nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒05‒31
seventeen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Drivers of SME Formation in Indian States: The Empirics By Pradhan, Jaya Prakash; Husain, Tareef
  2. Efficiency of small and medium-sized real estate industry -An analysis on the period after the burst of the bubble economy using micro-data By Yasuo Goto
  3. Selection into entrepreneurship and self-employment By Levine, Ross; Rubinstein, Yona
  4. Public Support of Innovative Activity in Small and Large Firms in Mexico By Guerrero, Maribel; Link, Albert
  5. Mission-Oriented Policies and the "Entrepreneurial State" at Work: An Agent-Based Exploration By Giovanni Dosi; Francesco Lamperti; Mariana Mazzucato; Mauro Napoletano; Andrea Roventini
  6. On Immigration and Native Entrepreneurship By Duleep, Harriet; Jaeger, David A.; McHenry, Peter
  7. Covid-19 and Firms: Productivity and Government Policies By Kozeniauskas, Nicholas; Moreira, Pedro; Santos, Cezar
  8. More than an Ivory Tower: The Impact of Research Institutions on the Quantity and Quality of Entrepreneurship By Valentina Tartari; Scott Stern
  9. Social entrepreneurs as change makers: expanding public service networks for social innovation By Anne Hansen; Lars Fuglsang; Faïz Gallouj; Ada Scupola
  10. How is COVID Changing the Geography of Entrepreneurship? Evidence from the Startup Cartography Project By Catherine E. Fazio; Jorge Guzman; Yupeng Liu; Scott Stern
  11. Board dynamics over the startup life cycle By Ewens, Michael; Malenko, Nadya
  12. Board Reforms and Innovation By Muhammad Farooq Ahmad; Oskar Kowalewski
  13. Space policy drives innovation through technological procurement: evidence from Italy By Paolo Castelnuovo; Stefano Clo; Massimo Florio
  14. High Growth Enterprises in the COVID-19 Crisis Context: demographics, environmental innovations, digitalization, finance and policy measures By BENEDETTI FASIL Cristiana; DEL RIO Juan Carlos; DOMNICK Clemens; FAKO Peter; FLACHENECKER Florian; GAVIGAN James; JANIRI Mario; STAMENOV Blagoy; TESTA Giuseppina
  15. Destabilizing Effects of Market Size in the Dynamics of Innovation By Matsuyama, Kiminori; Ushchev, Philip
  16. Perception of corruption influences entrepreneurship inside established companies By F. Javier Sanchez-Vidal; Camino Ramon-Llorens
  17. Agglomeration Economies and Race Specific Spillovers By Elizabeth Ananat; Shihe Fu; Stephen Ross

  1. By: Pradhan, Jaya Prakash; Husain, Tareef
    Abstract: The development of small and medium enterprises (SMEs) sector is a key policy priority as these enterprises play a critical role in the growth and development process of any economy. The present study is motivated to explore the regional dimensions of entry of new SMEs across Indian states and sectors covering an extensive study period 1980─2007. It further expands the literature on formation of firms from the sub-national perspective, empirically uncovering regional factors that significantly determine the formation of new firms. Findings suggest that new SME formation in India is characterized by a concentrated regional pattern during the study period with a few regions accounting for disproportionate share of the number of new SMEs formed. Also, Indian sub-national entities exhibited considerably disparity in the entry rate of new SMEs. Regional factors like local market size, availability of skills, technological specialization of manufacturing sector, land transportation networks, and entrepreneurial culture tend to play positive role in the formation rate of SMEs in Indian states.
    Keywords: SMEs, India, Regions, Entry Rate
    JEL: L11 L26 R11
    Date: 2021–05–10
  2. By: Yasuo Goto (Faculty of Social Innovation, Seijo University)
    Abstract: The real estate industry is a typical industry that suffered the most damage from the bursting of the bubble economy in Japan and seems to have not yet completely recovered from the severe situation overall. In this article we analyse the industry using comprehensive database which incorporate huge number of small and medium-sized enterprises. We confirmed that the real estate industry as a whole is not in a bad situation, but that the smallest tiers are performing poorly. It can be interpreted as not because of the large number of inefficient firms, but because of the high degree of inefficiency, in terms of inefficiency of firms which is evaluated with the criteria for “zombie” firm in this article. The average profit margin of SMEs in the real estate industry is relatively low, however, the proportion of zombie firms is not necessarily high. The problem is not the ratio of the number of zombies but the performance of zombies in the smallest class. In the real estate industry, relatively large-scale class generally has become out of the post-bubble situation. Improving the profitability of the smallest tier seems to be an unavoidable challenge for improving the performance of the industry as a whole.
