nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒09‒27
fourteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Essays on the Economics of Innovation By Ela Ince
  2. Assessing the mechanism of barriers towards green finance and public spending in small and medium enterprises from developed countries By Chien, Fengsheng; Ngo, Quang-Thanh; Hsu, Ching-Chi; Chau, Ka Yin; Iram, Robina
  3. Intangibles and industry concentration: Supersize me By Matej Bajgar; Chiara Criscuolo; Jonathan Timmis
  4. She Innovates- Female owner and firm innovation in India By Shreya Biswas
  5. Employment quality, economic performance and wages in Europe. Exploring the virtuous circle By Pianta, Mario; Reljic, Jelena
  6. Multinationals, innovation and institutional context: IPR protection and distance effects By Bruno, Randolph L.; Crescenzi, Riccardo; Estrin, Saul; Petralia, Sergio
  7. Caste, Courts and Business By Chakraborty, Tanika; Mukherjee, Anirban; Saha, Sarani; Shukla, Divya
  8. Human Resources in Europe. Estimation, Clusterization, Machine Learning and Prediction By Leogrande, Angelo; Costantiello, Alberto
  9. Economic impact of SMEs in the desert of Arica-Chile: an early evaluation of the business assistance provided by Sercotec's Arica Business Center program By Rodrigo Barra Novoa
  10. The Pitfalls of Using Location Quotients to Identify Clusters and Represent Industry Specialization in Small Regions By Andrew Crawley; Todd M. Gabe; Mariya Pominova
  11. Twenty years of job flows in an emerging country By Rodrigo Ceni; Gabriel Merlo
  12. Zoom in, zoom out: A shift-share analysis of productivity in Switzerland based on micro data By Jean-Marie Grether; Benjamin Tissot-Daguette
  13. Agency Costs in Small Firms By Bianchi, Milo; Luomaranta, Henri
  14. Economic linkages, technology transfers, and firm heterogeneity: The case of manufacturing firms in the Southern Key Economic Zone of Vietnam By Nguyen, Chi-Hai; Ngo, Quang-Thanh; Pham, My-Duyen; Nguyen, Anh-Tuan; Huynh, Ngoc-Chuong

  1. By: Ela Ince
    Abstract: The thesis brings together three independent essays on the economics of innovation. I analyse the impact of competition on firm-level innovation (chapter 1) and the impact of different types of innovation on firm performance (chapter 2) looking at the top business R&D spenders of the world. I, then, switch my focus on researchers and analyse the determinants of brain drain in Europe (chapter 3).The first chapter is co-authored by Anabela Santos (European Commission) and Michele Cincera (ULB) and aims at assessing the impact of competition on firm-level innovation. The sample is composed of the world top corporate R&D spenders listed in the EU 2017 industrial R&D Scoreboard, and the analysis covers the years spanning from 2007 to 2016. We use an industry-year indicator, the inverse of the Lerner Index, as the indicator of competition for these firms that are leading in innovation efforts in the industries they are operating at the worldwide. R&D expenditures are used as the proxy for innovation. Model is estimated using two-stage least squares, to control for potential endogeneity of the competition indicator. Results confirm the existence of an inverted-U shaped relationship between competition and innovation. Further analysis is undertaken splitting the overall firm sample into services and manufacturing sectors according to technology and knowledge intensities and into the country of headquarters. We validate the inverted-U shaped relationship between competition and innovation for the firms in medium-high- and high-tech manufacturing sectors whereas we do not observe this impact for the firms operating in medium-low- and low-tech manufacturing sectors nor in services sectors. We also find differences in innovation behaviour of firms headquartered in the EU, US, Japan and China. While the inverted-U shaped relationship is highly pronounced for the Chinese firms, we find the U shaped impact of competition on the innovation of the EU and Japanese firms.The second chapter brings together firm-level R&D spending information with patent information, and aims at investigating the impact of different types of patented inventions on firm output growth performance controlling for R&D spending and other firm financials. The firm sample is sourced from the EU 2014 Industrial R&D Scoreboard that brings together the leading private sector R&D investors of the world. The analysis covers the years from 2005 to 2010. I consider forward-looking patent value indicators of breakthrough and general innovation using 7-year citation window, and backward-looking patent value indicators of originality and radicalness in innovation activities. Firm performance is estimated through a Cobb-Douglas production function. I allow for non-linearity in the relationship