nep-sbm New Economics Papers
on Small Business Management
Issue of 2020‒10‒19
fourteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Access to Finance among Small and Medium-Sized Enterprises and Job Creation in Africa By Brixiova, Zuzana; Kangoye, Thierry; Yogo, Urbain Thierry
  2. Experience-based know-how, learning and innovation in German SMEs: An explorative analysis of the role of know-how in different modes of innovation By Alhusen, Harm
  3. Cooperation of start-ups and SMEs in Germany: Chances, challenges and recommendations By Röhl, Klaus-Heiner; Engels, Barbara
  4. The role of domestic-firm knowledge in foreign R&D collaborations: Evidence from co-patenting in Indian firms By Mathew, Nanditha; Napolitano, Lorenzo; Rizzo, Ugo
  5. The Impact of COVID-19 on Small Business Owners: The First Three Months after Social-Distancing Restrictions By Fairlie, Robert W.
  6. Intangible capital indicators based on web scraping of social media By Breithaupt, Patrick; Kesler, Reinhold; Niebel, Thomas; Rammer, Christian
  7. Crisis Innovation By Tania Babina; Asaf Bernstein; Filippo Mezzanotti
  8. Does the Wealth Tax Kill Jobs? By Bjørneby, Marie; Markussen, Simen; Røed, Knut
  9. Entrepreneurial Behavior dan Aspek-Aspek Pentingnya By Winatha, Arvin
  10. Blinder-Oaxaca Approach to Identify Innovation Differences in Transition Countries By Antonella Biscione; Dorothée Boccanfuso; Raul Caruso; Annunziata de Felice
  11. Curb your enthusiasm: optimistic entrepreneurs earn less By Dawson, Christopher; de Meza, David; Henley, Andrew; Arabsheibani, G. Reza
  12. COVID-19 and SME Failures By Pierre-Olivier Gourinchas; Ṣebnem Kalemli-Özcan; Veronika Penciakova; Nick Sander
  13. Syndication networks and company survival: Evidence from European venture-capital deals By Christopoulos, Dimitris; Köppl, Stefan; Köppl-Turyna, Monika
  14. “In knowledge we trust: learning-by-interacting and the productivity of inventors” By Matteo Tubiana; Ernest Miguelez; Rosina Morneo

  1. By: Brixiova, Zuzana (University of Economics Prague); Kangoye, Thierry (African Development Bank); Yogo, Urbain Thierry (World Bank)
    Abstract: In the past decade inclusive growth, that is job-rich growth, has topped the policy agenda in developing countries. This paper investigates how the access to finance affects employment in small and medium-sized enterprises (SMEs) in Sub-Saharan Africa. It first presents a model where firm creation requires entrepreneurial search and paying the start-up costs, while the firm's size in terms of employment depends on the access to credit. Under the financial market imperfections, access to credit can be a binding constraint on firm entry and employment even when the banks have sufficient liquidity. Using an impact evaluation-based approach on firm-level data from 42 African countries, we show that SMEs with access to formal financing create more jobs than firms without access, with employment in firms having access to more affordable and larger loans growing the fastest. The impact of access to finance is stronger for firms in manufacturing than in services, pointing to sectoral targeting of finance as a possible policy supporting industrialization.
    Keywords: entrepreneurship, financial inclusion, employment, propensity score matching
    JEL: L2 G2 D22 C1
    Date: 2020–09
  2. By: Alhusen, Harm
    Abstract: The 'doing-using-interacting mode' of innovation (DUI) is considered an important component of innovative activity. It describes informal innovative activities and complements the 'science-technology-innovation mode' (STI) which is based on research and development. A common demarcation criterion between both modes of innovation is the relevance of experiencebased knowledge, know-how and know-who for the DUI mode of innovation whereas the STI mode of innovation is said to rely on codified knowledge, know-what and know-why. Based upon 81 in-depth interviews with German SMEs and regional innovation consultants, this work focuses on the role of experience-based know-how for SMEs innovations within different modes of innovation. Experience-based know-how is found to be important for all modes of innovation, regardless of an SMEs mode of innovation. Results from qualitative interviews show that firms view experience-based know-how as important for at least one of the following domains: product innovation, business process innovation & organizational routines and customer knowledge. However, the acquisition, transfer and transformation of experience-based know-how can strongly differ, depending on the respective mode of innovation. As a recommendation, the idea that know-how is a suitable demarcation criterion for modes of innovation should be revised in future research.
