nep-sbm New Economics Papers
on Small Business Management
Issue of 2022‒04‒18
eighteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Fdi spillover effects on innovation activities of knowledge using and knowledge creating firms: evidence from an emerging economy By Vujanovic, Nina; Radosevic, Slavo; Stojcic, Nebojsa; Hisarciklilar, Mehtap; Hashi, Iraj
  2. Effects of the Quality of Science and Innovation on Venture Finance: Evidence from University Spinoffs in Japan By FUKUGAWA Nobuya
  3. Innovation and human capital policy By Van Reenen, John
  4. Spatial impact of entrepreneurial zones: firm, city, and inter city evidence By Stojcic, Nebojsa; Pylak, Korneliusz; Jurlina Alibegovic, Dubravka
  5. Measuring process innovation output: Results from firm-level panel data By Rammer, Christian
  6. Education and economic growth By Valero, Anna
  7. R&D expenditures and firm survival By Redha Fares; Amélie Guillin
  8. R&D grant and tax credit support for foreign-owned subsidiaries: Does it pay off? By Lenihan, Helena; Mulligan, Kevin; Doran, Justin; Rammer, Christian; Ipinnaiye, Olubunmi
  9. China's Declining Business Dynamism By Diego A. Cerdeiro; Cian Ruane
  10. Artificial intelligence and firm-level productivity By Czarnitzki, Dirk; Fernández, Gastón P.; Rammer, Christian
  11. In search of EU unicorns - What do we know about them? By Giuseppina Testa; Ramón Compañó; Ana Correia; Eva Rückert
  12. The Effects of High-Skilled Immigration Policy on Firms: Evidence from Visa Lotteries By Doran, Kirk; Gelber, Alexander; Isen, Adam
  13. Employee Health and Firm Performance By Rettl, Daniel A.; Schandlbauer, Alexander; Trandafir, Mircea
  14. The (heterogenous) economic effects of private equity buyouts By Davis, Steven J.; Haltiwanger, John C.; Handley, Kyle; Lerner, Joshua; Lipsius, Ben; Miranda, Javier
  15. Individual Preferences Toward Inward Foreign Direct Investment: A Conjoint Survey Experiment By TANAKA Ayumu; ITO Banri; JINJI Naoto
  16. Political and Socioeconomic Factors That Determine the Financial Outcome of Successful Green Innovation By Riehl, Kevin; Kiesel, Florian; Schiereck, Dirk
  17. Climate protection potentials of digitalized production processes: Microeconometric evidence? By Axenbeck, Janna; Niebel, Thomas
  18. Renewal Through Industry Switching and Its Impacts on Productivity By Kuosmanen, Natalia; Kuosmanen, Timo; Ali-Yrkkö, Jyrki; Pajarinen, Mika

  1. By: Vujanovic, Nina; Radosevic, Slavo; Stojcic, Nebojsa; Hisarciklilar, Mehtap; Hashi, Iraj
    Abstract: The beneficial effects of innovation for firm performance and competitiveness are well established but it has been suggested in recent years that innovation regimes differ between advanced and emerging economies. While advanced economies rely on knowledge generation, their emerging counterparts follow mainly knowledge use regime through the application of existing knowledge and technology. Climbing up the technological ladder can be helped through spillovers from foreign investors to local firms. We investigate whether FDI spillovers influence different phases of innovation process (from decision to innovate to productivity) among knowledge using and knowledge creating firms in an emerging European economy. The results show that innovation process in emerging economies is closer to imitation than creation of novel products. Local firms benefit from foreign counterparts in the early phase of innovation process. Stronger FDI effects are found on firms that undertake innovation through knowledge use than through knowledge generation.
