nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒06‒21
thirty papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Mission-Oriented Policies and the "Entrepreneurial State" at Work: An Agent-Based Exploration By Giovanni Dosi; Francesco Lamperti; Mariana Mazzucato; Mauro Napoletano; Andrea Roventini
  2. How different are necessity and opportunity firms? Evidence from a quantile analysis of the Colombian microenterprise sector By Rodriguez Torres, Omar
  3. A taxonomy of European innovation clubs By Wirkierman, Ariel L.; Ciarli, Tommaso; Savonna, Maria
  4. Local Bank, Digital Financial Inclusion and SME Financing Constraints: Empirical Evidence from China By Zhiqiang Lu; Junjie Wu; Hongyu Li; Duc Khuong Nguyen
  5. Partners and Geographical Scale of SMEs' Open Innovation: does Business Group Affiliation Matter? By François Deltour; SÉbastien Le Gall; Virginie Lethiais
  6. How does market competition affect firm innovation incentives in emerging countries? Evidence from Latin American firms. By Benavente, Jose Miguel; Zuniga, Pluvia
  7. Effects of Covid-19 Related Government Response Stringency and Support Policies: Evidence from European Firms By Benedikt Janzen; Doina Maria Radulescu
  8. Disruptive Innovation and R&D Ownership Structures of the Firm By Guo, Di; Huang, Haizhou; Jiang, Kun; Xu, Chenggang
  9. Estimating the Ex-ante and the Ex-post Effects of Chinese Outward FDI By Donatella Baiardi; Valeria Gattai; Piergiovanna Natale
  10. Organisation Capital, Knowledge Spillover and Firm Performance: Evidence from Chinese Manufacturing Sector By Qing Li; Yanrui Wu
  11. Predicting French SME Failures: New Evidence from Machine Learning Techniques By Christophe Schalck; Meryem Schalck
  12. From Imitation to Innovation: Where Is all that Chinese R&D Going? By König, Michael; Song, Zheng; Storesletten, Kjetil; Zilibotti, Fabrizio
  13. Impact of M&A by foreign companies on innovation activities of acquired companies (Japanese) By SUZUKI Shinya; INUI Tomohiko; IKEDA Yuya
  14. Will the AI revolution be labour-friendly? Some micro evidence from the supply side By Damioli, Giacomo; Van Roy, Vincent; Vertesy, Daniel; Vivarelli, Marco
  15. The elusive quest for the holy grail of an impact of EU funds on regional growth By Jan Fidrmuc; Martin Hulényi; Olga Zajkowska
  16. Advancing Research on Creativity in Family Firms By Julia Vincent Ponroy; Dianne; H.B. Welsh
  17. Shocks to bank capital position: Do they matter for lending to firms and how they are channelled? Evidence from Senior Loan Officer Opinion Survey for Poland By Ewa Wróbel
  18. The effectiveness of innovation policy and the moderating role of market competition: Evidence from Latin American firms By Benavente, Jose Miguel; Zuniga, Pluvia
  19. Employment and Productivity Dynamics and Patent Applications Related to the Fourth Industrial Revolution (Japanese) By IKEUCHI Kenta
  20. Growth and Welfare Effects of Interventions in Patent Licensing Negotiations By Kishimoto, Shin; Suzuki, Keishun
  21. Knowledge co-creation in the 21st century: A cross-country experience-based policy report By Laura Kreiling; Caroline Paunov
  22. (When) Does Patent Protection Spur Cumulative Research Within Firms? By Ashish Arora; Sharon Belenzon; Matt Marx; Dror Shvadron
  23. Is this Time Different? Corporate Resilience in the Age of Covid-19 By Jacques Bughin; Sybille Berjoan; Francis Hinterman; Yuhui Xiong
  24. The Determinants of Investment in Tangible Fixed Capital in Japan: Evidence from Firm Level (Japanese) By FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug; IKEUCHI Kenta
  25. Impacts of the Covid-19 crisis: evidence from 2 million UK SMEs By Hurley, James; Karmakar, Sudipto; Markoska, Elena; Walczak, Eryk; Walker, Danny
  26. Factoring in the micro: a transaction-level dynamic factor approach to the decomposition of export volatility By Matteo Barigozzi; Angelo Cuzzola; Marco Grazzi; Daniele Moschella
  27. Assessing Smart Specialisation: The Entrepreneurial Discovery Process By PERIANEZ FORTE Inmaculada; WILSON James
  28. Prospects and Challenges for Development of Small Business Forms in Agriculture of Ukraine By Zaburanna, Lesia V.; Lutska, Tetiana V.; Tkachuk, Vadym A.