    Keywords: DUI,STI,tacit knowledge,experience-based knowledge,learning processes,modes of innovation
    JEL: O3 O30 O31 R10
    Date: 2020
  3. By: Röhl, Klaus-Heiner; Engels, Barbara
    Abstract: The cooperation between established SMEs and innovative start-ups offers considerable opportunities for the respective companies and the German economy. New business models can be adopted, and innovative products can be jointly developed. In particular, the digitalisation of the 'German Mittelstand' could receive a boost through collaboration with digital start-ups. This could lead to an increase in the demographically induced declining growth potential of the German economy. In order to exploit the full potential of cooperation, cultural differences between the two types of company must be overcome and in case of different regional focal points, the initiation of contacts must be facilitated. Based on expert interviews in start-ups, SMEs and associations, this policy paper identifies opportunities to strengthen cooperative relationships between established SMEs and the growing start-up scene. The paper concludes with ten policy recommendations.
    JEL: L14 L23 L26
    Date: 2020
  4. By: Mathew, Nanditha (UNU-MERIT); Napolitano, Lorenzo (Joint Research Center (JRC), European Commission); Rizzo, Ugo (Department of Mathematics and Computer Science, University of Ferrara)
    Abstract: In this paper we analyze the impact of foreign R&D collaborations on the performance of domestic firms and how the relationship is augmented by the pre-existing capabilities of the domestic firms. Using data on Indian firms, we study patterns of co-invention of Indian firms with foreign partners. The results from a causal mediation analysis confirm the crucial role played by domestic firms' absorptive capacity in enhancing the benefits from a foreign collaboration. The evidence we present in this work highlights the microeconomics behind the process of technological capability accumulation and catching up in developing countries.
    Keywords: Co-patenting, Foreign Collaboration, Absorptive Capacity, Capability accumulation, Corporate Performance
    JEL: D24 L20 O12 O32 O33 O34
    Date: 2020–10–05
  5. By: Fairlie, Robert W. (University of California, Santa Cruz)
    Abstract: Social distancing restrictions and health- and economic-driven demand shifts from COVID-19 are expected to shutter many small businesses and entrepreneurial ventures, 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. 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 active business owners was the largest on record, and losses to business activity were felt across nearly all industries. African-American businesses were hit especially hard experiencing a 41 percent drop in business activity. Latinx business owner activity fell by 32 percent, and Asian business owner activity dropped by 26 percent. Simulations indicate that industry compositions partly placed these groups at a higher risk of business activity losses. Immigrant business owners experienced substantial losses in business activity of 36 percent. Female business owners were also disproportionately affected (25 percent drop in business activity). Continuing the analysis in May and June, the number of active business owners remained low – down by 15 percent and 8 percent, respectively. The continued losses in May and June, and partial rebounds from April were felt across all demographic groups and most industries. These findings of early-stage losses to small business activity have important implications for policy, income losses, and future economic inequality.
    Keywords: small business, entrepreneurship, business owners, self-employment, COVID-19, coronavirus, shelter in place restrictions, social distancing restrictions, minority business, female
    JEL: J15 J16 L26
    Date: 2020–09
  6. By: Breithaupt, Patrick; Kesler, Reinhold; Niebel, Thomas; Rammer, Christian
    Abstract: Knowledge-based capital is a key factor for productivity growth. Over the past 15 years, it has been increasingly recognised that knowledge-based capital comprises much more than technological knowledge and that these other components are essential for understanding productivity developments and competitiveness of both firms and economies. We develop selected indicators for knowledge-based capital, often denoted as intangible capital, on the basis of publicly available data from online platforms. These indicators based on data from Facebook and the employer branding and review platform Kununu are compared by OLS regressions with firm-level survey data from the Mannheim Innovation Panel (MIP). All regressions show a positive and significant relationship between survey-based firm-level expenditures for marketing and on-the-job training and the respective information stemming from the online platforms. We therefore explore the possibility of predicting brand equity and firm-specific human capital with machine learning methods.