    Keywords: firm dynamics, zombie firm, profit margin, bubble economy, small and medium-sized enterprises (SMEs), size-dependent policy
    JEL: P43 L25 M13 G32
    Date: 2021–05
  3. By: Levine, Ross; Rubinstein, Yona
    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 highly-remunerated 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 self-employed are not; and entrepreneurship is procyclical, but self-employment is countercyclical.
    Keywords: business cycles; Corporate Finance; entrepreneurship; Human Capital; Occupational choice
    JEL: E32 G32 J24 L26
    Date: 2020–08
  4. By: Guerrero, Maribel (University of North Carolina at Greensboro, Department of Economics); Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: The National Science and Technology Council (CONACYT) was established in 1970 by the Mexican government. CONACYT was formed to promote the scientific development and technological modernization of Mexico through developing high-level human resources, encouraging research projects, and disseminating scientific/technological information. In 2009, CONACYT launched the Innovation Stimulus Program (PEI) to foster enterprises’ innovation activities and to encourage collaboration on innovation activities among firms and between firms and public research institutes and higher education institutions. Based on an analysis of project data from the PEI program over the years 2009 through 2014 we found that large firms are more innovative than small firms. And, firms that are more innovative are those that had prior funded research, collaborated with universities in the funded research project, added new employees during the research project, and faced larger markets for their innovations.
    Keywords: Public program evaluation; innovation; R&D; Mexico;
    JEL: H32 O25 O31 O38 O54
    Date: 2021–05–19
  5. By: Giovanni Dosi; Francesco Lamperti; Mariana Mazzucato; Mauro Napoletano; Andrea Roventini
    Abstract: We study the impact of alternative innovation policies on the short- and long-run performance of the economy, as well as on public finances, extending the Schumpeter meeting Keynes agent- based model (Dosi et al., 2010). In particular, we consider market-based innovation policies such as R&D subsidies to firms, tax discount on investment, and direct policies akin to the "Entrepreneurial State" (Mazzucato, 2013), involving the creation of public research-oriented firms diffusing technologies along specific trajectories, and funding a Public Research Lab conducting basic research to achieve radical innovations that enlarge the technological opportunities of the economy. Simulation results show that all policies improve productivity and GDP growth, but the best outcomes are achieved by active discretionary State policies, which are also able to crowd-in private investment and have positive hysteresis effects on growth dynamics. For the same size of public resources allocated to market-based interventions, "Mission" innovation policies deliver significantly better aggregate performance if the government is patient enough and willing to bear the intrinsic risks related to innovative activities.
    Keywords: Innovation policy; mission-oriented R&D; entrepreneurial state; agent-based modelling.
    Date: 2021–05–24
  6. By: Duleep, Harriet; Jaeger, David A.; McHenry, Peter
    Abstract: We present a novel theory that immigrants facilitate innovation and entrepreneurship by being willing and able to invest in new skills. Immigrants whose human capital is not immediately transferable to the host country face lower opportunity costs of investing in new skills or methods and will be more exible in their human capital investments than observationally equivalent natives. Areas with large numbers of immigrants may therefore lead to more entrepreneurship and innovation, even among natives. We provide empirical evidence from the United States that is consistent with the theory's predictions.
    Keywords: immigration,innovation,entrepreneurship,human capital
    JEL: J15 J24 J39 J61 L26
    Date: 2021
  7. By: Kozeniauskas, Nicholas; Moreira, Pedro; Santos, Cezar
    Abstract: This paper investigates how the Covid-19 pandemic has affected firms and which firms have benefited from government support. Using a panel survey of Portuguese firms conducted during the pandemic matched with pre-Covid administrative data, the results show that the shock was large, but heterogeneous across firms. Though most firms experienced declines in sales, high productivity firms were more likely to remain open, less likely to cut employment and made less use of government support.
