nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒08‒16
twelve 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. The Cultural Roots of Firm Entry, Exit, and Growth By Katharina Erhardt; Simon Haenni
  3. Going-Private Transactions and Ex-Post Firm Behaviors: Evidence from Japanese Management Buyouts By KAWANISHI Takuya
  4. The cost of weak institutions for innovation in China By Rodríguez-Pose, Andrés; Zhang, Min
  5. Where cities fail to triumph: the impact of urban location and local collaboration on innovation in Norway By Fitjar, Rune Dahl; Rodríguez-Pose, Andrés
  6. A Novel Multi-Criteria Risk Matrix to Assist in the Strategy Formulation Process: The Case of SMEs By Jean-Marc Vasnier; Mourad Messaadia; Nicolas Maranzana; Ameziane Aoussat
  8. Size Matters: Corruption Perceptions versus Corruption Experiences by Firms By Rajeev K. Goel; Ummad Mazhar; Rati Ram
  9. Cultural Imprinting: Ancient Origins of Entrepreneurship and Innovation in Germany By Michael Fritsch; Martin Obschonka; Fabian Wahl; Michael Wyrwich
  10. FinTech Credit and Entrepreneurial Growth By Harald Hau; Yi Huang; Hongzhe Shan; Zixia Sheng
  11. Location choices of Chinese greenfield investments across EU regions: The role of industry and country-of-origin agglomerations By Yifei Wang; Andrea Ascani; Carolina Castaldi
  12. Corporate activity in France amid the Covid-19 crisis. A granular data analysis. By Bureau Benjamin,; Duquerroy Anne,; Giorgi Julien,; Lé Mathias,; Scott Suzanne,; Vinas Frédéric

  1. By: Giovanni Dosi (LEM - Laboratory of Economics and Management - SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa]); Francesco Lamperti (UP1 - Université Paris 1 Panthéon-Sorbonne); Mariana Mazzucato; Mauro Napoletano (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); 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. Simu- lation 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: 2021–01–01
  2. By: Katharina Erhardt; Simon Haenni
    Abstract: Can culture explain persistent differences in economic activity among individuals and across regions? A novel measure of cultural origin enables us to contrast the entrepreneurial activity of individuals located in the same municipality but whose ancestors lived just on opposite sides of the Swiss language border in the 18th century. Individuals with ancestry from the German-speaking side create 20% more firms than those with ancestry from the French-speaking side. These differences persist over generations and independent of the predominant culture at the current location. Yet, founders’ ancestry does not affect exit or growth of newly-founded firms. A model of entrepreneurial choice and complementary survey evidence suggest that the empirical patterns are mainly explained by differences in preferences, rather than skill. The results have sizable economic implications, accounting for 120,000 additional jobs over a period of 15 years.
    Keywords: culture, entrepreneurship, natural experiment, spatial RDD
    JEL: D22 L26 O12 Z10
    Date: 2021
  3. By: KAWANISHI Takuya
    Abstract: This empirical examination assesses effects of ceasing the public trading of company stock, specifically the practice of "going-private," on subsequent corporate behavior. More specifically, this report identifies effects of going private transactions on corporate restructuring, investment, and innovation activities (patents, R&D) using Japanese going-private-type management buy-out (MBO) data. Firms that conducted public-to-private MBOs are matched with firms that have similar attributes to clarify empirically whether going private promotes corporate innovation activities or restructuring. The study described herein also tests factors underlying changes that occur after going private using a hypothesis related to motives for going private. According to the results, restructuring behaviors are observed after going private, but firm innovation activities are not confirmed among the MBO firms. Buyout funds enhance investment of MBO firms after the buyouts are completed, but they exhibit no effect on innovation activities.
    Date: 2021–08
  4. By: Rodríguez-Pose, Andrés; Zhang, Min
    Abstract: Does the variation in the quality of local government institutions affect the capacity of firms to innovate? This paper uses a unique dataset that combines the specific features of 2,700 firms with the institutional and socioeconomic characteristics of the 25 cities in China where they operate, in order to assess the extent to which institutional quality – measured across four dimensions: rule of law, government effectiveness, corruption, and regulatory quality – affects both the innovation probability and intensity of firms. The results of the econometric analysis show that poor institutional quality in urban China is an important barrier for firm-level innovation. In particular, a deficient rule of law, high corruption, and a weak regulatory quality strongly undermine firm-level innovation. The role of these factors is far more limited in the case of innovation intensity. Better institutions also reduce the amount of time firms spend dealing with government regulations in order to facilitate innovation. The results also indicate that the cost of weak institutions for innovation is higher for private than for state-owned firms, at least in the early stages of innovation. In general, differences in institutional quality generate local urban ecosystems that impinge on the propensity of firms to innovate.
