nep-sbm New Economics Papers
on Small Business Management
Issue of 2022‒03‒14
fourteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The Transformation of Self Employment By Innessa Colaiacovo; Margaret Dalton; Sari Pekkala Kerr; William R. Kerr
  2. Artificial Intelligence and Reduced SMEs' Business Risks. A Dynamic Capabilities Analysis during the COVID-19 Pandemic By Drydakis, Nick
  3. Impact of ethical practices on small and medium enterprises’ performance in Saudi Arabia: An Partial Least Squares-Structural Equation Modeling analysis By Turki Abalala; Md. Mazharul Islam; Md. Mahmudul Alam
  4. Estimating conditional treatment effects of EIB lending to SMEs in Europe By Alessandro Barbera; Áron Gereben; Marcin Wolski
  5. The Role of Regulation and Bank Competition in Small Firm Financing: Evidence from the Community Reinvestment Act By Panagiotis Avramidis; George Pennacchi; Konstantinos Serfes; Kejia Wu
  6. Government procurement and access to credit: firm dynamics and aggregate implications By Julian di Giovanni; Manuel García-Santana; Priit Jeenas; Enrique Moral-Benito; Josep Pijoan-Mas
  7. Credit constrained firms and government subsidies: evidence from a European Union program By Eszter Balogh; Adám Banai; Tirupam Goel; Péter Lang; Martin Stancsics; Előd Takáts; Álmos Telegdy
  8. Sustainable Development Goals (SDGs) Contribution to Entrepreneurial Intention: The Need for Innovative Reflexions By Rabiaa Romdhane; Islem Khefacha; Haykel Haj
  9. The Level of Entrepreneurship in India By sahoo, satyabrata
  10. Conditions for efficient entry and clustering By Smirnov, Vladimir; Waity, Andrew
  11. Oil rent, entrepreneurial start-ups, and institutional quality: Insights from African oil-rich countries By M. Ajide, Folorunsho; A. A. Soyemi, Kenny
  12. The regulation methods of fiscal risk in the framework of the implementation of entrepreneurship support By Elena G. Demidova
  13. Productive Robots and Industrial Employment: The Role of National Innovation Systems By Kapetaniou, Chrystalla; Pissarides, Christopher A.
  14. Living in Rural Areas and Self-Employment By Belloc, Ignacio; Molina, José Alberto; Velilla, Jorge

  1. By: Innessa Colaiacovo; Margaret 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.
    Keywords: Self-employment, small business, entrepreneurship, startup investment, occupational choice, financing.
    JEL: L26 D24 G51 J11 J24 J62 M13 R11 R13
    Date: 2022–02
  2. By: Drydakis, Nick (Anglia Ruskin University)
    Abstract: The study utilises the International Labor Organization's SMEs COVID-19 pandemic business risks scale to determine whether Artificial Intelligence (AI) applications are associated with reduced business risks for SMEs. A new 10-item scale was developed to capture the use of AI applications in core services such as marketing and sales, pricing and cash flow. Data were collected from 317 SMEs between April and June 2020, with follow-up data gathered between October and December 2020 in London, England. AI applications to target consumers online, offer cash flow forecasting and facilitate HR activities are associated with reduced business risks caused by the COVID-19 pandemic for both small and medium enterprises. The study indicates that AI enables SMEs to boost their dynamic capabilities by leveraging technology to meet new types of demand, move at speed to pivot business operations, boost efficiency and thus, reduce their business risks.
