nep-sbm New Economics Papers
on Small Business Management
Issue of 2022‒02‒28
fifteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The evolving contribution of R&D, advertising and capital expenditures for US-listed firms’ growth in sales, 1979-2018. A quantile regression analysis By Joel Rabinovich
  2. Caste, Courts and Business By Chakraborty, Tanika; Mukherjee, Anirban; Saha, Sarani; Shukla, Divya
  3. Remittances and firm performance in sub-Saharan Africa : evidence from firm-level data By Kabinet Kaba; Mahamat Moustapha
  4. Automation and Related Technologies: A Mapping of the New Knowledge Base By Santarelli, Enrico; Staccioli, Jacopo; Vivarelli, Marco
  5. Enterprises Providing ICT Training in Europe By Laureti, Lucio; Costantiello, Alberto; Matarrese, Marco Maria; Leogrande, Angelo
  6. Return of the Solow-paradox in AI? AI-adoption and firm productivity By Bäck, Asta; Hajikhani, Arash; Jäger, Angela; Schubert, Torben; Suominen, Arho
  7. The Transformation of Self Employment By Innessa Colaiacovo; Margaret G. Dalton; Sari Pekkala Kerr; William R. Kerr
  8. Emprendimiento en entornos rurales: Evidencia con la Encuesta Europea sobre Condiciones Laborales By Belloc, Ignacio
  9. Agglomeration and Technological Specialization By Basheer Kalash
  10. Public subsidies and cooperation in research and development. Evidence from the lab By Antonio Acconcia; Sergio Beraldo; Carlo Capuano; Marco Stimolo
  11. Share Pledging in China: Funding Listed Firms or Funding Entrepreneurship? By Zhiguo He; Bibo Liu; Feifei Zhu
  12. Geography, Growth and Inequalities: Market Failures and Public Policy Implications By Benjamin Montmartin
  13. Financial support measures and credit to firms during the pandemic By Stefania De Mitri; Antonio De Socio; Valentina Nigro; Sabrina Pastorelli
  14. Supporting Business Owners with Psychiatric Disabilities: An Exploratory Analysis of Challenges and Supports By Laysha Ostrow; Jane K. Burke-Miller; Morgan Pelot; Crystal Blyler
  15. What drives MSME's credit choices? Business versus personal loan account utilization in Kenya By Mulindi, Hillary; Josea, Kiplangat; Tiriongo, Samuel

  1. By: Joel Rabinovich (City University London)
    Abstract: This article presents new insights on the evolving contribution of different types of investments to the growth in sales of US nonfinancial listed firms during the 1979-2018 period. By means of quantile regressions it is observed an increasing contribution over time of intangible investment vis-à-vis a decline in capital expenditure both for high-growth and slow-growth firms. However, the impact of different types of intangible investment differs depending on the kind of firm. Whereas research and development (R&D) has a positive contribution for high-growth firms, only advertising has a positive effect for their slow-growth peers.
    Keywords: Firm growth,Fast-growth firms,Quantile Regression,Intangibles
    Date: 2022–01–21
  2. By: Chakraborty, Tanika (Indian Institute of Management); Mukherjee, Anirban (University of Calcutta); Saha, Sarani (Indian Institute of Technology Kanpur); Shukla, Divya (Indian Institute of Technology Kanpur)
    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: 2022–01
  3. By: Kabinet Kaba (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Mahamat Moustapha (Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres, LEDa - Laboratoire d'Economie de Dauphine - CNRS - Centre National de la Recherche Scientifique - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres)
    Abstract: Sub-Saharan African firms face enormous obstacles to their development. The main constraints to business performance identified are poor access to finance and a weak domestic market. In this paper, we examine how international remittances affect firms' performance. Specifically, we investigate the role of remittances on capital accumulation, sales, and employment in 34,010 firms operating in 42 Sub-Saharan African countries between 2006 and 2020. Using a fixed-effect instrumental variable approach to control for the endogeneity of remittances, we find that international remittances positively affect the share of capital held by nationals in manufacturing firms. Moreover, international remittances positively affect sales in non-manufacturing firms, while a negative effect on the sales of manufacturing firms is observed. Regarding the effect of remittances on employment, we find a positive impact on both manufacturing and non-manufacturing firms. Heterogeneity tests suggest that the effect of remittances on firms' performance is larger in less financially developed and non-resource-rich countries. As for the negative impact of remittances on sales in manufacturing firms, the results show that it is entirely due to small firms. Finally, using remittances per capita instead of remittances relative to GDP, similar result are found.
