nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒05‒24
thirteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Urban Agglomeration and Firm Innovation: Evidence from Asia By Chen, Liming; Hasan, Rana; Jiang, Yi
  2. The Effects of COVID-19 on U.S. Small Businesses: Evidence from Owners, Managers, and Employees By Alekseev, Georgij; Amer, Safaa; Gopal, Manasa; Kuchler, Theresa; Schneider, JW; Ströbel, Johannes; Wernerfelt, Nils
  3. Intangible Capital and Firm-Level Productivity – Evidence from Germany By Roth, Felix; Sen, Ali; Rammer, Christian
  4. COVID-19 and SME Failures By Gourinchas, Pierre-Olivier; Kalemli-Ozcan, Sebnem; Penciakova, Veronika; Sander, Nick
  5. Industrial Clusters, Networks and Resilience to the Covid-19 Shock in China By Dai, Ruochen; Mookherjee, Dilip; Quan, Yingyue; Zhang, Xiaobo
  6. Firm-level heterogeneity in the impact of the COVID-19 pandemic By Alejandro Fernández-Cerezo; Beatriz González; Mario Izquierdo; Enrique Moral-Benito
  7. Small and medium enterprises in access to Bank credit in Mozambique By ALFAZEMA, ANTONIO
  8. Firm Entry and Exit in Local Markets: 'Market Pull' or 'Unemployment Push' Effects, or Both? By Martin Carree; Marcus Dejardin
  9. Heterogeneous Effects of Macroprudential Policies on Firm Leverage and Value By Hyunduk Suh; Jin Young Yang
  10. Using Principal Component Analysis to create an index of financial conditions in Spain. Differences by firm size and industry By Román-Aso, Juan A.; Coca Villalba, Fernando; Mastral Franks, Vanessa; Bosch Frigola, Irene
  11. Fiscal transfers, local government, and entrepreneurship By Danisewicz, Piotr; Ongena, Steven
  12. Judge Bias in Labor Courts and Firm Performance By Cahuc, Pierre; Carcillo, Stéphane; Moreau, Flavien; PATAULT, Bérengère
  13. The Impact of Financial Education of Managers on Medium and Large Enterprises - A Randomized Controlled Trial in Mozambique By Custódio, Cláudia; Mendes, Diogo; Metzger, Daniel

  1. By: Chen, Liming (Asian Development Bank); Hasan, Rana (Asian Development Bank); Jiang, Yi (Asian Development Bank)
    Abstract: This paper presents evidence on the spatial distribution and effects of urban agglomeration on firm innovation. It uses a unique dataset that consistently defines city boundaries and identifies firms’ innovation-related activities across 25 developing countries in Asia. We find firm innovation to be highly concentrated at the city level. We also find substantial gains from increases in city population in terms of firms’ propensity to introduce process and product innovations and undertake research and development (R&D) activities. These gains remain even after addressing concerns regarding endogeneity through the use of historical population data as instruments. In addition, we present evidence that knowledge spillovers are an important channel through which agglomeration effects occur, specifically through the presence of top-tier universities in a given city and by raising the effectiveness of firms’ R&D efforts. These findings confirm the existence and significance of urban economies of scale in augmenting the knowledge flows that generate innovation.
    Keywords: agglomeration economies; innovation; knowledge spillovers
    JEL: O10 O30 R11
    Date: 2020–07–10
  2. By: Alekseev, Georgij; Amer, Safaa; Gopal, Manasa; Kuchler, Theresa; Schneider, JW; Ströbel, Johannes; Wernerfelt, Nils
    Abstract: We analyze a large-scale survey of owners, managers, and employees of small businesses in the United States to understand the effects of the early stages of the COVID-19 pandemic on those businesses. The survey was fielded in late April 2020 among Facebook business page administrators, frequent sellers on Facebook's e-commerce platform Marketplace, and the general Facebook user population. We observe more than 66,000 responses covering most sectors of the economy, including many businesses that had stopped operating due to the pandemic. The survey asks 136 questions covering topics such as changes in business operations and employment, changes in financing patterns, and the interaction of household and business responsibilities. We characterize the adjustments implemented to survive the pandemic and explore the key challenges to continue operating or to re-open. We show how these patterns differ across industry, firm size, owner gender, and other firm characteristics.