  29. Are Applying for and Receiving Subsidy Worth for Small Enterprises? Evidence from the Government Support Program in Japan By HASHIMOTO Yuki; TAKAHASHI Kohei
  30. Heterogeneous Innovation Persistence: Evidence From Uruguayan Firms By Maximiliano Machado

  1. By: Giovanni Dosi (Scuola Superiore Sant'Anna, Pisa (Italy)); Francesco Lamperti (Institute of Economics and EMbeDS, Scuola Superiore Sant'Anna; RFF-CMCC European Institute on Economics and the Environment); Mariana Mazzucato (Institute for Public Purpose and Policy, University College London (London, UK)); Mauro Napoletano (Author-Workplace-Name: Université Côte d'Azur, CNRS, GREDEG, France; SKEMA Business School; OFCE Sciences-Po); Andrea Roventini (Institute of Economics and EMbeDS, Scuola Superiore Sant'Anna; Sciences Po, OFCE)
    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 agentbased 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 specic 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
    JEL: O33 O38 O31 O40 C63
    Date: 2021–06
  2. By: Rodriguez Torres, Omar (UNU-MERIT)
    Abstract: This paper explores the relationship between start-up motivation and business performance, by looking into the extent to which start-up motivation (necessity vs. opportunity) influences several business performance indicators. Using the Colombian Small and Microenterprise sector public dataset, we analyse the factors associated with microenterprise performance using a quantile regression approach to model the distribution of different measures of business performance. Among the findings, we present evidence of statistically significant differences among quantiles confirming the heterogeneity of start-up motivation and other firm characteristics of the firms operating in the sector. The results show that start-up motivation is a factor that explains the difference in the distribution of the business performance indicators under study. This findings contributes to the debate around the connection between entrepreneurship and growth in the context of developing economies. Even though firms motivated by necessity show a lower level of profit, in particular for the firms that perform relatively poorly, this is not necessarily associated with null or diminishing growth rates. Necessity is not necessarily a deterrent for growth. It needs to be understood as a means to support families that otherwise would have no income-generating opportunities.
    Keywords: Firm performance, entrepreneurship, public policy, new firms, enterprise policy
    JEL: L25 L26 J48 M13 L53 O25
    Date: 2021–04–28
  3. By: Wirkierman, Ariel L. (Institute of Management Studies(IMS), Goldsmiths, University of London); Ciarli, Tommaso (UNU-MERIT, and Science Policy Research Unit (SPRU), University of Sussex); Savonna, Maria (Science Policy Research Unit (SPRU), University of Sussex, and Department of Economics and Finance, Luiss University)
    Abstract: The paper provides a novel, empirically grounded map of innovation 'clubs' in the EU, based on a unique analysis of micro-aggregated, country-level data. Using exploratory factor analysis we articulate innovation variables in a taxonomy of four 'latent' innovation theories: Network-Innovation-System, Kaldorian, New-Growth-Theory, and Schumpeterian. We then characterise clusters of countries ('clubs'), based on their performance against this taxonomy, and design a new map of EU innovation clubs. We identify an articulated map of EU innovation hierarchy beyond the rather well-known 'core-periphery' structure, and interpret how some of the peripheries are functional to the 'consolidated core' of innovative countries, raising an issue of long-term sustainability of such hierarchies. We also find that even the most innovative clusters show concerning weaknesses. The strongest cluster in terms of its innovation system does not seem to exploit its full potential and lags behind with respect to radical product innovations. Instead, the leading cluster in terms of radical product innovations is strongly dependent on external innovative activity, is focused on scale-intensive sectors, and has a fairly weak innovation system. The periphery of small countries that show a healthy network structure, do so because they mainly include supplier-dominated firms, reliant on innovation inputs from the core. We offer some reactions on innovation policy within a broader view of EU cohesion.
    Keywords: Innovation theories, National Innovation System, Exploratory Factor Analysis, European cohesion policy
    JEL: O30 O52 C38
    Date: 2021–05–11
  4. By: Zhiqiang Lu; Junjie Wu; Hongyu Li; Duc Khuong Nguyen
    Abstract: This paper investigates the impact of local banks and digital financial inclusion on small and medium enterprise (SME) financing constraints. Using data of Chinese SMEs for the period 2007?2017, our robust results find (1) SMEs financing constraints are negatively associated with the proportion of local bank branches and the degree of digital financial inclusion; (2) the effect of local banks is more pronounced for small, transparent, and firms in the regions less dependent on bank credit; and (3) local bank branches and digital financial inclusion have a substitution effect on alleviating SMEs financial constraints. The findings shed light on how digital finance technologies could influence traditional SME-bank relationship and have important policy and managerial implications.