    Date: 2020–08
  8. By: Valentina Tartari; Scott Stern
    Abstract: This paper provides systematic empirical evidence for the distinctive role of universities on local entrepreneurial ecosystems. Assessing the impact of research institutions on entrepreneurship is challenging, given that these institutions are often located in economic and innovation environments conducive to growth-oriented entrepreneurial activity, are themselves a source of local demand, and produce knowledge, which might serve as the foundation for new ventures. To overcome this inference challenge, we first combine comprehensive business registration records with a predictive analytics approach to measure both the quantity and quality-adjusted quantity of entrepreneurship at the zip-code level on an annual basis. We then link each location to the presence or absence of research-oriented universities or national laboratories. Finally, we exploit significant changes over time in Federal commitments to both universities and national laboratories. Our key finding is that changes in Federal research commitments to universities are uniquely linked to positively correlated changes in the quality-adjusted quantity of entrepreneurship. In contrast, increases in non-research funding to universities and funding to national laboratories is associated with either a neutral or negative impact on the quality-adjusted quantity of entrepreneurship. Research funding to universities seems to play a unique role in promoting the acceleration of local entrepreneurial ecosystems.
    JEL: L26 O3 R12
    Date: 2021–05
  9. By: Anne Hansen (Roskilde Universitet [Roskilde]); Lars Fuglsang (Roskilde Universitet [Roskilde]); Faïz Gallouj (CLERSE - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Ada Scupola (Roskilde Universitet [Roskilde])
    Abstract: Social innovation, in the context of public innovation, has gained increased attention in the literature, and is approached relative to the third sector, to social enterprises, or as practices initiated by the public sector. However, the interplay among these actors in enabling social innovation is still underexplored. Therefore, the article investigates the role of social entrepreneurs from outside the public sector in enabling public sector innovation networks. Since social innovation is inherently relational, four cases demonstrating how social entrepreneurs have pushed the boundaries of public sector services, and hence expanded public innovation networks, are analysed.
    Keywords: public service innovation,social innovation,social entrepreneurs,innovation networks
    Date: 2021
  10. By: Catherine E. Fazio; Jorge Guzman; Yupeng Liu; Scott Stern
    Abstract: Leveraging data from eight U.S. states from the Startup Cartography Project, this paper provides new insight into the changing nature and geography of entrepreneurship in the wake of the COVID pandemic. Consistent with other data sources, following an initial decline, the overall level of state-level business registrations not only rebounds but increases across all eight states. We focus here on the significant heterogeneity in this dynamic pattern of new firm formation across and within states. Specifically, there are significant differences in the dynamics of new business registrants across neighborhoods in terms of race and socioeconomic status. Areas including a higher proportion of Black residents, and more specifically higher median income Black neighborhoods, are associated with higher growth in startup formation rates between 2019 and 2020. Moreover, these dynamics are reflected in the passage of the major Federal relief packages. Even though legislation such as the CARES Act did not directly support new business formation, the passage and implementation of relief packages was followed by a relative increase in start-up formation rates, particularly in neighborhoods with higher median incomes and a higher proportion of Black residents.
    JEL: L26 R12 R23
    Date: 2021–05
  11. By: Ewens, Michael; Malenko, Nadya
    Abstract: Venture capital (VC) backed firms face neither the governance requirements nor a major separation of ownership and control of their public peers. These differences suggest that independent directors could play a unique role on private firm boards. This paper explores the dynamics of VC-backed startup boards using new data on board member entry, exit, and individual director characteristics. We document several new facts about board size, the allocation of control, and composition dynamics. At formation, a typical board has four members and is entrepreneur-controlled. Independent directors are found on the median board after the second financing event, when control over the board becomes shared, with independent directors holding the tie-breaking vote. These patterns are consistent with independent directors playing both a mediating and advising role over the startup life cycle, and thus representing another potential source of value-add to entrepreneurial firm performance.
    Keywords: Allocation of control; Board Of Directors; corporate governance; Independent Directors; Mediation role; venture capital
    JEL: G24 G34
    Date: 2020–07
  12. By: Muhammad Farooq Ahmad (SKEMA Business School – University Cote d’Azur, Avenue Willy Brandt - 59777, Lille, France); Oskar Kowalewski (IESEG School of Management, LEM-CNRS 9221)
    Abstract: We study the effect of board reforms on firms’ research and development (R&D) investments utilizing a sample of 40 countries. Using a difference-in-differences analysis, we find that firmsinvest more in R&D following corporate governance reforms. Of these, two reforms–havingan independent audit committee and board independence–have a greater impact on R&Dinvestment. Additionally, we show that reforms have the largest impact on R&D investmentin hi-tech industries and the health sector.
