nep-sbm New Economics Papers
on Small Business Management
Issue of 2020‒05‒25
sixteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Entrepreneurs embrace competition: Evidence from a lab-in-the-field study By Diemo Urbig; Werner Boente; Vivien D. Procher; Sandro Lombardo
  2. Management Innovations in Family Firms after Succession: Evidence from Japanese SMEs By Hirofumi Uchida; Kazuo Yamada; Alberto Zazzaro
  3. Working Paper 328 - The Cost of Inaction: Obstacles and Lost Jobs in Africa By Andinet Woldemichael; Margaret Joldowski
  4. Assessing the 'digital divide' and its regional determinants: Evidence from a web-scraping analysis By Thonipara, Anita; Sternberg, Rolf G.; Proeger, Till; Haefner, Lukas
  5. The Coronavirus Economic Crisis: Its Impact on Venture Capital and High Growth Enterprises By Colin Mason
  6. Growing through Spinoffs. Corporate Governance, Entry, and Innovation By Maurizio Iacopetta; Raoul Minetti; Pierluigi Murro
  7. Market Orientation as Competitive Advantage in the Age of Corporate Social Responsibility ? An Integrative Framework By Sami Kajalo
  8. Education and Innovation: The Long Shadow of the Cultural Revolution By Zhangkai Huang; Gordon M. Phillips; Jialun Yang; Yi Zhang
  9. The life and death of zombies – evidence from government subsidies to firms By Nurmi, Satu; Vanhala, Juuso; Virén, Matti
  10. Evaluation d'impact de la réforme 2008 du crédit impôt recherche By Antoine Bozio; Sophie Cottet; Loriane Py
  11. The entrepreneurial employee in public and private sector – What, Why, How By Martin LACKEUS; Mats LUNDQVIST; Karen WILLIAMS MIDDLETON; Johan INDEN
  12. The Informational Content of Default Risk in UK Insurance Firms By Mario Cerrato; Paolo Coccorese; Xuan Zhang
  13. Electricity and Firm Productivity: A General-Equilibrium Approach By Stephie Fried; David Lagakos
  14. Regional Strategies for the Social Economy: Examples from France, Spain, Sweden and Poland By OECD
  15. New Firms, Capital Intensity and the Labor Share: New Theoretical and Empirical Insights By Jakob Grazzini; Lorenza Rossi
  16. Vacancies, Employment Outcomes and Firm Growth: Evidence from Denmark By Jesper Bagger; Francois Fontaine; Manolis Galenianos; Ija Trapeznikova

  1. By: Diemo Urbig (Schumpeter School of Business and Economics, University of Wuppertal); Werner Boente (Schumpeter School of Business and Economics, University of Wuppertal); Vivien D. Procher (Grenoble Ecole de Management, Univ Grenoble Alpes ComUE and RWI - Leibniz-Institut für Wirtschaftsforschung); Sandro Lombardo (Schumpeter School of Business and Economics, University of Wuppertal)
    Abstract: Referring to Isreal M. Kirzner (1973) and Joseph A. Schumpeter (1934), who emphasized the competitive nature of entrepreneurship, this study investigates whether potential and revealed entrepreneurs are more likely to seek competition than non-entrepreneurs. We provide a conceptual framework that links entrepreneurship to three facets of individual competitiveness drawn from economic, entrepreneurship, and psychological research: a desire to win, striving for personal development, and an enjoyment of competition. Following economic research linking competitive behavior in experiments to career choices, we conduct a lab-in-the-field study and demonstrate that entrepreneurs are more likely to enter competitions than non-entrepreneurs. Accounting for individual desires to win and mastery-related achievement motivations, our results indicate that entrepreneurs tend to enter competition for the sake of competition itself rather than for the prospect of winning it or personal development. Our results suggest that enjoyment of competition might be an additional factor driving entrepreneurs’ market entry decisions beyond well-known factors like overconfidence and risk taking.
