nep-sbm New Economics Papers
on Small Business Management
Issue of 2020‒05‒18
fourteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Financial Distancing: How Venture Capital Follows the Economy Down and Curtails Innovation By Sabrina Howell; Josh Lerner; Ramana Nanda; Richard Townsend
  2. Knowledge-Based Capital and Productivity Divergence By Marie Le Mouel; Alexander Schiersch
  3. 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
  4. The Logic of Value Creation of an Innovative Enterprise – Case Study By Zbigniew Malara; Janusz Kroik
  5. Nowhere Else to Go: The Determinants of Bank-Firm Relationship Discontinuations after Bank Mergers By Oliver Rehbein; Santiago Carbo-Valverde
  6. Making agricultural value chains more inclusive through technology and innovation By Reena das Nair; Namhla Landani
  7. Do Vertical Spillovers Differ by Investors' Productivity? Theory and Evidence from Vietnam By Ni, Bin; Kato, Hayato
  8. ‘To be or not to be’ located in a cluster? A descriptive meta-analysis of the firm-specific cluster effect By Nils Grashof; Dirk Fornahl
  9. Endogenous TFP, business cycle persistence and the productivity slowdown in the euro area By Spitzer, Martin; Schmöller, Michaela
  10. Tenancy by the Entirety and the Value of Wealth Insurance for Entrepreneurs By Traczynski, Jeffrey
  11. Internet in purchase processes of Polish SMEs By Ewa Pralat
  12. Economics of Research and Innovation in Agriculture By Petra Moser
  13. CSR Policies on Community Relationships as Value Drivers of Spanish Firms By Sonia Benito-Hernandez; Cristina Lopez-Cozar Navarro; Gracia Rubio Martin
  14. Pulling Effects in Migrant Entrepreneurship: Does Gender Matter? By Alessandra Colombelli; Elena Grinza; Valentina Meliciani; Mariacristina Rossi

  1. By: Sabrina Howell (New York University); Josh Lerner (Harvard Business School, Entrepreneurial Management Unit); Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit); Richard Townsend (University of California, San Diego)
    Abstract: Although late-stage venture capital (VC) activity did not change dramatically in the first two months after the COVID-19 pandemic reached the U.S., early-stage VC activity declined by 38%. The particular sensitivity of early-stage VC investment to market conditions- which we show to be common across recessions spanning four decades from 1976 to 2017- raises questions about the pro-cyclicality of VC and its implications for innovation, especially in light of the common narrative that VC is relatively insulated from public markets. We find that the implications for innovation are not benign: innovation conducted by VC-backed firms in recessions is less highly cited, less original, less general, and less closely related to fundamental science. These effects are more pronounced for startups financed by early-stage venture funds. Given the important role that VC plays in financing breakthrough innovations in the economy, our findings have implications for the broader discussion on the nature of innovation across business cycles.
    Keywords: Venture Capital, Innovation, Patents, Business Cycles, Recessions
    JEL: G24 O31
    Date: 2020–05
  2. By: Marie Le Mouel; Alexander Schiersch
    Abstract: Understanding the causes of the slowdown in aggregate productivity growth is key to maintaining the competitiveness of advanced economies and ensuring long-term economic prosperity. This paper is the first to provide evidence that investment in Knowledge-Based Capital (KBC), despite having a positive effect on productivity at the micro level, is a driver of the weak productivity performance at the aggregate level, by accentuating divergence between a group of “frontier” firms and the rest of the economy. Using detailed firm-level administrative data for Germany, we find evidence that the effect of KBC on productivity is heterogeneous across firms within industries: this effect is 3 times larger for firms in the top quintile of the KBC distribution compared to firms in the bottom quintile of the KBC distribution. We document the existence of divergence in productivity growth between top KBC users and the rest of firms at the industry level, and find that industries where this gap is larger are also those industries where the heterogeneity in the effect of KBC is highest and where average productivity growth was lower. The evidence hence supports the view that the use of KBC plays a role in explaining weak productivity growth, by accentuating differences between firms.
