nep-sbm New Economics Papers
on Small Business Management
Issue of 2020‒09‒07
sixteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Implementation of Smart Specialisation Strategies in Portugal: An assessment By Manuel Laranja; John Edwards; Hugo Pinto; Dominique Foray
  2. The Decline of Small Cities: Increased Competition from External Shopping Malls or Long-Term Negative Trends? By Daunfeldt, Sven-Olov; Mihaescu, Oana; Rudholm, Niklas
  3. The Multiple Perception of Innovation: The Case of Micro and Small Enterprises in the Region of Eastern Macedonia and Thrace By Vlados, Charis; Chatzinikolaou, Dimos
  4. Mysteries of the Trade? Skill-Specific Local Agglomeration Economies By Andersson, Martin; Larsson, Johan P
  5. Small Business Survival Capabilities and Policy Effectiveness: Evidence from Oakland By Robert P. Bartlett III; Adair Morse
  6. Skilled Human Capital and High-Growth Entrepreneurship: Evidence from Inventor Inflows By Benjamin Balsmeier; Lee Fleming; Matt Marx; Seungryul Ryan Shin
  7. Spouses and Entrepreneurship By João Alfredo Galindo da Fonseca; Charles Berubé
  8. The Determinants of Total Factor Productivity in the Portuguese Quaternary Sector By Paulo Matos; Pedro Neves
  9. Financial Support to Innovation: the Role of European Development Financial Institutions By Stefano CLÃ’; Marco FRIGERIO; Daniela VANDONE
  10. Immigrant Entrepreneurs as Job Creators: The Case of Canadian Private Incorporated Companies By Picot, Garnett; Rollin, Anne-Marie
  11. The effects of R&D tax incentives and their role in the innovation policy mix: Findings from the OECD microBeRD project, 2016-19 By OECD
  12. Corporate taxes and high-quality entrepreneurship: evidence from a tax reform By Ana Venâncio; Victor Barros; Clara Raposo
  13. Trade Facilitation, R&D Innovation, and Export Sophistication of Manufacturing Industries: Evidence from Russia and Central-Eastern European Countries By Yuanhong, Hu
  14. Unemployment, Entrepreneurship and Firm Outcomes By João Alfredo Galindo da Fonseca
  15. Long-run Perspectives on Mid-size Firms: The Role of Productivity and Geographic Scope By Karasik, Leonid; Rollin, Anne-Marie
  16. Regional Collaboration to Create a High-Skilled Workforce: Evaluation of the Jobs and Innovation Accelerator Challenge Grants By Megan Hague Angus; Jeanne Bellotti; Brittany English; Stephanie Boraas; Kevin Hollenbeck; Sarah Osborn

  1. By: Manuel Laranja (University of Lisbon – ISEG); John Edwards (European Commission - JRC); Hugo Pinto (University of Coimbra - Centre for Social Studies); Dominique Foray (École polytechnique fédérale de Lausanne (EPFL))
    Abstract: This report assesses the implementation of Smart Specialisation in Portugal, comparing the situation today with 2013. In that year a multi-level framework was designed that included a national and seven regional Smart Specialisation Strategies (S3). The role of regions in research and innovation policy was much less advanced in Portugal than other (Western) European countries, but a logical step to implement a concept that gives local actors a prominent role in strategy development through a process of entrepreneurial discovery. Smart Specialisation is a difficult concept to implement successfully because it crosses policy responsibilities and geographical levels. This report finds that a number of problems in the governance of S3 implementation accentuated these difficulties in Portugal: a governance structure that was never really activated; a policy mix constrained by the legal framework governing R&I spending by the European Structural and Investment Funds, preventing a flexible place based approach that responds to local entrepreneurial discovery; a basic form of monitoring that only analyses project alignment to priorities rather than the achievement of strategic objectives; a fragmented national strategic framework for R&I policy; and a lack of human resources to implement what is a challenging policy approach. The Portuguese regions did however learn from this first phase of Smart Specialisation and there have been some interesting and innovative attempts to instigate entrepreneurial discovery processes, work with other European regions and build capacity for managing innovation strategies. The report recommends that S3 in Portugal is fundamentally reset to embrace a more enterprise led model of innovation. This requires a much stronger governance framework including an active inter-ministerial committee led by the Ministry of Economy and a larger mandate for the National Innovation Agency. At regional level the S3 management teams need to be substantially reinforced and act more like development agencies than regional authorities, taking a pro-active approach to working with firms and monitoring the progress of their strategies. The National Innovation Agency should support the regional management teams in these tasks by enhancing their capabilities and facilitating inter-regional cooperation. The conclusion of this report is that these type of fundamental changes are important to set Portugal on the right track to fully benefit from Smart Specialisation post-2020.