    Keywords: innovation; institutions; government quality; firms; cities; China
    JEL: R14 J01
    Date: 2020–04–01
  5. By: Fitjar, Rune Dahl; Rodríguez-Pose, Andrés
    Abstract: The role of cities in fostering innovation has for long been taken for granted. Agglomeration and the knowledge spillovers generated in dense urban environments have been considered fundamental drivers of innovation. This view has, however, become challenged by research questioning the returns to physical agglomeration and local networking, placing instead more emphasis on the importance of interregional and international collaboration, and on innovation in peripheral regions. This paper delves into the debate on the role of cities for innovation by examining the interplay between urban location and local collaboration in Norway. It uses data from the Community Innovation Survey for 2006–2010 to map out the geographical dimension of R&D collaboration in Norwegian firms with a view to assessing whether different types of R&D collaboration in urban and rural locations affect firms’ propensity to innovate. The results show that local collaboration is associated with increased process and organisational innovation, while it does not produce higher levels of product or marketing innovation. Conversely, international collaboration is connected with higher probabilities of product, new-to-market and marketing innovations. Furthermore, location in urban or rural areas makes no difference for most innovation outcomes in Norway when other characteristics are controlled for. Location in cities also does not shape the returns to local R&D collaboration. Hence, the role of cities for innovation in Norway, whether in themselves or as sites for dense local interaction, is less relevant than the urban innovation literature would predict.
    Keywords: innovation; firms; networking; collaboration; cities; Norway; 209761
    JEL: L25 O31 O33
    Date: 2020–01–01
  6. By: Jean-Marc Vasnier (CESI - Centre d'Enseignement Supérieur Industriel); Mourad Messaadia (LINEACT - Laboratoire d’Innovation Numérique pour les Entreprises et les Apprentissages au service de la Compétitivité des Territoires - CESI - Centre d'Enseignement Supérieur Industriel); Nicolas Maranzana (LCPI - Laboratoire Conception de Produits et Innovation - Arts et Métiers Sciences et Technologies - HESAM - HESAM Université); Ameziane Aoussat (LCPI - Laboratoire Conception de Produits et Innovation - Arts et Métiers Sciences et Technologies - HESAM - HESAM Université)
    Abstract: Small and medium-sized enterprises (SMEs) are the spine of the European economy and play a key role in adding value in all sectors of the economy. However, due to a lack of methodology and time, SME entrepreneurs struggle to formalize their strategies and too often remain ill-prepared to face today's potential crises. This paper aims to propose a Risk Management (RM) tool to identify and assess the impact of risks on specific business strategic dimensions. The hypotheses and robustness of the model are tested using Monte Carlo simulation. The analysis shows that a reduced strategic risk matrix (size [Formula: see text]) could provide the same quality of information as a full strategic risk matrix (size [Formula: see text]) in about 80% of the cases, regardless of the weight of each criterion and the values of each risk factor. The results extend the limited use of RM tool in the field of SME Risk Management.
    Keywords: SMEs,Risk matrix,Monte Carlo simulation,Strategic risk management,Decision analysis
    Date: 2021
  7. By: Gerald A. Carlino
    Abstract: This paper examines how the enforceability of employee non compete agreements affects the entry of new establishments and jobs created by these new firms. We use a panel of startup activity for the U.S. states for the period 1977 to 2013. We exploit Michigan’s inadvertent policy reversal in 1985 that transformed the state from a non enforcing to an enforcing state as a quasinatural experiment to estimate the causal effect of enforcement on startup activity. In a difference-in-difference framework, we find little support for the widely held view that enforcement of non-compete agreements negatively affects the entry rate of new firms or the rate of jobs created by new firms. We find that increased enforcement had no effect on the entry rate of startups, but a positive effect on jobs created by these startups in Michigan relative to a counterfactual of states that did not enforce such covenants pre- and post-treatment. Specifically, we find that a doubling of enforcement led to an increase of about 8 percent in the startup job creation rate in Michigan. We also find evidence that enforcing non-competes positively affected the number of high-tech establishments and the level of high tech employment in Michigan. Extending our analysis to consider the effect of increased enforcement on patent activity, we find that enforcement had differential effects across technological classifications. Importantly, increased enforcement had a positive and significant effect on the number of Mechanical patents in Michigan, the most important patenting classification in that state.
    Keywords: Startup activity; Non-compete agreements; Regional economic growth.
