nep-sbm New Economics Papers
on Small Business Management
Issue of 2022‒01‒17
fourteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Hiring entrepreneurs for innovation By Louise Lindbjerg; Theodor Vladasel
  2. Efficient Innovation Policy Increases High-productivity R&D Work By Einiö, Elias; Koski, Heli; Kuusi, Tero; Lehmus, Markku
  3. Effects of Policy Reforms on Firm Innovation By Murat Seker; Mehmet Fatih Ulu
  4. From Immigrant Entrepreneurship to Plurinational Firms: Evidence from Italy By Arrighetti, Alessandro; Gnarini, Daniela; Lasagni, Andrea; Semenza, Renata
  5. Perspectives in Public and University Sector Co-operation in the Change of Higher Education Model in Hungary, in Light of China's Experience By Attila Lajos Makai; Szabolcs Ramhap
  6. 2021 Survey of Small Enterprises’ Financial Literacy: Main Results By Brindusa Anghel; Aitor Lacuesta; Federico Tagliati
  7. The Innovation Linkages in Europe By Costantiello, Alberto; Laureti, Lucio; Leogrande, Angelo; Marco, Matarrese
  8. With a little help from my website Firm survival and web presence in times of COVID-19 – Evidence from 10 European countries By Joachim Wagner
  9. SME viability in the COVID-19 recovery By McCann, Fergal; McGeever, Niall; Yao, Fang
  10. Innovation under central planning: patenting and productivity in the GDR By Frieling, Titus
  11. The Cost of Health Insurance and Entry into Entrepreneurship By Fossen, Frank M.; Hossain, Mobarak; Mukhopadhyay, Sankar; Toth, Peter
  12. Culture and Collaboration - an Underestimated Power!? The Effect of Regional Culture on the Research Collaboration Propensity in European Regions By Cathrin Söllner
  13. An Empirical Study on the Relationship of Regional Entrepreneurial Activities and Utilization of Digital Technology in Knowledge-Intensive Business Services (KIBS) By Nobuo Kobayashi; Takeshi Mori
  14. The Pandemic’s Effects on Women-Owned Small Firms: Findings from the Small Business Credit Survey By Lucas Misera; Ann Marie Wiersch

  1. By: Louise Lindbjerg; Theodor Vladasel
    Abstract: Technical human capital improves firms' invention outcomes, but generating innovation revenue may require distinct skills in bringing new ideas to market. We argue that former founders are endowed with execution skills, a generalist ability to create and exploit market gaps by acquiring and mobilizing resources, so entrepreneurial human capital enhances innovation in established organizations. Combining register and Community Innovation Survey data from Denmark, we show that entrepreneur hires are associated with higher sales from new products and services. This result is driven by founder hires in middle management, a hierarchical position where broader decision rights and resource access increase execution skills' effectiveness. Founder hires are more tightly linked to innovation new to the firm or market, rather than world, consistent with our prediction that execution skills help bring incremental improvements to market, but do not necessarily generate radical innovation. Together, our findings suggest that entrepreneurial human capital may help firms appropriate a larger share of the value their knowledge generates.
    Keywords: innovation, learning by hiring, entrepreneurship, execution skills, human capital, middle management
    JEL: J24 L23 M12 M21 M51
    Date: 2021–12
  2. By: Einiö, Elias; Koski, Heli; Kuusi, Tero; Lehmus, Markku
    Abstract: Abstract Our work applies the model developed by Acemoglu et al. (2018), henceforth, AAABK, for assessing the growth and welfare implications of different types of innovation policies. Central to the AAABK model is the ratio of high-productivity and low-productivity firms in total output and how different policy measures affect this relationship. We employ the AAABK framework to build a macroeconomic model of the innovative business sector in Finland and fit it to the company-level micro-data on Finnish companies from 2000 to 2016. We find that, generally, increasing R&D subsidies would be a recommendable policy in Finland. The welfare impacts of R&D subsidies are highest when they accelerate the re-allocation of R&D workers to companies with high R&D productivity. The most effective innovation policy targets R&D subsidies to companies with the highest innovation capacity (i.e., in these companies, R&D employees generate the highest increase in a firm’s productivity). If subsidies are allocated to companies with low innovation capacity or to low-productivity companies that are close to exiting the market, there will be less innovation and slower economic growth. An optimal subsidy policy would drive incumbents with low R&D productivity to exit.