    Keywords: Smart Specialisation, Innovation, Portugal
    Date: 2020–07
  2. By: Daunfeldt, Sven-Olov (Institute of Retail Economics (Handelns Forskningsinstitut)); Mihaescu, Oana (Institute of Retail Economics (Handelns Forskningsinstitut)); Rudholm, Niklas (Institute of Retail Economics (Handelns Forskningsinstitut))
    Abstract: We use the entry of 17 external shopping malls in Sweden to investigate how they have affected the performance of incumbent firms located in the city centres of small cities. We find that entry by external shopping malls decreased labour productivity for incumbent firms in city centres by -5.31%. However, when using time-specific fixed effects to control for common time trends in retailing in small cities, the impact on labour productivity, revenues, and number of employees due to the entry of external shopping malls becomes insignificant. The negative impact on incumbent firms is thus not due to the entry of external shopping malls but rather due to long-term negative economic trends in these cities.
    Keywords: external shopping malls; city centre; firm performance; agglomeration economies; competition; difference-in-differences
    JEL: D22 L25 P25 R12
    Date: 2020–08–24
  3. By: Vlados, Charis (Democritus University of Thrace, Department of Economics); Chatzinikolaou, Dimos (Democritus University of Thrace, Department of Economics)
    Abstract: This paper explores how innovation is perceived, on the one hand, by the scientific literature and, on the other, by the everyday practice of small and micro enterprises operating in the less developed socioeconomic system of the Greek region of Eastern Macedonia and Thrace. Our aim is to find out whether there are different perceptions of innovation from two different "worlds", the theoretical and the practical. For this, we conducted an introductory and qualitative field research on a sample of small and micro enterprises in the region of Eastern Macedonia and Thrace. We found there is a notable distance in the perception of innovation between the scientific theory and the everyday practice of micro and small enterprises in this less developed region in Greece.
    Keywords: Innovation multiplicity; Innovation definitions; Micro and small enterprises; Region of Eastern Macedonia and Thrace
    JEL: O39 R11
    Date: 2019
  4. By: Andersson, Martin (Department of Industrial Economics Blekinge Institute of Technology (BTH)); Larsson, Johan P (University of Cambridge, Department of Land Economy)
    Abstract: Using longitudinal Swedish data, we document robust evidence of highly local spillovers between individuals in similar occupations. The results are consistent with the existence of knowledge spillovers between workers performing similar work tasks in the same city-district. We further demonstrate less distance-sensitive benefits of working in diverse districts and regions, characterized by high density of employees in other occupations. The diversity benefits exist only in metropolitan areas and pertain to workers performing advanced services or non-routine work tasks.
    Keywords: Agglomeration economies; Wages; Spillovers; Attenuation; Clusters; Economic proximity; Relatedness
    JEL: J24 R10 R12
    Date: 2020–08–31
  5. By: Robert P. Bartlett III; Adair Morse
    Abstract: Using unique City of Oakland data during COVID-19, we document that small business survival capabilities vary by firm size as a function of revenue resiliency, labor flexibility, and committed costs. Nonemployer businesses rely on low cost structures to survive 73% declines in own-store foot traffic. Microbusinesses (1-to-5 employees) depend on 14% greater revenue resiliency. Enterprises (6-to-50 employees) have twice-as-much labor flexibility, but face 11%-to-22% higher residual closure risk from committed costs. Finally, inconsistent with the spirit of Chetty-Friedman-Hendren-Sterner (2020) and Granja-Makridis-Yannelis-Zwick (2020), PPP application success increased medium-run survival probability by 20.5%, but only for microbusinesses, arguing for size-targeting of policies.
    JEL: E61 G38 H32 J65 L26
    Date: 2020–07
  6. By: Benjamin Balsmeier; Lee Fleming; Matt Marx; Seungryul Ryan Shin
    Abstract: To what extent does high-growth entrepreneurship depend on skilled human capital? We estimate the impact of the inflow of inventors into a region on the founding of high-growth firms, instrumenting mobility with the county-level share of millions of inventor surnames in the 1940 U.S. Census. Inventor immigration increases county-level high-growth entrepreneurship; estimates range from 29-55 immigrating inventors for each new high-growth firm, depending on the region and model. We also find a smaller but significant negative effect of inventor arrival on entrepreneurship in nearby counties.