    Keywords: local banks; digital financial inclusion; financing constraints; SMEs; China.
    Date: 2021–01–01
  5. By: François Deltour (IMT Atlantique - SSG - Département Sciences sociales et de gestion - IMT Atlantique - IMT Atlantique Bretagne-Pays de la Loire - IMT - Institut Mines-Télécom [Paris], LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IUML - FR 3473 Institut universitaire Mer et Littoral - UM - Le Mans Université - UA - Université d'Angers - UN - Université de Nantes - ECN - École Centrale de Nantes - UBS - Université de Bretagne Sud - IFREMER - Institut Français de Recherche pour l'Exploitation de la Mer - CNRS - Centre National de la Recherche Scientifique - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes); SÉbastien Le Gall (UBS Vannes - Université de Bretagne Sud - Vannes - UBS - Université de Bretagne Sud, LEGO - Laboratoire d'Economie et de Gestion de l'Ouest - UBS - Université de Bretagne Sud - UBO - Université de Brest - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO - Université de Brest - UBL - Université Bretagne Loire - IMT Atlantique - IMT Atlantique Bretagne-Pays de la Loire - IMT - Institut Mines-Télécom [Paris]); Virginie Lethiais (IMT Atlantique - LUSSI - Département Logique des Usages, Sciences sociales et Sciences de l'Information - IMT Atlantique - IMT Atlantique Bretagne-Pays de la Loire - IMT - Institut Mines-Télécom [Paris], LEGO - Laboratoire d'Economie et de Gestion de l'Ouest - UBS - Université de Bretagne Sud - UBO - Université de Brest - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO - Université de Brest - UBL - Université Bretagne Loire - IMT Atlantique - IMT Atlantique Bretagne-Pays de la Loire - IMT - Institut Mines-Télécom [Paris])
    Abstract: Small businesses face multiple constraints on innovating that open innovation (OI) has potential to help overcome. The aim of this study is to examine the association between business group affiliation and the extent of OI engaged in by SMEs. Unlike independent SMEs, those that have affiliations might benefit from internal and also external networks to initiate partnerships to innovate. We analysed data collected from 711 French SMEs that engage in innovation to assess the association between business group affiliation and open innovation practices. We found that business group affiliation has no significant relationship with the degree of engagement in open innovation or with partnership openness. Nevertheless, we found that affiliation to an international group influences the geographical openness of SMEs' innovation. These findings contribute to our understanding of open innovation among SMEs by acknowledging the geographical challenges of partnerships in open innovation.
    Date: 2021–03–26
  6. By: Benavente, Jose Miguel (Inter-American Development Bank (IADB)); Zuniga, Pluvia (UNU-MERIT)
    Abstract: The role of market competition on firm innovation remains a controversial policy question, especially in the context of developing countries. This paper presents new empirical evidence about the impact of market competition on firm innovation engagement in Colombian and Chilean manufacturing industries. We correct for the endogeneity of market competition using instruments proxying entry costs and policy interventions (i.e. competition decisions and entry law reforms), our results are like those of developed countries. Market competition increases firm propensity to invest in innovation in manufacturing enterprises and this relationship is linear in Chilean while in Colombian industries it takes the form of an inversed-U shape relation. The impact of competition is decreasing with the level of sector asymmetry -as preconised in the literature, while the impact of firm distance to the frontier affects firm innovation engagement differently in the two countries. In Chile, competition raises innovation incentives for the third and fourth productivity quartiles while no impact is found for firms in the first (bottom) two quartiles. In contrast, in Colombia market competition raises innovation engagement across regardless their firm productivity position but effects are stronger in the medium range (second and third quartiles). Our main results are robust to controlling for past innovation engagement, import competition and business dynamics.
    Keywords: Market Competition, Innovation, Technology Purchasing, Productivity, Latin American Firms
    JEL: O32 D41 O47 D24
    Date: 2021–05–19
  7. By: Benedikt Janzen; Doina Maria Radulescu
    Abstract: In this paper we employ survey information on more than 10,000 Southern and Eastern European firms and panel data methods to assess the effects of the COVID-19-related lockdown and government support policies on the business operations of enterprises. Our findings reveal considerable size- and sector-related effect heterogeneity, with small firms, exporting firms and firms operating in the facility sector experiencing the largest losses in terms of sales. A complete lockdown leads to an average decrease in sales by approximately 64%. We also document a disproportionate impact on female self-employed. Furthermore, state aid in the form of deferral of payments or wage subsidies were the most effective government support instruments. For instance, wage subsidies saved up to 2.7 employees per firm in the surveyed enterprises.