    Keywords: Business subsidies, Innovation, Innovation policy, Growth, Growth models
    JEL: D21 D24 H25 L52 O31 O34
    Date: 2022–01–13
  3. By: Murat Seker (Turkish Airlines Headquarter, Istanbul); Mehmet Fatih Ulu (Koc University, Istanbul)
    Abstract: The regulatory environment in a country is an important factor that affects firm performance. This study investigates the impact of a particular regulation – license requirements for certain firm activities – on the innovation performance of Indian firms in the 1990s. Using a unique firm-level panel data set, it shows that the removal of license requirements led to an eight percentage points higher innovation rate within two years following the reform. We measure innovation as the introduction of new product varieties that had not been produced by the firm before. It takes a longer time for firms to innovate in industries in which they were not producing before. The conclusions in this study are also robust to the inclusion of controls for other policy reforms that occurred during the period of licensing reform. They also persist in tests with different subgroups of firms and with the use of alternative estimation methods.
    Keywords: Innovation, research and development, regulatory environment, regulations, industrial policy, India.
    JEL: L11 L52 O14 O31 O3
    Date: 2022–01
  4. By: Arrighetti, Alessandro; Gnarini, Daniela; Lasagni, Andrea; Semenza, Renata
    Abstract: The article contributes to the current debate on the relationship between migration and entrepreneurship, highlighting the evolution of processes and practices, from the traditional monoethnic firm towards new models, we defined as “plurinational”. It refers precisely to the cases, widespread in the evolving cosmopolitan society, where both entrepreneurs and workers belong to different nationalities. The article outlines the findings of a qualitative research study, based on interviews with a series of entrepreneurs of plurinational firms in Italy. Firstly, we found that plurinational firms originate from “weak ties” (through acquaintances and previous work experiences) rather than “strong ties” (through family and co-ethnic community networks). Secondly, far for being univocal models, we found a variety of plurinational entrepreneurships which derives from different scales of priority assigned by ownership or management to plurinationalism as “opportunity” or plurinationalism as “value”.
    Keywords: immigrant entrepreneurship,plurinationalism,migration,break-out strategies,organizational diversity,Italy
    Date: 2021
  5. By: Attila Lajos Makai; Szabolcs Ramhap
    Abstract: The model shift of higher education in Hungary brought not only the deepening of university-industry relations and technology transfer processes, but also contribute the emerging role of universities in shaping regional innovation policy. This process provides a new framework for cooperation between actors in regional innovation ecosystems and raises the relationship between economic-governmental-academic systems to a new level. Active involvement of government, the predominance of state resources, and the strong innovation-organizing power of higher education institutions are similarities that characterize both the Hungarian and Chinese innovation systems. This paper attempts to gather Chinese good practices whose adaptation can contribute to successful public-university collaboration. In the light of the examined practices, the processes related to the university model shift implemented so far can be placed in a new context, which are presented through the example of the Sz\'echenyi Istv\'an University of Gy\H{o}r.
