nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒08‒30
twenty-two papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Scaling up in Entrepreneurial Ecosystems: A comparative study of Entrepreneurial Ecosystems in Life Science By Alvedalen, Janna; Carlsson, Bo
  2. Model-Selection Inference for Causal Impact of Clusters and Collaboration on MSMEs in India By Samarth Gupta
  3. Comparative Analysis of Five Entrepreneurial Ecosystems in Life Sciences By Alvedalen, Janna; Carlsson, Bo
  4. Incentives for Entrepreneurial Firms and Technical and Policy Appendices By Hackler, Darrene; Harpel, Ellen
  5. Innovation Strategy and Economic Development By Matias Braun; Luis Felipe Cespedes; Sebastian Bustos
  6. Does Education Enhance Entrepreneurship? By Ahn, Kunwon; Winters, John V.
  7. The Indian manufacturing sector: finance, investment and performance of firms. By Agarwal, Manmohan; Azim, Rumi
  8. Size and Age as Determinants of Employment Growth among Manufacturing Firms in Pakistan By Farrukh Iqbal; Aadil Nakhoda
  9. Financing Entrepreneurship and Innovation in China By Lin William Cong; Charles M. C. Lee; Yuanyu Qu; Tao Shen
  10. Exploration and Exploitation in US Technological Change By Carvalho, Vasco M.; Draca, Mirko; Kuhlen, Nikolas
  11. Did US Business Dynamism Recover in the 2010s? By Asier Aguilera-Bravo; Miguel Casares; Hashmat Khan
  12. Resilience after a large firm's closure: the role of place leadership, local resources, and social capital in the transformation of an Entrepreneurial Ecosystem By Alvedalen, Janna
  13. Start-ups, Gender Disparities, and the Fintech Revolution in Latin America By Batiz-Lazo, Bernardo; González-Correa, Ignacio
  14. Immigration and Local Business Dynamics: Evidence from U.S. Firms By Parag Mahajan
  15. Linking the ‘Recovery and Resilience Plan’ and Smart Specialisation. The Portuguese Case By Anabela Santos
  16. Open Innovation Business Models : the example of living labs in France By Ingrid Fasshauer
  17. Case studies on Smart Specialisation By PERIANEZ FORTE Inmaculada; GUZZO Fabrizio; HEGYI Fatime Barbara; GIANELLE Carlo
  18. Causal Impact Of European Union Emission Trading Scheme On Firm Behaviour And Economic Performance: A Study Of German Manufacturing Firms By Nitish Gupta; Jay Shah; Satwik Gupta; Ruchir Kaul
  19. Agglomeration Economies and Labour Misallocation in Cote d’Ivoire By BAH, Mamadou Mouminy
  20. The productivity puzzle in business services By Alexander S. Kritikos; Alexander Schiersch; Caroline Stiel
  21. Learning and Product Innovation Performance in Informal Enterprises: Evidence from Urban Ghana By Avenyo, Elvis Korku
  22. Female entrepreneurship in the wine sector: the role of identity in small and medium-sized wineries’ formation, growth and response to Covid-19 By Cinzia Colapinto; Vladi Finotto; Christine Mauracher

  1. By: Alvedalen, Janna (CIRCLE, Lund University); Carlsson, Bo (Case Western Reserve University)
    Abstract: Scaling-up is still underexplored in the Entrepreneurial Ecosystem literature. This paper presents a comparative analysis of five Entrepreneurial Ecosystems in Life Sciences in Sweden and the US, based on own data collection. It examines the factors that support or impede the scale-up process of firms in different geographical contexts. The paper outlines firm-specific and firm-external factors important to high-growth firms in Life Science and shows these factors differentiate across distinct geographical contexts. The study sheds light on key enablers and barriers to scaling-up in Entrepreneurial Ecosystems and the roles of different actors including growth ambition, technological expertise, management competence, business model alteration, funding, global firms, human capital, support organizations, local growth culture, hospitals and universities.
    Keywords: Entrepreneurial Ecosystem; scale-up; high-growth firms; Life Sciences; Sweden; U.S.