    Keywords: Covid-19, firms, government support policies, panel data methods
    JEL: D22 H12 H32
    Date: 2021
  8. By: Guo, Di; Huang, Haizhou; Jiang, Kun; Xu, Chenggang
    Abstract: Among the 87 revolutionary innovations in the world over the life of the Soviet Union, 86 were invented in capitalist economies (Kornai, 2013). This paper studies why this is the case. This paper provides a theoretical foundation, which explains why disruptive innovations are organized and financed with a large number of independent small firms in a capitalist economy. Whereas not allowing private ownership, this kind of arrangement is not an option in an economy where only state ownership exists. This paper also contributes to empirical work on disruptive innovation, which is missing in the literature. We use FDA approved new molecular entities (NMEs) in the pharmaceutical industry as a proxy of disruptive innovation in the industry. Although pharma firms are often very large in size, their R&Ds for developing NMEs depend deeply on forming R&D alliances with independent small R&D firms. We find NMEs invented by a pharma firm is positively and significantly associated with the number of R&D alliances that the firm creates.
    Keywords: Capitalism; Innovation; Socialism; Soft-budget Constraint
    Date: 2020–06
  9. By: Donatella Baiardi; Valeria Gattai; Piergiovanna Natale
    Abstract: This study investigates the relationship between outward Foreign Direct Investment (FDI) and the performance of Chinese enterprises. Using firm-level panel data over the period 2008–2014, we introduce a taxonomy of outward FDI that accounts for the decision to invest abroad and the location of foreign affiliates. Through different specifications, we show systematic differences in performance between FDI starters and non-starters two years before and two years after the first investment by the starters. This fact points to the existence of strong ex-ante and ex-post effects of Chinese outward FDI. On one hand, we provide evidence — so far not present in the literature — that the best performing Chinese firms self-select into outward FDI. On the other hand, controlling for endogeneity through propensity score matching (PSM) techniques, we detect significant learning effects from outward FDI to firm-level performance. Interestingly, these effects are heterogeneous with respect to destination, with deeper learning for Chinese enterprises investing in Asia.
    Keywords: FDI; China; ex-ante effects; ex-post effects; panel data
    JEL: F23 L25 O53
    Date: 2021–06
  10. By: Qing Li (Qing Li, SHU-UTS SILC Business School, Shanghai University); Yanrui Wu (Business School, The University of Western Australia)
    Abstract: This study explores organisation capital and its spillover effects among Chinese manufacturing firms. By linking patent data with China’s annual survey of industrial enterprises database, we examine technological proximity as one potential channel for organisational spillover but find weak evidence. This result is consistent with previous findings from developed countries. In contrast, organisation capital is found to generate positive spillover in China when geographical proximity is considered. In other words, it is found that spillover from organisation capital is likely among Chinese firms due to geographical proximity rather than technological proximity.
    Keywords: Organisation capital; knowledge spillover; intangible capital; patent portfolio; Chinese firms
    JEL: D21 D24 L22
    Date: 2021
  11. By: Christophe Schalck; Meryem Schalck
    Abstract: The aim of this study is to provide new insights into French small and medium-sized enterprises (SME) failure prediction using a unique database of French SMEs over the 2012?2018 period including both financial and nonfinancial variables. We also include text variables related to the type of activity. We compare the predictive performance of three estimation methods: a dynamic Probit model, logistic Lasso regression, and XGBoost algorithm. The results show that the XGBoost algorithm has the highest performance in predicting business failure from a broad dataset. We use SHAP values to interpret the results and identify the main factors of failure. Our analysis shows that both financial and nonfinancial variables are failure factors. Our results confirm the role of financial variables in predicting business failure, while self-employment is the factor that most strongly increases the probability of failure. The size of the SME is also a business failure factor. Our results show that a number of nonfinancial variables, such as localization and economic conditions, are drivers of SME failure. The results also show that certain activities are associated with a prediction of lower failure probability while some activities are associated with a prediction of higher failure.
    Keywords: SME; failure prediction; Machine learning; XGBoost; SHAP values
    JEL: G33 C41 C46
    Date: 2021–01–01
  12. By: König, Michael; Song, Zheng; Storesletten, Kjetil; Zilibotti, Fabrizio
    Abstract: We construct a model of firm dynamics with heterogenous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007-2012. The estimated model fits the Chinese data well. We compare the estimates with those obtained using data for Taiwan and find the results to be robust. We perform counterfactuals to study the effect of alternative policies. We find large effects of R&D misallocation on long-run growth.