    Keywords: Knowledge-Based Capital, firm dynamics, productivity divergence
    JEL: D24 L25 O14 O30 O47
    Date: 2020
  3. By: Mihaescu, Oana (Institute of Retail Economics (Handelns Forskningsinstitut)); Korpi, Martin (Ratio); Öner, Özge (University of Cambridge)
    Abstract: We investigate to which extent shopping centers are drivers of 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) between 2000 and 2016. We use a regression setup with 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 when large shopping centers make entry, yielding an average negative effect of 5% on incumbent firm revenue and 3% on firm employment, results indicate an opposite pattern for smaller shopping centers, with firm revenue and firm employment increasing by 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, the results indicate that the geographical scope of the effects is much wider in the case of larger shopping centers, with the estimates becoming 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: 2020–05–06
  4. By: Zbigniew Malara; Janusz Kroik
    Abstract: The purpose of the study was to diagnose: sources, premises, attitudes fostering innovation under conditions of long term implementation of BOS by a small enterprise from the IT industry and development of the scope of measurements for the target research. The research method is a case study analysis, for which confirmation of the formulated assumption is sought (Wójcik, 2013). The sources of data are structured interviews with the manager determining the company strategy. Detailed questions were prepared, using publications concerning BOS and VIL focused on the problem being tackled. The threshold issue, from the point of view of BO, was analysis of the so-called patterns traps of thinking, as well as ways of motivating teams. An important problem was also the assessment of priorities in competing through product innovation and through development of relations with the customer (Osterwalder & Pigneur, 2011, p. 83). The title of the study is: “The Logic of Value Creation of an Innovative Enterprise - Case Study”. The use of the term “logic” in the title emphasizes the assumption adopted by the authors, that in the case analysis conducted, there is a specific structure of activities and methodological solutions that support innovation, which are in accordance with the guidelines indicated by various authors in the literature and used in organizational practice of companies. Further in the article, it was demonstrated based on the constructed measurement tool (interview template with the main manager) that allowed to formulate the supposition that the use of this tool is possible for other innovative companies. In the first case, the suggestion applies to IT companies.
    Keywords: Innovation; Organizational practice; IT companies
    JEL: L25 M00 M10 O31
    Date: 2019–03–29
  5. By: Oliver Rehbein; Santiago Carbo-Valverde
    Abstract: The decision to change or terminate a bank-firm relationship has been demonstrated to be crucial to firm performance following bank mergers. We investigate what determines this decision and find both bank competition and the available firm collateral to be important factors. We additionally provide new evidence that firms that are able to add a bank rela- tionship following a merger exhibit much stronger post-merger performance. Our findings are consistent with the interpretation that bank mergers cause a reduction in lending to most firms, leading them to search for alternative sources of finance.
    Keywords: bank mergers, relationship banking, competition
    JEL: G21 G34
    Date: 2020–05
  6. By: Reena das Nair; Namhla Landani
    Abstract: Some entry barriers in agricultural and agro-processing value chains, particularly for smallholder farmers and small/medium-sized processors, can be overcome with innovation and technology adoption. Technologies and innovation in these sectors have been both radical and incremental, ranging widely through biotechnology; production technologies; automation in sorting, grading, and packaging; and digital platforms and data-connected devices for market access.
    Keywords: Innovation, Technology, agricultural technology, upgrading, Value chains, Agriculture, Agro-processing, inclusive, Capabilities
    Date: 2020
  7. By: Ni, Bin; Kato, Hayato
    Abstract: Developing countries are eager to host foreign direct investment to receive positive technology spillovers to their local firms. However, what types of foreign firms are desirable for the host country to achieve spillovers best? We address this question using firm-level panel data from Vietnam to investigate whether foreign Asian investors in downstream sectors with different productivity affects the productivity of local Vietnamese firms in upstream sectors differently. Using endogenous structural breaks, we divide Asian investors into low-, middle-, and high-productivity groups. The results suggest that the presence of the middle group has the strongest positive spillover effect. The differential spillover effects can be explained by a simple model with vertical linkages and productivity-enhancing investment by local suppliers. The theoretical mechanism is also empirically confirmed.
