nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒05‒17
sixteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Credit Constraints, Labor Productivity and the Role of Regional Institutions: Evidence from Manufacturing Firms in Europe By Brezzi, Monica; Ganau, Roberto; Maslauskaite, Kristina; Rodríguez-Pose, Andrés
  2. Driving Innovations, Leveraging Technology in Indian Business Ecosystem By Joffi Thomas; Dinesh Tiwari
  3. Corporate R&D intensity decomposition: Different data, different results? By Pietro Moncada-Paternò-Castello; Sara Amoroso; Michele Cincera
  4. Productivity premia and firm heterogeneity in Eastern Africa By Demena, B.A.; Msami, J.; Mmari, D.E.; van Bergeijk, P.A.G.
  5. Pre-Internationalization and Performance Conditions of First-Time Exporting SMEs By Pierre-Xavier Meschi; Antonin Ricard; Ernesto Tapia Moore
  6. Education and economic growth By Anna Valero
  7. The Impact of Foreign Direct Investment on Innovation: Evidence from Patent Fillings and Citations in China By Chen, Yongmin; Jiang, Haiwei; Liang, Yousha; Pan, Shiyuan
  8. Inside the Regulatory Sandbox: Effects on Fintech Funding By Cornelli, Giulio; Doerr, Sebastian; Gambacorta, Leonardo; Merrouche, Ouarda
  9. Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws By Bernhard Ganglmair; Imke Reimers
  10. Foreign Shocks as Granular Fluctuations By di Giovanni, Julian; Levchenko, Andrei A.; Mejean, Isabelle
  11. Quality of government and regional trade: Evidence from European Union regions By Barbero Jiménez, Javier; Madras, Giovanni; Rodríguez-Crespo, Ernesto; Rodríguez-Pose, Andrés
  12. Artificial Intelligence and Industrial Innovation: Evidence from Firm-Level Data By Christian Rammer; Gastón P Fernández; Dirk Czarnitzki
  13. COVID-19’s impact on the financial health of Canadian businesses: An initial assessment By Timothy Grieder; Mikael Khan; Juan Ortega; Callie Symmers
  14. Four Decades of Canadian Earnings Inequality and Dynamics across Workers and Firms By Audra Bowlus; Émilien Gouin-Bonenfant; Huju Liu; Lance Lochner; Youngmin Park
  15. Private equity buyouts, credit constraints, and firm exports By Paul Lavery; Jose-Maria Serena; Marina-Eliza Spaliara; Serafeim Tsoukas
  16. Getting Schooled: The Role of Universities in Attracting Immigrant Entrepreneurs By Natee Amornsiripanitch; Paul A. Gompers; George Hu; Kaushik Vasudevan

  1. By: Brezzi, Monica; Ganau, Roberto; Maslauskaite, Kristina; Rodríguez-Pose, Andrés
    Abstract: This paper examines the relationship between credit constraints â?? proxied by the investment-to-cash flow sensitivity â?? and firm-level economic performance â?? defined in terms of labor productivity â?? during the period 2009-2016, using a sample of 22,380 manufacturing firms from 11 European countries. It also assesses how regional institutional quality affects productivity at the level of the firm both directly and indirectly. The empirical results highlight that credit rationing is rife and represents a serious barrier for improvements in firm-level productivity and that this effect is far greater for micro and small than for larger firms. Moreover, high-quality regional institutions foster productivity and help mitigate the negative credit constraints-labor productivity relationship that limits the economic performance of European firms. Dealing with the European productivity conundrum thus requires greater attention to existing credit constraints for micro and small firms, although in many areas of Europe access to credit will become more effective if institutional quality is improved.
    Keywords: credit constraints; Cross-Country Analysis; Europe; labor productivity; Manufacturing firms; Regional Institutions
    JEL: C23 D24 G32 H41 R12
    Date: 2020–11
  2. By: Joffi Thomas (Indian Institute of Management Kozhikode); Dinesh Tiwari (Broadpeak Capital Advisors)
    Abstract: Emergence of a Vibrant Innovation Ecosystem: Rapid penetration of digital technologies over the last two decades has ushered in business innovations in both incumbent firms and in startups. By the end of 2020, India found its place among the top four countries with a vibrant startup ecosystem with 36 unicorns. Confluence of Enabling Factors: A confluence of enabling factors of technology, talent, capital and supportive policy environment has led to the growth of the start-ups through the introduction phase (2006-2010), early growth phase (2011-2015) and accelerated growth phase (2016-2020). Growth of Indian Start-up Ecosystem: Venture capital investments of $ 19.85 B went into 3,442 firms funding innovations during 2006-2020. The investment of $3.9 B in 2006-2010 grew by 65% to $6.4 B in 2011-2015 period and further by 48% to $9.5 B in 2016-2020 period. Ecommerce and Fintech sectors received larger share of the investments contributing 11 of the 36 unicorns.Accelerating Innovation led Economic Growth: An enabling environment to further accelerate innovation led growth requires continuous focus on key enabling factors: (a) Technology-ensuring affordable digital technology access to rural population, adoption of deep technologies across start-ups (b) Talent - designing innovative mechanisms to attract and support talented entrepreneurs (c) Capital - accelerating investment flows by triggering investment-innovation-investor returns spirals in multiple sectors and (d) Policy Support-formulating proactive supportive policies with a fifteen year and five year planning horizon focussed on all round development of the rural economy leveraging novel technologies; providing institutional support to exploit global market opportunities involving industry and academe.