    Keywords: knowledge use; knowledge generation; FDI; innovation; emerging economy
    JEL: O31
    Date: 2022–01
  2. By: FUKUGAWA Nobuya
    Abstract: University spinoffs build on strong science, which allows them to create radical innovation. Radical innovation entails uncertainty in entrepreneurial outcomes, necessitating the participation of individuals and organizations that bridge the gap between science and the market. Recognizing that the commercial success of university spinoffs hinges on the entrepreneurial ecosystems they are embedded in, this study establishes unbalanced panel data (2015-2020) to examine the relationships among the key factors in university spinoff ecosystems: scientific productivity of academic researchers associated with university spinoffs, radicalness of the innovation created by the university spinoff, and entrepreneurial intermediaries who bridge the gap between science and the market. Estimation results reveal that h5-index positively affects venture capital funding. The quality of innovation does not affect the probability of university spinoffs receiving venture financing, negating the scout function of entrepreneurial intermediaries. Venture capital financing positively affects sales growth of university spinoffs, corroborating the coach function of entrepreneurial intermediaries.
    Date: 2022–02
  3. By: Van Reenen, John
    Abstract: If innovation is to be subsidized, a natural place to start is to increase the quantity and quality of human capital. Innovation, after all, begins with people. Simply stimulating the “demand side” through R&D subsidies and tax breaks may only drive up the price, rather than the volume of research activity. By contrast, increasing the supply of potential inventors can both directly increase innovation and reduce its cost. This paper examines the evidence on human capital policies for stimulating innovation such as expanding the home-grown workforce, fostering immigration, boosting universities and reducing barriers to entry into inventor careers, especially for under-represented groups. The evidence suggests targeting high ability but disadvantaged potential inventors at an early age is likely to have the largest long-run effects on growth.
    Keywords: innovation; R&D; intellectual property; tax; competition
    JEL: O31 O32
    Date: 2021–04–20
  4. By: Stojcic, Nebojsa; Pylak, Korneliusz; Jurlina Alibegovic, Dubravka
    Abstract: We investigate the impact of a decade-long large public entrepreneurial infrastructure investment programme in an emerging European economy. Using a unique dataset, we examine the short-run firm, city and inter-city effects of entrepreneurial zones (EZs). EZs have a positive impact on business investment, sales and especially export revenues of firms located within them. Positive economic effects of EZs are limited on host and neighbouring towns and cities, decrease with distance and eventually become negative. This points to the localised nature of EZs effects and their potential for spatial redistribution and clustering of economic activity.
    Keywords: Entrepreneurial zones; spillover effects; firm performance; exports; economic incentives; emerging economies
    JEL: L26 O12 R38
    Date: 2022–01
  5. By: Rammer, Christian
    Abstract: Process innovation is an important part of firms' innovation activities and supposed to significantly contribute to positive returns from innovation. Measuring process innovation output at the firm level is still in its infancy, however. This paper reports empirical evidence on measures of process innovation output that have been collected in the German part of the Community Innovation Survey (CIS) over the past 25 years. Distinguishing between cost reduction and quality improvement, the paper finds low item non-response for the qualitative (yes/no) part of both indicators. Item non-response is much higher for quantitative information and does not decrease with questionnaire experience of firms. For both cost reduction and quality improvement, response to quantitative indicators is categorical in nature, and firms tend to report the same set of values when participating frequently in the survey. The determinants of realising the two types of process innovation output are very similar. The observed variance in the quantitative part is difficult to explain for both measures. The impact of process innovation output on firm performance is limited. While cost reduction seems to spur the export share, sales increase due to quality improvement is associated with higher profitability.
    Keywords: Process innovation,innovation output,panel data,Community Innovation Survey
    JEL: O31 O32 O33
    Date: 2022
  6. By: Valero, Anna
    Abstract: This paper summarises the literature that has linked education and economic growth. It begins with an overview of the key concepts in neoclassical and endogenous growth models, and discussion on how these have been tested in the data. Issues with respect to specification, the measurement of human capital and causality are discussed, together with studies that have sought to address these. A more recent and growing literature that explores the links between firm level human capital and productivity, including externalities, is then summarised. Beyond studies that link human capital to economic performance directly, there are numerous studies that have explored the relationships between human capital and the determinants of growth including investment, technology adoption and invention. Key findings from this literature are drawn out, together with a summary of the literature that has linked the activities of universities (key producers of both human capital and innovation) to their local economies. The paper concludes with discussion of policy implications stemming from this body of research, and promising areas for future research.