    Keywords: SMEs, business risks, COVID-19, artificial intelligence, dynamic capabilities
    JEL: O33 Q55 L26
    Date: 2022–02
  3. By: Turki Abalala (King Abdulaziz University); Md. Mazharul Islam (King Abdulaziz University); Md. Mahmudul Alam (UUM - Universiti Utara Malaysia)
    Abstract: Purpose: The real challenge of establishing and maintaining business ethics in small and medium enterprises (SMEs) has become a global issue. We investigated the driving forces of ethical practices (EP) and its contribution to the overall performance in businesses. Design/methodology/approach: This study collected primary data from 117 small and medium enterprises (SMEs) in Saudi Arabia by using a well-designed questionnaire survey amongst SMEs and draw inferences using the structural equation modelling (SEM) analysis. Findings/results: Findings suggested that top management's characters and ethical commitment, ethical policy and culture of the organisation and external pressure positively influence the ethical practice in the organisation, which leads to a significant positive impact on both financial and non-financial performances of SMEs. But the level of fraud and corruption and the level of monitoring show a mixed moderating effect on the relationships between ethical practice in the organisation and business performance. Practical implications: The findings of this research will help SMEs' administrators and managers, as well as the companies to instil workplace ethics, which manages the level of business performance. The policymakers and other relevant authorities can also utilise the outcomes of this study to develop ethical policy guidelines and frameworks to improve SMEs' competitiveness and sustain their companies in the long run. Originality/value: The unique feature of this research is that both the causes and effects of EP are considered in one integrated model. This gives a more vivid picture of the ethical issue in a business organisation.
    Keywords: Business Ethics,Business Performance,Ethical Practices,Ethical Policy and Culture,Ethical Commitment,Small and Medium Enterprises (SME)
    Date: 2021–08–25
  4. By: Alessandro Barbera; Áron Gereben; Marcin Wolski
    Abstract: We estimate heterogeneous treatment effects of the EIB fnancial support on European firms between 2008 and 2015. The relevant control groups are created with propensity score matching and the effects are estimated in a difference-in-differences framework, controlling for firm-level and country-sector-year fixed effects. We find that the positive effects of EIB-supported lending on job creation and investments were larger for smaller and younger firms. Moreover, we find evidence that longer maturities and more advantageous loan pricing are associated with larger employment and investment effects, while no larger impact is observed for larger loan volumes. Overall, the results suggest that benefits of the EIB support are rather observed on an intensive, rather than on an extensive, margin.
    Keywords: SMEs, EIB, intermediated loans, impact assessment, conditional treatment effects, difference-in- differences.
    JEL: G38 G21 G23
    Date: 2022–02
  5. By: Panagiotis Avramidis; George Pennacchi; Konstantinos Serfes; Kejia Wu
    Abstract: This paper analyzes how bank regulation that promotes greater access to credit impacts the financing of targeted small firms. It develops a model where banks compete with trade creditors to fund small firms and applies it to study the effects of the Community Reinvestment Act (CRA). The empirical tests reveal that a CRA-induced increase in bank loans reduces small firms’ use of relatively expensive trade credit. The effect is more profound in low- and medium-income areas where financial constraints are tighter due to low bank competition. The effect is also larger for small firms that operate in trade credit-dependent industries.
    Keywords: Competition; Regulation; Trade credit; Small business loans
    JEL: G14 G21 L13 L50 L49
    Date: 2022–02–17
  6. By: Julian di Giovanni; Manuel García-Santana; Priit Jeenas; Enrique Moral-Benito; Josep Pijoan-Mas
    Abstract: We provide a framework to study how different allocation systems of public procurement contracts affect firm dynamics and long-run macroeconomic outcomes. We start by using a newly created panel dataset of administrative data that merges Spanish credit register loan data, quasicensus firm-level data, and public procurement projects to study firm selection into procurement and the effects of procurement on credit growth and firm growth. We show evidence consistent with the hypotheses that there is selection of large firms into procurement, that procurement contracts provide useful collateral for firms -more so than sales to the private sector- and that procurement contracts facilitate firm growth beyond the contract duration. We next build a model of firm dynamics with both asset-based and earnings-based borrowing constraints and a government that buys goods and services from private sector firms. We use the calibrated model to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. We find that granting procurement contracts to small firms, either by directly targeting them or by slicing large contracts into smaller ones, helps these firms grow and overcome financial constraints in the long run. However, we also find that reducing the average size of contracts -or making it less likely for large firms to access them- removes saving incentives for large firms, whose negative effects on capital accumulation can overcome the expansionary consequences for small firms and hence generate a drop in aggregate output.