    Keywords: COVID-19; Small business finance; small businesses; Working from Home
    JEL: L26 M13
    Date: 2020–09
  3. By: Roth, Felix; Sen, Ali; Rammer, Christian
    Abstract: This paper analyses the impact of intangible capital on firm-level productivity for Germany using panel data from the Community Innovation Survey for the time period 2006 to 2018. Our paper presents three novel results. First, we find a highly significant positive relationship between intangible capital and firm-level productivity with elasticities overall in line with previous findings reported for other large EU economies. Second, our results show that both manufacturing and services are highly intangible-capital intensive, and that intangibles have a greater impact on firm-level productivity in services - particular in the business services sector. Third, our results show that intangible capital investments in German firms are equal to investments in tangible capital since the early 2000s. Overall, the evidence presented in our paper indicates that Germany - in line with other advanced economies - has undergone a structural transition into a knowledge economy in which intangibles act as an important driver of firm-level productivity.
    Keywords: Intangible capital,firm-level productivity,panel data,Germany
    JEL: D24 O30 L22 C33
    Date: 2021
  4. By: Gourinchas, Pierre-Olivier; Kalemli-Ozcan, Sebnem; Penciakova, Veronika; Sander, Nick
    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). How- ever, 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.
    Keywords: bankruptcy; business failure; COVID-19; SMEs
    Date: 2020–09
  5. By: Dai, Ruochen; Mookherjee, Dilip; Quan, Yingyue; Zhang, Xiaobo
    Abstract: We examine how exposure of Chinese firms to the Covid-19 shock varied with a cluster index (measuring spatial agglomeration of firms in related industries) at the county level. Two data sources are used: entry flows of newly registered firms in the entire country, and an entrepreneur survey regarding operation of existing firms. Both show greater resilience in counties with a higher cluster index, after controlling for industry dummies and local infection rates, besides county and time dummies in the entry data. Reliance of clusters on informal entrepreneur hometown networks and closer proximity to suppliers and customers help explain these findings.
    Keywords: China; Clusters; COVID-19; firms; Social Networks
    JEL: D31 I3 J12 J16
    Date: 2020–10
  6. By: Alejandro Fernández-Cerezo (Banco de España); Beatriz González (Banco de España); Mario Izquierdo (Banco de España); Enrique Moral-Benito (Banco de España)
    Abstract: This paper explores the heterogeneity across firms within each sector and region in the impact of and response to the COVID-19 shock. It relies on a survey conducted by Banco de España to 4,004 companies in November 2020 matched to very rich balance-sheet information on firm characteristics. According to our results, the impact of the COVID-19 shock was larger in the case of small, young and less productive firms located in urban areas within each sector-region pair. Moreover, these firms resorted relatively more to public-guaranteed loans, tax deferrals, and furlough schemes (ERTEs). More indebted companies, which were not hit relatively harder by the shock, also perceived public-guaranteed loans as very useful. Firms consider that uncertainty represents a key hindrance to the recovery, but observable characteristics do not explain the variation in the perception of uncertainty once the impact of the shock is accounted for. Finally, we use the announcement of the Pfizer vaccine on November 9th 2020 as a natural experiment to provide evidence that the vaccine announcement increased significantly firms’ subjective recovery expectations.
    Keywords: COVID-19, firms, sales, employment, uncertainty
    JEL: D22 L20 L25
    Date: 2021–05
    Abstract: SMEs have a very important role towards society, being responsible for the production of a large part of the total goods and services, but also for stimulating competition, introducing innovative methods and for their importance in employability. In Mozambique, the credit capacity of SMEs is quite weak as the results point to the lack of organized accounting, insufficient collateral, reduced bargaining power, weak business management skills, and weaknesses in structuring business plans are challenges for SMEs to access bank financing. The main difficulty in applying for credit by companies is the existence of unattractive and uncompetitive rates and fees. The biggest problem related to accessing bank credit is the prohibitive collateral requirements and the problem of structural deficiencies, which cripple the economy.
    Keywords: Small and medium enterprises; Lending; Credit; Bank.
    JEL: M10
    Date: 2021–05–03
  8. By: Martin Carree (Maastricht University [Maastricht]); Marcus Dejardin (UNamur - Université de Namur [Namur], UCL - Université Catholique de Louvain)
    Abstract: Firm entry and exit flows in the retailing and consumer services may be viewed as market equilibrating processes. Local markets with considerable market room and high unemployment may be thought of having high subsequent entry rates and possibly low exit rates. We examine this relationship and obtain empirical results for a range of industries in 563 Belgian municipalities. We show that, over a three-year period, (net) entry is positively affected by the presence of local 'market room'. We find a significant 'unemployment push' effect on entry in some industries, but also a significantly positive effect of unemployment on exit. This pattern possibly indicates a 'revolving door regime' in areas marked by unemployment where new entrants leave the market relatively soon after entry, or only crowd out local competitors without creating additional employment.