between innovation strategy and firm performance, and investigate sectoral heterogeneity looking at the impact in health industries and ICT producers. Models are estimated using two-stage least squares and generalised method of moments to control for potential endogeneity of innovation indicators. The findings confirm certain non-linearities and sectoral heterogeneities in the relationships between the different types of innovation and firm performance. ICT producers are growing with breakthrough innovations, generality and novelty in innovation process supporting the general-purpose technology feature of ICT. I, however, do not find a positive impact of technological breakthroughs nor a specific trend of generality and novelty in innovation process on productivity of pharmaceutical and biotechnology firms in the sample.The third chapter is co-authored by Christophe Colassin (ULB) and Michele Cincera (ULB) and aims at analysing the determinants of brain drain in Europe where there exists unbalances and polarisation between the States in terms of attractiveness for researchers despite the common policies and practices put in place by the European Union. The information about the mobility outflows are sourced from Centre for Science and Technology Studies and concern the year 2019. In order to analyse the macroeconomic determinants of mobility of researchers, the chapter brings together information from various data sources that attribute country-level values to the potential determinants of mobility outflows. We use a gravity model framework to detect quantitatively the pull and push factors of researchers' mobility including the 28 EU Member states in the time of analysis, and 3 additional Schengen countries, Norway, Iceland and Switzerland. In addition to the cultural and geographic proximity, we find that a country’s researcher base, entrepreneurial opportunities, knowledge intensity, public R&D spending and international collaborations increase the mobility of researchers within Europe whereas non-academic placements of researchers and the perception of virtual mobility as an alternative decrease the mobility. Researchers from countries with attractive research systems, more innovative private sector and more female researchers are found to be more mobile, whereas, the ones with higher GDP growth rates are less. We find that satisfaction with the recruitment process and the salary levels are decreasing factors for the mobility outflows. Finally, while fixed-term contracts in academia are found to be a factor that decreases the attractiveness; satisfaction with recruitment process, existence of the top R&D spending enterprises in the economy, and the freedom of academic exchange and dissemination are the factors that increases the attractiveness of a country for mobility inflows.
    Keywords: Competition; Innovation; R&D; Productivity; Brain Drain
    Date: 2021–09–17
  2. By: Chien, Fengsheng; Ngo, Quang-Thanh; Hsu, Ching-Chi; Chau, Ka Yin; Iram, Robina
    Abstract: Due to their different abilities to improve financial growth and improve social development, small and medium enterprises (SMEs) have been referred to as the economy’s backbone. Small- and medium-sized enterprises are crucial for both high- and low-income nations’ financial development. Customers grow more conscious of their purchase choices, preferences, and environmental consequences. The financial opportunities for SMEs in the United Arab Emirates to use green innovation methods to address potential obstacles for increasing green goods, processes, and management are examined in this paper; as a result, it is critical to reduce clean technology adoption constraints in small- and medium-sized businesses. To identify significant hurdles, sub-barriers, and ways to overcome impediments to green innovation in the United Arab Emirates, we apply an integrated decision process. Following a detailed literature analysis and the assistance of twelve experts, six primary obstacles, twenty-five sub-obstacles, and strategies to reduce the barriers were identified. Primary and sub-barriers were assessed using the FAHP. The (FTOPSIS) approach was used to rank the strategies. Five SMEs in the United Arab Emirates are putting the suggested integrated decision model to the test. “Financial investment levels 0.646 to 11 percent growth level,” according to the FAHP, are the most significant hurdles to SMEs adopting green practices. This research demonstrated a considerable beneficial association between SMEs and financial development and funding in the United Arab Emirates. According to this study, using research methodologies to provide green innovation in SMEs is the best strategy to overcome green innovation and adoption hurdles in small and medium firms and increasing their economics.
