nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒12‒06
twelve papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Colocation of Entrepreneurs and New Firm Survival: Role of New Firm Founder’s Experiential Relatedness to Local Entrepreneurs By Tavassoli, Sam; Jienwatcharamongkhol, Viroj; Arenius, Pia
  2. A Post M&A Innovation in Family Firms By Abdul-Basit Issah
  3. Profit Taxation, R&D Spending, and Innovation By Lichter, Andreas; Löffler, Max; Isphording, Ingo E.; Nguyen, Thu-Van; Pöge, Felix; Siegloch, Sebastian
  4. Transformation in Industrial Towns in Slovenia and Switzerland By Arnault Morisson, David Bole, Jani Kozina, Maruša Goluža, Clara Turner, Heike Mayer
  5. How Does Basic Research Improve Innovation Performance in the World’s Major Pharmaceutical Firms? By Bart Leten; Stijn Kelchtermans; Rene Belderbos
  6. A GDP impact evaluation of R&D investments in Romania using the CGE model Rhomolo By Olga Diukanova; Mariana Chioncel
  7. Are Passive Institutional Investors Engaged Monitors or Risk-Averse Owners? Both! By Yuanchen Yang
  8. R&D innovation with socially responsible firms By Domenico Buccella; Luciano Fanti; Luca Gori
  9. Internationalisation of the next Smart Specialisation Strategy: Opportunities and barriers in the Friuli Venezia Giulia region By OECD
  10. Is the patent system a level playing field? The effect of patent attorney firms By Gaetan de Rassenfosse; Paul Jensen; T'Mir Julius; Alfons Palangkaraya; Elizabeth Webster
  11. The human side of productivity: Uncovering the role of skills and diversity for firm productivity By Chiara Criscuolo; Peter Gal; Timo Leidecker; Giuseppe Nicoletti
  12. European Structural Funds and Resilient and Recovery Facility Governance By Carlos San Juan Mesonada; Carlos Sunyer Manteiga

  1. By: Tavassoli, Sam (CIRCLE, Lund University); Jienwatcharamongkhol, Viroj (Blekinge Institute of Technology); Arenius, Pia (RMIT University)
    Abstract: Geographical clustering (colocation) influences new firm survival; however, not all new firms within a cluster are impacted equally. In this paper, we elaborate on how the colocation of local entrepreneurs may have different influences on new firm founder’s learning depending on his/her fit, in terms of his/her experiential relatedness, to that of local entrepreneurs. We then associate such founder’s learning with the higher survival of his/her new firm. We test our hypotheses using a matched founder-firm dataset that covers the population of the knowledge-intensive business service sector in Sweden during 2001-2012. We find support for our propositions concerning the relatedness of new firm founders’ experiential background to that of local entrepreneurs. Specifically, we find that high level of relatedness to local entrepreneurs enhances the survival rate of a new firm started by a novice founder, whereas intermediate level of relatedness suits better for a new firm started by an experienced founder.
    Keywords: Colocation; Entrepreneurial learning; New firm survival; Experiential relatedness; Entrepreneurial performance
    JEL: M13
    Date: 2021–11–24
  2. By: Abdul-Basit Issah (WIFU/Herdecke University)
    Abstract: The paper empirically investigates how family firms appropriate acquired resources to become more innovative in the context of merger waves. It draws on resource-based view and the theory of first mover (dis)advantages to examine the implications of the timing of acquisitions on innovation in family firms. Using a panel dataset of manufacturing firms in the Standard & Poor’s (S&P) 500 followed over a period of 31 years, the study finds empirical support for the predictions that targets acquired during the upswing of a merger wave are more valuable to family firms and associated with more innovation than for non-family firms.
    Keywords: Acquisitions; innovation; resource-based view; family firms; merger waves.
    JEL: G34 L10 L20 M20
    Date: 2021
  3. By: Lichter, Andreas (Heinrich Heine University Düsseldorf); Löffler, Max (Maastricht University); Isphording, Ingo E. (IZA); Nguyen, Thu-Van (Stifterverband Essen); Pöge, Felix (Boston University); Siegloch, Sebastian (University of Mannheim)
    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: 2021–11
  4. By: Arnault Morisson, David Bole, Jani Kozina, Maruša Goluža, Clara Turner, Heike Mayer
    Abstract: This report is the result of the first phase of the SNF Project on Industrial Towns titled “Places that don’t matter? Socio-economic transformation of industrial towns in Switzerland and Slovenia”, SNF grant number 192764. The report explores industrial transformation in small- and medium-sized towns (SMSTs) using six case-study towns—namely Biel/Bienne, Glarus and Mendrisio in Switzerland and Idrija, Kocevje, and Trbovlje in Slovenia. It provides a general overview of the institutional contexts of the case-study towns in their respective countries and regional profiles. The report describes the process of industrial transformations in different towns’ contexts.