    Keywords: entry,exit,entrepreneurship,unemployment,local development
    Date: 2020
  9. By: Hyunduk Suh (Inha University); Jin Young Yang (Zayed University)
    Abstract: We empirically investigate the effect of financial institution-targeted macroprudential policies on firms, using a comprehensive macroprudential policy dataset and corporate panel data across 29 countries. We find that the tightening of macroprudential measures persistently curbs the leverage growth of firms, while there is no indication that the loosening of the measures is related to the increase in leverage growth. We also find that this effect on leverage is heterogeneous across firms, as net macroprudential policy actions reduce the procyclicality of leverage more significantly for small firms and firms with high leverage. Also, we estimate the effect of macroprudential policies on firm value to evaluate potential policy trade-offs as the policies restrict the firms' access to credit during economic booms while protecting them from future financial crises. The effect of macroprudential policies on firm value is generally positive despite the policies' restrictive nature. Further, the effect on firm value is heterogeneous depending on firm characteristics: the positive effect becomes stronger as firms are less leveraged; but this positive effect is weaker for firms that grow faster, suggesting potential costs of macroprudential policies for these firms.
    Keywords: Macroprudential policy, Firm heterogeneity, Leverage, Tobin’s Q
    JEL: E51 E58 G18
    Date: 2021–04
  10. By: Román-Aso, Juan A.; Coca Villalba, Fernando; Mastral Franks, Vanessa; Bosch Frigola, Irene
    Abstract: In the last decades, a large number of academic contributions have investigated the access to credit from a great variety of perspectives. The aim of this paper is to develop an index of financial conditions to contrast subsequently, the impact of firm size and industry on it according to the information asymmetric theory. To that end, we implement a Principal Component Analysis with a database made up of 233 Spanish freelancers and MSMEs in 2018. This technique permits us to gather the objective facts and subjective perceptions of the surveyed by detecting common elements in their responses. Once components are identified, we run statistical tests to find out if firm size and industry explain the differences amongst companies. Our outcome only proves the theory for firm size, meanwhile the hypothesis remains unclear for industry
    Keywords: Index of financial conditions,Principal Components Analysis,Asymmetric information
    JEL: G20 G30 M21 M41
    Date: 2021
  11. By: Danisewicz, Piotr; Ongena, Steven
    Abstract: Can local government spending spur entrepreneurial activity? To answer this question we study Poland where municipalities with lower tax revenues receive direct monetary grants from the national budget that vary at multiple pre-determined and non-manipulable thresholds. Employing a fuzzy regression discontinuity design, we find a positive impact of fiscal transfers on the number of firms, especially sole proprietorships and small firms. The impact is stronger in municipalities where the opposition is more involved in the legislative process or more parties are represented in the municipal council, and in regions where historical legacies shaped a more positive attitude towards entrepreneurship.
    Keywords: "Fuzzy" Regression Disconti-nuity Design; entrepreneurship; Fiscal Transfers; Local government spending
    JEL: E62 H71 H72 L26 P16
    Date: 2020–10
  12. By: Cahuc, Pierre; Carcillo, Stéphane; Moreau, Flavien; PATAULT, Bérengère
    Abstract: Does labor court uncertainty and judge subjectivity influence firms performance? We study the economic consequences of judge decisions by collecting information on more than 145,000 Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias has statistically significant effects on the survival, employment, and sales of small low-performing firms. However, we find that the uncertainty associated with the actual dispersion of judge bias is small and has a non-significant impact on their average outcomes.
    Keywords: employment; Employment protection legislation; Labor courts
    JEL: J01 J08 K31
    Date: 2020–10
  13. By: Custódio, Cláudia; Mendes, Diogo; Metzger, Daniel
    Abstract: This paper studies the impact of a course in "Finance" for top managers of medium and large enterprises in Mozambique through a randomized controlled trial (RCT). Survey data and accounting data provide consistent evidence that managers change firm financial policies in response to finance education. The largest treatment ef- fect is on short-term financial policies related to working capital. Reductions in accounts receivable and inventories generate an increase in cash flows used to finance long-term investments. Those policy changes also improve the performance of the treated firms. Overall, our results suggest that relatively small and low-cost interventions, such as a standard executive education program in finance, can help firms to mitigate financial constraints and potentially affect economic development.
    Keywords: CEOs; Financial Education; financial literacy; Financing constraints; RCT
    JEL: D4 G30 J24 L25 M41 O16
    Date: 2020–09

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