    Keywords: Remittances,Firm Performance,Entrepreneurship,Saving and Capital Investment,Firm Employment,Africa
    Date: 2021
  4. By: Santarelli, Enrico (University of Bologna); Staccioli, Jacopo (Università Cattolica del Sacro Cuore); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: Using the entire population of USPTO patent applications published between 2002 and 2019, and leveraging on both patent classification and semantic analysis, this paper aims to map the current knowledge base centred on robotics and AI technologies. These technologies are investigated both as a whole and distinguishing core and related innovations, along a 4-level core-periphery architecture. Merging patent applications with the Orbis IP firm-level database allows us to put forward a twofold analysis based on industry of activity and geographic location. In a nutshell, results show that: (i) rather than representing a technological revolution, the new knowledge base is strictly linked to the previous technological paradigm; (ii) the new knowledge base is characterised by a considerable – but not impressively widespread – degree of pervasiveness; (iii) robotics and AI are strictly related, converging (particularly among the related technologies and in more recent times) and jointly shaping a new knowledge base that should be considered as a whole, rather than consisting of two separate GPTs; (iv) the US technological leadership turns out to be confirmed (although declining in relative terms in favour of Asian countries such as South Korea, China and, more recently, India).
    Keywords: robotics, artificial intelligence, general purpose technology, technological paradigm, industry 4.0, patents full-text
    JEL: O33
    Date: 2022–01
  5. By: Laureti, Lucio; Costantiello, Alberto; Matarrese, Marco Maria; Leogrande, Angelo
    Abstract: The determinants of enterprises providing ICT training in Europe are analyzed in this article. Data are collected from the European Innovation Scoreboard-EIS of the European Commission for 36 European countries in the period 2000-2019. Data are analyzed with Panel Data with Fixed Effects, Panel Data with Random Effects, Dynamic Panel, WLS and Pooled OLS. Results show that the number of enterprises providing ICT training in Europe is positively associate with “Innovation Index”, “Innovators”, “New Doctorate Graduates”, “Tertiary Education” and negatively associated with “Government Procurement of Advanced Technology Products”, “Human Resources”, and “Marketing or Organisational Innovators”. In adjunct a cluster analysis is performed by using k-Means algorithm optimized with the Silhouette Coefficient and we find the presence of four clusters. Finally, we use eight different machine learning algorithms to predict the value of the enterprises providing ICT training in Europe. We found that the Simple Tree Regression is the best predictor and that the number of enterprises providing ICT training in Europe is expected to growth of the 5,02%.
    Keywords: Innovation and Invention: Processes and Incentives; Management of Technological Innovation; Technological Change: Choices and Consequences; Intellectual Property and Intellectual Capital.
    JEL: O30 O31 O32 O33 O34
    Date: 2022–01–29
  6. By: Bäck, Asta (VTT); Hajikhani, Arash (VTT); Jäger, Angela (Fraunhofer Institute for Systems and Innovation Research ISI); Schubert, Torben (CIRCLE, Lund University); Suominen, Arho (VTT)
    Abstract: AI-related technologies have become ubiquitous in many business contexts. However, to date empirical accounts of the productivity effects of AI-adoption by firms are scarce. Using Finnish data on job advertisements between 2013 and 2019, we identify job advertisements referring to AI-related skills. Matching this data to productivity data from ORBIS, we estimate the productivity effects of AI related activities in our sample. Our results indicate that AI-adoption increases productivity, with three important qualifications. Firstly, effects are only observable for large firms with more than 499 employees. Secondly, there is evidence that early adopters did not experience productivity increases. This may be interpreted as technological immaturity.Thirdly, we find evidence of delays of least three years between the adoption of AI and ensuing productivity effects (investment delay effect). We argue that our findings on the technological immaturity and the investment delay effect may help explain the so-called AI-related return of the Solow-paradox: I.e. that AI is everywhere except in the productivity statistics.
