nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒07‒19
seventeen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Individual Determinants of Self-employment Entry in Social and Conventional Entrepreneurship: Are co-operatives different? By Adil Outla; Moustapha Hamzaoui
  2. "Migrant Inventors as Agents of Technological". By Ernest Miguelez; Andrea Morrison
  3. Give It Another Shot: Startup Experience and the Mobilization of Human Resources in New Ventures By Rocha, Vera; Pozzoli, Dario
  4. Startups in the United States during the pandemic reflect some dynamism amid job losses By Simeon Djankov; Eva (Yiwen) Zhang
  5. Tapping the Power of Social Media on Innovation Performance By Shan Shan The
  6. Does Stock Market Listing Boost or Impede Corporate Investment? By Ibrahim Yarba; Ahmet Duhan Yassa
  7. Financial Innovation in the 21st Century: Evidence from U.S. Patents By Josh Lerner; Amit Seru; Nick Short; Yuan Sun
  8. Crowdfunding, Crypto-Currency, Blockchain, Financial Dealings: Review of Business Planning, Challenges and Issues By ULLAH, NAZIM
  9. The Market for CEOs By Peter Cziraki; Dirk Jenter
  10. Graduation of Initial Public Offering Firms from Junior Stock Markets: Evidence from the Tokyo Stock Exchange By HONJO Yuji; KURIHARA Koki
  11. Academic engagement with industry: the role of research quality and experience By Scandura, Alessandra; Iammarino, Simona
  12. Broadband speed and firm entry in digitally intensive sectors: The case of Croatia By Drilo, Boris; Stojcic, Nebojsa; Vizek, Maruska
  13. Migration and Growth in a Schumpeterian Growth Model with Creative Destruction By Parello, Carmelo Pierpaolo
  14. Impact of Deadweight Effect on the Performance of Supported Firms By Simona Bratkova; Miroslav Sipikal; Valeria Nemethova
  15. Entry and Exit of Informal Firms and Development By Brian McCaig; Nina Pavcnik
  16. Fine....I'll do it myself: lessons from self-employment grants in a long recession period By Srhoj, Stjepan; Zilic, Ivan
  17. Structural Change towards Services By Werner Hölzl

  1. By: Adil Outla (Economy,finance and development LAB,Abdelmalek Essadi University of Tangier); Moustapha Hamzaoui (Economy,finance and development LAB,Abdelmalek Essadi University of Tangier)
    Abstract: The paper provides theoretical and empirical analysis on the choice problem of individuals' self-employment entry. With more focus on social entrepreneurship, the authors attempt to answer the question of how self-employment entry is different for social and conventional entrepreneurship. Drawing on the national employment survey, the empirical analysis and methodology approach allows the employment status preferences between cooperatives self-employment, independent self-employment, and employer self-employment. For the comparative analysis purpose, the probability of choosing paid job employment is also addressed. The empirical results indicate that the main positive determinants of social entrepreneurship entry are the risk tolerance, basic education, secondary education, and the attractiveness of rural areas. The results reveal also evidences of weak entrepreneurial culture in the Moroccan context. By comparison to conventional entrepreneurship, the empirical section contains additional information. The paper moves policymakers close to individuals' determinants and contributes to the socioeconomic incentive for social entrepreneurship.
    Keywords: Social-Entrepreneurship,Business-entrepreneurship,Co-operatives
    Date: 2021–06–26
  2. By: Ernest Miguelez (GREThA UMR CNRS 5113 – Université de Bordeaux, France. AQR-IREA – University of Barcelona, Spain.); Andrea Morrison (ICRIOS & Department of Management and Technology - Bocconi University, Italy. Department of Human Geography and Planning – Utrecht University, The Netherlands.)
    Abstract: How do regions enter new and distant technological fields? Who is triggering this process? This work addresses these compelling research questions by investigating the role of migrant inventors in the process of technological diversification. Immigrant inventors can indeed act as carriers of knowledge across borders and influence the direction of technological change. We test these latter propositions by using an original dataset of immigrant inventors in the context of European regions during the period 2003-2011. Our findings show that: immigrant inventors generate positive local knowledge spillovers; they help their host regions to develop new technological specialisations; they trigger a process of unrelated diversification. Their contribution comes via two main mechanisms: immigrant inventors use their own personal knowledge (knowledge creation); they import knowledge from their home country to the host region (knowledge transfer). Their impact is maximised when their knowledge is not recombined with the local one (in mixed teams of inventors), but it is reused (in teams made by only migrant inventors). Our work contributes to the existing literature of regional diversification by providing fresh evidence of unrelated diversification for European regions and by identifying important agents of structural change. It also contributes to the literature of migration and innovation by adding fresh evidence on European regions and by unveiling some of the mechanisms of immigrants’ knowledge transmission.