    Keywords: human capital; growth; innovation
    JEL: O30 O40
    Date: 2021–04–28
  7. By: Redha Fares; Amélie Guillin
    Date: 2022
  8. By: Lenihan, Helena; Mulligan, Kevin; Doran, Justin; Rammer, Christian; Ipinnaiye, Olubunmi
    Abstract: Foreign-owned subsidiaries make significant contributions to national Research and Development (R&D) in many host countries. Policymakers often support subsidiaries through R&D grants and R&D tax credits. A key objective of this funding is to leverage R&D-driven firm performance benefits for the host economy. However, the subsidiary's parent firm may decide not to exploit the results from publicly-funded R&D projects in the host country. Therefore, supporting subsidiaries' R&D presents a risk that significant amounts of public funding may translate into little, or no payoffs for the host economy. Our study provides the first evaluation of 1) whether public R&D funding stimulates additional R&D investment in subsidiaries, 2) whether policy-induced R&D drives subsidiary performance, and 3) the differential effects of R&D grants and R&D tax credits. Drawing on a unique panel dataset for Ireland (2007-2016), we find that both R&D supports drive subsidiary R&D, resulting in substantial host country firm performance benefits.
    Keywords: Public funding for R&D,Firm performance,Firm ownership,Foreign-owned subsidiaries,Multinational enterprise,R&D tax credit,R&D grant,Policy evaluation
    JEL: D22 O25 F23 F21 O38 D04 H25 O31
    Date: 2022
  9. By: Diego A. Cerdeiro; Cian Ruane
    Abstract: After impressive growth in the 2000s, China's productivity has more recently stagnated. We use firm-level data to analyze productivity and firm dynamism trends from 2003 to 2018. We document six facts that together show a decline in China’s business dynamism. We show that (i) the revenue share of young firms has declined, (ii) the life-cycle growth of young firms relative to older incumbents has slowed, (iii) weaker life-cycle growth can be explained by slower productivity growth and weaker investment in intangibles, (iv) younger and smaller firms are more capital constrained than their older and larger counterparts, (v) the responsiveness of capital growth to the marginal product of capital has declined, and (vi) large productivity gaps between SOEs and private firms persist. We find that business dynamism is weaker in provinces where SOEs account for a larger share of the capital stock. Our results suggest that declining private business dynamism is an important factor in explaining China's sluggish TFP growth and that SOE reform could boost productivity growth indirectly by stimulating business dynamism.
    Keywords: China, total factor productivity, growth, business dynamism.; business dynamism; life-cycle growth; SOE reform; China's productivity; dynamism trend; Productivity; Public enterprises; Total factor productivity; Capital productivity; Aging
    Date: 2022–02–18
  10. By: Czarnitzki, Dirk; Fernández, Gastón P.; Rammer, Christian
    Abstract: Artificial Intelligence (AI) is often regarded as the next general-purpose technology with a rapid, penetrating, and far-reaching use over a broad number of industrial sectors. A main feature of new general-purpose technology is to enable new ways of production that may increase productivity. So far, however, only very few studies investigated likely productivity effects of AI at the firm-level; presumably because of lacking data. We exploit unique survey data on firms' adoption of AI technology and estimate its productivity effects with a sample of German firms. We employ both a cross-sectional dataset and a panel database. To address the potential endogeneity of AI adoption, we also implement an IV approach. We find positive and significant effects of the use of AI on firm productivity. This finding holds for different measures of AI usage, i.e., an indicator variable of AI adoption, and the intensity with which firms use AI methods in their business processes.