    Keywords: SMEs; Barriers; Green innovation; Financial; FAHP; Financial development; United Arab Emirates
    JEL: E0
    Date: 2021–06–22
  3. By: Matej Bajgar (Center for Economic Research and Graduate Education - Economics Institute); Chiara Criscuolo (OECD); Jonathan Timmis (The World Bank)
    Abstract: This paper presents new evidence on the growing scale of big businesses in the United States, Japan, and Europe. It finds broad evidence of rising industry concentration across the majority of countries and sectors over the period 2002 to 2014. Rising concentration is strongly associated with intensive investment in intangibles, particularly innovative assets, software, and data. This relationship appears to be stronger in more globalised and digital-intensive industries. The results are consistent with intangibles disproportionately benefiting large firms and enabling them to scale up and increase market shares. We find nuanced implications of these new business models for competition – rising markups and reduced churning amongst the top firms, but falling industry prices.
    Keywords: Competition, Industry and entrepreneurship, Innovation
    JEL: E22 L1 L25
    Date: 2021–09–22
  4. By: Shreya Biswas
    Abstract: Using data from World Bank Enterprises Survey 2014, we find that having a female owner in India increases firm innovation probability using both input and output indicators of innovation. We account for possible endogeneity of female owner variable using a two stage instrumental variable probit model. We find that the positive effect of female owner variable is observed in the sub-samples of firms with more access to internal funding, young firms and firms located in regions with no or less crime This study highlights the need to promote female entrepreneurship as a potential channel for promoting firm innovation in India.
    Date: 2021–09
  5. By: Pianta, Mario; Reljic, Jelena
    Abstract: This paper investigates the existence of a virtuous circle between industries’ employment quality, the ability to introduce new products, increase labour productivity and pay higher wages. We first present descriptive evidence of these trends in Europe. We then develop a simultaneous four-equation model investigating empirically four related variables: first, the rise of non-standard work as a proxy of low employment quality; second, the success of firms in translating their R&D efforts into new products and services; third, labour productivity growth driven by technological activities; fourth, wage increases and the factors supporting their rise. The model is tested empirically for 41 manufacturing and service sectors of six European economies (Germany, France, Italy, Spain, the Netherlands, and the UK) over the period 1996-2016. The findings provide novel evidence of mutually reinforcing relationships, where higher employment quality complements technological activities, leading to more product innovations that increase productivity growth. In turn, the latter allows wage increases that contribute to higher employment quality, resulting in a good jobs-high innovation virtuous circle.
    Keywords: Non-standard work, Product Innovation, Labour productivity, Wages, Virtuous circles, European industries
    JEL: J23 J24 J31 J50 L6 L8 O31 O33 O52
    Date: 2021–09–19
  6. By: Bruno, Randolph L.; Crescenzi, Riccardo; Estrin, Saul; Petralia, Sergio
    Abstract: We characterise the knowledge production process whereby the inventive capabilities of the firm generate innovation output in highly inventive multinational enterprises (MNEs). We explore the sensitivity of this relationship to the strength of intellectual property rights (IPR) protection across the MNEs R&D subsidiaries. We argue that MNE innovative performance will be enhanced when the firm’s R&D activities are based in locations where IPR protection is stronger. Moreover, when considering the internal geography of the MNEs R&D activities, innovation performance depends on the distance between the home and host country IPR regime. Thus, innovation performance is worse as the difference between home and host IPR regimes increases. Finally, we explore asymmetries in this relationship, in particular that the deterioration is more marked when MNEs locate their R&D activities in host economies with IPR protection significantly less strict than in their home country. We test these ideas using a unique new dataset about the most innovative MNEs in the world, an unbalanced panel of around 900 MNEs observed for the period 2004 to 2013 and find strong support for all our hypotheses.
    Keywords: multinationals; innovation; IPR protection; institutional distance; patents; inventive capabilities; 639633-MASSIVE-ERC-2014-STG; 822781-GROWINPRO; Internal OA fund
    JEL: R14 J01 L81
    Date: 2021–07–19
  7. By: Chakraborty, Tanika; Mukherjee, Anirban; Saha, Sarani; Shukla, Divya
    Abstract: We study the role of formal institutions of contract enforcement in facilitating investments in small and medium firms(MSME). In a framework where established entrepreneurs can enforce contracts informally using their network ties and hierarchical advantage, we argue that an efficient formal judiciary helps entrepreneurs without any ties to informal business networks, disproportionately more. We test our theoretical prediction using a novel administrative panel-data from Indian courts and the nationally representative MSME survey data. Empirically, we treat entrepreneurs from disadvantaged castes (SC-ST) as those without traditional business-network ties. We find that improvement in court quality has a disproportionately larger impact on the investment decisions of SC-ST entrepreneurs. On average, if the time taken for a court to clear all existing cases reduces by 1 year, the initial gap in the probability of investing, between SC-ST and other entrepreneurs, gets reduced by 0.6-0.7 percentage points.
