nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒11‒29
eighteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Innovation pattern heterogeneity: A data-driven retrieval of the firms' approaches to innovation By Marco Capasso; Marina Rybalka
  2. Spurring growth and closing gaps through digitalisation in a post-COVID world: Policies to LIFT all boats By Mauro Pisu; Christina von Rüden; Hyunjeong Hwang; Giuseppe Nicoletti
  3. Financial Constraints for R&D and Innovation: New Evidence from a Survey Experiment By Dirk Czarnitzki; Marek Giebel
  4. Profit taxation, R&D spending, and innovation By Lichter, Andreas; Löffler, Max; Isphording, Ingo Eduard; Nguyen, Thu-Van; Poege, Felix; Siegloch, Sebastian
  5. Winner Takes All? Tech Clusters, Population Centers, and the Spatial Transformation of U.S. Invention By Brad Chattergoon; William R. Kerr
  6. Firm Size and the Task Content of Jobs: Evidence from 47 Countries By De Vera, Micole; Garcia-Brazales, Javier
  7. Corporate Tax Cuts for Small Firms: What Do Firms Do? By Wei Cui; Mengying Wei; Weisi Xie; Jing Xing
  8. Misappropriation of R&D subsidies: Estimating treatment effects with one-sided noncompliance By Boeing, Philipp; Peters, Bettina
  9. Multilevel analysis of firms’ performance in Emerging Economies: The role of transport infrastructures and logistics as contextual factors By Bergantino, Angela Stefania; Capozza, Claudia; Spiru, Ada
  10. Keeping regional inequality in check in Sweden By Christophe André; Jinwoan Beom; Mathilde Pak; Axel Purwin
  11. Corporate bond financing of Italian non-financial firms By Giorgio Meucci; Fabio Parlapiano
  12. Regional differences in productivity in Sweden: Insights from OECD regions By Christophe André; Mathilde Pak
  13. Does IT Help? Information Technology in Banking and Entrepreneurship By Mr. Yannick Timmer; Mr. Nicola Pierri; Toni Ahnert; Sebastian Doerr
  14. Elections Hinder Firms’ Access to Credit By Florian LEON; Laurent WEILL
  15. The Impact of Environmental Policy on Innovation in Clean Technologies By Johannes Eugster
  16. Firm-Level Upgrading in Developing Countries By Eric Verhoogen
  17. News from the frontier: Increased productivity dispersion across firms and factor reallocation By Paul Bouche; Gilbert Cette; Rémy Lecat
  18. Girls Will Be Girls? The Gendered Effect of Economic Policy Uncertainty on Corporate Investment By Caroline PERRIN; Laurent WEILL

  1. By: Marco Capasso; Marina Rybalka
    Abstract: Innovation is one of the usual suspects in defining differences in performance among firms, according to a strong and diverse theoretical framework. Understanding the diversity that exists within the population of innovative firms is essential to elaborate appropriate innovation policies. Our study explores the diversity of innovation patterns among Norwegian firms included in the 2018 Community innovation survey (CIS2018). By applying factor analysis on a wide array of survey variables and on a large sample of firms, we identify eleven typical approaches to innovation, which recurrently connect innovation inputs and outputs at firm level. A main outcome of our study is a renewed fine-grained view on innovation as a multifaceted concept.
    Keywords: Technological change; Innovation survey; Factor analysis; Business strategies; Intra-industry heterogeneity.