    Keywords: Artificial Intelligence,Productivity,CIS data
    JEL: O14 O31 O33 L25 M15
    Date: 2022
  11. By: Giuseppina Testa (European Commission - JRC); Ramón Compañó (European Commission - JRC); Ana Correia; Eva Rückert
    Abstract: This paper provides insights into the geographical and sectorial distribution of EU unicorns. Using the Unicorn club data from Dealroom up to mid-2021, it explores where they are located, how old they are and how they reached unicorn status. The analysis takes the form of a comparative study of unicorns from the EU, the US and China. We compare the three locations in terms of the age of companies at which unicorn status is reached, the number of financing rounds and the overall amount of financing raised by the time unicorn status is attained. We also profile the top investors in European unicorns and their acquisition strategies. We then look at the unicorn founders in terms of gender, place of origin and educational background. Finally, we discuss the role of government intervention, in particular of the European Innovation Council, in supporting the development of fast-growing companies.
    Keywords: unicorn, startups, scaleups, venture capital, finance, innovation
    JEL: O32 O31 O25
    Date: 2022–02
  12. By: Doran, Kirk (University of Notre Dame); Gelber, Alexander (University of Pennsylvania); Isen, Adam (U.S. Department of the Treasury)
    Abstract: We compare winning and losing firms in lotteries for H-1B visas, matching administrative data on these lotteries to administrative tax data on U.S. firms and to approved U.S. patents. Winning one additional H-1B visa crowds out about 1.5 other workers at the firm. Additional H-1Bs have insignificant and at most modest effects on firm innovation. More general evidence from the universe of U.S. firms and the universe of H-1B visas using alternative estimation strategies is consistent with these results. Firms that hire H-1Bs grow faster and innovate more because they are different in other ways from firms that do not.
    Keywords: immigration, highly skilled workforce, innovation, employment
    JEL: J00 J08 J15 J23 J24 J48
    Date: 2022–03
  13. By: Rettl, Daniel A. (University of Georgia); Schandlbauer, Alexander (University of Southern Denmark); Trandafir, Mircea (University of Southern Denmark)
    Abstract: When workers are in bad health, their productivity declines. We investigate whether the health of employees affects firm performance, taking advantage of the severity of the seasonal influenza seasons as a source of exogenous variation. We find that firms whose employees are particularly affected by influenza experience reductions in their return on assets and in net income. These results are not driven by firm-specific characteristics, as we find the same relationship between influenza severity and firm performance within firms, at the establishment level. We also document substantial heterogeneity in the effects, with small firms and labor-intensive firms driving our findings. This suggests that labor is an important driver of firm performance and that capital-intensive and larger firms are better able to shift resources in response to temporary shocks to their workforce. Back-of-the-envelope calculations suggest that smaller firms may be better off subsidizing vaccination programs for their employees.
    Keywords: seasonal influenza, health shock, firm performance
    JEL: L25 I12 G30 J31
    Date: 2022–03
  14. By: Davis, Steven J.; Haltiwanger, John C.; Handley, Kyle; Lerner, Joshua; Lipsius, Ben; Miranda, Javier
    Abstract: The effects of private equity buyouts on employment, productivity, and job reallocation vary tremendously with macroeconomic and credit conditions, across private equity groups, and by type of buyout. We reach this conclusion by examining the most extensive database of U.S. buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and millions of control firms. Employment shrinks 13% over two years after buyouts of publicly listed firms - on average, and relative to control firms - but expands 13% after buyouts of privately held firms. Post-buyout productivity gains at target firms are large on average and much larger yet for deals executed amidst tight credit conditions. A post-buyout tightening of credit conditions or slowing of GDP growth curtails employment growth and intra-firm job reallocation at target firms. We also show that buyout effects differ across the private equity groups that sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in deal flow at the group level brings lower employment growth at target firms.