    Keywords: Enjoyment of competition; Individual competitiveness; Entrepreneurship; Behavioral Economics; Lab-in-the-field experiment
    Date: 2020–05
  2. By: Hirofumi Uchida (Graduate School of Business Administration Kobe University); Kazuo Yamada (Faculty of Economics and Graduate School of Economics Nagasaki University); Alberto Zazzaro (Universita' degli Studi di Napoli Federico II)
    Abstract: In this paper, we examine whether family firms are more or less likely to foster management innovation, expanded incumbent business activities, or make advance to new business fields after CEO succession than non-family firms. Using data of 1,149 SMEs (small- and medium-sized enterprises) obtained from a corporate survey in Japan, we find that the new CEOs of family firms are not systematically less or more innovative than their counterparts in non-family firms. However, we also find that this zero effect of family ownership on innovation likelihood is the result of a negative impact of professional successors and a positive impact of heir successors. Finally, we show that access to intangible family assets increases the innovativeness of heir successors and decreases that of professional successors.
    Keywords: Innovation, Family Firm, Family Ownership, Succession
    JEL: L21 J12 Z13 G32 G21
    Date: 2020–05
  3. By: Andinet Woldemichael (Research Department, African Development Bank); Margaret Joldowski (Charles H. Dyson School of Applied Economics and Management, Cornell University)
    Abstract: In a competitive market, the constant “churning” of firms into and out of business boosts productivity, economic growth, and net job creation. Without competitive markets, however, firm exit, and the failures of firm entry could be due to obstacles other than competition and innovation. In African countries, incumbent firms and potential entrants face immense obstacles: a difficult political environment, burdensome business regulations, inadequate infrastructure, and limited access to finance. This report investigates the extent to which such obstacles hinder job creation in general and firm dynamism, particularly. Using World Bank Enterprise Survey (ES) panel data that covers 18 African countries, the report quantifies the number of jobs lost due to obstacles. It finds that a single obstacle reduces annual employment growth by 0.1–0.34 percentage point. Hence, by removing key business obstacles, Africa could boost new job creation and save many existing high-quality jobs. JEL Classification: D22; L11; L25; O43; J23
    Keywords: Unemployment, labor demand, constraints, firm dynamism; doing business
    Date: 2019–12–31
  4. By: Thonipara, Anita; Sternberg, Rolf G.; Proeger, Till; Haefner, Lukas
    Abstract: Following the 'death of distance' postulate, digitization may reduce or even eliminate the penalty of firms being located in rural areas compared with those in urban agglomerations. Despite many recent attempts to measure digitization effects across space, there remains a lack of empirical evidence regarding the adoption of digital technologies from an explicit spatial perspective, i.e. comparing urban with rural areas. Using web-scraping data for a representative sample of 345,000 German firms, we analyze the determinants of homepage usage. Accordingly, we show that homepage usage - as a proxy for the degree of digitization of the respective firm - is highly dependent on location, whereby firms in urban areas are more than twice as likely to use webpages than those located in rural areas. Our county-level analysis shows that a high population density, young population, net gains in internal migration, high educational level and high firm-specific revenues have a positive and significant effect on the probability that firms conduct digital marketing using webpages. Access to broadband internet has a positive effect in rural areas. There are no differences between urban, suburban and rural areas in terms of webpage up-todateness as well as social media usage. We conclude that there is a substantial digital divide in online marketing and discuss policy implications.
    Keywords: digital divide,digitization,Germany,rural,Small and Medium-Sized Enterprises,urban,web-scraping
    JEL: D22 L22 L26
    Date: 2020
  5. By: Colin Mason (University of Glasgow)
    Abstract: This paper has been prepared as a contribution to a larger on-going research activity on high growth innovative enterprises (HGEs) and scale up companies of the European Commission’s Joint Research Centre (JRC), led by the Unit for Finance, Innovation and Growth (B7). This broad activity has been analysing the sectoral and geographical variability of HGE demographics in the EU and the framework conditions affecting their development with an emphasis on financing and risk-financing in particular. In keeping with the JRC’s role of providing evidence and analysis to underpin EU policy, the work is conducted in close contact with a wide range of Commission policy DGs, and is designed to provide both EU-wide and member state specific input to the annual cycle of economic policy coordination in the EU known as the “European Semester†. In the context of the COVID-19 crisis and the policy response to the immediate and subsequent socio-economic fallout, the vulnerability of high-growth and potential high-growth enterprises is of huge concern particularly in view of the disproportionate contribution these enterprises can play in securing a sustainable exit from the crisis in the medium to long term. The importance of risk-capital for these firms means that it is vital to have a close-to-real-time means of monitoring the impacts of the crisis on venture capital markets in Europe and globally so that pertinent evidence can be provided also in close-to-real-time to those developing and implementing the policy response to the crisis. This paper represents a particularly timely contribution in this regard.