    Keywords: Judiciary,Duration Index,MSME,Entrepreneurship
    JEL: K12 L26 O17
    Date: 2021
  8. By: Leogrande, Angelo; Costantiello, Alberto
    Abstract: We estimate the relationships between innovation and human resources in Europe using the European Innovation Scoreboard of the European Commission for 36 countries for the period 2010-2019. We perform Panel Data with Fixed Effects, Random Effects, Pooled OLS, Dynamic Panel and WLS. We found that Human resources is positively associated to “Basic-school entrepreneurial education and training”, “Employment MHT manufacturing KIS services”, “Employment share Manufacturing (SD)”, “Lifelong learning”, “New doctorate graduates”, “R&D expenditure business sector”, “R&D expenditure public sector”, “Tertiary education”. Our results also show that “Human Resources” is negatively associated to “Government procurement of advanced technology products”, “Medium and high-tech product exports”, “SMEs innovating in-house”, “Venture capital”. In adjunct we perform a clusterization with k-Means algorithm and we find the presence of three clusters. Clusterization shows the presence of Central and Northern European countries that has higher levels of Human Resources, while Southern and Eastern Europe has very low degree of Human Resources. Finally, we use seven machine learning algorithms to predict the value of Human Resources in Europe Countries using data in the period 2014-2021 and we show that the linear regression algorithm performs at the highest level.
    Keywords: Innovation and Invention: Processes and Incentives, Management of Technological Innovation and R&D, Technological Change: Choices and Consequences, Diffusion Processes Intellectual Property and Intellectual Capital, Open Innovation, Government Policy.
    JEL: O30 O31 O32 O33 O34 O38
    Date: 2021–09
  9. By: Rodrigo Barra Novoa (UCJC - Universidad Camilo José Cela - Universidad Privada Madrid)
    Abstract: The article analyzes under a case study methodology the first economic impact results of the Small Business Development Center program in Arica, a program financed by the Technical Cooperation Service (SERCOTEC). The preliminary conclusion of the article suggests that the first economic impact results show that the 833 enterprises assisted by the program generate more sales opportunities, jobs, and investments, creating positive income and fiscal returns, despite the enormous difficulties presented by the current pandemic facing the country and especially the region. From a public policy standpoint, the CDN's contribution to the regional economy helps create new employment opportunities in growing MSMEs. For their part, maturing companies contribute to job retention thanks to the advisory processes that help reorient their businesses, and the work with entrepreneurs contributes to the generation of new businesses that strengthen the regional economy.
    Keywords: business,economic growth,public policies,small enterprises,SERCOTEC
    Date: 2021–03–23
  10. By: Andrew Crawley; Todd M. Gabe; Mariya Pominova
    Abstract: This paper examines the use of location quotients, a measure of regional business activity relative to the national benchmark, as an indicator of sectoral agglomeration in small cities and towns, and as a measure of industry specialization that might impact the number of new business startups in these places. Using establishment-level data on businesses located in Maine, our findings suggest that the addition of one "hypothetical" establishment in very small towns leads to a dramatic change in the magnitude of the region-industry location quotient. At population sizes of about 4,100 or more people, however, location quotients are reasonably stable. Regression results from an analysis of the relationship between new business activity and regional industry specialization show that the effect of location quotients on business startups switches from "inelastic" to "elastic" at a population size cutoff of about 2,600 residents. Overall, our findings suggest that researchers and practitioners should exercise caution when using location quotients to study small regions.
    Keywords: Agglomeration; Industrial Cluster; Location Quotient; Regional Economics; Rural
    JEL: R10 R11 R12
    Date: 2021–09–10
  11. By: Rodrigo Ceni (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Gabriel Merlo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: In a market economy, firms are continuously exposed to economic shocks that affect their performance and results. In response to these shocks, firms react by reallocating their productive factors, such as capital and labor, to more productive uses. We estimate the job flows over a twenty-year period in Uruguay, exploring firm and worker characteristics. We use panel data from social security administrative records that match employers and employees in formal firms between 1996 and 2015. Job flow levels and their cycles are consistent with international evidence. Entry and exit of firms from the market play an important role, explaining about 30% of the total number of jobs created and destroyed for the whole period with high heterogeneity across industries, firm age, and firm size. In particular, the smallest firms are not as relevant in explaining net growth as political and popular beliefs would suggest, and it is start-ups that have the main role in job creation in Uruguay. Despite representing only 5% of total employment, they created more than one-quarter of new jobs and maintained this role in a fully saturated regression. Among worker characteristics, we found no differences in job flows by gender, but female workers gain participation in the period; there are bigger flow rates among workers under 25 and workers in the first and third wage terciles.