    JEL: O30 O38 R11
    Date: 2021–08–05
  8. By: Rajeev K. Goel; Ummad Mazhar; Rati Ram
    Abstract: This study uses a large firm-level data set covering more than 80 countries to explore the effects of firm-size, city-size, and government-size on perceived and experienced corruption. Four points summarize our main findings, which seem instructive and new. First, there is a broad structural similarity in the major determinants of perceived and experienced corruption. Second, larger firms and larger government size lower corruption perceptions and experience. Third, larger cities raise corruption perceptions and experience. Fourth, when the sample is limited to large cities, the corruption-lowering effect of government size loses significance throughout, while firm size loses significance in experience regressions.
    Keywords: corruption perception, corruption experience, firm size, government size, city size, emerging economies
    JEL: K42 L25
    Date: 2021
  9. By: Michael Fritsch (Friedrich Schiller University Jena, Germany); Martin Obschonka (Queensland University of Technology, Brisbane, Australia); Fabian Wahl (University of Hohenheim, Germany); Michael Wyrwich (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany)
    Abstract: A region’s present-day economic performance can be deeply anchored in historical factors. We provide the first systematic evidence of a deep imprinting effect in the context of Roman rule in the south-western part of Germany nearly 2,000 years ago. Our analysis reveals that regions in the former Roman part of Germany show a stronger entrepreneurship and innovation culture today, evident by higher levels of quantity and quality entrepreneurship and innovation. The data indicate that this lasting 'Roman effect' was constituted by the early establishment of interregional social and economic exchange and related infrastructure. Our findings thus help in unpacking the hidden cultural roots of present-day economic performance, with important implications for research and economic policy.
    Keywords: Entrepreneurship, innovation, historical roots, Romans, Limes
    JEL: N9 O1 I31
    Date: 2021–08–11
  10. By: Harald Hau (University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)); Yi Huang (Graduate Institute of International and CEPR); Hongzhe Shan (Swiss Finance Institute, Swiss Finance Institute, Students); Zixia Sheng (New Hope Financial Services)
    Abstract: Based on automated credit lines to more than two million vendors trading on Alibaba’s online retail platform, we show how the take-up of FinTech credit varies with the entrepreneur’s bank distance. Proximity to the branches of the five largest stateowned banks correlates positively with the take-up of FinTech credit and suggests more severe credit frictions for Chinese e-commerce vendors close to such banks. We use a discontinuity in the credit decision algorithm to document that a firm’s credit approval and credit use boost a vendor’s sales and transaction growth. Entrepreneurial growth after access to FinTech credit is largest for younger e-commerce firms and in the month of first-time credit approval.
    Keywords: FinTech, credit constraints, micro credit, entrepreneurship
    JEL: G20 G21 O43
    Date: 2021–03
  11. By: Yifei Wang (Utrecht University); Andrea Ascani (Gran Sasso Science Institute); Carolina Castaldi (Utrecht University)
    Abstract: We model the impact of public housing supply on local development by using a spatial equilibrium model with a “share-altering†technological shift from agriculture to manufacturing. The model shows that a larger local availability of houses triggers greater population growth and, consequently, industrialization. It also suggests that these effects are stronger in places that exhibited, prior to the public housing plan, relatively higher population density. These implications are broadly confirmed by an empirical evaluation of the INA-Casa plan, a program implemented by the Italian government in the aftermath of WWII.
    Keywords: industry agglomeration, country-of-origin, agglomeration, multinational enterprises, foreign direct investment, China
    JEL: F23 L20 R30
    Date: 2021–07
  12. By: Bureau Benjamin,; Duquerroy Anne,; Giorgi Julien,; Lé Mathias,; Scott Suzanne,; Vinas Frédéric
    Abstract: Taking advantage of detailed firm-level data on VAT returns, we estimate the monthly impact of the Covid-19 crisis on the turnover of more than 645,000 French firms. Our approach, based on a micro-simulation model, is innovative in a triple way. Firstly, we quantify the activity loss with respect to a counterfactual situation in which the crisis would not have hit. Secondly, we estimate this shock at the firm level, enabling a thorough analysis of activity loss heterogeneity throughout the crisis. In particular, we shade light on the dispersion of the shock both within and between industries. We show that the industry the firm operates in explains up to 48% of the monthly activity shocks’ variance weighted by employment, a much larger share than in a normal year. Finally, we leverage our monthly firm-level data on sales to show how corporate activity has evolved along four distinct trajectories throughout 2020. The main determinant of belonging to a given profile of activity is the firm industry – defined at a very granular level. Conditional on industry, the activity trajectory is also correlated with the ability to adapt some firms have demonstrated during the crisis in terms of organization and production.
    Keywords: Covid-19 ; business dynamics ; micro-simulation ; non-financial corporations
    JEL: D22 G38 H32
    Date: 2021

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