    Keywords: Recruiting personnel; AI related jobs; Artificial Intelligence; Job Market; Text Mining; Firm performance; Productivity
    JEL: D22 D24 O31 O32
    Date: 2022–02–15
  7. By: Innessa Colaiacovo; Margaret G. Dalton; Sari Pekkala Kerr; William R. Kerr
    Abstract: Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in "hometown" local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-to-scale among large businesses, or a worsening of financing conditions and debt levels.
    JEL: D24 G51 J11 J24 J62 L26 M13 R11 R13
    Date: 2022–02
  8. By: Belloc, Ignacio
    Abstract: This paper analyses the differences between earnings and market work time between the self-employed (entrepreneurs) and employed workers in 35 European countries. In addition, we analyse the determinants of the decision to become a self-employed. We develop an empirical analysis of the determinants of earnings, working hours and self-employment, paying special attention to the effect of the geographical environment of workers’ residence. To do this, we use the 2015 European Working Conditions Survey (2015 EWCS) and collect information for all workers aged between 16 and 65, in order to perform a descriptive and econometric analysis. In the econometric analysis, we ran three models and found that workers living in rural settings are more likely to be self-employees and that engaging in self-employment in rural settings is associated with significantly lower monthly incomes. Our results also show that the self-employed devote more time to the labour market, although this is not reflected in higher end-of-month earnings.
    Keywords: Earnings, European Working Conditions Survey, rural areas, self-employment, work hours.
    JEL: J14 L26 M21 O57
    Date: 2022–01–18
  9. By: Basheer Kalash (Université Côte d'Azur; GREDEG CNRS; Sciences Po, OFCE, France)
    Abstract: Notable attention has been given to the relationship between agglomeration and innovation. However, there is a lack of evidence of how agglomeration affects the type of innovation produced. This study aims to causally assess the impact of a change in agglomeration economies, via transportation improvements, on regional technological specialization. It investigates this relationship using the inauguration of the Öresund Bridge between Sweden and Denmark in 2000 as a quasi-experiment for a difference-in-difference approach. It considers the Öresund area, which consists of Copenhagen and the Swedish Skåne, as the treated regions and the other regions in Denmark and Sweden as a control group. The International Patent Classification (IPC) codes of European Patent Office (EPO) applications are employed to define technology classes for 30 NUTS-3 regions in Sweden and Denmark from 1988 to 2011. The results show that the opening of the Öresund bridge led to an increase in Skåne's highly cited patent technology classes, but no significant change in the specialization of Copenhagen. The results suggest that changes in regions' specializations are not only dependent on the quality of patent technology classes but are also region-specific.
    Keywords: Agglomeration, technological specialization, Öresund, transportation infrastructure, innovation
    JEL: O31 O33 R11
    Date: 2022–01
  10. By: Antonio Acconcia (University of Naples 'Federico II' and CSEF); Sergio Beraldo (University of Napoli 'Federico II' & CSEF); Carlo Capuano (University of Napoli 'Federico II' & CSEF Marco); Marco Stimolo (University of Campania 'Luigi Vanvitelli')
    Abstract: We implement an experimental design based on a duopoly game in which subjects choose whether to cooperate in Research and Development (R&D) activities. We first conduct six experimental markets that differ in both the levels of knowledge spillovers and the intensity of competition. Consistently with the theory, we find that the probability of cooperation increases in the level of spillovers and decreases in that of market competition. We then replicate the experimental markets by providing subsidies to subjects who cooperate. Subsidies relevantly increase the probability of cooperation in focus markets, causing, however, a sensible reduction of R&D investments. Overall, our evidence suggests that, depending on the characteristics of the market, the use of public subsidies might be redundant, for firms would anyway joined their R&D efforts; or counterproductive, inducing firms to significantly reduce R&D investments compared to the non-cooperative scenario.
    Keywords: Cooperation in R&D, Public Subsidies, Knowledge Spillovers, Market Competition
    JEL: L24 O3
    Date: 2022–01
  11. By: Zhiguo He; Bibo Liu; Feifei Zhu
    Abstract: This paper studies the connection between share pledging and entrepreneurial activities in China, challenging the common wisdom that share pledging funds circle back to the listed firms. Share pledging funds are at the discretion of the shareholders who pledge their publicly traded shares, and survey evidence shows that a majority of the largest shareholders (67.3%) used pledging funds outside the listed firms. By linking firm registration data with share pledging data, we show a positive relation between shareholders’ pledging transactions and entrepreneurial activities. Utilizing the launch of the exchange market in 2013 as a quasi-natural experiment that favors share pledging by natural person shareholders against that by legal entity shareholders, our difference-in-differences (DiD) analysis shows natural person shareholders increased their entrepreneurial activities significantly in response to the policy shock, relative to legal entity shareholders. In addition to various robustness checks, we also show that shareholders with better access to share pledging invest more heavily in industries with above-median growth potential.