    Keywords: entrepreneurship, industrial culture, new industrial path development, institutional context, regional innovation system, local policy
    JEL: L26 R58 Z18 P48 P25 P16 O38
    Date: 2021–11
  5. By: Bart Leten; Stijn Kelchtermans; Rene Belderbos
    Abstract: Employing a panel (1995-2015) of large R&D spending pharmaceutical firms, we investigate how internal basic research increases a firm’s innovative performance. We disentangle two mechanisms through which internal basic research affects technology development: (1) as strengthening of the firm’s absorptive capacity to build on externally conducted science, and (2) as a direct source of the firm’s innovation. We find that the positive relationship between internal basic research and innovation performance is significantly mediated by these two mechanisms, with the absorptive capacity mechanism relatively more important. The mediation relationships are more pronounced in recent years, with basic research as a direct source of innovation increasing in importance. This pattern is associated with a decline of corporate investments in basic research over time, and suggests that firms have adopted a more judicious and targeted approach to basic research aimed at getting more leverage out of a smaller commitment to basic research.
    Date: 2021–11–19
  6. By: Olga Diukanova (European Commission - JRC); Mariana Chioncel (University of Bucharest)
    Abstract: This study evaluates the potential economic impacts of Research & Development (R&D) investments in Romania during the 2021-2027 policy cycle. The assessment is based on three distinct R&D investments scenarios: (1) 2% Gross domestic Expenditure on R&D (GERD) intensity target achieved by 2029, with equal split between public and private investment, in accordance with the R&D investment targets declared in the national strategic documents; (2) gradual increase of GERD intensity to 2.25% by 2029, with public investment of 1.25% of GDP (in line with the new ERA target); and (3) 0.48% of GDP, “business as usual’ scenario (following the same investment pattern as in the past years). The results of computer simulations with the RHOMOLO model, which is a dynamic multi-regional computable general equilibrium (CGE) model developed by the Joint Research Centre (JRC) of the European Commission, show that the most pronounced GDP impacts in Romania would be achieved with the highest intensity of R&D policy funding. Aside from the capital city region RO32, the less developed regions RO12, RO22, RO31 and RO41 exhibit the highest GDP multipliers across Romanian regions, which indicates the high potential of R&D funding in these regions. The strongest spillover effects emerge from the regions that in certain years make substantial R&D domestic private and public investments relative to the size of their economies. Although R&D investments augment factor productivity that depreciates gradually in the absence of continuous funding, the strength of lagged effects of R&D funding depends on the intensity of R&D investments rather than on the source of funding. However, in the short run, the economic cost for Romania is determined by the source of R&D investments: despite their small size, the EU investments that are largely financed by other EU member states, produce quite sizeable GDP multipliers in Romania compared to the national public and private investments.
    Keywords: RHOMOLO, Cohesion Policy, regional growth, regional development, Romania.
    JEL: C68 R13
    Date: 2021–11
  7. By: Yuanchen Yang
    Abstract: We differentiate the effects of passive institutional investors, which mainly refer to index funds that adopt a passive portfolio strategy, on firms’ innovation activities and innovation strategies. Relying on plausibly exogenous variation in passive institutional ownership generated by Russell 1000/2000 index reconstitutions, we find that, with larger passive institutional ownership, while firms’ countable innovation activities increase, they shift their innovation strategies by focusing more on exploitation of existing knowledge instead of exploring new technology. Enhanced monitoring by passive institutional investors through active votes could explain their positive effects on firms’ innovation activities. Increasing risk aversion on the part of passive institutional investors appears the underlying force that drives firms’ shift to incremental innovation. Our paper uncovers a subtle relation between institutional investors and innovation, which is largely ignored by earlier studies.
    Date: 2021–06–04
  8. By: Domenico Buccella; Luciano Fanti; Luca Gori
    Abstract: This work revisits the R&D model à la D’Aspremont –Jacquemin (1988) (AJ) in a context with socially responsible firms. In the traditional model firms invest but, in equilibrium, they are cast into a prisoner’s dilemma. Socially responsible firms also invest in equilibrium. However, provided that firms consider sufficiently high consumer welfare, to invest is firms’ utility-enhancing: the prisoner’s dilemma vanishes, and the R&D investment is the firms’ Pareto-efficient choice. That is, while in the traditional AJ context to invest in R&D is Pareto-inferior for the whole society, when firms are of CSR type their R&D innovation becomes a Pareto-superior choice.
