nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒04‒26
eleven papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The Role of SMEs in extra-EU Exports: Key performance indicators By Cernat, Lucian; Jakubiak, Malgorzata; Preillon, Nicolas
  2. Opening up military innovation: causal effects of 'bottom-up' reforms to U.S. defense research By Sabrina T. Howell; Jason Rathje; John Van Reenen; Jun Wong
  3. R&D Internationalization Strategies of the World’s Top Corporate R&D Investors By Heike Belitz; Anna Lejpras
  4. May AI revolution be labour-friendly? Some micro evidence from the supply side By Damioli, G.; Van Roy, V.; Vertesy, D.; Vivarelli, M.
  5. Innovation and human capital policy By John Van Reenen
  6. Assessing the Impact of COVID-19 on Trade: a Machine Learning Counterfactual Analysis By Dueñas, Marco; Ortiz, Víctor; Riccaboni, Massimo; Serti, Francesco
  7. The global network of embodied R&D flows By Fabrizio Fusillo; Sandro Montresor; Giuseppe Vittucci Marzetti
  8. Tax-induced Investments in Tax Havens by Spanish Multinationals By Ángela Castillo-Murciego; Julio López-Laborda
  9. Do foreign investment and trade spur innovation? By Gorodnichenko, Y; Svejnar, J; Terrell, K
  10. The Bright and Dark Side of Financial Support from Local and Central Banks after a Natural Disaster: Evidence from the Great Kanto Earthquake, 1923 Japan By Tetsuji Okazaki; Toshihiro Okubo; Eric Strobl
  11. Foreign investors and target firms’ financial structure: cavalry or locusts? By Lorenzo Bencivelli; Beniamino Pisicoli

  1. By: Cernat, Lucian (DG Trade); Jakubiak, Malgorzata (DG Trade); Preillon, Nicolas (DG Trade)
    Abstract: This paper examines the growing importance of EU exporting small and medium enterprises (SMEs) for EU exports in recent years in terms of standard metrics (the number of exporting SMEs, their share in total EU exports) but also in respect to several key performance indicators, such as export competitiveness, digital intensity of their exports, greenhouse gas (GHG) emissions and jobs supported by EU exporting SMEs. The empirical evidence suggests that the number of EU exporting SMEs has grown steadily over time. EU exporting SMEs seem to perform better than the OECD average in sectors of medium digital intensity. In particular, SMEs are competitive in digitally intensive goods, where EU large firms do not seem to be equally successful. SME exports have also lower GHG emissions than average levels, with 70% of SME exports belonging to low and medium-low emission intensity. Finally, yet importantly, EU SME exports are a major driver for export-led job creation: over 13 million jobs in Europe depend on EU SME exports.
    Keywords: SMEs; international trade; performance indicators
    JEL: F13
    Date: 2020–04–09
  2. By: Sabrina T. Howell; Jason Rathje; John Van Reenen; Jun Wong
    Abstract: When investing in research and development (R&D), institutions must decide whether to take a top-down approach - soliciting a particular technology - or a bottom-up approach in which innovators suggest ideas. This paper examines a reform to the U.S. Air Force Small Business Innovation Research (SBIR) program that transitioned from "Conventional topics," which solicit specific technologies, to "Open topics," which invite firms to suggest any new technology that may be useful to the Air Force. The reform seeks to address challenges facing military R&D, in particular a less innovative defense industrial base. We show that the Open program attracts new entrants, defined as younger firms and those without previous defense SBIR awards. In a regression discontinuity design that offers the first causal evaluation of a defense R&D program, we show that winning an Open award increases future venture capital investment, non-SBIR defense contracting, and patenting. Conventional awards have no effect on these outcomes but do increase the chances of future defense SBIR contracts, fostering incumbency. The bottom-up approach appears to be a mechanism behind Open's success. For example, winning has a positive effect on innovation even in less specific Conventional topics. The results suggest that government (and perhaps private sector) innovation could benefit from more bottom-up, decentralized approaches that reduce barriers to entry, minimize lock-in advantages for incumbents, and attract a wider range of new entrants.