    Keywords: China; Imitation; Innovation; Misallocation; productivity; R&D; Subsidies; Taiwan; TFP growth; Traveling Wave
    JEL: O31 O33 O47
    Date: 2020–06
  13. By: SUZUKI Shinya; INUI Tomohiko; IKEDA Yuya
    Abstract: In recent years, the number of acquisitions of Japanese companies by foreign companies has been increasing. In addition, M&As for technology acquisition are becoming more important, especially in industries such as automobiles and semiconductors, where radical technological changes such as electrification and autonomous driving are occurring. There is a possibility that R&D activities and technological resources are reorganized within the corporate group after the implementation of international M&As. In this study, we examine how the R&D activities of Japanese companies acquired by foreign companies change using a panel dataset at the firm level. The results show that R&D expenditures of an acquired company tend to decrease after the acquisition by a foreign company. However, R&D expenditures do not decrease after the acquisition in industries such as transportation machinery and electronic machinery. Furthermore, the effects of an acquisition on R&D expenditures of the acquired company vary depending on the nationality of the acquiring company.
    Date: 2021–03
  14. By: Damioli, Giacomo (European Commission, Joint Research Centre (JRC)); Van Roy, Vincent (European Commission, Joint Research Centre (JRC)); Vertesy, Daniel (UNU-MERIT, and the International Telecommunication Union); Vivarelli, Marco (UNU-MERIT, and Catholic University of Milan)
    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 labour-friendly 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: O31 O33 O34 E24
    Date: 2021–04–20
  15. By: Jan Fidrmuc (Brunel University); Martin Hulényi (Institute for Strategy and Analysis (ISA)); Olga Zajkowska (Narodowy Bank Polski)
    Abstract: We analyse the impact of EU structural and cohesion funds on economic growth of European regions using 2SLS to tackle their potential endogeneity and estimating a spatial model to account for inter-regional spillovers. We use the presence of environmentally protected areas as instruments for Cohesion Policy funds. We find that the European funds have a significant and positive effect on regional economic growth in the EU. However, there is considerable heterogeneity in the effect of Cohesion Policy across individual EU member states: the effect is stronger in the new member states, and weak or negative in the countries hit by the recent austerity measures. The inter-regional spillovers in the effect of Cohesion Policy on regional growth are found to be important: most of the effect takes place outside the recipient region rather than inside. Finally, our results also confirm the positive impact of institutional quality.
    Keywords: Regional aid; growth; environmental conservation; 2SLS; spatial.
    JEL: C21 C36 F36 E62 O11 P48
    Date: 2020
  16. By: Julia Vincent Ponroy; Dianne; H.B. Welsh
    Abstract: This chapter explores creativity in family businesses and asks the important question : Do family businesses represent organizational contexts likely to encourage creativity? We begin by defining creativity and outline the antecedents to creativity. Next, we discuss the connection between creativity and innovation and the characteristics in family firms that foster or hinder creativity from both organizational and individual perspectives. Concerning measurement, we offer Psychological Capital (PsyCap) as a potential new avenue with merit to analyze creativity in family firms. We discuss what research has been conducted so far on PsyCap, creativity and family firms and describe further directions. We conclude that creativity is an area ripe for research that may unlock some of the unanswered questions that have plagued the field and might offer practical solutions for family firm competitiveness and longevity.
    Keywords: family firms, creativity, Psychological Capital
    Date: 2020–01–01
  17. By: Ewa Wróbel (Narodowy Bank Polski)
    Abstract: Basing on data from bank lending surveys, we show that shocks to capital position are an important driver of bank lending standards, terms and conditions. Standards for small and medium-sized enterprises are affected more than those for large entities. Shocks to capital are channelled to firms mostly through these terms and conditions which are related to loan price: average spreads and spreads on riskier loans. The third mostly used channel is required collateral. Adverse shocks to capital position result in a lower lending, in particular for real property acquisition and for financing working capital and on current account.
    Keywords: bank capital, bank lending survey, structural VAR.