    Keywords: Patents, Migration, Technological diversification, Relatedness, Europe. JEL classification: O30, F20, F60.
    Date: 2021–07
  3. By: Rocha, Vera (Copenhagen Business School); Pozzoli, Dario (Copenhagen Business School)
    Abstract: Human resources can provide a competitive advantage to firms, but we still know little about how newly-founded ventures start mobilizing these resources. Given the central role of entrepreneurs' background in designing the strategy of new firms, we investigate whether and how startup experience, namely past performance as entrepreneurs, influences employee mobilization strategies in new ventures. Integrating behavioral theories of the firm with regulatory focus theory, we postulate that serial entrepreneurs who failed in the past are more likely to be prevention oriented and change their employee mobilization strategies towards a more targeted hiring approach in subsequent ventures. Using Danish register data, we compare the employee sourcing practices of serial entrepreneurs with their former practices as novice entrepreneurs, as well as with a control group of first-time entrepreneurs who engage in serial venturing later on. We find that entrepreneurs who have already failed (i.e. discontinued a former business) select their employees from fewer sources in the labor market. Our tests lend support for learning as a key mechanism driving these differences. Alternative mechanisms such as selection effects, stigma of failure, and demand-side constraints are not empirically supported.
    Keywords: failure, hiring, new ventures, startup experience, human capital
    JEL: J24 L26 C01
    Date: 2021–06
  4. By: Simeon Djankov (Peterson Institute for International Economics); Eva (Yiwen) Zhang (Peterson Institute for International Economics)
    Abstract: New business applications have surged in the United States since the start of the COVID-19 pandemic. The growth is driven largely by startups in online retail, transportation, and personal services. Many of these new entrepreneurs are self-employed and were likely laid off and forced into entrepreneurship by necessity. No official data are available yet on the number of businesses destroyed in 2020, because business data for firms that close without entering bankruptcy are lagging. But the authors calculate that firm births may have surpassed firm deaths during the pandemic. While this boom in business entry is a tribute to the adaptability and potential innovative spirit in US capitalism, one should not be overly optimistic about jobs created in this wave of startups. As many of these new startups are by people forced to strike out on their own, the number of jobs created per new firm is even smaller than it was during previous US recessions. And like online businesses started around the last recession (e.g., Uber, Airbnb, and Venmo), some of these new firms may turn out to be major contenders in their sectors, displacing workers employed by their traditional rivals.
    Date: 2021–05
  5. By: Shan Shan The (School of Management, Universiti Sains Malaysia, Malaysia Author-2-Name: Daisy Mui Hung Kee Author-2-Workplace-Name: School of Management, Universiti Sains Malaysia, Malaysia Author-3-Name: Munazza Zahra Author-3-Workplace-Name: School of Management, Universiti Sains Malaysia, Malaysia Author-4-Name: Gadi Dung Paul Author-4-Workplace-Name: School of Management, Universiti Sains Malaysia, Malaysia Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - This study investigates the relationship between social media and innovation performance among SMEs in Malaysia. This study also extends social media literature by investigating the underlying mechanism of open innovation in the relationship between social media and innovation performance. Methodology/Technique - A questionnaire was used to collect data from the respondents. A total of 173 samples from data collection were then used to test the hypotheses by using the SPSS and SmartPLS software. Finding - The result has revealed that social media has a significant effect on innovation performance. Besides, outbound innovation is also found to mediate the relationship between social media and innovation performance. Novelty - This study contributes to the literature on social media and innovation by providing new evidence regarding outbound innovation impact on performance among SMEs. It also provides a great idea of social media's importance to SME managers in improving innovation performance in an organization. Type of Paper - Empirical.