    Keywords: innovation, defense, R&D, procurement
    JEL: O31 O32 O38 H56 H57
    Date: 2021–04
  3. By: Heike Belitz; Anna Lejpras
    Abstract: This paper contributes to the debate on the internationalization of the R&D activity of multinational enterprises (MNEs). Specifically, we examine the following research questions: (1) What are the determinants of the MNEs’ R&D internationalization level? (2) What types of internationalization strategies—home-base-augmenting (HBA), home-base-exploiting (HBE), technology-seeking (TS), and/or market-seeking (MS)—do the MNE employ? and (3) What are the typical patterns in pursuing different strategy mixes by MNEs? To this end, we merge data on 2,000 global research leaders from the 2012-2014 period with the EPO Worldwide Patent Statistical Database PATSTAT. Based on the final dataset, covering about 1,700 world’s top corporate R&D investors and their patenting activity, we find that about one-fifth focus their patent-relevant R&D activity in their home country only. Our study confirms former results of the literature that R&D offshoring is used by leading R&D performers predominantly to acquire complementary technological knowledge (HBA strategy) and to use their home-based technological advantages to expand their market penetration (HBE strategy). With patent data from the late 2010s, we find a further increase in the proportion of HBA strategies compared to the 2000s. This indicates the growing importance of international knowledge exchange between technologically similarly oriented locations. Hence, the increased attraction of foreign R&D locations is no reason for concern regarding the perceived hollowing-out of the national innovation systems. Indeed, since the advantages built at home are at the core of both the HBA and HBE strategies, the national system of innovation in the home country should support the technological advantages of firms, thereby enabling them to succeed in their R&D activity abroad.
    Keywords: R&D, patents, innovation, internationalization, multinational firms, global firms
    JEL: F23 O19 O31 O32
    Date: 2021
  4. By: Damioli, G.; Van Roy, V.; Vertesy, D.; Vivarelli, M.
    Abstract: This study investigates the possible job-creation impact of AI technologies, focusing on the supply side, namely the providers of the new knowledge base. The empirical analysis is based on a worldwide longitudinal dataset of 3,500 front-runner companies that patented the relevant technologies over the period 2000-2016. Obtained from GMM-SYS estimates, our results show a positive and significant impact of AI patent families on employment, supporting the labourfriendly nature of product innovation in the AI supply industries. However, this effect is small in magnitude and limited to service sectors and younger firms, which are the leading actors of the AI revolution. Finally, some evidence of increasing returns seems to emerge; indeed, the innovative companies which are more focused on AI technologies are those obtaining the larger impacts in terms of job creation.
    Keywords: Innovation,technological change,patents,employment,job-creation
    JEL: O33
    Date: 2021
  5. By: John Van Reenen
    Abstract: If innovation is to be subsidized, a natural place to start is to increase the quantity and quality of human capital. Innovation, after all, begins with people. Simply stimulating the "demand side" through R&D subsidies and tax breaks may only drive up the price, rather than the volume of research activity. By contrast, increasing the supply of potential inventors can both directly increase innovation and reduce its cost. This paper examines the evidence on human capital policies for stimulating innovation such as expanding the home-grown workforce, fostering immigration, boosting universities and reducing barriers to entry into inventor careers, especially for under-represented groups. The evidence suggests targeting high ability but disadvantaged potential inventors at an early age is likely to have the largest long-run effects on growth.
    Keywords: innovation, R&D, intellectual property, tax, competition
    JEL: O31 O32
    Date: 2021–04
  6. By: Dueñas, Marco; Ortiz, Víctor; Riccaboni, Massimo; Serti, Francesco
    Abstract: By interpreting exporters’ dynamics as a complex learning process, this paper constitutes the first attempt to investigate the effectiveness of different Machine Learning (ML) techniques in predicting firms’ trade status. We focus on the probability of Colombian firms surviving in the export market under two different scenarios: a COVID-19 setting and a non-COVID-19 counterfactual situation. By comparing the resulting predictions, we estimate the individual treatment effect of the COVID-19 shock on firms’ outcomes. Finally, we use recursive partitioning methods to identify subgroups with differential treatment effects. We find that, besides the temporal dimension, the main factors predicting treatment heterogeneity are interactions between firm size and industry.
    Keywords: Machine Learning; International Trade; COVID-19
    JEL: F14 F17 D22 L25
    Date: 2021–04
  7. By: Fabrizio Fusillo (Università di Torino); Sandro Montresor (Gran Sasso Science Institute); Giuseppe Vittucci Marzetti (Università di Milano-Bicocca)
    Abstract: We combine the World Input-Output Dataset (WIOD) with OECD data on Analytical Business Enterprise R&D (ANBERD) and build up the network that emerges by mapping the sectoral R&D expenditure that flows in an embodied way among 690 industry-country nodes (23 industries of 30 countries), from 2009 to 2013. Drawing on frontier network analysis techniques, we examine the distribution of the relational properties of the country-industry nodes, identify the most central of them, and detect the clusters that they form. Our analysis reveals that, while the diffusion of embodied R&D is highly pervasive on a global scale, the linkages it creates across sectors tend to be highly asymmetric and polarised. Furthermore, except for transportation and ICT related industries, embodied R&D flows determine communities largely confined within national borders. Despite being based on structural inputoutput relationships, the position and role of country-industry nodes in the global network of embodied R&D knowledge show a certain variability both over time and across network dimensions.