    JEL: J24 J61 L26
    Date: 2020–07
  7. By: João Alfredo Galindo da Fonseca (Université de Montréal, CIREQ); Charles Berubé (Innovation, Science and Economic Development Canada)
    Abstract: Does having a spouse influence an individual’s decision to start a firm and what firms they create? The answer to this question is crucial for our understanding of how recent changes to family composition influence firm creation. We develop a model of endogenous entrepreneurship with spousal labour supply decisions and endogenous marriage. Married individuals have three channels, that go in opposite directions, which influence their choice to start a firm relative to the unmarried. Firstly, spouses work less when the business is more profitable partially offsetting the benefit of higher profits (spousal substitution effect). Secondly, if the business fails, the spouse works more hours (spousal insurance effect). Finally, a married individual shares their in-come with their spouse which decreases their income as a worker, their cost to entrepreneurship (spousal opportunity cost effect). We proceed to test empirically the relative strength of these channels. The model is informative of the components of the error term and the conditions for validity of our instrumental variable strategy. Using city level variation in the past composition of immigrants we show higher marriage rates are associated to more entry and lower average size of startups.
    Keywords: firm dynamics, macroeconomics, labor markets, family economics
    JEL: E24 E23 J63 J64
    Date: 2019–05
  8. By: Paulo Matos; Pedro Neves
    Abstract: Quaternary activities have been on the rise, as a consequence of the increasing technological developments and work automation, as they are expected to have an impact on both the future of the job market and the overall economy. As such, and considering that Total Factor Productivity (TFP) constitutes a main driver of output growth, we propose to study its determinants for the quaternary sector. First, we establish several criteria to build our own definition of quaternary activities, as they are not acknowledged in national accounts or other statistics. For such purpose, our empirical assessment is based on a firm level panel dataset, comprising Portuguese firms, between 2006 and 2017. Secondly, we employ the Levinsohn and Petrin (2003)’s methodology to estimate TFP at the firm level. Finally, through a second stage estimation, we build a fixed effects model based on several determinants said to impact firms' TFP, and establish a comparison with the remainder sectors of economic activity. Both descriptive statistics of the database and the final regression outputs provide evidence that quaternary activities differ from the remainder in several characteristics. Our results show that innovation, wage premium and international openness rise the level of TFP, while indebtedness presents an opposite correlation. The age and size of the firm show a non linear relationship with TFP.
    Keywords: Total Factor Productivity, LEVPET, Fixed Effects, Quaternary Sector
    JEL: C33 D22 D24 O31 O47
    Date: 2020–04
  9. By: Stefano CLÃ’; Marco FRIGERIO; Daniela VANDONE
    Abstract: This paper explores the role of Development Financial Institutions (DFIs) in supporting innovation by facilitating the access to finance for start-ups and high-growth small and medium enterprises. After having mapped the population of DFIs in Europe, we benchmark their portfolio of equity deals to those of other European financial institutions (venture capital and private equity). We build a unique sample of European 12,437 Mergers and Aquisitions within the 2008–2017 period and for each target company we match the related patenting and economic data. We obtain a dataset of 80,713 yearly observations which allows us to empirically analyse the pre and post-deal patenting activity of companies targeted by both DFIs and other financial institutions. Our findings show that the target company patenting performance improves after receiving the support of financial institutions, and this effect is on average higher when DFIs participate to the equity deal. We also find that partnerships among DFIs and other financial institutions are associated with the best patenting performance of the target companies. These results are confirmed when a propensity score matching technique is adopted to address biases associated to the potential endogenous selection of the target company.
    Keywords: Development banking;Development Financial Institutions;public-private partnership; equitydeals; patenting activity; financial support to innovation
    Date: 2020
  10. By: Picot, Garnett; Rollin, Anne-Marie
    Abstract: Using data from Statistics Canada’s Canadian Employer–Employee Dynamics Database (CEEDD), this paper has three objectives: (1) determining how the number of jobs created or destroyed by immigrant-owned private incorporated companies compared with that of firms with Canadian-born owners, (2) determining whether immigrant-owned firms were more likely than firms with Canadian-born owners to be high growth firms or rapidly shrinking firms, and (3) determining which immigrant characteristics were associated with a higher likelihood of immigrant-owned firms being high growth firms or rapidly shrinking firms. This paper addresses gross job creation (jobs created by expanding continuing firms and entering firms), gross job destruction (jobs terminated by contracting continuing firms and exiting firms), and net job change (the difference between gross job creation and gross job destruction).
    Keywords: Job departures, Job creation, Immigrants, Entrepreneurs
    Date: 2019–04–24
  11. By: OECD
    Abstract: This report presents new evidence on the impact of R&D tax incentives and direct funding of business R&D, drawing on distributed cross-country and firm-level analyses undertaken as part of the first phase of the OECD microBeRD project (2016-19). This “distributed” approach facilitates a harmonised analysis of confidential business R&D and tax relief microdata in 20 OECD countries. microBeRD provides new insights into the effectiveness of R&D tax incentives in encouraging business R&D in the OECD area and the heterogeneity of effects both within and across OECD countries, including the underlying impact mechanisms. The report contributes to the debate on the role of R&D tax incentives in the policy mix by providing additional comparative evidence on the effects of alternative business R&D inducement incentives.