    Keywords: Covid-19
    Date: 2020–04
  6. By: Maurizio Iacopetta (Sciences Po-OFCE and SKEMA Business School); Raoul Minetti (Michigan State University); Pierluigi Murro (LUISS University)
    Abstract: New firms are often based on ideas that the founders developed while working for incumbent firms. We study the macroeconomic effects of spinoffs through a growth model of product variety expansion, driven by firm entry, and product innovation. Spinoffs stem from conflicts of interest between incumbent firms' shareholders and employees. The analysis suggests that incumbents invest more in product innovation when knowledge protection is stronger. An inverted-U shape relationship emerges, however, between the intensity of spinoff activities and the strength of the rule of law. A calibration experiment indicates that, with a good rule of law, loosening knowledge protection by 53 reduces product innovation by one fifth in the short run and one seventh in the long run, but boosts the spinoff rate by one tenth and one sixth in the short and long run, respectively. Nevertheless, per capita income growth drops and welfare deteriorates. The trade-offs are broadly consistent with evidence from Italian firms.
    Keywords: Corporate Governance, Endogenous Growth, Spinoffs.
    JEL: E44 O40 G30
    Date: 2020–05
  7. By: Sami Kajalo (Aalto University School of Business)
    Abstract: The present paper focuses on creating an organizing framework that would integrate the two distinct research domains of Market Orientation and Corporate Social Responsibility. Market Orientation (MO) consists of intelligence gathering, dissemination and management?s efforts to implement this new market knowledge for firm?s benefit. Although there is evidence of benefits of MO, recent research also suggests that MO itself does not anymore provide superior performance. Instead MO has become a ?cost of competing?. On the other hand, there is evidence that it is difficult (or even impossible) to achieve high performance without MO. Corporate Social Responsibility (CSR) represents companies? business practices that are intended to improve societal well-being. CSR has taken its place as a key component of firms? overall strategy and its importance is represented in annual reports and corporate websites. Moreover, recent recent suggests that CSR has a small positive impact on companies? financial performance and even a positive effect on shareholder wealth. There are only few previous attemps to focus on the interplay of MO and CSR. The present paper focuses on this research gap and provides an organizing framework to facilitate further research on the interplay of MO and CSR.
    Keywords: Market Orientation, Corporate Social Responsibility, Marketing
    JEL: M31 M14
    Date: 2020–02
  8. By: Zhangkai Huang; Gordon M. Phillips; Jialun Yang; Yi Zhang
    Abstract: The Cultural Revolution deprived Chinese students of the opportunity to receive higher education for 10 years when colleges and universities were closed from 1966-1976. We examine the human capital cost of this loss of education on subsequent innovation by firms, and ask if it impacted firms more than 30 years later. We examine the innovation of firms with CEOs who turned 18 during the Cultural Revolution, which sharply reduced their chances of attending college. Using multiple approaches to control for selection and endogeneity, including an instrument based on whether the CEO turned 18 during the Cultural Revolution and a regression discontinuity approach, we show that Chinese firms led by CEOs without a college degree spend less on R&D, generate fewer patents, and receive fewer citations to these patents.
    JEL: G3 I23 J24 O31 O32
    Date: 2020–05
  9. By: Nurmi, Satu; Vanhala, Juuso; Virén, Matti
    Abstract: We analyze the demographics of zombie firms and durations of zombie spells as well as their determinants, including an application on public subsidies using firm level population panel data from Finland. Firm-level analysis of firm demographics reveals that zombie-firms, as commonly defined in the literature, are often not truly distressed firms but rather companies with temporarily low revenues relative to interest payments. More importantly, we find that roughly a third of these firms are in fact growing companies and two thirds recover from the zombie status to become healthy firms. We also show that the increase of zombie firms over the past 15 years has mainly been driven by cyclical factors, as opposed to a secular trend. In our policy application on government subsidies to firms, estimation results strongly suggest that subsidy-receiving firms are less likely to die, regardless of the type of subsidy. However, with regard to recovery there is heterogeneity in the effects depending on the type of firm and the type of subsidy received. Thus, we do not find a robust positive association of subsidies with zombie recovery.