    Keywords: R&D flows, input-output, global innovation network, network analysis
    JEL: O33 R15 O57
    Date: 2021–04
  8. By: Ángela Castillo-Murciego (Departamento de Economía y Empresa, Universidad de La Rioja); Julio López-Laborda (Departamento de Estructura e Historia Económica y Economía Pública, Universidad de Zaragoza)
    Abstract: Tax havens may play a key role in the profit-shifting activity of multinational companies (MNCs), since, among other characteristics, they are the territories with the most beneficial taxes for foreign investors. This paper shows that Spanish MNCs with higher average foreign non-haven tax rates are more likely to invest in tax havens. This outcome is robust to at least two different tax haven lists and various definitions of the average non-haven tax rate. The size of the foreign and domestic activity of the Spanish MNCs, as well as their use of intangible assets and the fact of belonging to the Ibex 35 index, also positively affect the probability of investing in tax havens. By economic sectors, once the endogeneity problem is controlled for, the incentive of third countries’ high taxes on investments in tax havens is greater for manufacturers than for service firms, but this effect is especially high for financial firms. Moreover, within the Ibex 35 index of companies, only the financial firms exert a positive effect on the likelihood of investing in these low-tax territories. Additionally, it seems that while foreign non-haven taxes positively influence the number of different tax havens used by Spanish firms, they have no effect on the number of affiliates located within them. The paper also estimates that Spanish MNCs have been able to save about 4 billion euros per year in corporate income tax in the period 2013-2018 as a result of these practices.
    Date: 2021–04
  9. By: Gorodnichenko, Y; Svejnar, J; Terrell, K
    Abstract: Using large firm-level and industry-level data sets from eighteen countries, we find that foreign direct investment (FDI) and trade have positive spillover effects on product and technology innovation by domestic firms in emerging markets. The FDI effect is more pronounced for firms from advanced economies. However, while we detect the spillover effects with micro data at the firm-level, when we use linkage variables computed from input-output tables at the industry level we find much weaker, and usually insignificant, effects. These patterns are important for policy, suggesting that spillovers are localized to firms engaged directly with multinationals and in trade, rather than affecting all domestic firms in industries with FDI presence.
    Keywords: Economics
    Date: 2020–01–01
  10. By: Tetsuji Okazaki (Graduate School of Economics, University of Tokyo, Japan); Toshihiro Okubo (Faculty of Economics, Keio University, Japan); Eric Strobl (Department of Economics, Bern University, Switzerland)
    Abstract: Natural disasters can seriously damage firms as well as the banks that they use independent of their size. However, it is small- and medium-sized firms in particular that will be affected by this because they tend to be financially constrained and thus greatly depend on these potentially damaged local banks for financing. In this paper, we focus on the Great Kanto Earthquake of 1923, which resulted in serious damage to small- and medium-sized firms and banks in Yokohama City, to investigate how effective the provision of loans by local banks, as well as the Earthquake Bills policy implemented by the Bank of Japan, was in helping firms recover. Using linked firm- and bank-level datasets, we find that larger local banks allowed damaged firms to survive and grow. The Earthquake Bills policy mitigated the negative impact of bank damage on firms and prevented credit crunch, although this deteriorated the balance sheet of local banks and resulted in financial instability and a banking crisis as a side effect.
    Date: 2021–04
  11. By: Lorenzo Bencivelli (Bank of Italy); Beniamino Pisicoli (University of Rome Tor Vergata)
    Abstract: We study how FDI affects the financial structure of targeted firms, by looking at a sample of foreign acquisitions that occurred in Italy between 1998 and 2016. We show that the entry of foreign investors promotes the diversification of financing sources. Moreover, foreign acquisitions lower investment sensitivity to the availability of bank credit and the cash flow sensitivity of cash, allowing targeted firms to rely more on non-bank external financing channels. Importantly, these effects are stronger for investment in intangible assets. These findings suggest that the positive productivity effects of FDI emphasized in the literature are, at least in part, traceable to enhanced investment in capital that is harder to finance through the banking sector.
    Keywords: FDIs, firms’ financial structure, non-bank financing, investment
    JEL: F15 F21 F23 F61
    Date: 2021–04

This nep-sbm issue is ©2021 by João Carlos Correia Leitão. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.