    JEL: E44 E51 G21
    Date: 2021
  18. By: Benavente, Jose Miguel (Inter-American Development Bank (IADB)); Zuniga, Pluvia (UNU-MERIT)
    Abstract: The objective of this paper is to evaluate whether market competition matters for the effectiveness of innovation policies. Using data for Chilean and Peruvian manufacturing firms, we implement propensity matching techniques combined with differences-in-differences estimation to evaluate the impact of innovation subsidies on the post-treatment innovation investment effort of firms and test whether such impact differs according to the intensity of competition. We corroborate the existence of "crowding-in" effects in beneficiaries when compared to a control group of untreated firms. The subsidy impact is found either only significant in highly competitive sectors or larger in more competition-intensive industries -compared to low competition ones. Thus, we confirm that market competition plays a moderating role in the effectiveness of innovation policies to stimulate firm innovation investment. The results are robust to different matching and estimation methods. Our results therefore suggest that market contexts should be considered in the design of innovation policies.
    Keywords: Innovation Subsidies, Innovation Policy, Market Competition Latin American firms
    JEL: O38 O31 R38 H71
    Date: 2021–05–19
  19. By: IKEUCHI Kenta
    Abstract: In recent years, the development of new digital-related technologies such as artificial intelligence (AI) and Internet-of Things (IoT) and their industrial applications have been attracting attention. These technological developments collectively are called the "Fourth Industrial Revolution" which is set to bring about major changes in industrial structure. On the other hand, previous research using national / industrial level data has pointed out that progress in digitization widens the productivity gap between companies and reduces the dynamics of the market. Therefore, this research analyzes the relationship between the development of technologies related to the Fourth Industrial Revolution such as artificial intelligence and IoT and market dynamics using Japanese firm-level micro datasets. The patent data is combined with the Basic Survey of Japanese Business Structure and Activities, Census of Manufacture, Economic Census for Business Frame, Economic Census for Business Activity and Establishment and Enterprise Census of Japan to build firm-level panel data and to examine how the research and development activities related to the Fourth Industrial Revolution, such as artificial intelligence and IoT, are associated with the productivity and employment growth of business establishments and firms, and discuss the policy implications. The results of this study show that the development of technologies related to the Fourth Industrial Revolution such as AI and IoT are associated with the dynamics of productivity and employment in firms. The development of AI-related technologies has particularly benefited large firms, with limited benefits to small and medium-sized firms.
    Date: 2021–03
  20. By: Kishimoto, Shin; Suzuki, Keishun
    Abstract: Policy makers sometimes intervene in patent licensing negotiations to guide licensing fees, but the impacts of such interventions on economic growth and welfare are relatively unknown. This paper develops a novel Schumpeterian growth model featuring a cooperative game-theoretic framework that describes negotiations about licensing fees. We find that the growth effect of intervention is negative if firms can raise unlimited external funds for their R&D investment. However, when the amount of external funds available is limited, both the growth and the welfare effects of intervention can be positive. This result means that interventions are desirable when the internal funds of firms are the main source of their R&D investment.
    Keywords: Patent licensing negotiations, Schumpeterian growth, Cooperative game, Patent protection, Financial constraints.
    JEL: C71 D45 O30
    Date: 2021–05–28
  21. By: Laura Kreiling (OECD); Caroline Paunov (OECD)
    Abstract: The importance of knowledge co-creation – the joint production of innovation between industry, research and possibly other stakeholders, such as civil society – has been increasingly acknowledged. This paper builds on 13 cross-country case studies and co-creation experiences during the COVID-19 pandemic to characterise the diversity of knowledge co-creation initiatives and identify lessons for policy. The paper identifies a strong rationale for policy to support knowledge co-creation because the benefits of successful co-creation initiatives outweigh the initial co-ordination costs. Moreover, knowledge co-creation initiatives can contribute to democratising innovation. Successful initiatives engage all stakeholders and have effective governance and management structures. They also have clearly defined ownership and use rights of the collaborations’ outcomes and benefit from favourable conditions to operate, including temporary staff mobility and institutional set-ups that facilitate collaboration and effective communication among participants.
    Keywords: case studies, collaborative innovation, COVID-19 pandemic, industry-science linkages, knowledge co-creation, OECD countries, policy recommendation
    JEL: O31 O32 O35
    Date: 2021–06–16
  22. By: Ashish Arora; Sharon Belenzon; Matt Marx; Dror Shvadron
    Abstract: We estimate the effect of patent protection on follow-on investments in corporate scientific research. We exploit a new method for identifying an exogenous reduction in the protection a granted patent provides. Using data on public, research-active firms between 1990 and 2015, we find that firms decrease follow-on research after a reduction in patent protection, as measured by a drop in internal citations to an associated scientific article. This effect is stronger for smaller firms and in industries where patents are traded less frequently. Our findings are consistent with a stylized model whereby patent protection is a strategic substitute for commercialization capability. Our results imply that stronger patents encourage follow-on research, but also shift the locus of research from big firms toward smaller firms and startups. As patent protection has strengthened since the mid-1980s, our results help explain why the American innovation ecosystem has undergone a growing division of innovative labor, where startups become primary sources of new ideas.