    Keywords: Web Scraping,Knowledge-Based Capital,Intangibles
    JEL: C81 E22 O30
    Date: 2020
  7. By: Tania Babina; Asaf Bernstein; Filippo Mezzanotti
    Abstract: The effect of financial crises on innovation is an unsettled and important question for economic growth, but one difficult to answer with modern data. Using a differences-in-differences design surrounding the Great Depression, we document that local distress caused a sudden and persistent decline in patenting by the largest organizational form of innovation at this time—technological entrepreneurs. Parallel trends prior to the shock, evidence of a drop within every major technology class, and consistent results using distress driven by commodity shocks—all suggest a causal effect of distress. Despite this, we find that innovation during crises can be more resilient than it may appear at first glance. First, there is no observable change in the number of future citations, despite the decline in the number of patents filed. Second, the shock is in part absorbed through a reallocation of inventors into firms, who over the long-run produce patents with greater impact. Third, the results reveal no immediate brain drain of inventors from the affected areas. Overall, we demonstrate that crises can be both destructive and creative forces for innovation, and provide the first systematic evidence of the role played by the Great Depression in the long-run organization of innovative activity.
    JEL: G01 G21 N12 N22 N32 O3
    Date: 2020–09
  8. By: Bjørneby, Marie (The Norwegian University of Life Sciences); Markussen, Simen (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research)
    Abstract: Fueled by increasing inequality and rising fiscal deficits, the interest in wealth taxation has increased over the last years, both in the public debate and in academia. Yet, knowledge about the behavioral effects of a wealth tax is limited. We utilize rich Norwegian register data and a series of tax reforms implemented between 2007 and 2017 to study how a net wealth tax imposed on owners of small and medium sized businesses affects their firms' investment and employment decisions. Identification of causal effects is based on a generalized difference-in-differences strategy. We find no empirical support for the claim that a moderate wealth tax adversely affects investments and employment in firms controlled by the taxpayers. To the contrary, our results indicate a positive causal relationship between the level of a household's wealth tax and subsequent employment growth in the firm it controls. The rationale behind this result appears to be that the tax value of a given wealth can be reduced by being invested in a non-traded firm, and that this incentive becomes stronger the higher is the wealth tax.
    Keywords: wealth tax, capital taxation, labor demand, investment
    JEL: H21 J23 G11
    Date: 2020–10
  9. By: Winatha, Arvin
    Abstract: Entrepreneuial Orientation / Orientasi Kewirausahaan sering disebut sebagai pembuatan strategi kewirausahaan, dan telah dicirikan sebagai atribut gaya manajemen yang mendukung perubahan dan mendukung kegiatan yang berkaitan dengan pemanfaatan berbagai bentuk inovasi, pengembangan produk / layanan baru dan penciptaan nilai pelanggan yang unggul. Dalam menjelaskan Open Innovation ada 4 variabel yang berperan . selain itu dalam risk governance juga ada 4 hal latent yang digunakan untuk mengukur tingkat pengelolaan resiko yang terdiri dari risk-taking behavior, firm performance, pricing capability, dan information technological turbulence
    Date: 2020–09–12
  10. By: Antonella Biscione (CESPIC, Catholic University “Our Lady of Good Counsel”); Dorothée Boccanfuso (Faculté de Gouvernance, Sciences Economiques et Sociales, Université Mohammed VI Polytechnique); Raul Caruso (CESPIC, Catholic University “Our Lady of Good Counsel”); Annunziata de Felice (Department of Law, University of Bari Aldo Moro)
    Abstract: By the use of firm-level data coming from the Business Environment and Enterprise Performance Survey (BEEPS V) conducted in 2012–2014, this paper aims to investigate the sources of the possible gender ownership gap in innovativeness in a set of Transition economies. Through the Blinder-Oaxaca decomposition we highlight the factors explaining the differences in the propensity to innovate between female-owned and male-owned firms. We find that the innovation disparity between firms with females among their owners and those having only male owners is mainly due to the differences in endowment effects. Tangible and intangible assets affect the innovation gap between the two groups of firms.