    Keywords: Social Media, Innovation Performance, Open Innovation, Smes, Malaysia
    Date: 2021–06–30
  6. By: Ibrahim Yarba; Ahmet Duhan Yassa
    Abstract: This paper investigates investment behavior across public and privately held firms using a novel firm-level dataset. We use coarsened exact matching to construct a control group of firms with which we compare listed firms before and after listing in a difference-in-differences framework. Results reveal that stock market listing spurs growth significantly in terms of sales, employment and assets for manufacturing firms. Furthermore, results indicate that manufacturing listed firms invest more than their non-listed counterparts. In addition, their investment decisions are significantly more sensitive to changes in investment opportunities, and they respond more aggressively. These results constitute a rejecting evidence against existence of short-termism for manufacturing listed firms in Turkey. Moreover, these findings provide significant support for the arguments regarding the advantages of public firms in terms of better access to external finance and enhanced corporate structure, which enables them to fulfill growth potential much easily, and highlight the importance of policies that should be implemented to deepen the Turkish capital markets.
    Keywords: Stock market listing, Corporate investment, Firm growth, Short-termism, Coarsened exact matching, Difference-in-differences
    JEL: C23 D22 G31 G32 L25
    Date: 2021
  7. By: Josh Lerner; Amit Seru; Nick Short; Yuan Sun
    Abstract: We develop a unique dataset of 24 thousand U.S. finance patents granted over last two decades to explore the evolution and production of financial innovation. We use machine learning to identify the financial patents and extensively audit the results to ensure their reasonableness. We find that patented financial innovation is substantial and economically important, with the number of annual grants expanding from a few dozen in the 1990s to over 2000 in the 2010s. The subject matter of financial patents has changed, consistent with the industry’s shift in revenue and value-added towards household investors and borrowers. The surge in financial patenting was driven by information technology firms and others outside of financial sector, which collectively accounted for 69% of the awards. The location of innovation has shifted, with banks moving this activity from regions with tight financial regulation to more permissive ones. High-tech regions have attracted financial innovation by payments, IT, and other non-financial firms. Turning to the source of these ideas, while academic knowledge remained associated with more valuable patents, citations in finance patents to academic papers, especially in those by banks, fell sharply.
    JEL: G20 O31
    Date: 2021–07
    Abstract: Corporate sustainability has moved from exploitation to exploration, from corporate environmental management to sustainable entrepreneurship, and from efficiency to innovation. The purpose of the study is to review global entrepreneurship, innovation and Sustainability - theory and practice, entrepreneurship micro – enterprise idea/ project and critical reflection of entrepreneurial theories, concepts and techniques. The study reviews a number literature from different journals ranging from 1994-2016. Based on the review, crow-funding and crypto-currency are the new innovation in the business world and used for financial dealings. Innovative idea should be based on emergency and urgent demand like mask and PPE all over the world. Furthermore, in addition to technology, competition is vital as it ensures that competing businesses provide the target market with quality goods and services.
    Keywords: Financial innovation, business planning, challenges and issues
    JEL: G39
    Date: 2021
  9. By: Peter Cziraki; Dirk Jenter
    Abstract: We study the market for CEOs of large publicly-traded US firms, analyze new CEOs’ prior connections to the hiring firm, and explore how hiring choices are determined. Firms are hiring from a surprisingly small pool of candidates. More than 80% of new CEOs are insiders, defined as current or former employees or board members. Boards are already familiar with more than 90% of new CEOs, as they are either insiders or executives who directors have previously worked with. There are few reallocations of CEOs across firms – firms raid CEOs of other firms in only 3% of cases. Pay differences appear too small to explain these hiring choices. The evidence suggests that firm-specific human capital, asymmetric information, and other frictions have first-order effects on the assignment of CEOs to firms.