    Keywords: FDI spillovers; Heterogeneous productivity; Firm-level data; Endogenous structural break; Vertical Cournot model
    JEL: D22 F21
    Date: 2020–03–27
  8. By: Nils Grashof (University of Bremen); Dirk Fornahl (University of Bremen)
    Abstract: In the 21st century clusters can be observed in most developed economies. However, the scientific results regarding the effect of clusters on firm performance are highly contradictive. This inconsistency in the empirical results makes it difficult to infer general conclusions about the firm-specific cluster effect, referring to the effect from being located in a cluster on firm performance, e.g. derived through the externalities within clusters. Therefore, this paper aims to reconcile the contradictory empirical findings. It investigates whether the still prevalent assumption that clusters are a beneficial location for firms is unconditionally true or whether doubts about the alleged positive effect of clusters on firm performance are justified. By conducting a descriptive meta-analysis of the empirical literature, based on four different performance variables from four separate publication databases, the study investigates the actual effect direction as well as possible moderating influences. We find evidence for a rather positive firm-specific cluster effect. However, we identify several variables from the micro-, meso- and macro-level that directly or interactively moderate the relationship between clusters and firm success. The corresponding results demonstrate, for example, that a negative firm-specific cluster effect occurs more frequently in low-tech industries than in high-tech industries. ‘To be or not to be’ located in a cluster is therefore not the question, but it rather depends on the specific conditions.
    Keywords: : meta-analysis, cluster effect, firm performance
    Date: 2020–03
  9. By: Spitzer, Martin; Schmöller, Michaela
    Abstract: This paper analyses the endogeneity of euro area total factor productivity and its role in business cycle amplification by estimating a medium-scale DSGE model with endogenous productivity mechanism on euro area data. In this framework, total factor productivity evolves endogenously as a consequence of costly investment in R&D and adoption of new technologies. We find that the endogeneity of TFP induces a high degree of persistence in the euro area business cycle via a feedback mechanism between overall economic conditions and investment in productivity-enhancing technologies. As to the sources of the euro area productivity slowdown, we conclude that a decrease in the efficiency of R&D investment is among the key factors generating the pre-crisis productivity slowdown, while starting from the Great Recession a shock to liquidity demand is identified as the most important driving force. The endogenous technology mechanism further exerts a dampening effect on the inflation response following a recessionary shock and hence has important implications for both the negligible fall in inflation during the Great Recession, as well as the sluggish increase of inflation in the subsequent recovery. JEL Classification: E24, E32, O31
    Keywords: endogenous productivity, euro area business cycles, low inflation, weak growth
    Date: 2020–05
  10. By: Traczynski, Jeffrey (Federal Deposit Insurance Corporation)
    Abstract: This paper explores the willingness of entrepreneurs to pay for wealth insurance to protect personal assets in case of business failure and the impact of this strategy on small business operation decisions. I show that antidiscrimination laws allow married firm owners in half of U.S. states to choose between asset protection and having more collateral for business funding, allowing entrepreneurs to reveal their valuation for preserving personal assets at time of failure. I find that firm owners value asset protection offered by tenancy by the entirety laws at $900-$1000 per year. Firms receive smaller loans when entrepreneurs use this form of ownership to reduce the personal costs of firm failure, but show no differences in hiring patterns or spending on risky projects. This strategy of preparation in case of failure appears to affect small businesses through the funding channel.