    JEL: L26 M21 O33
    Date: 2021–08–20
  2. By: Samarth Gupta (National Council of Applied Economic Research)
    Abstract: Do agglomeration-based spillovers impact firms more than the technical know-how obtained through inter-firm collaboration? Quantifying the effect of these treatments on firm performance can be valuable for policy-makers as well as managers/entrepreneurs. I observe the universe of Indian MSMEs inside an industrial cluster but with no collaboration (Treatment Group 1), those in collaboration with other firms for technical know-how but outside a cluster (Treatment Group 2) and those outside cluster with no collaboration (Control Group). Selection of firms into these treatments and sub-sequent performance of the firm may be simultaneously driven by observable factors. To address selection bias and overcome model mis-specifcation, I use two data-driven, model-selection methods, developed in Belloni et al. (2013) and Chernozhukov et al.(2015), to estimate causal impact of the treatments on GVA of ?rms. The results suggest that ATE of cluster and collaboration is nearly equal at 30%. I conclude by offering policy implications of the results.
    Keywords: Entrepreneurship, Firm Performance, SME
    JEL: L25 L26
    Date: 2020–08
  3. By: Alvedalen, Janna (CIRCLE, Lund University); Carlsson, Bo (Case Western Reserve University)
    Abstract: Entrepreneurial ecosystem (EE) is a popular concept in entrepreneurship studies that describes all actors and the interaction between actors in a specific geographical area. While studies have focused on a single case, this paper explores and compares the nature of five EEs in Life Sciences in Sweden and the US, based on own data collection in all five areas. The paper outlines commonalities and differences between how EEs operate and function in different territorial contexts. It also explores how national and local factors influence the rate and nature of entrepreneurship at the regional level. The paper shows how important it is to take a territorial perspective on EE, because EEs look different in distinct geographical and institutional contexts.
    Keywords: Entrepreneurial Ecosystem; Life Sciences; Sweden; US
    JEL: L26 M21 O33
    Date: 2021–08–20
  4. By: Hackler, Darrene; Harpel, Ellen
    Abstract: Many economic development organizations (EDOs) have embraced the mission to support entrepreneurial firms in their communities. EDOs engage in their entrepreneurial ecosystems, in part, by providing resources, sometimes in the form of business incentives. The purpose of this report is to provide practitioners and policymakers with insights regarding the use of these incentives and guidance for offering incentives to entrepreneurial firms. Researchers and policymakers use a wide range of definitions for “entrepreneurial firm” and “incentive,” making it difficult to categorize and describe the current state of entrepreneurial firm incentives. Multiple additional research challenges, including a lack of data on program outcomes, hinder the ability to draw definitive policy guidance from both program evaluations and academic research. This report strives to sort this tangle of material into a framework that is helpful for policymakers and economic development practitioners.
    Keywords: entrepreneurship, startups, small business, incentives, economic development, incubators, accelerators, equity
    JEL: L26 O1 O11 O12
    Date: 2021–08
  5. By: Matias Braun; Luis Felipe Cespedes; Sebastian Bustos
    Abstract: Productivity differentials have been documented as the main determinant of the variation of income per capita across countries. In this paper, we investigate whether the implementation of innovation-intensive or adoption-intensive business strategies by firms can explain differences in productivity levels and productivity growth across industries and countries. We compute a novel innovation-intensity strategy index for firms, based on textual analysis of financial reports issued in the US by firms from developed and developing countries and from a wide range of industries. We show that the index captures dimensions of the innovation process implemented by firms that go beyond R&D efforts. Our empirical results indicate that firms that pursue an innovation-based strategy exhibit higher productivity levels compared to firms that follow an adoption-based strategy. Nonetheless, the optimal business strategy depends on the distance to the world technology frontier. Firms far from the frontier grow faster when implementing an adoption-based strategy, but an innovation-based strategy better suits firms closer to the technological frontier. We provide evidence indicating that a country’s financial market sophistication, competition policy and innovation capabilities –such as educational level, availability of scientists and engineers, and intellectual property protection– are key determinants of the strategy implemented by firms. The empirical evidence suggests that middle-income traps may occur if competition policy, innovation capabilities and financial market sophistication are not enhanced as a country moves closer to the technology frontier.