    Date: 2021–12
  6. By: Brindusa Anghel (Banco de España); Aitor Lacuesta (Banco de España); Federico Tagliati (Banco de España)
    Abstract: This paper analyses the financial literacy of Spanish enterprises with fewer than 50 employees (small enterprises) based on a survey conducted by the Banco de España between March and May 2021 as part of a project launched by the Organisation for Economic Co-operation and Development’s International Network on Financial Education. The survey includes a series of questions aimed at measuring firms’ financial literacy (financial knowledge, attitudes and behaviour) and the financial instruments held by them, the impact of the COVID-19 crisis on their activity and their level of digitalisation. The business owners should answer these questions as long as they are involved in taking financial decisions for the business. The main results of the survey suggest that, in Spain, owners of enterprises with fewer than 20 employees have little financial knowledge compared with those of enterprises with 20 to 49 employees. The same is true of firms in the accommodation and food service activities, construction and real estate activities, and other personal services sectors (the latter being a mixed group of sectors which would include firms in education, repairs, laundry services, etc.) compared with firms in other sectors. In terms of financial attitudes, business owners with ten or more employees have a greater tendency to set long-term financial goals than owners of firms with fewer than ten employees. Some financial behaviours (such as having strategies to cope with theft or considering different options for their financial product and service providers) are less widespread among smaller firms, especially those with fewer than five employees. Lastly, the percentage of Spanish small enterprises, regardless of size, whose owners have thought about how they will fund their own retirement is remarkably low. The use of capital instruments and other more recent types of financing (such as sustainable bonds, business angels or crowdfunding) is marginal in small Spanish enterprises. Likewise, the use of property and, particularly, business interruption insurance is limited among these firms. There are no discernible, significant differences in financial knowledge, attitudes or behaviours in terms of the gender of the business owner. Also, in general, the average financial literacy of small enterprises improves with the level of educational attainment only if the owner has specific training in business, economics or finance. Other characteristics positively associated with financial competencies, irrespective of educational attainment, are having more than ten years’ experience as a business owner or having a business owner for a parent. The impact of the COVID-19 crisis on the level of turnover, profit and debt was quite similar for firms with different degrees of financial literacy. However, the negative impact on employment and liquidity was somewhat lower for the higher quartiles of owners’ financial literacy. Additionally, higher financial knowledge was associated with being more likely to apply for and obtain a new loan or benefit from a public guarantee. Firms with less financial knowledge did make greater use of income transfers and rental moratoria. Lastly, there is a positive correlation between financial literacy and a higher pre-pandemic level of digitalisation in the firm. However, there is no such correlation between financial literacy and digital activities following COVID-19.
    Keywords: financial literacy, small enterprises, online survey, COVID-19, digitalisation
    JEL: C81 D25
    Date: 2021–11
  7. By: Costantiello, Alberto; Laureti, Lucio; Leogrande, Angelo; Marco, Matarrese
    Abstract: In this article we investigate the determinants of the Innovation Linkages in Europe. We use data from the European Innovation Scoreboard of the European Commission in the period 2000-2019 for 36 countries. Data are analyzed using Panel Data with Fixed Effects, Random Effects, Dynamic Panel at 1 Stage, Dynamic Panel at 2 Stage, Pooled OLS, WLS. Results show that the Innovation Linkages in Europe is positively associated with “Buyer Sophistication”, “Government Procurement of Advanced Technology Products”, “Finance and Support”, “Firm Investments”, “Human Resources”, and negatively associated with “Population Density”, “Employment Share Services”.
    Keywords: O30; O31, O32; O33; O36.
    JEL: O3 O30 O31 O32 O33 O34
    Date: 2021–01
  8. By: Joachim Wagner (Leuphana University, Lueneburg, Institute for the World Economy, Kiel, and IZA, Bonn)
    Abstract: This paper uses firm level data from the World Bank Enterprise surveys conducted in 2019 and from the COVID-19 follow-up surveys conducted in 2020 in ten European countries to investigate the link between having a website before the pandemic and firm survival until 2020 .The estimated effect of web presence is statistically highly significant ceteris paribus after controlling for various firm characteristics that are known to be related to survival. Furthermore, the size of this estimated effect can be considered to be large on average. A web site helped firms to survive.
    Keywords: Web presence, firm survival, COVID-19, World Bank Enterprise Surveys
    JEL: D22 L20 L25 L29
    Date: 2021–04
  9. By: McCann, Fergal (Central Bank of Ireland); McGeever, Niall (Central Bank of Ireland); Yao, Fang (Central Bank of Ireland)
    Abstract: Using survey data from a representative sample of Irish Small and Medium Enterprises (SMEs), we study how firms are likely to recover under macroeconomic forecasts of the pandemic recovery. The rate of financial distress among firms is expected to fall under baseline forecasts from a peak of 12 per cent in 2020 to 7 per cent by 2024. We find that those firms that struggle to recover by the end of our scenario window were mostly unprofitable or distressed prior to the pandemic. Beyond our baseline case, we further model three alternative recovery scenarios to study the effect of fiscal support tapering, a partial recovery due to structural change in sectoral demand, and a financing gap driven by credit risk retrenchment by lenders. Our findings highlight the continued importance of “bridging” liquidity finance provision to ensure the long term solvency of viable firms.