    Keywords: job flows; employer employee match data; formal jobs; Uruguay
    JEL: J23 J63 L25
    Date: 2021–07
  12. By: Jean-Marie Grether; Benjamin Tissot-Daguette
    Abstract: Using novel data on value added in Switzerland we propose to use a growth rate decomposition technique, in the spirit of shift-share analysis, to analyze the patterns of regional competitiveness over the 2011-2015 period. The growth differential of a region (or canton) depends on four terms, three structural effects and one competitive effect. The competitive effect turns out to be the dominant force at a high level of aggregation. An interesting pattern of structural effects unveils when working at a lower level of aggregation, allowing for identification of the leaders and laggers across regions and sectors.
    Keywords: firm-level, productivity, shift-share, structural and competitive effects, Switzerland.
    JEL: R11 R32
    Date: 2021–09
  13. By: Bianchi, Milo; Luomaranta, Henri
    Abstract: We explore how the separation between ownership and control a§ects Örm productivity. Using administrative panel data on the universe of limited liability Örms in Finland, we document a substantial increase in productivity when the CEO obtains majority ownership or when the majority owner becomes the CEO. We exploit plausibly exogenous variations to CEO turnover, induced by shocks to the CEO spouseís health. Extending the analysis beyond typical samples of large public Örms, we show that our e§ects are stronger in medium-sized private Örms. We also investigate possible mechanisms and provide suggestive evidence that increased ownership boosts CEOís e§ort at work.
    Keywords: agency costs;Örm productivity,;CEO ownership.
    JEL: G30 M12 D24 E23 L25
    Date: 2021–08
  14. By: Nguyen, Chi-Hai; Ngo, Quang-Thanh; Pham, My-Duyen; Nguyen, Anh-Tuan; Huynh, Ngoc-Chuong
    Abstract: The current article examines the factors affecting economic linkages in the Southern Key Economic Zone of Vietnam, using a unique 5-year firm-level dataset with 5050 observations, using a unique 5-year firm-level dataset with 5050 observations, which is collected and merged from two data sources namely the Vietnam Technology and Competitiveness Survey and the Vietnam Annual Enterprise Survey in 2015-2019. Empirical results from estimating panel logit models based on different types of economic linkages such as (1) backward economic linkage with the domestic supplier, (2) backward economic linkage with a foreign supplier, (3) forward economic linkage with the domestic customer, and (4) forward economic linkage with a foreign customer reveal the importance of firm characteristics, technology transfer, and economic constraints that cause firms to conduct economic linkages across firm sizes and types of ownership. There is clear evidence for the determinants of economic linkages in manufacturing sectors by firm sizes, and by ownership in this analysis are concerned. To be specific, based on a regression analysis, employment, firm’s experience, technology transfer, and economic constraints stand out as the major drivers of economic linkage of various forms. In addition, results reveal several patterns of economic linkages such as domestic technology embodied economic linkage, local supply-chain technology embodied economic linkage, international/global supply-chain technology embodied economic linkage, local market-explored economic linkage, local market privilege, and foreign market privilege. Moreover, it is evidence that investments in basic infrastructure, transport infrastructure, communication infrastructure, removal of financing constraints, increase the labor supply, improvement of working skills of laborers have favored the growth of economic linkages. Our results initiate policy implications in the context that, apart from the firm’s and the industry sector’s characteristics, economic obstacles and the nature of technology transfer significantly influence the firm’s behaviors of conducting economic linkages in various firm sizes and types of ownership.
    Keywords: Economic linkages; vertical (or backward) linkages, horizontal (or forward) linkages, key economic zone; manufacturing firms; Vietnam
    JEL: M14 N14
    Date: 2021–03–01

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