at creating new ones. Finally, place-based leaders are co-ordinating and mobilising different actors and resources for the collective pursuit. Constructing regional resilience calls for this ‘trinity of change agency’. We provide empirical illustrations of our arguments from two peripheral Finish regions that went through similar crises but emerged differently from it. Our findings indicate that the interplay of different types of change agency has a significant role in regional processes of adaptation and adaptability of the region.
    Keywords: resilience; adaptability; change agency; periphery; non-core regions; regional development; crisis; regional policy
    JEL: O30 P48 R10 R58
    Date: 2020–04–14
  13. By: Lee, Neil; Rodríguez-Pose, Andrés
    Abstract: Entrepreneurship is sometimes portrayed as a cure-all solution for poverty reduction. Proponents argue it leads to job creation, higher incomes, and lower poverty rates in the cities in which it occurs. Others, by contrast, posit that many entrepreneurs are actually creating low-productivity firms serving local markets. Yet, despite this debate, little research has considered the impact of entrepreneurship on poverty in cities. This paper addresses this gap using a panel of US cities for the period between 2005 and 2015. We hypothesise that the impact of entrepreneurship depends on whether it occurs in tradeable sectors – and, therefore, is more likely to have positive local multiplier effects – or non-tradable sectors, which may saturate local markets. We find that entrepreneurship in tradeables reduces poverty and increases incomes for non-entrepreneurs. The result is confirmed using an instrumental variable approach, employing the inheritance of entrepreneurial traits as an instrument. In contrast, while there are some economic benefits from non-tradeable entrepreneurship, we find these are not large enough to reduce poverty.
    Keywords: entrepreneurship; Poverty; Cities; Economic development; USA
    JEL: M13 J31 J21 O18 R11
    Date: 2020–04–09
  14. By: Javier Barbero (European Commission - JRC); Olga Diukanova (European Commission - JRC); Carlo Gianelle (European Commission - JRC); Simone Salotti (European Commission - JRC); Artur Santoalha (TIK Centre for Technology, Innovation and culture - UIO)
    Abstract: We make the case for a technology-enabled approach to Smart Specialisation policy making in order to foster its effectiveness by proposing a novel type of economic impact assessment. We use the RHOMOLO model to gauge empirically the general equilibrium effects implied by the Smart Specialisation logic of intervention as foreseen by the policy makers designing and implementing the European Cohesion policy. More specifically, we simulate the macroeconomic effects of achieving the R&D personnel targets planned by a set of Southern European regions. We discuss the implications of the proposed methodology for future assessments of Smart Specialisation.
    Keywords: Rhomolo, Region, Growth, Smart Specialisation; ex-ante policy impact assessment; CGE models; Cohesion policy.
    JEL: C68 O38 R13 R58
    Date: 2020–04
  15. By: Kaiser, Ulrich; Kuhn, Johan M.
    Abstract: Can publicly available, web-scraped data be used to identify promising business startups at an early stage? To answer this question, we use such textual and non-textual information about the names of Danish firms and their addresses as well as their business purpose statements (BPSs) supplemented by core accounting information along with founder and initial startup characteristics to forecast the performance of newly started enterprises over a five years' time horizon. The performance outcomes we consider are involuntary exit, above{average employment growth, a return on assets of above 20 percent, new patent applications and participation in an innovation subsidy program. Our first key finding is that our models predict startup performance with either high or very high accuracy with the exception of high returns on assets where predictive power remains poor. Our second key finding is that the data requirements for predicting performance outcomes with such accuracy are low. To forecast the two innovation-related performance outcomes well, we only need to include a set of variables derived from the BPS texts while an accurate prediction of startup survival and high employment growth needs the combination of (i) information derived from the names of the startups, (ii) data on elementary founder-related characteristics and (iii) either variables describing the initial characteristics of the startup (to predict startup survival) or business purpose statement information (to predict high employment growth). These sets of variables are easily obtainable since the underlying information is mandatory to report upon business registration. The substantial accuracy of our predictions for survival, employment growth, new patents and participation in innovation subsidy programs indicates ample scope for algorithmic scoring models as an additional pillar of funding and innovation support decisions.
    Keywords: startup,performance,prediction,text as data
    JEL: L26 C53
    Date: 2020
  16. By: Pierre-Alexandre Balland; Ron Boschma
    Abstract: Regional capabilities are regarded a pillar of Smart Specialization Strategy (S3). There is yet little focus in S3 policy on the role of inter-regional linkages. Our study on 292 NUTS2 regions in Europe finds that inter-regional linkages have a positive effect on the probability of regions to diversify, especially in peripheral regions. What matters is not being connected to other regions per se but being connected to regions that provide complementary capabilities. Finally, we propose a new indicator that enables regions to identify other regions as strategic partners in their S3 policy, depending on the presence of complementary capabilities in other regions.
    Keywords: Smart Specialization, relatedness, inter-regional linkages, regional diversification, complementary capabilities
    JEL: O25 O38 R11
    Date: 2020–04
  17. By: Nils Grashof (Centre for Regional and Innovation Economics, University of Bremen, Germany)
    Abstract: Human resources are a key factor for firm success, particularly nowadays when most industrial economies face an increasing shortage of qualified labour. With their pooled labour markets, regional clusters have been shown to be a preferable location for firms in order to satisfy their demand for skilled employees. Nevertheless, in light of possible disadvantages (e.g. labour poaching) and the broad field of studies dealing with firm performance differentials, the prevalent assumption that all companies profit equally from the specialized labour pool in clusters must be questioned. Consequently, the aim of this paper is to empirically investigate the conditions and mechanisms through which companies located in clusters can gain, in terms of innovativeness, from the specialized labour pool. By synthesizing theoretical streams from the strategic management (e.g. resource-based view) and the economic geography literature (e.g. cluster approach), variables from three different levels of analysis (micro-level, meso-level and macro- level) are examined separately as well as interactively. Apart from revealing that being located in a cluster indeed increases on average firm innovativeness, one of the central findings is that firms benefit unequally within the cluster environment depending on the specific firm-level, cluster-level, industry-/market-level conditions and their respective interactions.
    Keywords: specialized labour pool, cluster, agglomeration, firm performance differentials, innovation
    JEL: C31 J24 L22 O30 R10 R23
    Date: 2020–04–12

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