    Keywords: CEO labor markets, CEO-firm matching, assignment models, CEO turnover, CEO compensation
    JEL: D22 G34 J23 M12 M51
    Date: 2021
  10. By: HONJO Yuji; KURIHARA Koki
    Abstract: For young and innovative firms, an initial public offering (IPO) is crucial for securing financing for research and development (R&D) investment. This study explores the post-IPO behavior and performance of firms listed on the two junior stock markets of the Tokyo Stock Exchange (TSE): Market of High-Growth and Emerging Stocks (MOTHERS) and JASDAQ. Using a sample of 943 non-financial firms listed on these markets from November 1999 to December 2019, we find that approximately 40% of IPO firms graduate to the TSE main markets, while more than 10% of IPO firms delist from the TSE junior markets. The results reveal that firms listed on the TSE junior markets increase financing cash flow by accessing public equity markets. Moreover, using a survival analysis approach, we examine the factors associated with the time to graduation to the TSE main markets. As a result, we find that young IPO firms and those with high R&D intensity are less likely to graduate from the TSE junior markets. In addition, firms with higher market capitalization are more likely to graduate to the TSE main markets. The results also reveal that listing regulations on graduation to the TSE main markets within 10 years, which were introduced only to MOTHERS, accelerate the graduation of IPO firms when the sample is restricted to firms listed before the announcement of the 10-year rule. Furthermore, we provide evidence that IPO firms that ultimately graduate to the TSE main markets show better post-IPO performance.
    Date: 2021–06
  11. By: Scandura, Alessandra; Iammarino, Simona
    Abstract: This work explores the role of university department characteristics in academic engagement with industry. In particular, we investigate the role played by research quality and previous experience in academic engagement across different scientific disciplines. We test our hypotheses on a dataset of public sponsored university-industry partnerships in the United Kingdom, combined with data from the UK Research Assessment Exercises 2001 and 2008. Our analysis reveals a negative link between academic quality and the level of engagement with industry for departments in the basic sciences and a positive relationship for departments in the applied sciences. Our results further show that the role of research quality for academic engagement strictly depends on the level of the department’s previous experience in university-industry partnerships, notably in the basic sciences, where experience acts as a moderating factor. The findings of this work are highly relevant for policy makers and university managers and contribute to the innovation literature focused on the investigation of the determinants of valuable knowledge transfer practices in academia.
    Keywords: academic engagement; academic quality; experience; university-industry collaboration; Springer deal
    JEL: I23 O30
    Date: 2021–06–22
  12. By: Drilo, Boris; Stojcic, Nebojsa; Vizek, Maruska
    Abstract: We explore how improvements in digital infrastructure contribute to digital transformation of the Croatian economy. More specifically, we investigate under what conditions improvements in broadband speed are conductive for firm entry in digitally intensive sectors at the local level (cities and municipalities; LGUs) during the period 2014–2017. The results of the benchmark random effects panel data model suggest a 10 percent increase in broadband speed increases the number of new digitally intensive firms by 0.68. Two-way interactions between explanatory variables suggest improvements in broadband infrastructure yield the greatest number of new firm entries in densely populated LGUs, and in LGUs with a higher quality of human capital and greater public investment in physical infrastructure. Using the spatial Durbin panel method, we find improvements in broadband infrastructure exhibit positive firm entry effects both within and between cities and municipalities.
    Keywords: firm entry; digitally intensive sectors; broadband speed; digital transformation; Croatia; spatial spillovers
    JEL: D22 L26 M13 O33
    Date: 2021–07
  13. By: Parello, Carmelo Pierpaolo
    Abstract: This paper incorporates endogenous migration into a second-generation Schumpeterian growth model to study how migration, innovation and growth interact one another. I find that migration always enhances the rates of innovation and growth of the receiving economy, but also that the other way round is not true when the gap in technical knowledge between country is fixed over time. However, when the technology gap is allowed to adjusts endogenously, I find that implementing pro-innovation policies in the receiving economy shrinks immigration flows and reduces the across-country technology.
    Keywords: R&D-based Growth, Labor Migration, R&D policy, Technology Transfer
    JEL: J61 O3 O4
    Date: 2021–06–09
  14. By: Simona Bratkova (University of Economics in Bratislava); Miroslav Sipikal (University of Economics in Bratislava); Valeria Nemethova (University of Economics in Bratislava)
    Abstract: Public support can flow to different areas of the economy and can have several dimensions. Frequent recipients of subsidies are firms, whose support can have specific effects. Such an undesirable effect occurs if these projects are supported that would be carried out without this subsidy. In this case, we are talking about the so-called deadweight effect, which has been discussed and investigated in several studies in the scientific literature. The present article tries to shift knowledge about this effect through a study of supported companies in Slovakia. The aim of the research is to find out whether deadweight effect had an impact on the short-term or long-term results of investigated companies by analysing economic results of the supported firms. Changes in several firm indicators were monitored as profit, sales and value added for individual years (2010, 2013, 2018). Results present changes in size categories of firms according to the number of employees. Firm groups were distinguished based on the extent of deadweight effect. The results showed that in cases when deadweight effect occurred, the profitability of supported firms increased, which ultimately means inessentiality of subsidy that spilled over into the profits of surveyed companies.