    Date: 2021–11–07
  2. By: Mauro Pisu; Christina von Rüden; Hyunjeong Hwang; Giuseppe Nicoletti
    Abstract: The full potential of digital technologies remains unrealised and their benefits unequally shared because of insufficient investment in enabling intangible assets and communication networks within and across countries. The COVID-19 shock poses new challenges and opportunities. Drawing on past and ongoing OECD work, the paper proposes a multipronged policy approach to durably accelerate the diffusion and uptake of digital technologies across all layers of society, and share their benefits more widely. The building blocks of the proposed LIFT approach include: Lifelong learning for all to ensure everybody has the opportunity to acquire and upgrade the skills needed to thrive in a digital world; Intangibles finance for the knowledge economy to allow more firms, especially small ones, to increase intangible investment and seize the opportunities offered by the digital transformation; Framework market conditions for the digital age to upgrade policies to the digital age, especially in the areas of taxation, competition law and enforcement, digital security, firms’ entry and exit, and e-government; Technology access via digital infrastructure to facilitate access to communication networks and accelerate the take up of digital technologies and their international diffusion.
    Keywords: Compensation, Competition Policy, Education and Inequality, Firm Growth, Firm Performance, Innovation Policy, Skill Biased, SME, Technology Adoption, Technology and Competitiveness, Wages
    JEL: L25 L4 O32 O33 O38 I24 J3
    Date: 2021–11–26
  3. By: Dirk Czarnitzki; Marek Giebel
    Abstract: We utilize a new survey experiment to evaluate the existence and degree of financial constraints for R&D in the economy. The experiment does not only allow to deduct the presence of financial constraints, but also to evaluate their economic significance. Using data on German companies, we find that financial constraints for R&D exist but that their relevance might have been overestimated in the literature. Most R&D projects that have not been implemented because of financial constraints turn out to have low expected marginal rates of return. While this findings stands in some contrast to other studies, we also find several results that are in line with the literature: young firms are most constrained and the constraints occur at the intensive margin, i.e. our results do not suggest that non-innovative companies are deterred from innovation. Instead, highly innovative companies are restricted by the capital market.
    Keywords: Innovation, Financial Constraints, Survey Experiment
    Date: 2021–11–18
  4. By: Lichter, Andreas; Löffler, Max; Isphording, Ingo Eduard; Nguyen, Thu-Van; Poege, Felix; Siegloch, Sebastian
    Abstract: We study how profit taxation affects plants' R&D spending and innovation activities. Relying on geocoded survey panel data which approximately covers the universe of R&D-active plants in Germany, we exploit around 7,300 changes in the municipal business tax rate over the period 1987-2013 for identification. Applying event study models, we find a negative and statistically significant effect of an increase in profit taxation on plants' R&D spending with an implied long-run elasticity of 􀀀1.25. Reductions in R&D are particularly strong among more credit-constrained plants. In contrast, homogeneity of effects across the plant size distribution questions policy makers common practice to link targeted R&D tax incentives to plant size. We further find lagged negative effects on the (citation-weighted) number of filed patents.
    Keywords: corporate taxation,firms,R&D,innovation,patents
    JEL: H25 H32 O31 O32
    Date: 2021
  5. By: Brad Chattergoon; William R. Kerr
    Abstract: U.S. invention has become increasingly concentrated around major tech centers since the 1970s, with implications for how much cities across the country share in concomitant local benefits. Is invention becoming a winner-takes-all race? We explore the rising spatial concentration of patents and identify an underlying stability in their distribution. Software patents have exploded to account for about half of patents today, and these patents are highly concentrated in tech centers. Tech centers also account for a growing share of non-software patents, but the reallocation, by contrast, is entirely from the five largest population centers in 1980. Non-software patenting is stable for most cities, with anchor tenants like universities playing important roles, suggesting the growing concentration of invention may be nearing its end. Immigrant inventors and new businesses aided in the spatial transformation.
    JEL: L86 O30 O31 O32 O33 O34 R11 R12
    Date: 2021–11
  6. By: De Vera, Micole; Garcia-Brazales, Javier
    Abstract: Using a mix of household- and employer-based survey data from 47 countries, we provide novel evidence that workers in larger firms perform more non-routine analytical and interpersonal tasks, even within narrowly defined occupations. Moreover, workers in larger firms rely more on the use of information and communications technologies (ICT) to perform these tasks. We also document a 17% wage premium that workers in larger firms enjoy relative to their counterparts in smaller firms. We find evidence that the firm size gradient in the task content of jobs accounts for around 10% of the large firm wage premium.