    JEL: G15 G23 O16 O53
    Date: 2022–02
  12. By: Benjamin Montmartin (SKEMA Business School; Université Côte d'Azur; OFCE Sciences.Po; GREDEG CNRS)
    Abstract: We propose a unique market and social planner solution for a generalized new economic geography and growth model that highlights the importance of taking into account the existence of agglomeration externalities in the analysis of market failures and public policies. Our model disentangles the underinvestment in R&D and the suboptimal growth link present in the previous endogenous growth model. Consequently, our framework allows the market economy to reach various steady-state situations. By evaluating the effects of two strategic policies implemented in the European Union, namely, an innovation and a cohesion policy, we highlight that the complementarity or substitutability of these policies to bring the economy closer to its optimum is directly related to the hypothesis made on the link between agglomeration and growth.
    Keywords: Agglomeration, growth, spatial income inequality, innovation and cohesion policies
    JEL: F43 H50 R12
    Date: 2022–01
  13. By: Stefania De Mitri (Bank of Italy); Antonio De Socio (Bank of Italy); Valentina Nigro (Bank of Italy); Sabrina Pastorelli (Bank of Italy)
    Abstract: The COVID-19 pandemic has led to an abrupt disruption of economic activity. A wide range of support measures have been introduced to help firms, including public loan guarantees to ease access to credit and debt moratoria to relieve their liquidity needs. This study explores the main features of the firms that had access to these initiatives in the year starting in March 2020. The liquidity crisis has prompted many companies to apply for both, especially in the sectors hit hardest by the pandemic (trade, accommodation and food services). Medium-sized and mid-cap companies, for which access to public guarantees has been extended, have resorted to guaranteed loans extensively. Access to state-backed loans has been wider for financially solid companies; recourse to moratoria has been higher for financially vulnerable firms. Overall, government measures have supported credit during the pandemic; only for large businesses, financing has increased also for those not resorting to guarantees. This evidence suggests that without the support measures, credit restrictions would have been severe also for larger companies.
    Keywords: COVID-19 pandemic, support measures, indebtedness, riskiness
    JEL: G32 H81
    Date: 2021–12
  14. By: Laysha Ostrow; Jane K. Burke-Miller; Morgan Pelot; Crystal Blyler
    Abstract: This study aims to identify business-related challenges and examine whether supports designed to alleviate those challenges are associated with positive business milestones and self-employment satisfaction.
    Keywords: psychiatric disability, business owners, self employment
  15. By: Mulindi, Hillary; Josea, Kiplangat; Tiriongo, Samuel
    Abstract: With most economies seeking to tap on MSMEs to navigate beyond the devastating impact of Covid-19, this paper seeks to create an understanding of the MSMEs demand-side credit perspectives. Using 279 MSMEs from the KBA Inuka Enterprise program, we anchor our analysis on a three-step probit model with sample selection to examine the choices on the utilization of business versus personal accounts among MSMEs. The results reveals that the level of MSMEs turnover affect the choice to borrow, who to borrow from and the type of loan to pursue (between personal and business loan). However, the tendency of MSMEs with turnovers of over Ksh 500,000 leaning more towards the utilization of personal over business accounts remains a puzzle. Further, the age of enterprise is important for the decision to take a bank loan or other loans, with the implication that MSMEs need to have a long-term view over their businesses to be attractive to long-term funders (banks). Heterogeneity across the industry is evident and it influences MSMEs credit choices. The gender of MSME owner influences the use of a business or personal account for loans, as the results indicate men use their business accounts more than women. Lastly, registration status of MSMEs matters in accessing business loans. From the policy perspective, discussions around lessening the credit accessibility constraints imposed by turnover levels, the age of enterprise, industry of operation, gender and registration status of enterprises are key.
    Date: 2022

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