nep-sbm New Economics Papers
on Small Business Management
Issue of 2020‒07‒20
eighteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The cost of weak institutions for innovation in China By Rodríguez-Pose, Andrés; Zhang, Min
  2. Firm and Technology Dynamics in the Short- and Long-Run: A Macroeconomic Model for Research and Innovation Policy Evaluation By BENEDETTI FASIL Cristiana; IMPULLITTI Giammario; LICANDRO Omar; SEDLACEK Petr
  3. Review of theoretical and empirical studies of state support for small and medium-sized enterprises: the ecosystem approach By Barinova, Vera (Баринова, Вера); Zemtsov, Stepan (Земцов, Степан); Tsareva, Yulia (Царева, Юлия)
  4. Place-Based Innovation Ecosystems. A Case-Study Comparative Analysis By Gabriel Rissola; Jurgen Haberleithner
  5. Higher Education for Smart Specialisation: The Case of Lithuania By Zilvinas Martinaitis; Eskarne Arregui-Pabollet; Lina Stanionyte
  6. The Impact of COVID-19 on Small Business Owners: Evidence of Early-Stage Losses from the April 2020 Current Population Survey By Fairlie, Robert W.
  7. Did bank lending stifle innovation in Europe during the Great Recession? By Oana Peia; Davide Romelli
  8. Regional patterns of unrelated technological diversification: the role of academic inventors By Francesco Quatraro; Alessandra Scandura
  9. From Imitation to Innovation: Where Is all that Chinese R&D Going? By Michael König; Zheng Michael Song; Kjetil Storesletten; Fabrizio Zilibotti
  10. Smart Specialisation, an innovation bridge between the EU and Latin America By Albane Demblans; Cristiano Cagnin; Javier Gomez
  11. Supporting innovative entrepreneurship: an evaluation of the Italian "Start-up Act" By Francesco Manaresi; Carlo Menon; Pietro Santoleri
  12. In the Eye of the Storm: Firms, Putty-Clay and Capital Destruction By Martino Pelli; Jeanne Tschopp; Natalia Bezmaternykh; Kodjovi M Eklou
  13. Learning opportunities stemming from place-based transformative Smart Specialisation. Examples from Visegrad Group countries. By Katerina Ciampi Stancova
  14. Does Firm Size Effect Wages and Labor productivity? -Micro data analysis in case of Japan- By Ai Oku; Shun Inoue; Tsubasa Masui
  15. Hidden champions: A review of the literature & future research avenues By Schenkenhofer, Julian
  16. EIDES 2020: The European Index of Digital Entrepreneurship Systems By Erkko Autio; Laszlo Szerb; Eva Komlosi; Monika Tiszberger
  17. Innovative Entrepreneurship as a Collaborative Effort: An Institutional Framework By Elert, Niklas; Henrekson, Magnus
  18. Towards Entrepreneurial Ecosystem Indicators : Speed and Acceleration By Th\'eophile Carniel; Jean-Michel Dalle

  1. By: Rodríguez-Pose, Andrés; Zhang, Min
    Abstract: Does the variation in the quality of local government institutions affect the capacity of firms to innovate? This paper uses a unique dataset that combines the specific features of 2,700 firms with the institutional and socioeconomic characteristics of the 25 cities in China where they operate, in order to assess the extent to which institutional quality -- measured across four dimensions: rule of law, government effectiveness, corruption, and regulatory quality -- affects both the innovation probability and intensity of firms. The results of the econometric analysis show that poor institutional quality in urban China is an important barrier for firm-level innovation. In particular, a deficient rule of law, high corruption, and a weak regulatory quality strongly undermine firm-level innovation. The role of these factors is far more limited in the case of innovation intensity. Better institutions also reduce the amount of time firms spend dealing with government regulations in order to facilitate innovation. The results also indicate that the cost of weak institutions for innovation is higher for private than for state-owned firms, at least in the early stages of innovation. In general, differences in institutional quality generate local urban ecosystems that impinge on the propensity of firms to innovate.