    Keywords: personal bankruptcy, tenancy by the entirety, revealed preference, entrepreneurship
    JEL: K35 K36 L26 M13
    Date: 2020–04
  11. By: Ewa Pralat
    Abstract: The aim of this paper is to examine how small and medium-sized enterprises use Internet in their purchase processes. The available Internet tools included homepages of suppliers, company blogs, social networks, B2B e-commerce websites, B2B e-marketplaces, e-catalogues, e-requests, etc. The matter of the sources of information about suppliers was also raised. The author conducted a survey among 126 small and medium-sized enterprises from the Lower Silesia Region. It was aimed at learning their preferences as to how to use the Internet in the purchasing process, at evaluating the usage rate of individual solutions and at identifying the types of products bought via the Internet.
    Keywords: SME; Purchase process; Internet tool
    JEL: L25 L81 L86
    Date: 2020–05–06
  12. By: Petra Moser
    Abstract: Feeding the world’s growing population is one of the most critical policy challenges for the 21st century. With tightening constraints on water, arable land, and other natural resources, agricultural innovation is quickly becoming the most promising path meet the nutrient needs for future generations. At the same time, the increasing variability in the world’s climate intensifies the need for developing new crops that can tolerate extreme weather. Despite the urgency of this task, there is an active discussion on the returns to public and private spending in agricultural R&D, and many of the world’s wealthier countries have scaled back their share of GDP devoted to agricultural R&D. Dwindling public support leaves universities, which, historically, have been a major source of agricultural innovation, increasingly dependent on funding from industry, with uncertain effects on agricultural research. All of these factors create an urgent need for systematic empirical evidence on the forces that drive research and innovation in agriculture. This book aims to provides such evidence through economic analyses of the sources of agricultural innovation, the challenges of measuring productivity, the role of universities and their interactions with industry, and emerging mechanisms to fund agricultural R&D.
    JEL: N5 O3 O32 O33 Q16 Q18 Q24 Q25 Q54 Q55
    Date: 2020–05
  13. By: Sonia Benito-Hernandez (Universidad Politecnica de Madrid); Cristina Lopez-Cozar Navarro (Universidad Politecnica de Madrid); Gracia Rubio Martin (Universidad Complutense de Madrid)
    Abstract: This paper provides empirical evidence of efforts to enable Spanish manufacturing companies to boost their economic profitability rates through the development of Corporate Social Responsibility (CSR) policies. This study aims to develop new approaches and sensibilities towards work from an ethical, values (virtues) and CSR perspective, showing how internal and externaldimensions of CSR -such as those related to relationships with employees, relationship with the community and responsibility in process quality management -contribute to improve the economic profitability of the company (ROA) in addition to improving society. The results of a sample of 6,186 businesses show that, in general, the implementation of collaboration policies have increased relationships with the community. Alliances with competitors, institutions and suppliers had a significant positive effecton increased ROA. Nevertheless, as we anticipated, cooperation with customers had a negative impact on ROA. In addition, to improve relationships with employees, the implementation of quality policies had a positive and relevant impact on the ROA.
    Keywords: Economic Profitability, Policies of CSR, Employees’ Relations, Responsibility in Quality Management, Community Relations
    JEL: M14 L20
    Date: 2020–05
  14. By: Alessandra Colombelli (DIGEP, Politecnico di Torino); Elena Grinza (LUISS University); Valentina Meliciani (Department of Management, University of Turin); Mariacristina Rossi (Collegio Carlo Alberto)
    Abstract: In this paper, we examine whether the existing stock of migrant firms induces more new firms of the same co-ethnic group in the same sector and province. We do so by analyzing the number of new firms created each year by country of origin, sector, and province, drawing on administrative data of the population of individual entrepreneurs observed over the period 2002-2013. We find support for a strong attractiveness (pulling) effect. We also find that this effect significantly differs by gender: female migrant entrepreneurs show lower reactiveness to the existing stock of firms compared to their male counterparts. We finally show that such gender differences are stronger for migrants coming from more gender-unequal countries. On the contrary, the degree of gender inequality in the region of destination does not matter.
    Keywords: Migrant entrepreneurship, pulling effect, gender differences, gender inequality, country of origin, region of destination
    JEL: L26 J15 J16
    Date: 2020–05

This nep-sbm issue is ©2020 by João Carlos Correia Leitão. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.