    Keywords: Entrepreneurship, structural funds, deadweight effect, firm support evaluation
    Date: 2021–03
  15. By: Brian McCaig; Nina Pavcnik
    Abstract: Non-farm informal businesses comprise the majority of the firm distribution in developing countries. We document novel stylized facts about entry and exit of informal, non-farm firms using nationally representative panel data over 15 years and across regions with varying levels of local economic development in Vietnam. First, we find that informal businesses exhibit rates of entry and exit around 14-18% annually. Entry and exit rates are similar and highly correlated at a point in time, within industries, and within regions. They both decline over time and across space with economic development. Second, although market selection influences which firms survive, entry and exit has little net effect on aggregate (revenue) productivity or hiring of workers outside the household. This owes to overlapping labor productivity of entering and exiting firms and low subsequent productivity growth and hiring among the surviving entrants. Nonetheless, entry and exit are associated with large changes in individual income. Third, the large overlap in revenue of entering and exiting informal businesses and the high correlation between entry and exit rates are related to the education of owners and their economic activities before and after operating an informal business. Informal business owners are less educated on average than wage workers in the formal sector, but more educated than agricultural workers. The transitions in and out of operating an informal business reflect the underlying structure of economic activities of the working age population, with education gaps also playing a role. The most common transition into non-farm businesses is to and from self-employment in agriculture. The likelihood of this transition declines with economic development, highlighting the role of net entry from agriculture into informal non-farm businesses in structural change.
    JEL: J46 L2 O17 O53
    Date: 2021–07
  16. By: Srhoj, Stjepan; Zilic, Ivan
    Abstract: This paper evaluates the effect of a self-employment grant scheme for unemployed individuals-designed to ease the first 12 months of business operation-on firm growth, survival, and labor market reintegration in Croatia in the 2010-2017 period. Grants offered a moderate amount of finances (up to 50% of average annual gross salary) and absorbed only 5% of funds allocated to active labor market policies (ALMPs), but accounted for 10% of new firms opened throughout the years. We contribute to the literature on self-employment grants with several novel findings. Exploiting the longitudinal structure of the unemployment episodes dataset, we find that individuals who finish their spell with a grant have a significantly lower probability of returning to unemployment. The policy is particularly effective for individuals who would have otherwise had labor market opportunities (men, more educated, prime-age workers, previously employed), individuals who became unemployed after inactivity and lost their job due to a firm's closure-which demonstrates that self-employment subsidies can be effective in ameliorating unemployment. However, the policy was not effective for longer unemployed individuals. At the firm level, we find descriptive evidence that limited liability firms opened via a grant have lower growth potential and worse survival profile, while unlimited liability firms-even though a sizable portion of them closes after a required 12-month grant period-have a more favorable survival profile. Finally, we also find that the effectiveness of these grants has increased throughout the years, indicating toward the direction of institutional learning.
    Keywords: evaluation; firm performance; self-employment grant; unemployment
    JEL: R14 J01 N0
    Date: 2021–06–19
  17. By: Werner Hölzl
    Abstract: This paper examines broad patterns of structural change for a large number of countries on a global scale and for a smaller set of advanced industrialised countries over time. The findings show that structural change over the past decades followed the three-sector hypothesis. The past decades were characterised by the rise of the service sector, driven especially by business services and non-market service. At the same time as manufacturing sectors are declining in terms of shares, they remain the sectors with the highest contributions to aggregate productivity growth. An analysis of determinants of structural change confirms that country competencies related to institutional quality, knowledge generation and industrial application of the new knowledge are an important driving force of structural changes towards services, but that they have a heterogeneous impact on manufacturing subsectors. High technology manufacturing share seems not to be characterised by a tendency to decline with the development of country competencies. Broad policy implications are discussed.
    Keywords: Structural Change, Service Share, Manufacturing Share
    Date: 2021–07–05

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