    Keywords: China; cities; firms; Government quality; Innovation; institutions
    JEL: H1 O3 O31
    Date: 2020–02
  2. By: BENEDETTI FASIL Cristiana (European Commission - JRC); IMPULLITTI Giammario; LICANDRO Omar; SEDLACEK Petr
    Abstract: We develop a dynamic stochastic general equilibrium model with firm and technology dynamics to assess the impact of a rich set of innovation policies. We explore the aggregate and cross-sectional effects of an R&D tax credit, corporate taxes, and policies affecting firms’ access to credit. Two main results emerge. First, the aggregate impact of these policies is driven by general equilibrium effects operating via the government budget, the labor market and via equilibrium entry of firms. In contrast, their stimulating effect on innovation and productivity growth has a negligible impact on aggregate income and employment. Second, we find that uniform policies have heterogeneous effects on firms and their size distribution which generate rich feedbacks to the aggregate economy.
    Keywords: Firm dynamics, innovation policy, endogenous growth, business cycles
    Date: 2020–06
  3. By: Barinova, Vera (Баринова, Вера) (The Russian Presidential Academy of National Economy and Public Administration); Zemtsov, Stepan (Земцов, Степан) (The Russian Presidential Academy of National Economy and Public Administration); Tsareva, Yulia (Царева, Юлия) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The long history of support for small and medium enterprises in Russia has not yet led to the active development of entrepreneurship, so the current principles of support require adjustment. The main goal of this work was to analyze and summarize the relevant theoretical and empirical studies on the ecosystem approach in supporting small and medium enterprises. The necessity of supporting small and medium-sized enterprises is substantiated, the prerequisites for the implementation of such support at different levels are examined, criticism of traditional approaches to supporting SMEs is presented, and the rationale for applying the ecosystem approach to stimulating entrepreneurship is analyzed. Among empirical studies of state support for small and medium-sized enterprises, the authors separately considered the massive support for SMEs, support for technology companies and fast-growing firms, as well as regional support for SMEs with elements of an ecosystem approach
    Date: 2020–03
  4. By: Gabriel Rissola (European Commission - JRC); Jurgen Haberleithner
    Abstract: This case-study comparative analysis focuses on five different Place-based Innovation Ecosystems in four countries of the European Union (namely Espoo in Finland, Barcelona in Spain, Gothenburg in Sweden and Ljubljana in Slovenia) and one in the United States of America (Boston) and seeks to generate scientific evidence for the future development of the European Union policies related to innovation in the context of regional and urban innovation ecosystems. All five selected and presented Place-based Innovation Ecosystems have been individually synthesised, analysed and compared based on common dimensions of analysis. These results allowed - as a first theoretical approximation to a specific typology - to define five different models of Place-based Innovation Ecosystems, with the potential to serve as an indicative reference for the development of other EU (and non-EU) cases. In conclusion, this study evidences a high complexity of innovation ecosystems with different levels of implementation of the Quadruple Helix Model and different kind of interrelations with Smart Specialisation Strategies and their inherent Entrepreneurial Discovery Processes. Orchestrators and main key-players play an essential role in the governance of the innovation ecosystems, performing a leadership role concerning local, regional, national and international innovation-related policy agendas. This leadership, talent attraction and retaining, the presence of research and innovation infrastructure, complementary system stakeholders and internationalisation were detected as core elements for successful local and regional innovation ecosystems.
    Keywords: Place-based, Territorial, Innovation Ecosystems, Smart Specialisation, Quadruple Helix, Espoo, Barcelona, Gothenburg, Ljubljana, Boston
    Date: 2020–05
  5. By: Zilvinas Martinaitis (Visionary Analytics); Eskarne Arregui-Pabollet (European Commission - JRC); Lina Stanionyte (European Commission - JRC)
    Abstract: This technical report presents the findings of the case study carried out in Lithuania on the role of Lithuanian Higher Education Institutions (HEIs) in the design and implementation of the Smart Specialisation Strategy (S3). It is one of the case studies undertaken in the project Higher Education for Smart Specialisation (HESS), an initiative of the European Commission's Joint Research Centre (JRC) and the Directorate General for Education, Youth, Sport and Culture. The research shows that the Smart Specialisation Strategy in Lithuania has constituted an important framework to coordinate research and innovation policies and investments with a significant improvement from past experiences, creating a space for a participatory process of innovation stakeholders. The higher education institutions are actively participating in the S3 process, with a good correlation of the S3 selected priority areas and the higher education research capacities, but with no significant changes in the internal decision-making. The higher education system presents an unbalanced funding model, with most incomes devoted to education activities rather than research and innovation. The research and innovation system of Lithuania is highly dependent on European Structural and Investment Funds, as national funding is comparatively very small, creating specific challenges in the implementation of the Smart Specialisation concept. Too narrowly defined priority areas can create a lock down effect in terms of broad support to innovation with limited funding sources to counterbalance. There is a growing demand of the productive sector of skilled students in engineering/STEM fields. This has increased demands of discussion spaces between public authorities, business and higher education to re-balance the attraction of students from social sciences to STEM studies, as well as a stronger policy to attract international talent. A long-term agreement between the Government and HEIs regarding the future HE educational offer, research priorities and resources could strengthen the contribution of higher education to S3, building on the experience of this case study and bringing forward its recommendations.