    Keywords: Innovation, Science and technology, Tax
    JEL: O38 H25 L25
    Date: 2020–09–03
  12. By: Ana Venâncio; Victor Barros; Clara Raposo
    Abstract: We examine the impact of corporate taxation on entrepreneurship, using a quasi-natural experiment, which substantially reduced the corporate tax rate for start-ups located in inland municipalities in Portugal. The combination of a high quality and universal firm level database for Portugal allows the detailed study of firm's behaviour. We use BPlim’s harmonized Central Balance Sheet panel for the period of 2006 to 2015 to evaluate the different behaviour of exporters and non-exporters in Portugal. We follow on the self-selection and learning-by-exporting literature, estimating several exporter productivity premiums. After finding solid evidence of a productivity advantage of exporters compared to non-exporters, which seems to emerge several years before firms start to export, we expand our study in order to explore the causality of the previous findings. Thus, we estimate a logit fixed effects model to assess the impact of several variables in the export propensity of a firm. We corroborate the self-selection theory, given the significance of labour productivity in probability of a firm exporting, as well, as significant effects of firm absolute size, relative market share, sector concentration and investment.
    Keywords: Firm entry; Job creation; Tax policy; Corporate taxes; High-quality entrepreneurship
    JEL: H24 H26 J24 L26 M13 H25
    Date: 2020–01
  13. By: Yuanhong, Hu
    Abstract: This paper calculates the trade facilitation index and manufacturing export sophistication of Russia and Central and Eastern European countries from 2003 to 2017, and examines the impact of trade facilitation and R&D innovation on manufacturing export sophistication. The study found that the export sophistication of labor-intensive industries continues to decrease, the export sophistication of capital and technology-intensive industries continues to increase, while the export sophistication of traditional resource-based heavy industries is stable. In addition, trade facilitation and R&D innovation have significantly contributed to the export sophistication of Russia, Central and Eastern European countries, especially the manufacturing industry after the 2009 financial crisis. For Central European and European Union member states, the impact of trade facilitation and R&D innovation on export sophistication is significantly greater than that of Eastern European and non-EU member states. The promotion of heavy, heterogeneous, medium and high-tech industries is obviously stronger than that of light, homogeneous and low-tech industries. In addition, the moderating role of trade dependence cannot be ignored. Trade facilitation and R&D innovation have a significant non-linear impact on export sophistication.
    Keywords: Trade Facilitation,Export Sophistication,R&D Innovation,Manufacturing,Russia,Central and Eastern Europe
    JEL: F14 F41 F43
    Date: 2020
  14. By: João Alfredo Galindo da Fonseca (Université de Montréal, CIREQ)
    Abstract: Are there differences between firms created by unemployed individuals relative to otherwise identical employed individuals? The answer is crucial for understanding the impact of policies that promote entrepreneurship among the unemployed. I develop an equilibrium model of entrepreneurship. Different outside options imply the unemployed are more likely to start firms, but these are smaller and fail more often. I verify these implications using a new administrative Canadian matched owner-employer-employee dataset. I use firm closures to identify random assignments of individuals to unemployment. I find that subsidies for firms started by the unemployed induce a reallocation of resources to low-productivity firms. The mechanism is further tested empirically by verifying that wage workers are more responsive to wages than the unemployed in their decision to start a firm.
    Keywords: firm dynamics, unemployment, macroeconomics, labor markets
    JEL: E24 E23 J63 J64
    Date: 2019–05
  15. By: Karasik, Leonid; Rollin, Anne-Marie
    Abstract: This paper uses Canadian business microdata for 1999 to 2013 to study the characteristics of private-sector medium-sized firms that transition to the large or small size classes. A firm’s size class is defined over a three-year window to ensure that it represents the firm’s long-term state rather than a transient state for a given year. The paper examines what distinguishes medium-sized firms that become large from those that revert to being small.
    Keywords: Size of business, Productivity, Private sector
    Date: 2019–02–05
  16. By: Megan Hague Angus; Jeanne Bellotti; Brittany English; Stephanie Boraas; Kevin Hollenbeck; Sarah Osborn
    Abstract: This report presents lessons learned from two initiatives aimed at creating high-wage jobs and innovation in various geographical regions.
    Keywords: employment, job creation, labor, workforce development, small businesses, economic development

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