nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒02‒15
nine papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The Impact of Regulation on Innovation By Philippe Aghion; Antonin Bergeaud; John Van Reenen
  2. The Innovation Premium to Soft Skills in Low-Skilled Occupations By Philippe Aghion; Antonin Bergeaud; Richard Blundell; Rachel Griffith
  3. Selection into entrepreneurship and self-employment By Rubinstein, Yona; Levine, Ross
  4. Essay to analyze SMEs strategies facing globalization: a neo-institutional approach By Khaled Tahari; Amar Elafani
  5. On the productivity advantage of cities By Jacob, Nick; Mion, Giordano
  6. The Organization of Innovation: Property Rights and the Outsourcing Decision By Thomas Jungbauer; Sean Nicholson; June Pan; Michael Waldman
  7. How Does Competition by Informal and Formal Firms Affect the Innovation and Productivity Performance in Peru? A CDM Approach By Alvarez, Lourdes; Huamaní, Edson; Coronado, Yngrid
  8. Preliminary findings on structural issues in the Vietnamese financial research landscape from 2008-2020 By Ho, Tung Manh; Nguyen, Quoc-Hung; Le, Ngoc-Thang B.; Tran, Hung-Long D.
  9. Import competition, heterogeneous preferences of managers and productivity By Cheng Chen; Claudia Steinwender

  1. By: Philippe Aghion; Antonin Bergeaud; John Van Reenen
    Abstract: Does regulation affect the pace and nature of innovation and if so, by how much? We build a tractable and quantifiable endogenous growth model with size-contingent regulations. We apply this to population administrative firm panel data from France, where many labor regulations apply to firms with 50 or more employees. Nonparametrically, we find that there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Further, a dynamic analysis shows a sharp reduction in the firm’s innovation response to exogenous demand shocks for firms just below the regulatory threshold. We then quantitatively fit the parameters of the model to the data, finding that innovation at the macro level is about 5.4% lower due to the regulation, a 2.2% consumption equivalent welfare loss. Four-fifths of this loss is due to lower innovation intensity per firm rather than just a misallocation towards smaller firms and lower entry. We generalize the theory to allow for changes in the direction of R&D, and find that regulation’s negative effects only matter for incremental innovation (as measured by citations and text-based measures of novelty). A more regulated economy may have less innovation, but when firms do innovate they tend to “swing for the fence” with more radical (and labor saving) breakthroughs.
    JEL: J08 O33
    Date: 2021–01
  2. By: Philippe Aghion; Antonin Bergeaud; Richard Blundell; Rachel Griffith
    Abstract: Matched employee-employer data from the UK are used to analyze the wage premium to working in an innovative firm. We find that firms that are more R&D intensive pay higher wages on average, and this is particularly true for workers in some low-skilled occupations. We propose a model in which a firm's innovativeness is reflected in the degree of complementarity between workers in low-skill and high-skilled occupations, and in which non-verifiable soft skills are an important determinant of the wages of workers in low-skilled occupations. The model yields additional predictions on training, tenure and outsourcing which we also find support for in data.
    Keywords: innovation, skill-based technological change, wage, complementarity
    JEL: O33 L23 J31
    Date: 2019–12
  3. By: Rubinstein, Yona; Levine, Ross
    Abstract: We study the effects of ability and liquidity constraints on entrepreneurship. We develop a three sector Roy model that differentiates between entrepreneurs and other self-employed to address puzzling gaps that have emerged between theory and evidence on entry into entrepreneurship. The model predicts—and the data confirm—that entrepreneurs are positively selected on highlyremunerated cognitive and non-cognitive human capital skills, but other self-employed are negatively selected on those same abilities; entrepreneurs are positively selected on collateral, but other selfemployed are not; and entrepreneurship is procyclical, but self-employment is countercyclical.
    Keywords: entrepreneurship; human capital; occupational choice; corporate finance; business cycles
    JEL: J24 G32 E32
    Date: 2020–10
  4. By: Khaled Tahari (Faculté des Sciences Économiques, Université d’Oran); Amar Elafani
    Abstract: SMEs are at the heart of the new industrial project in Algeria. They are appreciated for their dynamism, their structural flexibility and their ability to adapt their behaviour to an environment now opened to competition. However, their size can be a handicap due to the absence of economies of scale and financial barriers to entry for vital activities such as research and development. This makes them vulnerable if they do not develop a greater capacity for innovation and adaptation in an economy fronting an international competition.