    JEL: O30 O32 O34
    Date: 2021–06
  23. By: Jacques Bughin; Sybille Berjoan; Francis Hinterman; Yuhui Xiong
    Abstract: We study corporate resilience during the Covid-19 pandemic for a sample of 4100 large global firms (mode: 1-10 billion USD revenue) using a large set of machine learning techniques. As per Hamel and Valikangas (2003), we find that both traits of innovations, as well as of organizational agility (Teece et al. 2016), drive the firm's post-Covid rebound. Remarkably, the Covid-19 pandemic is also exhibiting two extra traits among covid-19 resilient firms: they are consolidating their play in business ecosystems, while they are engaged in a “twin transformation” of digitization and sustainability. In general, also the way corporations play those traits matters, i.e. orchestrating the business ecosystems, engaging in disruptive (as opposed to incremental) innovation, and transforming at scale to boost resilience. Finally, there is a large complementarity among “resilience” traits, boosting the probability of resilience by close to 40% versus the sum of only the direct effects.JEL-codes: L25, M15, M21, 033, I101. Introduction
    Keywords: corporate, resilience, covid-19
    Date: 2021–06
  24. By: FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug; IKEUCHI Kenta
    Abstract: This paper empirically analyzed the determinants of the investment in tangible fixed capital by Japanese firms after the global financial crisis in 2008, using the micro data of "the Basic Survey of Japanese Business Structure and Activities". With regard to the investment of Japanese firms since the global financial crisis, many previous studies have investigated why investment is sluggish despite increased profits. It has been argued that causes of the stagnation of investment are the slowdown of TFP growth, the use of internal funds on R&D, unmeasured investment on the intangible assets, FDI, M&A, etc., and increasing internal reserves as a precautionary motive. In this paper, we examine these arguments by estimating the investment function of Japanese firms. The main results are as follows. 1) firms with higher TFP increased investment, 2) M&A and investment in software are complementary with investment in tangible fixed capital, and 3) increased cash flow increased fixed investment.
    Date: 2021–03
  25. By: Hurley, James (Bank of England); Karmakar, Sudipto (Bank of England); Markoska, Elena (Bank of England); Walczak, Eryk (Bank of England); Walker, Danny (Bank of England)
    Abstract: We introduce a novel data set to analyze the impact of the Covid-19 crisis on SME cash flows. The crisis led to a sharp drop in economic activity in the UK, which hit SMEs harder than larger businesses. The data set comprises monthly information on all 2 million SMEs that have current accounts or debt with nine major banking groups, with roughly 5 billion data points in total. We document a few basic facts on UK SME cash flows during Covid-19. (1) The virus and the public health interventions coincided with a 30 percentage point reduction in turnover growth for the average SME. (2) There was significant heterogeneity in the turnover shock across SMEs, with the biggest reductions for younger SMEs in consumer-facing sectors in Scotland and London. (3) Cash flows were broadly flat on average and there was much less heterogeneity across SMEs. (4) SMEs with average turnover growth in 2020 were most likely to use the main government-guaranteed loan scheme for SMEs, as well as those in the hospitality sector in more affluent areas of the country. Our analysis provides a framework to monitor SMEs as the sector recovers from the pandemic.
    Keywords: Covid-19 pandemic; small and medium-sized enterprises; SMEs; government support schemes
    JEL: D22 E65 G30
    Date: 2021–06–11
  26. By: Matteo Barigozzi; Angelo Cuzzola; Marco Grazzi; Daniele Moschella
    Abstract: This paper analyzes the sources of export volatility estimating a dynamic factor model on transaction-level data. Using an exhaustive dataset covering all French export transactions over the period 1993-2017, we reconstruct the latent factor space associated to global and destination-specific macroeconomic cycles by means of a modified expectation maximization algorithm to accommodate both the sparsity and the high dimensionality of the micro time series. Thus while paving the way for a novel application of dynamic factor models to microeconomic analysis, we provide a decomposition of the volatility of aggregate export and firms growth rates, highlighting structural spatial patterns and drawing attention to the role of geographical diversification for the mitigation of risks related to firms' export activities.
    Keywords: Factor models; trade volatility; diversification.