    Date: 2021–03
  3. By: Pietro Moncada-Paternò-Castello; Sara Amoroso; Michele Cincera
    Abstract: Research and Development (R&D) indicators are used to facilitate international comparisons and as targets for research and innovation policy. An example of such an indicator is R&D intensity. The decomposition of the aggregate corporate R&D intensity is able to explain the differences in R&D intensity between countries by determining whether is the result of firms' underinvestment in R&D or of the differences across sectors. Despite its importance, the literature of corporate R&D intensity decomposition has been developed only recently. This article reviews for the first time the different methodological frameworks of corporate R&D intensity decomposition and how they are used in practice, shedding light on why sometimes empirical results seem to be contradictory. It inspects how the use of different data sources and analytical methods affect R&D intensity decomposition results, and what the analytical and policy implications are. The article also provides methodological and analytical guidance to analysts and policymakers.
    Keywords: corporate R&D intensity gap; decomposition; literature survey; methodological hints; R&D policy
    Date: 2020–08–01
  4. By: Demena, B.A.; Msami, J.; Mmari, D.E.; van Bergeijk, P.A.G.
    Abstract: Productivity development is a key issue for export-driven growth and development. We use East African Community (EAC) firm-level data. Instead of focusing on single EAC partners, using the World Bank Enterprise Surveys, investigate firm-level productivity difference for seven countries that are part of the COMESA-EAC-SADC tripartite free trade area (TFTA). Using export and ownership dimensions, we identify four types of firms: National Domestic, National Exporters, Foreign Domestic and Foreign Exporters. We find a clear export productivity premium for national manufacturing firms and service sectors, but not for foreign owned firms. We also find clear foreign-ownership productivity premium for both domestic and exporting firms in manufacturing sectors but less clear in services sectors. The gap between national export premium and foreign-ownership premium is stronger in manufacturing firms as opposed to service sectors. Moreover, we find clear and strong productivity premia in size, training programmes and level of development in the manufacturing firms. In the services sector, these premia are always smaller and only significant for medium-sized firms. There is no difference in experience premium between sectors in terms of both significance and magnitude of the estimated coefficients.
    Keywords: Productivity, exports, firm heterogeneity, FDI, sub-Saharan Africa, EAC.
    JEL: O12 J24 F23 D20 O55
    Date: 2021–05–06
  5. By: Pierre-Xavier Meschi (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon); Antonin Ricard (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon, AMU IAE - Institut d'Administration des Entreprises (IAE) - Aix-en-Provence - AMU - Aix Marseille Université); Ernesto Tapia Moore (KEDGE Business School [Marseille])
    Abstract: This article aims to determine whether pre-internationalization conditions improve the performance of first-time exporting small and medium-sized enterprises (SMEs). Two pre-internationalization conditions are discussed here: firm performance and age at internationalization. Building on the aspiration-level performance model of March and Shapira (1992) with sequential internationalization and international new-ventures approaches, this article develops two research hypotheses proposing an effective alignment with pre-internationalization performance and age at internationalization. These research hypotheses are examined using a panel database of 522 French SMEs that began export operations for the first time in 2014. The statistical results partially support our first hypothesis by showing that early-internationalizing SMEs with a lower performance relative to their peers significantly increase their post-internationalization performance. Contrary to what we predicted in our second hypothesis, we observe that late-internationalizing SMEs, which deliver a much higher performance than their historical aspirations, significantly reduce their post-internationalization performance.