    Keywords: Tasks,Occupations,Firm size,Cross-country evidence,Wage differential
    JEL: J24 J31 L25
    Date: 2021
  7. By: Wei Cui; Mengying Wei; Weisi Xie; Jing Xing
    Abstract: What do small firms do when given an income tax cut? We address this question by examining the consequences of a sharp reduction in the corporate income tax rate for small- and micro-profit enterprises (SMPE) in China based on confidential tax returns. Utilizing the gradual increases in the qualifying threshold for SMPEs during 2010-2016, we find that newly qualified SMPEs with positive taxable income increased investment, interest expense and productivity. SMPEs in taxable losses did not respond to the tax cut. The tax cut induced more SMPEs to register, especially those in financially constrained sectors. Despite these positive effects, firms’ fixed asset growth slows down when they get closer to the SMPE threshold. Our study contributes to understanding the effect of tax preferences for small businesses.
    Keywords: tax incentives, small firms, productivity, investment, firm entry
    Date: 2021
  8. By: Boeing, Philipp; Peters, Bettina
    Abstract: In evaluating the effectiveness of R&D subsidies, the literature has focused on potential crowding out effects, while the possibility of misappropriation of public funds that results from moral hazard behavior has been completely neglected. This study develops a theoretical framework with which to identify misappropriation. Using Chinese firm-level data for the period 2001-2011, we show that misappropriation is a major threat. 42% of grantees misused R&D subsidies for non-research purposes, accounting for 53% of the total amount of R&D subsidies. In a second step, we study the loss of effectiveness of R&D subsidies in stimulating R&D expenditures that is due to misappropriation. We measure the loss in effectiveness by estimating the causal effect of R&D subsidies in the presence of misappropriation using an intention-to-treat (ITT) estimator and comparing it to the ideal situation (without misappropriation) using the complier average causal effect (CACE). We find that China's R&D policy could have been more than twice as effective in boosting R&D without misappropriation. R&D expenditures could have been stimulated beyond the subsidy amount (additionality), but noncompliant behavior has resulted in a moderately strong partial crowding out effect. We find significant treatment heterogeneity by period, subsidy size, industry, and ownership. Notably, the loss in effectiveness has diminished following a policy reform in 2006. Nevertheless, the misappropriation of public funds considerably undermines the impact of R&D policies in China.
    Keywords: R&D subsidies,misappropriation,China,moral hazard,policy evaluation
    JEL: O31 O38 C21 H21
    Date: 2021
  9. By: Bergantino, Angela Stefania; Capozza, Claudia; Spiru, Ada
    Abstract: Firms as part of an ecosystem are constrained by many context facets, having different dimensions and effects on their performance. In this work, we explore differences in firm performance in emerging economies by introducing contextual factors at country-level along with firm-level factors into the analysis. Especially, our focus is on a country's transport infrastructure endowment and logistics services as a source of heterogeneity in firm performance. We perform a multilevel analysis that allows us to define a two-level hierarchical structure, where firms are nested in countries. The empirical framework adopted allows us not to neglect other contextual bases by relying on their multidimensionality and global diversity. Our results confirm that part of the country-level variability in firm performance is explained by transport infrastructure and logistics services. The impact is, however, heterogeneous across infrastructures: network-type infrastructures, such as roads, railways, and logistics services, have a larger effect on firm-level performance, while transport nodes, such as airports and ports, show little or no effect. This research provides useful implications for both theory and practice, especially for policymakers and organizations.