    Date: 2021–06–08
  27. By: PERIANEZ FORTE Inmaculada (European Commission - JRC); WILSON James
    Abstract: The entrepreneurial discovery process (EDP) is widely conceived as an inclusive, evidence-based process of stakeholder engagement that produces information about the potential for new activities, thus enabling effective targeting of research and innovation policy. How this interactive process should be stimulated and organised remains highly context-dependent. This document analyses new evidence collected on the smart specialisation policy experience across European Union (EU) regions and countries during the 2014-2020 programming period as part of a broader analytical exercise carried out by the Smart Specialisation Platform of the European Commission’s Joint Research Centre (JRC). To this end, the document is developed in six sections. After an introduction, section 2 reviews existing literature related to the entrepreneurial discovery process with a specific focus on the mechanisms and practices used by countries and regions to foster entrepreneurial discovery processes within their Research and Innovation Strategies for Smart Specialisation (RIS3). Section 3 and 4 explain the research questions addressed by this study and the data and methodology applied. Section 5 presents and analyses the main findings of our study. Finally, section 6 provides some final thoughts and conclusions.
    Keywords: smart specialisation, smart specialisation strategies, entrepreneurial discovery process, innovation policies
    Date: 2021–05
  28. By: Zaburanna, Lesia V.; Lutska, Tetiana V.; Tkachuk, Vadym A.
    Abstract: The article summarizes the practice of creation and functioning of small business forms in agriculture of Ukraine, assesses their role and capabilities at the present stage and in the future, identifies priority, desirable directions for further development of society and mechanisms for their provision. The necessity of implementing a consistent policy of entrepreneurial activity expansion in the rural area is substantiated, in the first place by family farming, which is capable to ensure the maximum employment rate of rural population. Due to the above-mentioned processes, agroholdings have narrowed down the ability of the rural population to conduct agricultural entrepreneurial activity. It has also been proved that in order to increase the efficiency of agricultural production, the profitability of rural households from the agricultural products production and sale, employment of rural population and the development of the agrarian market’s infrastructure, it is necessary to intensify the creation of agricultural servicing cooperatives, especially in sectors where the production of small business forms prevails. It was found that it is extremely important to introduce a permanent state of financial and other support for the development of agricultural servicing cooperatives and small forms of farming in the rural area, focusing on supporting the latter through cooperatives in which they participate
    Keywords: Agricultural and Food Policy, Community/Rural/Urban Development
    Date: 2020
    Abstract: This paper examines the effects of the Business Sustainable Subsidy (BSS) on small enterprises' productivity. The BSS aims productivity improvement and sustainable development of small enterprises by aiding a part of expenses for their business activities. We use rich firm data which contains the attributes and the accounting information of both applied and non-applied firms and examine the effects of receiving and applying for the subsidies. We employ sharp regression discontinuity design for the effects of reception and difference in differences design for that of application. Our empirical results show that significant differences in small enterprises' performance improvement were not evident between receiving the subsidies and not. On the other hand, we found that applicant small enterprises perform higher productivity and sales growth than not-applicant firms. We also robustly obtain the positive results of application impacts by difference in differences model with propensity score matching, controlling for preintervention levels and trends in the outcome. Our findings imply that application in itself promotes firms' voluntarily activities to their own business issues through external support, and leads to improve their productivity.
    Date: 2021–05
  30. By: Maximiliano Machado (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This research addresses the persistence in innovation results for Uruguayan firms in the period 2004 –2015. Using panel data from the Survey of Innovation Activities, persistence in products and process innovations is estimated, investigating also heterogeneous effects in size and sectors. The estimations were defined according to the methodology proposed by Wooldridge (2005) to control for firms’ individual heterogeneity. The findings indicate that innovation results are not persistent in Uruguayan firms, showing null and negative effects of previous innovation on future innovation, indicating that the probability of innovating in t is non-affected or reduced for firms that innovated in t-1. Delving into these results, which is not usual in the literature in the field, the effects of the t-2 lag are estimated. Results indicate that innovating in t-2 increases the likelihood of persistence in innovation in t. This fact suggests that the Uruguayan firms innovate intermittently, contrary to what the literature states, arguably following an uneven innovation trajectory. Such results distance from empirical evidence for developed countries; although, they are in line with results for countries in the region and the case of Portugal. The effects may be related to the high costs of innovating continuously and the scarce relation with the environment, factors in which Uruguayan firms are lagging in relation to firms in developed countries.
    Keywords: Innovation, Persistence, Panel Data, Uruguay
    JEL: O31 O32 L25 C01
    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.