    Keywords: Corporate Governance, Board Reforms, Innovation, Research and Development
    JEL: G3 O30 O32
    Date: 2021–05
  13. By: Paolo Castelnuovo; Stefano Clo; Massimo Florio
    Abstract: To what extent public procurement for mission-oriented policies drives innovation? Space policy is a particularly interesting case study, and we investigate the impact of technological procurement of the Italian Space Agency (ASI) on suppliers’ innovation output. We have built an empirical model that takes advantage of unique data on ASI orders merged with patent and company data of more than 460 firms involved in a procurement relationship with ASI over the period 2004-2018. We combine matching techniques with a diff-in-diff approach with heterogeneous timing in treatment to assess whether becoming a space agency technological supplier has an impact on the extent and quality of firms’ patenting activity. Our findings, that are novel for space policy studies, suggest a statistically significant effect of space agency procurement. The effect is stronger for high-tech suppliers. These results are robust to several alternative specifications and estimation methods and provide evidence about the importance of space policy in enhancing firms’ innovation capacity through the procurement pathway.
    Keywords: Public procurement, space industry, space policy, innovation.
    JEL: C25 H57 O32 O38
    Date: 2021
  14. By: BENEDETTI FASIL Cristiana (European Commission - JRC); DEL RIO Juan Carlos (European Commission - JRC); DOMNICK Clemens (European Commission - JRC); FAKO Peter (European Commission - JRC); FLACHENECKER Florian (European Commission - JRC); GAVIGAN James (European Commission - JRC); JANIRI Mario (European Commission - JRC); STAMENOV Blagoy; TESTA Giuseppina (European Commission - JRC)
    Abstract: High growth enterprises (HGEs) make a disproportionately high contribution to job creation and economic growth. Through their frequently innovative, technology-based character, they also can have a significant impact on industrial renewal, sectoral productivity and regional competitiveness. This report examines the EU’s economies through the lens of HGEs and those enterprises benefiting from venture capital investments which have the characteristics or aspiration to achieve very high rates of growth. Specific analyses on eco-innovation, digitalization and the role of HGEs in previous recessions and recoveries are covered. A series of factsheets consisting of snapshot graphs and figures – one for each of the EU27 member states - based on the analyses which are developed collectively for the EU in the main body of the report are integral part of the report.
    Keywords: High growth enterprises, HGEs, COVID-19
    Date: 2021–05
  15. By: Matsuyama, Kiminori; Ushchev, Philip
    Abstract: In existing models of endogenous innovation cycles, market size alters the amplitude of fluctuations without changing the nature of fluctuations. This is due to the ubiquitous assumption of CES homothetic demand system, implying that monopolistically competitive firms sell their products at an exogenous markup rate in spite of the empirical evidence for the procompetitive effect of entry and market size. We extend a model of endogenous innovation cycles to allow for the procompetitive effect, using a more general homothetic demand system, which contains both CES and translog as special cases. We show that a larger market size and/or a smaller innovation cost, which causes the markup rate to decline through the procompetitive effect, has destabilizing effects on the dynamics of innovation.
    Keywords: Dynamic monopolistic competition; Endogenous innovation cycles; H.S.A.; market size; Periodic cycle; Piecewise-linear dynamical system; Procompetitive Effect; Robust chaotic attractor; the Judd model
    JEL: D43 E32 L13 O31
    Date: 2020–07
  16. By: F. Javier Sanchez-Vidal; Camino Ramon-Llorens
    Abstract: Based on the Global Entrepreneurship Monitor (GEM) surveys and conducting a panel data estimation to test our hypothesis, this paper examines whether corruption perceptions might sand or grease the wheels for entrepreneurship inside companies or intrapreneurship in a sample of 92 countries for the period 2012 to 2019. Our results find that the corruption perception sands the wheel for intrapreneurship. There is evidence of a quadratic relation, but this relation is only clear for the less developed countries, which sort of moderate the very negative effect of corruption for these countries. The results also confirm that corruption influences differently on intrapreneurship depending on the level of development of the country.
    Date: 2021–05
  17. By: Elizabeth Ananat; Shihe Fu; Stephen Ross
    Abstract: Racial social isolation within and across workplaces may reduce firm productivity. We provide descriptive evidence that African-Americans feel socially isolated from Whites. To test whether isolation affects productivity, we estimate models of Total Factor Productivity for manufacturing firms allowing returns to local area concentrations of economic activity and human capital spillovers to vary with the racial and ethnic composition of both the establishment and the local area employment. Higher own-race exposure for establishment workers to workers at surrounding establishments strengthens the relationship between productivity and both employment density and concentrations of college educated workers. Effects for human capital spillovers are largest for firms with more patents and more research and development spending. Looming demographic changes suggest that this drag on productivity may increase over time.
    JEL: J15 J24 L11 R12 R23 R32
    Date: 2021–05

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.