    Keywords: Smart specialisation strategies, higher education institutions, universities, territorial development, human capital, skills, innovation and growth, entrepreneurship
    Date: 2020–06
  6. By: Fairlie, Robert W. (University of California, Santa Cruz)
    Abstract: Social distancing restrictions and demand shifts from COVID-19 are expected to shutter many small businesses, but there is very little early evidence on impacts. This paper provides the first analysis of impacts of the pandemic on the number of active small businesses in the United States using nationally representative data from the April 2020 CPS – the first month fully capturing early effects from the pandemic. The number of active business owners in the United States plummeted by 3.3 million or 22 percent over the crucial two-month window from February to April 2020. The drop in business owners was the largest on record, and losses were felt across nearly all industries and even for incorporated businesses. African-American businesses were hit especially hard experiencing a 41 percent drop. Latinx business owners fell by 32 percent, and Asian business owners dropped by 26 percent. Simulations indicate that industry compositions partly placed these groups at a higher risk of losses. Immigrant business owners experienced substantial losses of 36 percent. Female-owned businesses were also disproportionately hit by 25 percent. These findings of early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality.
    Keywords: small business, entrepreneurship, self-employment, COVID-19, coronavirus, shelter in place, social distancing
    JEL: J15 J16 L26
    Date: 2020–05
  7. By: Oana Peia; Davide Romelli
    Abstract: Using the 2008-09 Global Financial crisis and the 2012 Euro area sovereign debt crisis as natural experiments, we investigate the effects of contractions in credit supply on R&D spending in a large sample of European firms. Our identification strategy exploits differences in financial constraints across firms, as well as the cross-industry variation in dependence on external finance, to identify a causal effect of bank credit supply on firm investment in innovation. We show that firms that are more likely financially constrained, in industries more dependent on external finance, have a disproportionally lower growth rate of R&D spending, as well as lower R&D intensity and share of R&D investment in total investment during periods of tight credit supply. These results are robust to different proxies of financial constraints, model specifications and fixed-effects identification strategies.
    Keywords: Financial frictions; Investment; Innovation; R&D spending
    JEL: O30 G21 I22
    Date: 2019–11
  8. By: Francesco Quatraro; Alessandra Scandura
    Abstract: This paper investigates the relationship between the involvement of academic inventors in local innovation dynamics and the patterns of regional technological diversification. Based on the combination of the evolutionary economic approach and the theories on regional innovation capabilities, and on the distinctive features of academic inventors, we hypothesise that knowledge spillovers accruing from the participation of university scientists to local patenting activity influence the extent of regional technological diversification. In addition, we posit that the involvement of academic inventors mitigates the path dependency engendered by the constraining role of the existing capabilities. The empirical results highlight the key role of academic institutions for the development of regional technological trajectories while contributing to the academic and policy debate on regional diversification strategies.
    Keywords: regional diversification, relatedness, academic inventors
    JEL: O33 R11
    Date: 2020
  9. By: Michael König; Zheng Michael Song; Kjetil Storesletten; Fabrizio Zilibotti
    Abstract: We construct a model of firm dynamics with heterogeneous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007--2012. The estimated model fits the Chinese data well. We compare the estimates with those obtained using data for Taiwan and find the results to be robust. We perform counterfactuals to study the effect of alternative policies. We find large effects of R&D misallocation on long-run growth.