    Date: 2021–12
  10. By: Frieling, Titus
    Abstract: This thesis employs novel datasets on patenting activity and TFP in the GDR to study the relationship between innovation and productivity. Patenting activity is chosen as a variable of interest due to its inherent link to the innovative process and high international and intertemporal comparability. No statistically significant relationship between patenting and future productivity growth is found in an analysis across 16 sectors of the GDR’s economy from 1950-1989. This result is unusual, and likely results out of the institutional framework of the GDR: firstly, it being a planned economy and the associated reduced productivity effects of innovations, and secondly, the GDR’s unique patent system which likely increased the number of patent applications while reducing their economic usefulness. By including the full breadth of the GDR’s patent stock, as well as robustly estimating the initial capital stock of the GDR, a more reliable account of both these variables can be made than was possible in previous studies. This thesis contributes to the literature through its use of new data and an adaptation of a proven empirical identification strategy to a new context. It also suggests avenues for further research on the relationship between patenting and innovation in the GDR and planned economies more widely.
    JEL: R14 J01 N0
    Date: 2021–12
  11. By: Fossen, Frank M. (University of Nevada, Reno); Hossain, Mobarak (University of Nevada, Reno); Mukhopadhyay, Sankar (University of Nevada, Reno); Toth, Peter (University of Nevada, Reno)
    Abstract: Unavailable or expensive health insurance may hinder the transition of individuals from paid employment to entrepreneurship. The literature argues that the guaranteed availability of health insurance introduced by the Affordable Care Act (ACA) of 2010 could reduce this barrier to entrepreneurship and thereby increase entrepreneurial activity. In this paper, we investigate how much the cost of health insurance when leaving paid employment—given availability of health insurance—matters for the decision to become an entrepreneur. We use individual-level data from the Current Population Survey (CPS-ASEC) combined with county-level panel data on health insurance costs in local Health Insurance Exchanges (HIX) introduced by the ACA to estimate county-treatment fixed-effects regressions. The results indicate that increasing the premium of the benchmark HIX plan by $100 per month decreases the annual probability of entry into self-employment by 0.25 percentage points, which corresponds to 18% of the average annual entry rate.
    Keywords: entrepreneurship, health insurance, premium, deductible, MOOP
    JEL: I13 I11 J22 J23 L26
    Date: 2021–11
  12. By: Cathrin Söllner (CRIE - Centre for Regional and Innovation Economics, University of Bremen)
    Abstract: Collaboration is an important factor for regional economic growth. Still, the literature lacks explanations why some regions collaborate more or less than expected. The present paper proposes regional culture as influencing factor, being region-specific and connected to interactive activities. Estimations are based on a sample of 155,019 collaborative patents from 134 European NUTS-2 regions. Data on regional culture was extracted from the European Values Study. Results reveal that regional culture has a significant effect on the collaboration likelihood. This influence differs due to the various dimensions of regional culture.
    Keywords: collaboration propensity, regional culture, Hofstede, EU-regions, patents
    JEL: F00 O43 R11
    Date: 2022–01–06
  13. By: Nobuo Kobayashi (School of Economics, Kwansei Gakuin University); Takeshi Mori (Nomura Research Institute)
    Abstract: This paper presents an analysis of factors that promote and suppress the regional start-up activities of knowledge-intensive business services (KIBS) in Japan, based on the Digital Capability Index (DCI). The results showed that rapid progress in the digitization of public services and local residents f high ICT skills were factors that promoted KIBS start-ups. In addition, the results revealed that the establishment of a high-speed information and communication environment in the region has promoted T-KIBS startups, which utilize the Internet. Regarding factors not included in the DCI, the results showed a positive effect of the concentration of human resources and business establishments in metropolitan areas, which was in line with the findings of previous studies. In contrast, the start-up rates of T-KIBS were high in areas where the ratios of day and night populations were low. This finding suggests that although the main customers of T-KIBS are companies in metropolitan areas, such as Tokyo and Osaka, they locate their offices in the suburbs, where commercial rents are lower than in urban areas.
    Keywords: Knowledge Intensive Business Services (KIBS), Digital Capability Index (DCI), start-up activity
    JEL: L26 L84 L86 R30
    Date: 2022–01
  14. By: Lucas Misera; Ann Marie Wiersch
    Abstract: the fourth concludes that businesses owned by women, and, in particular, by Black women, faced more financial and operational challenges during the pandemic and were less likely to receive financing than men-owned businesses.
    Date: 2021–11

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