    JEL: D22 D24 G33 H25 L16 L25 O25
    Date: 2020–05–14
  10. By: Antoine Bozio (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques, PSE - Paris School of Economics); Sophie Cottet (IPP - Institut des politiques publiques); Loriane Py (Centre de recherche de la Banque de France - Banque de France)
    Abstract: Le Crédit d'impôt recherche (CIR) est aujourd'hui le principal dispositif de soutien public à l'investissement en recherche et développement en France. Au vu de l'enjeu, à la fois pour les finances publiques et pour le potentiel de croissance, l'évaluation rigoureuse des politiques publiques de soutien à l'innovation est essentielle. Ce rapport contribue à ces évaluations, encore peu développées, en exploitant de nombreuses sources de données: données fiscales sur les entreprises, sur le crédit d'impôt recherche, sur les aides directes à l'innovation de Bpifrance, ainsi que l'enquête R&D du Ministère de l'Éducation nationale, de l'Enseignement supérieur et de la Recherche et les données PATSTAT de l'Office européen des brevets. L'appariement de ces données met en lumière la segmentation des dispositifs sur des populations d'entreprises aux caractéristiques différentes, mais aussi l'enjeu d'un non-recours élevé à ces dispositifs de soutien à l'innovation. Notre stratégie d'identification préférée repose sur la comparaison d'entreprises qui avaient recours au CIR avant la réforme de 2008 et d'entreprises qui n'ont jamais eu recours au CIR pendant la période d'analyse (2004-2011). Sous l'hypothèse qu'en l'absence de la réforme, l'évolution des dépenses de R&D de ces deux groupes d'entreprises aurait été parallèle, nous obtenons des effets positifs de la réforme sur les dépenses de R&D de l'ordre de 15 % à 18 % impliquant un multiplicateur du crédit d'impôt de 1,3 à 1,5 – c'est-à-dire un effet d'un euro de CIR entraînant de 1,3 à 1,5 euros de dépenses R&D supplémentaires – mais avec un intervalle de confiance qui n'exclut pas que l'effet soit inférieur à 1. L'effet sur les dépôts de brevet met en évidence un effet positif et significatif de l'ordre de 5 % sur la probabilité de déposer un brevet, mais aucun effet sur le nombre de brevets déposés conditionnellement au fait d'avoir déposé un brevet sur la période d'analyse avant réforme. Cet effet de la réforme 2008 sur une mesure de l'innovation permet d'émettre un jugement globalement positif, mais nuancé, avec un effet particulièrement limité au regard de l'effort en termes de finances publiques.
    Date: 2019–03
  11. By: Martin LACKEUS (Chalmers University of Technology); Mats LUNDQVIST (Chalmers University of Technology); Karen WILLIAMS MIDDLETON (Chalmers University of Technology); Johan INDEN (Chalmers University of Technology)
    Abstract: Entrepreneurial employees that drive innovation and change have become a sheer necessity for many established organisations in public and private sector. This report gives a science-based overview of what entrepreneurial employees do, why such behaviours are needed and how any employee can become more entrepreneurial. Being entrepreneurial is not something magic, it is a discipline that can be learned by any employee in private and public sector. A simple explanatory “diamond†model is provided that guides employees, managers and policymakers. The report offers new clarity in an under-researched but important and promising area. What entrepreneurial employees do is that they exercise their deeply personal agency to create something novel of value for others. They learn experientially what value different creations have for others. Employees who do this over time develop their entrepreneurial competences. Why they do this is because it benefits their organisation and themselves. They contribute to overall efficiency, to future-proofing the organisation, and to building a more engaging organisational culture. In return, they get a more meaningful inner work life, higher autonomy, more recognition and a boosted career trajectory. How to become more entrepreneurial is described through four focus areas; agency, novelty, value for others and learning. Entrepreneurial employees raise their agency through dedication, courage and action-taking. They work with novelty through envisioning, claiming and organising the new. They create new value for others through empathic discussions and prototypes. Finally, they learn through analyzing, experimenting with and revising their value creation attempts.