    Keywords: Aspiration-level performance model,Early internationalization,First-time exporting SME,Internationalization process,Late internationalization,Social and historical aspirations
    Date: 2021–03–19
  6. By: Anna Valero
    Abstract: This paper summarises the literature that has linked education and economic growth. It begins with an overview of the key concepts in neoclassical and endogenous growth models, and discussion on how these have been tested in the data. Issues with respect to specification, the measurement of human capital and causality are discussed, together with studies that have sought to addresses these. A more recent and growing literature that explores the links between firm level human capital and productivity, including externalities, is then summarised. Beyond studies that link human capital to economic performance directly, there are numerous studies that have explore the relationships between human capital and the determinants of growth including investment, technology adoption and invention. Key findings from this literature are drawn out, together with a summary of the literature that has linked the activities of universities (key producers of both human capital and innovation) to their local economies. The paper concludes with discussion of policy implications stemming from this body of research, and promising areas for future research.
    Keywords: human capital, growth, innovation
    Date: 2021–04
  7. By: Chen, Yongmin; Jiang, Haiwei; Liang, Yousha; Pan, Shiyuan
    Abstract: This paper studies how foreign direct investment (FDI) affects innovation in the host country, using matched firm-level patent data of Chinese firms. The data contain multidimensional information about patent counts and citations which, together with an identification strategy based on Lu et al. (2017), allows us to measure innovation comprehensively and to uncover the causal relationship. Our empirical analysis shows that FDI has positive intra-industry effects on the quantity and quality of innovation by Chinese firms. We show that these positive effects are driven by increases in competition, rather than by knowledge spillover from FDI which is measured by patent citations between domestic firms and foreign invested enterprises (FIEs). We further investigate the inter-industry effects of FDI and find that FDI has positive vertical effects on innovation in upstream sectors.
    Keywords: FDI; Innovation; Patent; Competition; Spillover
    JEL: F2 L5 O3
    Date: 2021–05–11
  8. By: Cornelli, Giulio; Doerr, Sebastian; Gambacorta, Leonardo; Merrouche, Ouarda
    Abstract: Policymakers around the world are adopting regulatory sandboxes as a tool for spurring innovation in the financial sector while keeping alert to emerging risks. Using unique data for the UK, this paper provides first evidence on the effectiveness of the world's first sandbox in improving fintechs' access to finance. Firms entering the sandbox see a significant increase of 15% in capital raised post-entry, relative to firms that did not enter; and their probability of raising capital increases by 50%. Our results suggest that the sandbox facilitates access to capital through two channels: reduced asymmetric information and reduced regulatory costs or uncertainty. Our results are similar when we exploit the staggered introduction of the sandbox and compare firms in earlier to those in later sandbox cohorts, and when we compare participating firms to a matched set of comparable firms that never enters the sandbox.
    Keywords: Fintech; regulatory sandbox; Startups; venture capital
    JEL: G32 G38 M13 O3
    Date: 2020–11
  9. By: Bernhard Ganglmair; Imke Reimers
    Abstract: We use exogenous variation in the strength of trade secrets protection to show that a relative weakening of patents (compared to trade secrets) has a disproportionately negative effect on the disclosure of processes - inventions that are not otherwise visible to society. We develop a structural model of initial and follow-on innovation to determine the effects of such a shift in disclosure on overall welfare in industries characterized by cumulative innovation. We find that while stronger trade secrets encourage investment in R&D, they may have negative effects on overall welfare - the result of a significant decline in follow-on innovation.
    Keywords: cumulative innovation; disclosure; self-disclosing inventions; Uniform Trade Secrets Act
    JEL: D80 O31 O34
    Date: 2019–08
  10. By: di Giovanni, Julian; Levchenko, Andrei A.; Mejean, Isabelle
    Abstract: This paper uses a dataset covering the universe of French firm-level sales, imports, and exports over the period 1993-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. The largest firms are both important enough to generate aggregate fluctuations (Gabaix, 2011), and most likely to be internationally connected. This implies that foreign shocks are transmitted to the domestic economy primarily through the largest firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 40 to 85% of the impact of foreign fluctuations on French GDP is accounted for by the "foreign granular residual" -- the term capturing the fact that larger firms are more affected by the foreign shocks. At the macro level, firm heterogeneity dampens the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model.
    Keywords: Aggregate fluctuations; granularity; input linkages; international trade; shock transmission
    JEL: E32 F15 F23 F44 F62 L14
    Date: 2020–11
  11. By: Barbero Jiménez, Javier; Madras, Giovanni; Rodríguez-Crespo, Ernesto; Rodríguez-Pose, Andrés
    Abstract: This paper examines â?? using a novel database of regional trade flows between 267 European regions for 2013 â?? how government quality affects trade between European Union (EU) regions. The results of a structural gravity cross-sectional analysis of trade show that trade across EU regions is highly influenced by differences in regional government quality. This influence varies by sector of economic activity and by the level of economic development of the region. The results indicate that, if the less developed regions of the EU want to engage in greater interregional trade, improving their institutional quality is a must.