    Abstract: Le dispositif cognitif de la théorie néo-institutionnelle sociologique et économique est perçu comme susceptible de restituer la complexité de la relation entre les PME en tant qu'organisations et le nouvel ordre institutionnel décliné sous le vocable de mondialisation ou globalisation. L'auteur constate une certaine convergence dans le traitement des ressources humaines (isomorphisme) mais aussi une hybridation dans le comportement et la structuration de ces organisations. La démonstration s'appuie sur des études de cas représentant des unités moyennes : deux publiques et une privée ancienne unité publique cédée à une grande entreprise familiale de dimension internationale. Mots clés : PME, institutions, PME et GRH, flexibilité organisationnelle, changement organisationnel
    Keywords: SMEs,institutions,SMEs and HRM,organizational flexibility,organizational change. Jel Classification Codes: D29,L25,L32,L33,G38,Jel Classification Codes: D29,HRM,organizational change
    Date: 2021–01–04
  5. By: Jacob, Nick; Mion, Giordano
    Abstract: Ever since Marshall (1890) agglomeration externalities have been viewed as the key factor explaining the existence of cities and their size. However, while the various micro foundations of agglomeration externalities stress the importance of Total Factor Productivity (TFP), the empirical evidence on agglomeration externalities rests on measures obtained using firm revenue or value-added as a measure of firm output: revenue-based TFP (TFP-R). This paper uses data on French manufacturing firms' revenue, quantity and prices to estimate TFP and TFP-R and decompose the latter into various elements. Our analysis suggests that the revenue productivity advantage of denser areas is mainly driven by higher prices charged rather than differences in TFP. At the same time, firms in denser areas are able to sell higher quantities, and generate higher revenues, despite higher prices. These and other results we document suggest that firms in denser areas are able to charge higher prices because they sell higher demand/quality products. Finally, while the correlation between firm revenue TFP and firm size is positive in each location, it is also systematically related to density: firms with higher (lower) TFP-R account for a larger (smaller) share of total revenue in denser areas. These patterns thus amplify in aggregate regional-level figures any firm-level differences in productivity across space.
    Keywords: total factor productivity (TFP); density; agglomeration externalities; revenue-based TFP; prices; demand; quality
    JEL: R12 R15 D24 L11
    Date: 2020–04
  6. By: Thomas Jungbauer; Sean Nicholson; June Pan; Michael Waldman
    Abstract: Why do firms outsource research and development (R&D) for some products while conducting R&D in-house for similar ones? An innovating firm risks cannibalizing its existing products. The more profitable these products, the more the firm wants to limit cannibalization. We apply this logic to the organization of R&D by introducing a novel theoretical model in which developing in-house provides the firm more control over the new product’s location in product space. An empirical analysis of our testable predictions using pharmaceutical data concerning patents, patent expiration, and outsourcing at various stages of the R&D process supports our theoretical findings.
    JEL: D23 L24 L65 O32
    Date: 2021–01
  7. By: Alvarez, Lourdes; Huamaní, Edson; Coronado, Yngrid
    Abstract: Innovation is one of the main determinants to stimulate productivity. However, incentives to innovate may be affected by the level of competition. In particular, in developing countries, where informality is highly prevalent, formal firms have to face both types of competition: formal and informal. Previous studies have acknowledged a negative impact from competition (schumpeterian effect) but also, several recent studies have shown that competition could spur innovation (escape-competition effect). Given the importance of informal competition in developing countries, as Peru, where almost three out of four firms are informal and the intensity of investment in R&D+i activities is pretty low, this study aims to evaluate the impact of formal and informal competition, at the industrial level, on the whole innovation process and, expressly, on productivity for Peru. By using a CDM model, this study analyses how the intensity of formal and informal competition affects every stage of the innovation process. The CDM model makes possible to study four interrelated stages of the innovation process: i) the firms’ choice to engage with innovation, ii) the amount of resources invested in R&D+i activities, iii) the effects of R&D+i investments on innovation output, and iv) the impacts of innovation outcome on firms’ productivity. The model is estimated using firm-level data collected by the Peruvian National Innovation Survey 2018 and the National Business Survey 2018. Our main findings indicate that competition, both formal and informal, affects negatively the decision to engage in innovation. However, the relationship changes throughout the remaining stages of the innovation process. Whereas the informal competition affects negatively the whole innovation process (engage in innovation, intensity of R&D+I activities spending, innovation output and firms’ productivity) satisfying the Schumpeterian theory; formal competition seems to affect positively the intensity of R&D+i activities spending and also firms’ productivity, which can be explained as an escape-competition effect within the formal firms. In conclusion, meanwhile it is found that informal competition affects negatively the whole innovation process, formal competition could, instead, encourage formal firms’ willingness to invest more in R&D+i activities, increasing their productivity.
    Keywords: Competition, CDM model, informality, innovation, productivity
    JEL: D4 E26 M11 O17 O32
    Date: 2020–09
  8. By: Ho, Tung Manh; Nguyen, Quoc-Hung; Le, Ngoc-Thang B.; Tran, Hung-Long D.
    Abstract: In this report, we will look at major research findings on foreign direct investment (FDI), SMEs, micro-credit programs, financial inclusion, and IFRS adoption. These topics are of increasing importance, and they have gradually become critical for academia, policymakers, and corporate sectors if they are set to investigate Vietnam’s fast-expanding economy.
    Date: 2021–01–12
  9. By: Cheng Chen; Claudia Steinwender
    Abstract: When managers have objectives beyond maximizing monetary profits, inefficiencies may arise. An increase in competition may then force managers to improve the productivity of the firm in order to ensure survival. While this hypothesis has received ample theoretical attention, empirical evidence is scarce, mainly because preferences of managers are typically unobserved. In this paper, we exploit the fact that a large literature has documented specific non-monetary preferences of family managers. Using Spanish firm-level data, we compare how family-managed and professionally-managed firms react to import competition shocks. We find that import competition leads to productivity increases in family-managed firms that are initially unproductive. Productivity improvements are driven by family management as opposed to family ownership or non-managing family members. Furthermore, we show that these managers increase efficiency by reducing material usage, which is consistent with them trying to increase their short-term cash flow in order to survive. Finally, productivity improvements seem to be particularly pronounced in multi-generational family firms that also introduce organizational changes.
    Keywords: import competition, productivity, family firms, managers
    JEL: D22 D23 F14 L21 L22
    Date: 2020–01

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