    Keywords: entrepreneurship, lifelong learning, employability, employment, growth, innovation, human capital, future of work
    Date: 2020–05
  12. By: Mario Cerrato; Paolo Coccorese; Xuan Zhang
    Abstract: “Historically, insurers have made money in two ways – returning an underwriting profit and investing premiums and making money on the investment returns.” By Nick Kitchen, Head of Technical Casualty and Motor Lines, Zurich Insurance plc. In this paper, we use a novel data-set of UK public and non-public insurance companies for the period 1985-2014 in order to investigate the empirical relationship between firms’ specific characteristics and default risk. We employ a portfolio approach, and after splitting firms’ returns into underwriting and investment returns, we find evidence that default risk is closely related to size and reinsurance activities, especially for small size firms, and that such firms are much less risky than large firms and earn the highest return when their default risk is low. Some policy implications are also provided.
    JEL: G23 G20 G28
    Date: 2020–02
  13. By: Stephie Fried; David Lagakos
    Abstract: The lack of reliable electricity in the developing world is widely viewed by policymakers as a major constraint on firm productivity. Yet most empirical studies find modest short-run effects of power outages on firm performance. This paper builds a dynamic macroeconomic model to study the long-run general equilibrium effects of power outages on productivity. The model captures the key features of how firms acquire electricity in the developing world, in particular the rationing of grid electricity and the possibility of self-generated electricity at higher cost. Power outages lower productivity in the model by creating idle resources, by depressing the scale of incumbent firms and by reducing entry of new firms. Consistent with the empirical literature, the model predicts that the short-run partial-equilibrium effects of eliminating outages are small. However, the long-run general-equilibrium effects are many times larger, supporting the view that eliminating outages is an important development objective.
    JEL: E13 E23 O11 O41 Q43
    Date: 2020–05
  14. By: OECD
    Abstract: This paper explores the linkages between regional strategies for the social economy and regional development in four EU countries: France, Spain, Sweden and Poland. It provides a comparative perspective of regional strategies for the social economy (Section 1), based on i) the level of recognition of the social economy itself, ii) multi-level governance arrangements, iii) the regional strategic priority given to the social economy and iv) financial resources available for regional strategies. It gives examples of strategies for the social economy in selected regions in the four countries to document the diversity of practice (Section 2). It outlines conclusions and policy orientations (Section 3) to help reinforce the positive impact of regional strategies for the social economy on regional development.
    Keywords: regional development, regional strategies, social economy, social enterprises, social entrepreneurship
    JEL: L3 L31 L38 O18 O35 P13
    Date: 2020–05–19
  15. By: Jakob Grazzini; Lorenza Rossi
    Abstract: This paper considers a two sectors heterogeneous firms model where firms’ specific production technology and capital intensity are endogenously determined through business dynamics. It shows that a shock to the relative price of investment goods is followed by the entrance of new firms characterized by higher capital intensity of production and lower labor income share. Using ORBIS firm-level data of the US economy, the paper finds strong and robust evidence confirming that new firms enter the market with higher capital intensity. Furthermore, firms-level data are used to show that the labor share is significantly affected by capital intensity, as well as by firms’ size and firms’ mark-up.
    Keywords: firms dynamics, firms heterogeneity, labor income share, capital intensity, capital technological change, ORBIS microdata
    JEL: E21 E22 E25
    Date: 2020
  16. By: Jesper Bagger (Royal Holloway, University of London and Dale T. Mortensen Centre, Aarhus University); Francois Fontaine (Paris School of Economics, Universite Paris 1-Pantheon Sorbonne); Manolis Galenianos (Royal Holloway, University of London); Ija Trapeznikova (Royal Holloway, University of London)
    Abstract: We use a comprehensive dataset from Denmark that combines online job advertisements with a matched employer-employee dataset and a firm-level dataset with value added and revenue information to study the relationship between vacancy-posting and various firm outcomes. We find that posting a vacancy significantly increases a firm's hiring rate, and that two-third of the additional hiring occurs in the same quarter while one-third occurs with one quarter lag. The majority of the effect is accounted for by hiring from employment. Small and slow-growth firms show greater hiring responses and the hiring response of high-productivity firms takes longer to materialize. We find that separations that are likely associated with quits predict vacancy posting, consistent with replacement hiring and vacancy chains. Growth in value added and revenue has a strong positive effect on vacancy posting but only when shocks are permanent - transitory shocks do not affect vacancy posting.
    Keywords: Vacancies, hiring, separations, employment growth, firm growth, value added, revenue
    JEL: J23 J63
    Date: 2020–05–15

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