nep-sbm New Economics Papers
on Small Business Management
Issue of 2023‒01‒23
sixteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Self-Efficacy and Entrepreneurial Performance of Start-Ups By Marco Caliendo; Alexander Kritikos; Daniel Rodriguez; Claudia Stier
  2. Crisis, innovation and change management: A blind spot for micro-firms? By Chatzinikolaou, Dimos; Vlados, Charis
  3. Discovery processes for transformative innovation policy By LARANJA Manuel; PERIANEZ FORTE Inmaculada; REIMERIS Ramojus
  4. The 2022 EU Survey on Industrial R&D Investment Trends By NINDL Elisabeth
  5. On the determinants of corporate default in the EU-27: Evidence from a large sample of companies By FATICA Serena; OLIVIERO Tommaso; RANCAN Michela
  6. Judge Bias in Labor Courts and Firm Performance By Pierre Cahuc; Stéphane Carcillo; Bérangère Patault; Flavien Moreau
  7. R&D and Regional Competitiveness: A Study of Global Entrepreneurial Firms By Link, Albert; Sardar, Rashedur
  8. Bank Local Specialization By Anne Duquerroy; Clément Mazet-Sonilhac; Jean-Stéphane Mésonnier; Daniel Paravisini
  9. Foreign Shocks as Granular Fluctuations By Julian Di Giovanni; Andrei A Levchenko; Isabelle Mejean
  10. Chaebols and Firm Dynamics in Korea By Philippe Aghion; Sergei Guriev; Kangchul Jo
  11. Firm Cyclicality and Financial Frictions By Alex Clymo; Filip Rozsypal
  12. Entrepreneurial openness, creativity, and firm growth By Mindsponge, AISDL
  13. Enhancing sustainability dimension in Smart Specialisation strategies: a framework for reflection By MIEDZINSKI Michal; COENEN Lars; LARSEN Henrik; MATUSIAK Monika; SARCINA Angela
  14. The Contribution of High-Skilled Immigrants to Innovation in the United States By Shai Bernstein; Rebecca Diamond; Abhisit Jiranaphawiboon; Timothy McQuade; Beatriz Pousada
  15. La brecha de género en el emprendimiento y la cultura emprendedora: Evidencia con Google Trends By Gutiérrez, Antonio
  16. Theories of Financing for Entrepreneurial Firms: A Review By Miglo, Anton

  1. By: Marco Caliendo (University of Potsdam, IZA, DIW, IAB); Alexander Kritikos (DIW Berlin, University of Potsdam, IZA, IAB); Daniel Rodriguez (University of Potsdam); Claudia Stier (University of Potsdam)
    Abstract: Self-efficacy reflects the self-belief that one can persistently perform difficult and novel tasks while coping with adversity. As such beliefs reflect how individuals behave, think, and act, they are key for successful entrepreneurial activities. While existing literature mainly analyzes the influence of the task-related construct of entrepreneurial self-efficacy, we take a different perspective and investigate, based on a representative sample of 1, 405 German business founders, how the personality characteristic of generalized self-efficacy influences start-up performance as measured by a broad set of business outcomes up to 19 months after business creation. Outcomes include start-up survival and entrepreneurial income, as well as growth-oriented outcomes such as job creation and innovation. We find statistically significant and economically important positive effects of high scores of self-efficacy on start-up survival and entrepreneurial income, which become even stronger when focusing on the growth-oriented outcome of innovation. Furthermore, we observe that generalized self-efficacy is similarly distributed between female and male business founders, with effects being partly stronger for female entrepreneurs. Our findings are important for policy instruments that are meant to support firm growth by facilitating the design of more target-oriented offers for training, coaching, and entrepreneurial incubators.