    Keywords: Government procurement, financial frictions, capital accumulation, aggregate productivity
    JEL: E22 E23 E62 G32
    Date: 2022–02
  7. By: Eszter Balogh; Adám Banai; Tirupam Goel; Péter Lang; Martin Stancsics; Előd Takáts; Álmos Telegdy
    Abstract: We assess the effects of non-repayable subsidies on financially constrained and unconstrained Hungarian SMEs. Using rejected subsidy applicants as control group and bank queries to the credit-registry to identify firms that applied for but did not receive a loan, we show that subsidies generate a sizeable incremental impact on asset growth of constrained firms relative to unconstrained businesses. This effect, however, is transitory and does not translate into higher sales, profitability or productivity. Financing, therefore, may not be the primary hurdle for these SMEs, and credit constraints may reflect other shortcomings, such as lack of good management or viable projects.
    Keywords: SMEs, subsidies, credit constraints, emerging market economies, difference-in-differences, credit registry micro-data
    JEL: G38 G21 E58
    Date: 2021–11
  8. By: Rabiaa Romdhane (ISG BIZERTE); Islem Khefacha (LAREMFIQ - Laboratory Research for Economy, Management and Quantitative Finance - Institut des Hautes Etudes Commerciales (Université de Sousse), FSEG Mahdia - Faculté des Sciences Économiques et de Gestion de Mahdia [Univ Monastir] - UM - Université de Monastir - University of Monastir); Haykel Haj (IHEC Sousse - IHEC)
    Keywords: OECD countries,GMM,SDGs,Sustainability
    Date: 2021–12–20
  9. By: sahoo, satyabrata (Shree Guru Gobind Singh Tricentenary University: Gurgaon, Haryana, IN)
    Abstract: Entrepreneurship plays a paramount role in the magnification and development of the economy of any country. Entrepreneurship acts as a vaccine for a nation's economic prosperity, leading to the generation of employment opportunities, national income, rural development, technological development, industrialization, export promotion, etc. Many institutes and companies are involved in entrepreneurship development activities, and some join these programs as a stepping stone to becoming an entrepreneur. Entrepreneurs convert conceptions into economic opportunities through innovations considered a significant source of competitiveness in an increasingly globalizing world economy. Ergo, most regimes strive to augment the supply of competent and ecumenically competitive entrepreneurs in their respective countries. The primary purport of this research is to understand the paramountcy of entrepreneurship in India. Numerous factors need to be considered while expertise the significance of entrepreneurship. Entrepreneurs experience several opportunities and challenges inside the direction of pursuance in their goals and targets.
    Date: 2021–12–08
  10. By: Smirnov, Vladimir; Waity, Andrew
    Abstract: We outline the conditions for efficient entry order and clustering in a triopoly preemption game in which firms differ in their sunk costs of entry. The critical factor turns out to be how symmetric the potential entrants are. If the cost asymmetry between the firms is sufficiently large, entry is always in the efficient order. On the other hand, if firms are relatively symmetric, entry order can be inefficient in that the firm with the second-lowest entry cost enters first. Furthermore, if there is any difference in entry costs between the two most efficient firms, there is never clustering (which is when firms enter the market at the same time). Lastly, in contrast to the case with relatively symmetric firms, when the cost asymmetry between firms is large, the leader's entry time in the triopoly is always earlier than it is in a duopoly.