    Keywords: Process innovation; Corporate social reponsibility; Nash equilibrium; Social welfare
    JEL: D43 L13 O31
    Date: 2021–11–01
  9. By: OECD
    Abstract: Smart Specialisation Strategy is a place-based EU policy that seeks to enhance regional competitiveness through leveraging and bolstering innovation in the selected priority areas (industries or technologies) in each region. The new iteration of S3 requires developing cross-border collaborations with regions possessing complex and complementary technological expertise currently missing in a region to upgrade its technological evolution. The reason for this is that new growth opportunities arise from recombining existing technological capabilities while more complex technologies offer strong competitive advantage. This paper presents a simple roadmap for regional S3 internationalisation and the results of an in-depth case study on the opportunities for and barriers to S3 internationalisation in Friuli Venezia Giulia (FVG), a region in the North East of Italy. The paper develops recommendations on how to make the most of the Research, Technology, Development and Innovation endowments in FVG through enhancing the innovation-internationalisation nexus in order to improve competitiveness of the region.
    Keywords: Friuli Venezia Giulia, regional innovation systems, S3 internationalisation, Smart Specialisation Strategy (S3)
    JEL: O19 O30 R12 R58
    Date: 2021–11–30
  10. By: Gaetan de Rassenfosse (Ecole polytechnique federale de Lausanne); Paul Jensen (University of Melbourne); T'Mir Julius (University of Melbourne); Alfons Palangkaraya (Swinburne University of Technology); Elizabeth Webster (Swinburne University of Technology)
    Abstract: The patent system underpins the business model of some of the fastest-growing companies. Used appropriately, it should support frontier technologies and nurture new firms. Used perniciously, it can stifle innovation and protect established technological behemoths. We analyse patent examination decisions at the American, European, Japanese, Korean, and Chinese patent offices and find evidence that patent attorney firms have a surprisingly large role in the patent system. Patent attorney firm quality is most important, vis-Ã -vis invention quality, in less codified and more rapidly changing technology areas such as software and ICT. Moreover, patent attorney firm quality matters more when invention quality is low. Finally, there is a significant inter-patent office variation, with a greater patent attorney firm quality effect at the USPTO.
    Keywords: appropriation; innovation; patent attorney firm; patent system
    JEL: K20 L43 O34
    Date: 2021–11
  11. By: Chiara Criscuolo; Peter Gal; Timo Leidecker; Giuseppe Nicoletti
    Abstract: Relying on linked employer-employee datasets from 10 countries, this paper documents that the skills and the diversity of the workforce and of managers – the human side of businesses – account on average for about one third of the labour productivity gap between firms at the productivity “frontier” (the top 10% within each detailed industry) and medium performers at the 40-60 percentile of the productivity distribution. The composition of skills, especially the share of high skills, varies the most along the productivity distribution, but low and medium skilled employees make up a substantial share of the workforce even at the frontier.High skills show positive but decreasing productivity returns. Moreover, the skill mix of top firms varies markedly across countries, pointing to the role of different strategies pursued by firms in different policy environments. We also find that managerial skills play a particularly important role, also through complementarities with worker skills. Gender and cultural diversity among managers – and to a lesser extent, among workers – is positively related to firm productivity as well. We discuss public policies that can facilitate the catch-up of firms below the frontier through skills and diversity. These cover a wide range of areas, exerting their influence through three main channels: the supply, upgrading and the matching across firms (the SUM) of skills and other human factors.
    Keywords: diversity, linked employer-employee data, managers, productivity, skills
    JEL: D24 J24 M14
    Date: 2021–12–06
  12. By: Carlos San Juan Mesonada; Carlos Sunyer Manteiga
    Abstract: The paper attempts to recover empirical evidence related to the European Structural and Investment Funds (ESIF) to promote growth for the management of the Recovery & Resilience Facility (RRF). We analyse the impact of the EU Cohesion Policy on regional development over the period 1986-2018, using dynamic panel data models. In doing so, we use a neoclassical Solow growth model, extending the current literature in at least three ways. First, we make use of a new dataset, which contains highly detailed data on regional commitments and payments of Structural Funds; secondly, we address the endogeneity via a difference GMM estimator; finally, we control for the spatial interdependence among regions via a Spatial Durbin model. We find that the Cohesion Policy fosters regional growth both in the short and long run, regardless of the Objective considered. The role of the business cycle in the speed of regional convergence is quantified. The funds’ effectiveness is hindered during the crisis, especially in the least developed regions, partly due to lower absorptive rates. Furthermore, human capital and quality of government are crucial growth determinants necessary for improving the performance of the Structural Funds. Finally, we discuss if the combination of ESIF & RRF funds will be appropriate for accelerating the post-pandemic recovery versus the financial recession recovery.
    Date: 2021

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