    Date: 2021–08
  6. By: Ahn, Kunwon (Iowa State University); Winters, John V. (Iowa State University)
    Abstract: Formal education is correlated with entrepreneurial activity and success, but correlation does not indicate causation. Education and entrepreneurship are both influenced by other related factors. The current study estimates causal effects of formal education on entrepreneurship outcomes by instrumenting for an individual's years of schooling using cohort mean years of maternal schooling observed decades prior. We differentiate self-employment by industry employment growth and firm incorporation status. We have multiple important results. Formal schooling significantly increases the probability of self-employment in high-growth industries for both women and men. Education reduces the probability of male self-employment in shrinking industries. Education also increases incorporated self-employment for women and men and reduces unincorporated self-employment among men but not women. The overall probability of self-employment increases with education for women but is unaffected by education for men. The results suggest that formal education enhances entrepreneurship.
    Keywords: entrepreneurship, self-employment, education, human capital
    JEL: I20 J24 L26
    Date: 2021–08
  7. By: Agarwal, Manmohan (Centre for International Trade and Development, Jawaharlal Nehru University); Azim, Rumi (Centre for International Trade and Development, Jawaharlal Nehru University)
    Abstract: The paper tests the hypothesis that financial stress caused the stagnation in the manufacturing sector, using firm level data on a sample of 804 large, mid, and small cap manufacturing firms for 15 years from 2005 to 2019. We analyse the trend in the financial indicators and estimate dynamic panel data regression using a two-step GMM method. We do not find substantial for financial stress to be a major determinant of the investment slowdown in these firms. Our results support the Pecking order theory, particularly for larger firms. In addition, we find that the declining growth in sales is a major determinant in explaining the slowdown in fixed investments and profits. For small cap firms, the size of the firms also matters. We therefore suggest that measures to increase demand can help in reviving the sales growth of firms and thereby private investments and profits.
    Keywords: Capital structure ; Investment ; Profitability ; Manufacturing ; India
    Date: 2021–08
  8. By: Farrukh Iqbal (Center for Social Policy Research.); Aadil Nakhoda (Institute of Business Administration, Karachi.)
    Abstract: Size-based industrial policy is usually justified in developing countries on the basis of positive externalities arising from an assumed inverse relationship between size and firm dynamism, whereby smaller firms generate jobs faster than larger firms and thus absorb more labour. Theoretically, such a profile could arise from the stylized lifecycle of the typical firm which starts small and grows on the basis of economies of scale until a point where such economies are fully exploited. A similar profile could also be generated by the rising age of the firm. In this case, the firm grows faster when young, driven by the effort, ideas and risk-taking of young owners and managers, but grows slower as they mature and become more risk averse and more cognizant of their firm’s capabilities. In recent decades, empirical support has been found for both size and age effects on employment growth in some developed and developing countries. For Pakistan, the joint effects of size and age on employment growth have not been studied at the national level, even though size-based industrial policies have long been applied and age-based policies are growing in popularity. We address this gap in this paper and report three key findings: (i) size is inversely related to employment growth among manufacturing firms in Pakistan; (ii) the effects appear to be concentrated among firms having 50 workers or less; and (iii) age is not a statistically significant determinant of employment growth when all manufacturing sub-sectors are considered in the aggregate.
    Keywords: Firm Size; Firm Age; Employment Growth; Manufacturing; Pakistan; Industrial Policy
    JEL: L25 O14
    Date: 2020
  9. By: Lin William Cong; Charles M. C. Lee; Yuanyu Qu; Tao Shen
    Abstract: This study reports on the current state-of-affairs in the funding of entrepreneurship and innovations in China and provides a broad survey of academic findings on the subject. We also discuss the implications of these findings for public policies governing the Chinese financial system, particularly regulations governing the initial public offering (IPO) process. We also identify and discuss promising areas for future research.
    Date: 2021–08
  10. By: Carvalho, Vasco M. (University of Cambridge); Draca, Mirko (University of Warwick and CAGE); Kuhlen, Nikolas (University of Cambridge and The Alan Turing Institute)
    Abstract: How do firms and inventors move through ‘knowledge space’ as they develop their innovations? We propose a method for tracking patterns of ‘exploration and exploitation’ in patenting behaviour in the US for the period since 1920. Our exploration measure is constructed from the text of patents and involves the use of ‘Bayesian Surprise’ to measure how different current patent-based innovations are from existing portfolios. Our results indicate that there are distinct ‘life-cycle’ patterns to firm and inventor exploration. Furthermore, exploration activity is more geographically concentrated than general patenting, but this concentration is centred outside the main hubs of patenting.