    Keywords: gravity model of trade; institutions; quality of government; regional policy; structural estimation; Trade
    JEL: E02 F15 R10
    Date: 2021–01
  12. By: Christian Rammer; Gastón P Fernández; Dirk Czarnitzki
    Abstract: Artificial Intelligence (AI) represents a set of techniques that enable new ways of innovation and allows firms to offer new features of products and services, to improve production, marketing and administration processes, and to introduce new business models. This paper analyses the extent to which the use of AI contributes to the innovation performance of firms. Based on firmlevel data from the German part of the Community Innovation Survey (CIS) 2018, we examine the contribution of different AI methods and applications to product and process innovation outcomes. The representative nature of the survey allows extrapolating the findings to the macroeconomic level. The results show that 5.8% of firms in Germany were actively using AI in their business operations or products and services in 2019. The use of AI generated additional sales with world-first product innovations in these firms of about €16 billion, which corresponds to 18% of total sales of world-first innovations in the German business sector. Firms that developed AI by combining in-house and external resources obtained significantly higher innovation results. The same is true for firms that apply AI in a broad way and have already several years of experience in using AI.
    Keywords: Artificial Intelligence, Innovation, CIS data, Germany
    Date: 2021–04–30
  13. By: Timothy Grieder; Mikael Khan; Juan Ortega; Callie Symmers
    Abstract: Despite COVID-19 challenges, bold policy measures in Canada have helped businesses manage cash flow pressures and kept insolvency filings low. But the impact of the pandemic has been uneven, and the financial health of some firms may further deteriorate over the next year.
    Keywords: Coronavirus disease (COVID-19); Credit and credit aggregates; Financial stability; Firm dynamics; Recent economic and financial developments; Sectoral balance sheet
    JEL: G38
    Date: 2021–05
  14. By: Audra Bowlus; Émilien Gouin-Bonenfant; Huju Liu; Lance Lochner; Youngmin Park
    Abstract: This paper studies the evolution of individual earnings inequality and dynamics in Canada from 1983 to 2016 using tax files and administrative records. Linking these individuals to their employers (and rich administrative records on firms) beginning in 2001, it also documents the relationship between the earnings dynamics of workers and the size and growth of their employers. It highlights three main patterns over this period: First, with a few exceptions (sharp increase in top 1% and declining gender gap), Canada has experienced relatively modest changes in overall earnings inequality, volatility, and mobility between 1983 and 2016. Second, there is considerable variability in earnings inequality and volatility over the business cycle. Third, the earnings dynamics of individuals are strongly related to the size and employment growth of their employers.
    JEL: E24 J24 J31 J62 L25
    Date: 2021–05
  15. By: Paul Lavery; Jose-Maria Serena; Marina-Eliza Spaliara; Serafeim Tsoukas
    Abstract: We analyse the impact of private equity buyouts on firm exports, on a panel of UK non-financial firms over 2004-2017. Using difference-in-differences estimations, we show that private equity ownership increases the probability of exporting, the value of exports, and the export to sales ratio. We further show that the positive impact of private equity ownership on exports holds only after private-to-private buyouts, or acquisitions of small or young target firms. Our findings suggest that private equity investors mitigate the credit constraints faced by their portfolio companies, hence boosting their exports.
    Keywords: Private equity buyouts; exporting; credit constraints; transactions
    JEL: G34 G32
    Date: 2021–05
  16. By: Natee Amornsiripanitch; Paul A. Gompers; George Hu; Kaushik Vasudevan
    Abstract: Immigrant founders of venture capital-backed companies have been critical to the entrepreneurial ecosystem. We document the channels through which immigrant founders find their way to the United States and how those channels have changed over time. Immigrants have been an important source of founders for venture capital-backed startups accounting for roughly 20% of all founders over the past 30 years. Immigrants coming to the United States for their education have been the primary source of founders with those coming after being educated abroad and then arriving for work decreasing in importance over time. The importance of undergraduate education as a channel for immigrant founders has increased over time. Immigrant founders coming for education are likely to start their companies in the state in which they were educated, especially states where they received their graduate education, leading to potentially large local economic benefits. The results of this paper have important policy implications for the supply of entrepreneurial talent and efforts to promote entrepreneurial ecosystems.
    JEL: G24 J0 J15 J24 L26
    Date: 2021–05

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