    JEL: L16 O31 O47 O53
    Date: 2020–06
  10. By: Albane Demblans (European Commission - JRC); Cristiano Cagnin (European Commission - JRC); Javier Gomez (European Commission - JRC)
    Abstract: Since 2016, the International Urban Cooperation Programme has been a vehicle for cooperation between the European Union and Latin America on the topic of innovation for local and regional development. In this endeavour, the Smart Specialisation approach originally deployed in the EU, and its potential to foster localised, innovation-driven sustainable territorial development, have been a great source of inspiration. Building on the 20 regional pairings between regions from the EU and Latin America (Mexico, Brazil, Colombia, Argentina, Chile and Peru), this Science for Policy Report analyses the outcomes and the lessons generated by transcontinental cooperation and examines the potential to enshrine the EU touch on Smart Specialisation in the innovation landscape of Latin America.
    Keywords: European Union, Latin America, innovation, local and regional development, Smart Specialisation
    Date: 2020–05
  11. By: Francesco Manaresi (Directorate General for Economics, Statistics and Research, Bank of Italy); Carlo Menon (Laterite); Pietro Santoleri (Institute of Economics and EMbeDS, Sant'Anna School of Advanced Studies)
    Abstract: The role of innovative start-ups in contributing to aggregate economic dynamism has attracted increased attention in recent years. While this has translated into several public policies explicitly targeting them, there is little evidence on their e ectiveness. This paper provides a comprehensive evaluation of the "Start-up Act", a policy intervention aimed at supporting innovative start-ups in Italy. We construct a unique database encompassing detailed information on firm balance-sheets, employment, firm demographics, patents and bank-firm relationships for all Italian start-ups. We use conditional difference-in-differences and instrumental variable strategies to evaluate the impact of the "Start-up Act" on firm performance. Results show that the policy induces a significant increase in several firm outcomes whereas no effect is detected in patenting propensity and survival chances. We also document that the policy alleviates nancial frictions characterizing innovative start-ups through the provision of tax credits for equity and a public guarantee scheme which, respectively, trigger an increase in the probability of receiving VC and accessing bank credit.
    Keywords: Start-ups; Entrepreneurship policy; Policy Evaluation; Firm performance
    JEL: M13 L25 L53 D04
    Date: 2020–07
  12. By: Martino Pelli; Jeanne Tschopp; Natalia Bezmaternykh; Kodjovi M Eklou
    Abstract: In this paper we provide a new identification strategy to test for the presence of putty-clay capital, i.e. capital that once installed cannot be re-invested. Using a panel of Indian manufacturing firms between 1995 and 2006, we quantify the response of firm sales within and across industries to an exogenous negative shock to the firm capital stock and find effects akin to Schumpeterian creative destruction, where surviving firms build back better. We show that within an industry, the sales of less productive firms decrease disproportionately more, while across industries capital destruction leads to a shift in sales towards more performing industries; which is consistent with a putty-clay technology. As a source of shock, we use a novel measure of firm exposure to storms based on the maximum wind speed exerted by each storm on each of the postal codes where the headquarters and the establishments of a firm are located. We establish that, depending on their strength, storms destroy up to 75.3% of the fixed assets of the median firm (in terms of its productivity and industry performance) and cause a decrease in its sales that can reach 99%.
    Keywords: firms, putty-clay capital, creative destruction, storms
    JEL: D22 D24 Q54
    Date: 2020–06
  13. By: Katerina Ciampi Stancova (European Commission - JRC)
    Abstract: Smart specialisation (S3) is a place-based agenda for regional economic transformation. To that end, smart specialisation emphasises the importance of strategic thinking, good (multi-level) governance, existence of public institutions that are able to orchestrate fruitful discussion about the region’s future development trajectories as well as develop appropriate policy instruments and interventions, and finally engaged stakeholders that are willing to take an active lead in local development. In order to achieve these objectives, public institutions are required to learn constantly – explore, integrate and exploit knowledge acquired by individuals. The proposition of this study is to discuss if and how smart specialisation fosters policy learning and to provide some evidence on implementation of smart specialisation and associated policy learning opportunities in Visegrad Group countries.