    Keywords: JEL Classification:
    Date: 2021
  11. By: Asier Aguilera-Bravo (Universidad de Navarra); Miguel Casares (Universidad Pública de Navarra & INARBE); Hashmat Khan (Carleton University)
    Abstract: We provide evidence that both firm and establishment entry rates in the US have been increasing over the past decade, seemingly ending the secular decline observed over previous decades. However, the job-size of new businesses relative to incumbents has decreased substantially. Controlling for these opposite trends reveals that the size-adjusted entry rate continues to decline.
    Date: 2021
  12. By: Alvedalen, Janna (CIRCLE, Lund University)
    Abstract: Studies have argued for the pivotal role of large firms in Entrepreneurial Ecosystems (EE). The sudden closure of large firms can be expected to have a substantial negative impact on an EE. This paper investigates the resilience of an EE in the aftermath of a large firm exit in the Lund region. A qualitative case study shows how agency and resources turned the local EE into a dynamic center for Life Sciences. Factors that contributed to the resilience of the EE in Lund were entrepreneurial place leadership, local resources, and social capital. The study provides a framework to understand the transformation of an EE after a crisis.
    Keywords: entrepreneurial ecosystem; resilience; place leadership; social capital; entrepreneurship; closure of large firm
    JEL: L26 M21 O33
    Date: 2021–08–20
  13. By: Batiz-Lazo, Bernardo; González-Correa, Ignacio
    Abstract: This chapter considers the process of entrepreneurial activity to deploy financial technologies (fintech) through mandate-specific new companies in Latin America. We deal with important historical issues such as defining the term, establishing temporal and industrial activity boundaries, positioning this particular process within other organizational forms typical of the region, the role of women and other relevant issues such as the modernization of retail payments and personal lending. A central question is whether fintech start-ups have had a 'scissor' effect in the entrepreneurial process of Latin America: at the base of the pyramid (that is, reducing frictions to support overall entrepreneurial activity, increasing financial inclusion, etc.) and near the top (by creating new business leaders). As a result, this chapter provides an initial assessment of gender disparities and barriers enabling women entrepreneurs in the fintech ecosystem.
    Keywords: fintech, gender, women, entrepreneurship, startups, Latin America
    JEL: G2 J16 M13 N26
    Date: 2021–08
  14. By: Parag Mahajan
    Abstract: This paper finds that establishment entry and exit—particularly the prevention of establishment exit—drive immigrant absorption and immigrant-induced productivity increases in U.S. local industries. Using a comprehensive collection of confidential survey and administrative data from the Census Bureau, it shows that inflows of immigrantworkers lead to more establishment entry and less establishment exit in local industries. These relationships are responsible for nearly all of long-run immigrant-induced job creation, with 78 percent accounted for by exit prevention alone, leaving a minimal role for continuing establishment expansion. Furthermore, exit prevention is not uniform: immigrant inflows increase the probability of exit by establishments from low productivity firms and decrease the probability of exit by establishments from high productivity firms. As a result, the increase in establishment count is concentrated at the top of the productivity distribution. A general equilibrium model proposes a mechanism that ties immigrantworkers to high productivity firms and shows how accounting for changes to the firm productivity distribution can yield substantially larger estimates of immigrant-generated economic surplus than canonical models of labor demand.
    Keywords: Immigration, Business Dynamics, Job Creation, Productivity, Firm Heterogeneity
    JEL: J23 J61 L11 F22
    Date: 2021–08
  15. By: Anabela Santos (European Commission - JRC)
    Abstract: Based on the case study of Portugal, the present study aims to analyse the alignment of investments in the Portuguese ‘Recovery and Resilience Plan’ with the Smart Specialisation Strategies priorities (2021-2027) of this territory, and then identify opportunities for potential synergies and complementary between funding instruments. With the information available in the Plan and its annex, a detailed analysis is performed to identify investments able to enhance Research & Development, and Innovation and/or to improve the regional innovation eco-systems. The analysis shows that up to €6 Billion of the Plan (37%) may potentially support directly and indirectly the Smart Specialisation in Portugal. However, the effect of such contribution will strongly depend on the final beneficiaries, projects selected, absorption capacity, and governance model. The paper also explains the relevance of Smart Specialisation in the Covid-19 recovery and draft some policy recommendations.