    Keywords: administrative data,business cycle,credit conditions,employment,private equity,productivity
    JEL: D24 G24 G32 G34 J23 J63 L25
    Date: 2022
  15. By: TANAKA Ayumu; ITO Banri; JINJI Naoto
    Abstract: In this study, we conduct a conjoint survey experiment in Japan to analyze the determinants of preferences toward the acquisitions by foreign firms. Conjoint survey experiments allow us to simultaneously estimate the effects of various attributes of foreign acquisitions, enabling us to analyze the complex causal relationships between various attributes of an acquisition project and people's antipathy toward it. The results of the experiment demonstrate that the nationality of the foreign firm, reciprocity, and the economic conditions of the location of the firm being acquired are important factors. Specifically, our respondents' approval rates for acquisitions by US firms are higher and those for acquisitions by Chinese, Korean, and Russian firms are lower compared to those for the acquisitions by the baseline "foreign firms." Moreover, their approval rates are higher for acquisitions by firms from countries that have been receptive to Japanese investment and for the foreign takeover of firms in areas with a high unemployment rate.
    Date: 2022–02
  16. By: Riehl, Kevin; Kiesel, Florian; Schiereck, Dirk
    Abstract: Green innovation and technology diffusion must be financially and commercially attractive to convince corporate decision makers. This paper focuses on the factors that determine the financial outcome of successful green innovation activities conducted by large, listed companies. We employ a cross-industry dataset including more than 97,954 reports on corporate environmentalism from 286 international listed companies. Our results indicate that economic, political, cultural, firm-specific, investor-related, and governance factors significantly determine the financial performance of green innovation, measured by abnormal returns. Moreover, we can show that factors that reduce the competition in green innovation markets benefit the financial success of firms operating via them. Finally, we find an opposing influence for several factors that benefit earlier stages of innovation (e.g., research output) while harming the later stages (e.g., market introduction and financial performance). These findings imply that a spatial separation strategy for different stages of innovation supports corporate environmentalism activities. Moreover, physical property rights, the governments’ willingness to support green technologies, and economic framework conditions such as oil price, GDP, or public R&D budget need to be balanced by policymakers to address and stimulate green innovation.
    Date: 2022
  17. By: Axenbeck, Janna; Niebel, Thomas
    Abstract: Although information and communication technologies (ICT) consume energy themselves, they are considered to have the potential to reduce overall energy intensity within economic sectors. While previous empirical evidence is based on aggregated data, this is the first large-scale empirical study on the relationship between ICT and energy intensity at the firm level. For this purpose, we employ administrative panel data on 28,600 manufacturing firms from German Statistical Offices collected between 2009 and 2017. Our results confirm a statistically significant and robust negative link between software capital as an indicator for the firm-level degree of digitalization and energy intensity, but the effect size is rather small. Hence, we conclude that energy intensity reductions related to the use of digital technologies are lower than expected.
    Keywords: ICT,Firm-level panel data,Energy intensity improvements
    JEL: D22 D24 L60 O12 O14 O33 Q40
    Date: 2021
  18. By: Kuosmanen, Natalia; Kuosmanen, Timo; Ali-Yrkkö, Jyrki; Pajarinen, Mika
    Abstract: Abstract Productivity growth in Finland has slowed down due to structural change. Firms are in a continuous process of renewal in a dynamic economy. In addition to firms’ entry and exit, the structure of business sector also renews internally. Some firms renew their product and service offerings to such an extent that they change industry. We find that industry switching by firms are surprisingly common in Finnish business sector. As many as a quarter of companies in the early 2000s that continue to operate in 2018 have switched industries. Similar to entry and exit, the renewal of products and service offerings is a part of structural change that can impact productivity growth of industries. Industry switching has both positive and negative contributions to aggregate productivity in different industries and periods. Gradual industry switching mainly has negative impact on productivity growth suggesting that the change of industry is a survival strategy. On the other hand, more radical industry changes generally have positive impacts on productivity. This result is particularly relevant to the Finnish innovation policy that aims to provide incentives for continuous renewal of companies. Much research has been done on barriers to startup establishment. However, industry switching is also a form of entry, and the barriers of product switching and how those could be lowered should be further explored.
    Keywords: Industry, Industry switching, Productivity, Renewal, Structural change
    JEL: D4 O47 D23
    Date: 2022–03–28

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