    Keywords: smart specialisation, policy learning, knowledge networks, innovation policy, Visegrad Group countries
    Date: 2020–05
  14. By: Ai Oku (Chief Economist, Policy Research Institute); Shun Inoue (Researcher, Policy Research Institute); Tsubasa Masui (Officer, Policy Research Institute)
    Abstract: This paper analyzes the relationship of gfirm size and wages h and gfirm size and labor productivity h by using micro data of Financial Statements Statistics of Corporations by Industry FY2018. We find that 1) in the manufacturing sector, the larger the firm is, the higher the wages and labor productivity are, 2) in the services sector, especially large firms (250 employees or over), the relationship between gfirm size and wages h and gfirm size and labor productivity h is not as strong as that in the manufacturing sector, 3) in both the manufacturing sector and the services sector, wages and labor productivity have a positive correlation.
    Keywords: Firm size, wage, labor productivity, Financial Statements Statistics of Corporations by Industry
    JEL: D22 J24 J31 L25
    Date: 2020–01
  15. By: Schenkenhofer, Julian
    Abstract: Substantial efforts have contributed to overcome the scarcity of hidden champions research. Nevertheless, literature has missed to compile a comprehensive review. Drawing on the insights of 94 publications, four strands of literature could be distinguished to unravel the essence of hidden champions. Research on hidden champions studies their 1) internationalization strategies, 2) R&D and innovation strategies, the 3) worldwide and regional geographic distribution of hidden champions and finally 4) other research that could not be assigned to one of the first three strands. A hand-collected sample of 1372 German hidden champions exemplifies the key insights from the reviewed research articles. Discussing the findings of the different literature strands aims at drawing a conclusion on their main results and analytical pitfalls to eventually unfold and motivate future research avenues.
    Keywords: Literature Review,Hidden Champions,Niche Strategy
    JEL: D4 L1 L22 O32
    Date: 2020
  16. By: Erkko Autio (Imperial College London Business School); Laszlo Szerb (University of Pécs); Eva Komlosi (University of Pécs); Monika Tiszberger (University of Pécs)
    Abstract: Digitalisation is shaping and even transforming both the location and nature of entrepreneurial opportunities in the economy and the practices to pursue them. In order to help maximise the productivity potential of the digitally enhanced entrepreneurial dynamic in countries, policymakers need to understand the state of their countries' digital framework conditions for entrepreneurship. The European Index of Digital Entrepreneurship Systems (EIDES) addresses this gap by monitoring digital framework and systemic conditions for entrepreneurial stand-up, start-up, and scale-up in the EU27 countries and the United King-dom. This is the third edition of the EIDES. It provides an assessment of framework conditions for digital start-ups and scale-ups in European countries in 2020 and analyses their evolution in the period between 2018 and 2020.
    Keywords: Digital Economy, Entrepreneurship, Start-up, Scale-up, framework conditions
    Date: 2020–06
  17. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: We demonstrate how successful entrepreneurship depends on a collaborative innovation bloc (CIB), a system of innovation that evolves spontaneously and within which activity takes place through time. A CIB consists of six pools of economic skills from which people are drawn or recruited to form part of a collaborative team, which is necessary for innovation-based venturing to flourish. The six pools include entrepreneurs, inventors, early- and later-stage financiers, key personnel, and customers. We show how the application of the CIB perspective can help make institutional and evolutionary economics more concrete, relevant, and persuasive, especially regarding institutional prescriptions. Generally, we envision an institutional framework that improves the antifragility of CIBs and the economic system as a whole, thus enabling individual CIBs and the broader economic system to thrive when faced with adversity.
    Keywords: Institutional economics; Evolutionary economics; Antifragility; Entrepreneurship; Innovation; Institutions
    JEL: D20 G32 L23 L26 O33
    Date: 2020–06–24
  18. By: Th\'eophile Carniel; Jean-Michel Dalle
    Abstract: We suggest the use of indicators to analyze entrepreneurial ecosystems, in a way similar to ecological indicators: simple, measurable, and actionable characteristics, used to convey relevant information to stakeholders and policymakers. We define 3 possible such indicators: Fundraising Speed, Acceleration and nth-year speed, all related to the ability of startups to develop more or less rapidly in a given ecosystem. Results based on these 3 indicators for 6 prominent ecosystems (Berlin, Israel, London, New York, Paris, Silicon Valley) exhibit markedly different situations and trajectories. Altogether, they contribute to confirm that such indicators can help shed new and interesting light on entrepreneurial ecosystems, to the benefit of potentially more grounded policy decisions, and all the more so in otherwise blurred and somewhat cacophonic environments.
    Date: 2020–06

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