    Keywords: Covid-19 crisis; Innovation; Government Policy; Portugal.
    JEL: E32 O31 G38
    Date: 2021–08
  16. By: Ingrid Fasshauer (Université Gustave Eiffel, DICEN-IDF - Dispositifs d'Information et de Communication à l'Ère du Numérique - Paris Île-de-France - UPN - Université Paris Nanterre - CNAM - Conservatoire National des Arts et Métiers [CNAM] - Université Gustave Eiffel)
    Abstract: Livings labs, emerging forms of collaborative innovation including users in their real-life context, are more and more numerous in France. Even if part of them is organized in a network, they are very diverse in terms of portage, legal structure and above all business model. The latter is all the more crucial since Schuurman (2015) notes a mortality rate of 40% on living labs labeled by the largest network of living labs, European Network of Living Labs (ENoLL). A large number of living labs thus have an unwanted temporary nature (Leminen et al., 2012). Based on a survey, it highlights that three forms of value are generated by the living labs studied: knowledge creation, social impact and economic value. Revenues can be exclusively public, exclusively private or mixed. As for the sharing of value, it is a concern for several living labs which respond by ensuring the dissemination of their innovations to a wide audience. Only research-oriented laboratories have intellectual property protection practices. By taking these three dimensions into account, we propose a typology distinguishing between four categories of living labs.
    Keywords: Living Lab,Open Innovation,Business Model,Value sharing
    Date: 2020–09–02
  17. By: PERIANEZ FORTE Inmaculada (European Commission - JRC); GUZZO Fabrizio (European Commission - JRC); HEGYI Fatime Barbara (European Commission - JRC); GIANELLE Carlo (European Commission - JRC)
    Abstract: This report comprises 10 case study reports at regional and national on the implementation of the Smart Specialisation policy across 4 EU countries. This analytical work seeks to provide a wide assessment of the smart specialisation policy experience along with some reflections for the 2021-2027 EU Cohesion policy. The reports were produced by national experts using a common conceptual framework and set of guidelines for data collection. They were also redacted according to a common structure which facilitates comparative analysis and information search in general. The case studies included in this report consists of three sections on (i) governance, (ii) the entrepreneurial discovery process and, (iii) monitoring and evaluation, plus a succinct account of some relevant implementation measures characterised by being experimentalThe section on governance provides an overview of the smart specialisation governance and comprises four parts focused on political support and leadership; autonomy and accountability of the smart specialisation management body; horizontal and vertical coordination; and stakeholder engagement. The section on the entrepreneurial discovery process looks at the main dimensions of the process and develops four parts focused on understanding the continuous entrepreneurial discovery process concept; the entrepreneurial discovery process organisation: structure, role, processes, resources, and the mobilisation and engagement of stakeholders; and capacity building. The last section on monitoring and evaluation consists of four parts focused on the general objectives and main results of the smart specialisation strategy; the specificity and usefulness of the smart specialisation monitoring system; the smart specialisation monitoring system usage; and the smart specialisation evaluation.
    Keywords: Smart Specialisation
    Date: 2021–08
  18. By: Nitish Gupta; Jay Shah; Satwik Gupta; Ruchir Kaul
    Abstract: In this paper, we estimate the causal impact (i.e. Average Treatment Effect, ATT) of the EU ETS on GHG emissions and firm competitiveness (primarily measured by employment, turnover, and exports levels) by combining a difference-in-differences approach with semi-parametric matching techniques and estimators an to investigate the effect of the EU ETS on the economic performance of these German manufacturing firms using a Stochastic Production Frontier model.