    Date: 2021
  10. By: Christophe André; Jinwoan Beom; Mathilde Pak; Axel Purwin
    Abstract: Regional inequality is low in Sweden compared to most other OECD countries, but has been rising over the past decades, fuelling discontent in parts of the country, whose inhabitants feel left behind. The younger population is increasingly concentrated in the largest cities, which also enjoy the highest productivity growth. Demographic trends exacerbate the difficulty in providing equal public services across the country. Healthy public finances are allowing the government to increase its support to municipalities and regions to adjust to demographic developments and local operating conditions. Beyond this effort, keeping regional inequality in check will require upgrading the sub-national government fiscal framework, enhancing public service efficiency, especially through digitalisation, and promoting regional convergence further, especially by strengthening the role of universities in regional knowledge and innovation networks.
    Keywords: Regional economic activity, Regional government analysis, Regional inequality, Regional Studies, State and local budget and expenditures, State and local taxation, subsidies, and revenue, Sweden
    JEL: H71 H72 P48 R11 R50
    Date: 2021–11–19
  11. By: Giorgio Meucci (Bank of Italy); Fabio Parlapiano (Bank of Italy)
    Abstract: This work analyses the main trends in bond financing by Italian non-financial firms and its role in relation to bank credit across different economic phases. The first part of the analysis refers to the 2008-2019 period, characterized by both crisis and recovery episodes, while the second part focuses on the specific effects of the recent pandemic crisis. The corporate bond market experienced substantial growth over the years, with an increasing number and more diverse types of issuers tapping the market. At the same time, not all crises episodes have had similar effects for bond financing. The 2008 and 2012 crises encouraged non-financial firms, especially the larger ones, to use bond instruments as an alternative to (rationed) bank credit, highlighting substitutability between market and bank-based financing channels. Instead, during the 2020 pandemic crisis, both bond issuances and bank credit expanded at unprecedentedly high rates, highlighting complementarities.
    Keywords: non-performing loans, firm distress, firm recovery
    JEL: G1 G3 G32
    Date: 2021–11
  12. By: Christophe André; Mathilde Pak
    Abstract: Regional inequality has increased in Sweden over the past decades, albeit from a low level. While redistribution and other public policies can narrow regional gaps in income, well-being and access to services, productivity growth is key to maintaining economic dynamism, creating job opportunities and attracting and retaining skilled workers. Against this background, this paper documents the performance of Swedish large regions (TL2) on the main productivity drivers identified by the literature. Panel regressions on a dataset covering up to 125 OECD regions in 17 countries identify the factors associated with high regional productivity, namely rail and road connectivity, knowledge-intensive employment and research and education. Investment in construction and finance is linked to somewhat weaker productivity. Even after taking these factors into account, the Stockholm region benefits from a sizeable productivity advantage, which likely reflects agglomeration effects.
    Keywords: Productivity, Regional development, Regional economic activity, Regional Studies, Sweden
    JEL: O47 P48 R11 R12 R58
    Date: 2021–11–19
  13. By: Mr. Yannick Timmer; Mr. Nicola Pierri; Toni Ahnert; Sebastian Doerr
    Abstract: This paper analyzes the importance of information technology (IT) in banking for entrepreneurship. To guide our empirical analysis, we build a parsimonious model of bank screening and lending that predicts that IT in banking can spur entrepreneurship by making it easier for startups to borrow against collateral. We provide empirical evidence that job creation by young firms is stronger in US counties that are more exposed to ITintensive banks. Consistent with a strengthened collateral lending channel for IT banks, entrepreneurship increases more in IT-exposed counties when house prices rise. In line with the model's implications, IT in banking increases startup activity without diminishing startup quality and it also weakens the importance of geographical distance between borrowers and lenders. These results suggest that banks' IT adoption can increase dynamism and productivity.
    Keywords: technology in banking, entrepreneurship, information technology, collateral, screening; banks' IT adoption; importance of information technology; IT in banking; startup activity; bank screening; Collateral; Self-employment; Employment; Job creation
    Date: 2021–08–06
  14. By: Florian LEON (FERDI, Clermont-Ferrand); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: We investigate whether the occurrence of elections affect access to credit for firms. We perform an investigation using firm-level data covering 44 developed and developing countries. We find that elections have a detrimental influence on access to credit: firms are more credit-constrained in election years but also in pre-election years. We explain this finding by the fact that elections exacerbate political uncertainty. The negative effect of elections takes place through lower credit demand, whereas the occurrence of elections does not affect credit supply. We further establish that the design of political and financial systems affects how elections influence access to credit.