    Keywords: Blinder-Oaxaca decomposition; non-linear model; gender ownership; innovation gap; Transition Countries
    JEL: O32 J12 P23
    Date: 2020–10
  11. By: Dawson, Christopher; de Meza, David; Henley, Andrew; Arabsheibani, G. Reza
    Abstract: This paper concerns the implications of biased beliefs on entrepreneurial earnings. Amongst self-employed business owners, income is decreasing in optimism measured whilst still an employee. Controlling for earnings in paid employment, self-employment earnings of those with optimism above the mean are some 30% less than those with optimism below the mean. For employees, it is optimists that have higher earnings. These and associated results suggest that mistaken expectations lead to entry errors. As a test of external validity, future divorcees turn out to be financial optimists, indicating our measure captures an intrinsic psychological trait associated with rash decisions.
    Keywords: financial optimism; expectations; entrepreneurs
    JEL: D84 M13
    Date: 2019–01
  12. By: Pierre-Olivier Gourinchas; Ṣebnem Kalemli-Özcan; Veronika Penciakova; Nick Sander
    Abstract: We estimate the impact of the COVID-19 crisis on business failures among small and medium size enterprises (SMEs) in seventeen countries using a large representative firm-level database. We use a simple model of firm cost-minimization and measure each firm’s liquidity shortfall during and after COVID-19. Our framework allows for a rich combination of sectoral and aggregate supply, productivity, and demand shocks. We estimate a large increase in the failure rate of SMEs under COVID-19 of nearly 9 percentage points, absent government support. Accommodation & Food Services, Arts, Entertainment & Recreation, Education, and Other Services are among the most affected sectors. The jobs at risk due to COVID-19 related SME business failures represent 3.1 percent of private sector employment. Despite the large impact on business failures and employment, we estimate only moderate effects on the financial sector: the share of Non Performing Loans on bank balance sheets would increase by up to 11 percentage points, representing 0.3 percent of banks’ assets and resulting in a 0.75 percentage point decline in the common equity Tier-1 capital ratio. We evaluate the cost and effectiveness of various policy interventions. The fiscal cost of an intervention that narrowly targets at risk firms can be modest (0.54% of GDP). However, at a similar level of effectiveness, non-targeted subsidies can be substantially more expensive (1.82% of GDP). Our results have important implications for the severity of the COVID-19 recession, the design of policies, and the speed of the recovery.
    JEL: D2 E65 G33
    Date: 2020–09
  13. By: Christopoulos, Dimitris; Köppl, Stefan; Köppl-Turyna, Monika
    Abstract: We look at syndication in the venture capital industry. Investments conducted by syndicates are believed to have better chances of being successful, measured by the survival probability of portfolio companies or by successful exits. Using a novel and large dataset, covering several countries, our analysis shows that strong network ties of investors are associated with success of portfolio companies in Europe. We also show that there are differences in the association of network centrality with survival between different financing rounds, the former being more important in early-stage investments. Finally, we show a strong association of network ties of investors with sales growth of portfolio companies, before and after the deal.
    Keywords: Venture Capital,Networks,Europe,Investment Syndication
    JEL: G11 G24 M13
    Date: 2020
  14. By: Matteo Tubiana (University of Bergamo); Ernest Miguelez (GREThA UMR CNRS 5113 - Université de Bordeaux); Rosina Morneo (AQR-IREA, University of Barcelona)
    Abstract: Innovation rarely happens through the actions of a single person. Innovators source their ideas while interacting with their peers, at different levels and with different intensities. In this paper, we exploit a dataset of disambiguated inventors in European cities to assess the influence of their interactions with co-workers, organizations’ colleagues, and geographically co-located peers, to understand if the different levels of interaction influence their productivity. Following inventors’ productivity over time and adding a large number of fixed effects to control for unobserved heterogeneity, we uncover critical facts, such as the importance of city knowledge stocks for inventors’ productivity, with firm knowledge stocks and network knowledge stocks being of smaller importance. However, when the complexity and quality of knowledge is accounted for, the picture changes upside down and closer interactions (individuals’ co-workers and firms’ colleagues) become way more important.
    Keywords: Inventors, Productivity, Stock of knowledge, Interactions. JEL classification: O18, O31, O33, O52, R12.
    Date: 2020–09

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