    Keywords: timing games; asymmetric firms; clustering; inefficient entry
    Date: 2021–11
  11. By: M. Ajide, Folorunsho (Department of Economics); A. A. Soyemi, Kenny (Department of Economics)
    Abstract: Objective: The objective of this study was to examine the moderating effect of institutional quality in the relationship between oil rents and entrepreneurial start-ups for oil-rich countries in Africa. Research Design & Methods: The study employed panel regression techniques that included instrumental variable (IV) estimator to analyse the data of 11 oil-rich countries in Africa over a period of 2006-2018. Findings: The following results emerged. (1) Oil rent’s impact is positive and significantly affects entrepreneurial start-ups. (2) The interactive coefficients of oil rents and institutional quality have a negative and significant impact on entrepreneurial start-ups. This means the quality of African institution reduces and leaks out entrepreneurial benefits of oil rents in African oil-rich countries. We establish that institutional quality’s threshold at which oil rent would accelerate entrepreneurial start-ups is 2.23 on a five-point scale. Implications & Recommendations: This study revealed that the ability of oil rents to consistently promote entrepreneurial development in oil-rich economies depends on the level of institutional conditions. This situation may create a growth trap for African oil-dependent economies because entrepreneurial start-ups depend on the quality of institutional foundations, which may position the growth inclusiveness and government actions on the right paths. In this context, our empirical findings reveal that African governments need to work on the institutional quality of their economies to reduce the institutional curse of oil rents on African entrepreneurial start-ups. Contribution & Value Added: The article advances our understanding on the nexus of entrepreneurship and oil rents. It is the first study conducted on oil-rich countries in Africa. Moreover, the work differs from the literature by examining the threshold level at which African institutional quality would meaningfully enhance positive relationship between oil rents and entrepreneurial start-ups.
    Keywords: Africa; institutions; new business entry; oil rents; panel-corrected standard errors
    JEL: M13 N97 O43
    Date: 2022–02–13
  12. By: Elena G. Demidova (Starooskolsky Technological Institute)
    Abstract: In this article, I consider the issues of financial resource shortage, the limited possibility of attracting bank loans, and business risk. All these problems constrain the development of entrepreneurship. Objectives I aim to determine a scientifically based financial mechanism of financing the priority directions of territories' development. In this study, I develop tools of financing the priority directions of the municipal economy. The proposed financial scheme allows to expand the volume of financing and ensure the access of businesses to financial support. The article proposes concrete financing mechanisms for investment with minimal risk for the budget and preferential conditions for business.
    Date: 2022–01
  13. By: Kapetaniou, Chrystalla (University of Southampton); Pissarides, Christopher A. (London School of Economics)
    Abstract: In a model with robots, and automatable and complementary human tasks, we examine robot-labour substitutions and show how it they are influenced by a country's "innovation system". Substitution depends on demand and production elasticities, and other factors influenced by the innovation system. Making use of World Economic Forum data we estimate the relationship for thirteen countries and find that countries with poor innovation capabilities substitute robots for workers much more than countries with richer innovation capabilities, which generally complement them. In transport equipment and non-manufacturing robots and workers are stronger substitutes than in other manufacturing.
    Keywords: robots-employment substitution, automatable tasks, complementary task creation, innovation environment, industrial allocations
    JEL: J23 L60 O33 O52
    Date: 2022–02
  14. By: Belloc, Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Velilla, Jorge (University of La Rioja)
    Abstract: This paper examines whether workers living in rural areas are more likely to be self-employed, compared with those in urban areas. We provide evidence for 35 European countries, using the European Working Conditions Survey for the year 2015. We also study the time devoted to market work, and monthly earnings, of self-employed workers in rural and urban areas. Results show that workers in rural areas are more likely to be self-employed than workers in urban areas, although engaging in self-employment in rural areas is associated with significantly lower monthly incomes. We also report differences by welfare state regime. Self-employment is considered a key mechanism to compensate for the difficulty of developing in rural areas, and this paper shows that workers in rural areas in Europe are more likely to be self-employed, despite more challenging working conditions.
    Keywords: rural areas, self-employment, europe, earnings, work hour
    JEL: E24 L26 O18
    Date: 2022–02

This nep-sbm issue is ©2022 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.