    Keywords: Elections, access to credit, credit constraints.
    JEL: G21 D72
    Date: 2021
  15. By: Johannes Eugster
    Abstract: This paper studies the effect of climate change mitigating policies on innovation in clean energy technologies. Results suggest that the tightening of environmental policies since the early 1990s have made a statistically and economically significant contribution to the increase in clean innovation. These effects generally materialized quickly, within 2 to 3 years of the policy change, and were driven by individually significant marginal effects of both market-based policies – such as feed-in tariffs and trading schemes – as well as non-market policies, such as R&D subsidies or emission limits. Looking at electricity innovation in particular, the paper finds that the estimated effect on total innovation is positive on net, meaning that increased innovation in clean and grey technologies is not offset by a decrease in innovation in dirty technologies. From a policy point of view, the paper’s results call for strong policy efforts to decisively shift innovation towards clean technologies.
    Keywords: Climate change mitigation, innovation, environmental policies; policy point of view; effect of climate change; climate change mitigation; policy effort; policy tool; Environmental policy; Electricity; Climate policy; Renewable energy; Global
    Date: 2021–08–06
  16. By: Eric Verhoogen
    Abstract: In principle, firms in developing countries benefit from the fact that advanced technologies and products have already been developed in industrialized countries and can simply be adopted, a process often referred to as industrial upgrading. But for many firms this advantage remains elusive. What is getting in the way? This paper reviews recent firm-level empirical research on the determinants of upgrading in developing countries. The first part focuses on how to define and measure various dimensions of upgrading --- learning, quality upgrading, technology adoption, and product innovation. The second part takes stock of recent micro-empirical evidence on the drivers of upgrading, classifying them as output-side drivers, input-side drivers, or drivers of know-how. The review concludes with some thoughts about promising directions for research in the area.
    JEL: F1 L2 O1
    Date: 2021–11
  17. By: Paul Bouche; Gilbert Cette; Rémy Lecat
    Abstract: Analysing French firms over 1991-2016, we find first that since the beginning of the century, one or two downward significant productivity breaks have occurred in all industries, both at the frontier and for laggard firms, suggesting a decline in the contribution of technological progress to productivity growth. Second, the median labour share is always higher for the laggard firms than for the frontier firms, with a sharp decrease from the mid-1990s to 2008, and an increase from 2008 onwards. Third, factor reallocation decreased significantly in the 2000s, at the time when we observed an increase in productivity dispersion, with a growing productivity gap between frontier and laggard firms. It appears also that reallocation has been lower on average over the whole period for sectors with a high import share, which can be related to the impact of global value chains.
    Keywords: Productivity, Frontier Firms, Reallocation
    JEL: D24 E24 J23 L25
    Date: 2021
  18. By: Caroline PERRIN (LaRGE Research Center, Université de Strasbourg); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: We examine the effect of CEO gender on the relation between economic policy uncertainty (EPU) and corporate investment. Using the newspaper-based EPU index developed by Baker, Bloom, and Davis (2016), we perform an empirical investigation on firm-level data of more than 38,000 firms from eight European countries for 2010-2019. We find evidence that higher EPU is associated with higher corporate investment. However, we show that this beneficial effect of economic policy uncertainty is lower when the firm CEO is a woman. We explain this finding by the higher risk aversion of women relative to men. Our main results are robust to a battery of sensitivity tests. Our work contributes to the debate on the impact of EPU on firm corporate decisions by bringing upfront the influence of CEO gender.
    Keywords: Economic policy uncertainty, firm investment, CEO gender.
    JEL: G30 G32 J16
    Date: 2021

This nep-sbm issue is ©2021 by João Carlos Correia Leitão. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.