    Date: 2021–08
  19. By: BAH, Mamadou Mouminy
    Abstract: This paper analyses the effects of agglomeration economies on firm labour misallocation, using the Ivorian firm data from 2013-2016. After measuring the degree of firm labour misallocation in the first step, we assess the level of labour misallocation in denser regions in the second step. The results show on the one hand that the average labour misallocation (labour gap) at the firm level is 2,825,887 FCFA ($5,137.97 ) over the period 2013-2016 and this gap has significantly decreased over years. On the other hand, firms located in denser regions exhibit lower labour misallocation. In terms of the magnitude, both localisation and urbanisation economies are large and statistically significant. A 10% increase in the degree of localisation in a region reduces the labour misallocation by 7.41% on average, while a 10% increase in the degree of urbanisation alters the labour misallocation by 4.26%. These findings confirm that labour misallocation has a geographical dimension, in addition to the firm characteristics. A sound policy needs to accounts for the spatial distribution of firms and the creation of active poles of development in major Ivorian regions.
    Keywords: Localisation, Urbanisation, Misallocation, Total factor productivity, firm-level data
    JEL: D24 L25 O4 R3
    Date: 2021–08–15
  20. By: Alexander S. Kritikos (DIW Berlin, University of Potsdam, IZA Bonn, IAB Nuremberg); Alexander Schiersch (DIW Berlin); Caroline Stiel (DIW Berlin)
    Abstract: In Germany, the productivity of professional services, a sector dominated by micro and small firms, declined by 40 percent between 1995 and 2014. This productivity decline also holds true for professional services in other European countries. Using a German firm-level dataset of 700,000 observations between 2003 and 2017, we analyze this largely uncovered phenomenon among professional services, the 4th largest sector in the EU15 business economy, which provide important intermediate services for the rest of the economy. We show that changes in the value chain explain about half of the decline and the increase in part-time employment is a further minor part of the decline. In contrast to expectations, the entry of micro and small firms, despite their lower productivity levels, is not responsible for the decline. We also cannot confirm the conjecture that weakening competition allows unproductive firms to remain in the market.
    Keywords: business services, labor productivity, productivity slowdown
    JEL: L84 O47 D24 L11
    Date: 2021–08
  21. By: Avenyo, Elvis Korku
    Abstract: Recognising that enterprises learn how to produce goods and services in the informal economy, this paper examines the effect of two learning processes (apprenticeship and ‘formal interactions’) on the product innovativeness of informal enterprises in Ghana. Employing unique survey data on 513 enterprises and the Type II Tobit model, our analyses reveal that apprenticeship, on the one hand, enhances the technological capability of enterprises leading to product innovativeness, while competitive formal interactions, on the other hand, provide important market feedback that enhances the innovativeness of enterprises. The paper concludes by discussing the policy implications of these findings.
    Keywords: Innovation; Informal Sector; Learning; SMEs; Ghana; sub-Saharan Africa (SSA)
    JEL: D22 L25 L53 O12 O17 O31
    Date: 2021
  22. By: Cinzia Colapinto (Dept. of Management, Università Ca' Foscari Venice); Vladi Finotto (Dept. of Management, Università Ca' Foscari Venice); Christine Mauracher (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: The increasing interest in female entrepreneurship advanced our understanding of how psychological and personality traits and the contextual factors surrounding the decision of women to become founders influence their ways of establishing and managing organizations. Recent literature points to the fact that the differences among men and women as founders and leaders of organizations might exist also when major crises happen: in front of radical changes and events that abruptly disrupt the processes and operations of firms, women might manage situations in a peculiar way. From this perspective, Covid-19 represents a fruitful testbed. The onset of the pandemic had social and economic consequences at global level: the outbreak has caused major disruptions in supply chains and shifts in consumption patterns. Relevant current questions are how Covid-19 pandemic has been affecting female entrepreneurs and how resilient they were. The paper looks at women-owned wineries in the Northern part of Italy as an interesting case: indeed, the wine industry has been traditionally a male-dominated industry and it has been heavily impacted by the covid-19 pandemic. Through qualitative research we explore how female wineries were able to change their direction or implement new services. We find that women weigh strategic choices such as using e-commerce with the need to maintain extant relationships, make decisions influenced by the need to preserve communities and rely on peer-networks to provide mutual support.
    Keywords: wineries, digitalization, Covid-19 pandemic, female entrepreneurship, crisis management
    JEL: L26 L66 M19
    Date: 2021–08

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