    Keywords: entrepreneurship, firm performance, general self-efficacy, survival, job creation, innovation
    JEL: L26 M13 D91
    Date: 2023–01
  2. By: Chatzinikolaou, Dimos (Democritus University of Thrace, Department of Economics); Vlados, Charis (Democritus University of Thrace, Department of Economics)
    Abstract: Purpose This paper aims to explore how the owners of less competitive micro-firms (MFs) perceive the “crisis–innovation–change management” triangle. It examines whether their understanding of these overarching entrepreneurship theory principles is inadequate compared to the relevant scientific literature. Design/methodology/approach This qualitative analysis follows principles based on the inductive method and grounded theory, thickly describing the results from research conducted in a sample of 38 tertiary-sector MFs in the Eastern Macedonia and Thrace region – one of the least developed and competitive areas across Europe. It triangulates the data with 11 respective small firms. Findings MF owners perceive the crisis as an ostensibly exogenous phenomenon, innovation as something quasi-unattainable – although vaguely significant – and change management as a relatively unknown process. This understanding lies somewhat distant from the extant literature that examines the structural nature of crises, the innovational power to exit profound restructurings and the rebalancing requisite for building new overall organizational methods to survive this internal–external transformation. In essence, the triangle crisis–innovation–change management is a blind spot for the examined MF owners as they ignore its significance as an adaptation mechanism – contrary to several direct competitors. Social implications Based on the reluctance of these individuals to cultivate their systematic business knowledge, it seems unrealistic that they would seek to pay the necessary high price for business consulting in the future. An ideal solution would be to build public entrepreneurship clinics to provide these less dynamic and adaptable organizations with free preliminary or in-depth counseling. The Institute of Local Development-Innovation could aim to provide free consulting services to reinforce organizational physiology by coordinating different socioeconomic actors. Originality/value To the best of our knowledge, this empirical research is one of the first to test the comprehension of weaker MFs – less competitive and developed in organizational terms – to the triangle crisis–innovation–change management.
    Keywords: Entrepreneurship; Micro-firms; Crisis; Innovation; Change management; Entrepreneurship reinforcement policy
    JEL: L26 L53 O10
    Date: 2022–10–03
  3. By: LARANJA Manuel; PERIANEZ FORTE Inmaculada (European Commission - JRC); REIMERIS Ramojus (European Commission - JRC)
    Abstract: Smart Specialisation Strategies - S3, designed and implemented through entrepreneurial discovery processes – EDP during 2014-2020, are likely to continue to play an important role under the policy objective of a Smarter Europe in the next EU funding programming cycle 2021-2027. Innovation policy and S3 now should be aligned with EU Green and Digital transitions with the aim to contribute to systemic transformation. By selectively reviewing conceptual and empirical studies, this paper identifies critical lessons from Smart Specialisation implementation and EDP that may be relevant for Member States and regions adopting a new S3 innovation policy frame. In particular, in the context of the Partnerships for Regional Innovation (PRI), lessons from EDP practices may be useful for conceptualisation and development of the proposed Open Discovery Processes - ODP.
    Keywords: Discovery processes, transformative innovation policy, entrepreneurial discovery process, open discovery process
    Date: 2022–12
  4. By: NINDL Elisabeth (European Commission - JRC)
    Abstract: This report presents the results of the 2022 survey of the top 1 000 EU companies by R&D investment in 2020, conducted between June and September 2022. The survey is intended to provide insights into the research and development activities of the R&D investors listed in the 2021 EU Industrial R&D Investment Scoreboard (Scoreboard 2021). The objective of this survey is to gather future expectations for R&D investment and gain first-hand information on barriers and drivers and the role of various activities that influence the level and direction of R&D investment. The survey addresses financing and collaboration, technology transfer and open innovation, and the effects of COVID-19 and the war in Ukraine. The response rate stood at 12%. The number of responses increased by 31.5% compared to the previous year, and the respondents accounted for over 26% of the R&D investment of the top 1 000 EU corporate investors in R&D. The results show a strong recovery in R&D investment after the COVID-19 pandemic, and the respondents expect this positive development to continue in 2022 and 2023. The main drivers of R&D investment are environmental sustainability and digitalisation. The respondents’ capital investment is largely driven by technologies to reduce emissions and to adapt to Industry 4.0. The survey thus confirms that innovative EU companies are actively helping to meet the targets set out in the European Green Deal and the green and digital transformation (the Twin Transition).
    Keywords: R&D, Survey, EU Industrial R&D Scoreboard, Innovation, Growth
    Date: 2022–12
  5. By: FATICA Serena (European Commission - JRC); OLIVIERO Tommaso; RANCAN Michela
    Abstract: We analyze a large sample of companies operating in the EU-27 in the period 2007-2018 to gain new insights on the determinants of corporate defaults. The sample includes micro, small, medium and large enterprises, both active and defaulting. We document significant differences in the drivers of insolvency across firm size categories. Micro and small firms are significantly more vulnerable to sectoral shocks and to disruptions along the supply chain than larger companies. Instead, the default probability for all firms is significantly larger when companies experience in the previous year negative end-of-the year equity, that is a measure of prolonged financial distress. By exploiting institutional differences in judicial efficiency among EU-27 countries, we find financial distress is more likely to predict default in jurisdictions with more efficient insolvency procedures. Finally, we derive potential implications of our findings, especially with regard to the recent crises hitting European firms and the harmonisation of national insolvency regimes in the EU-27 towards most efficient legal practices, as foreseen under the Capital Markets Union Action Plan.
    Keywords: bankruptcy, financial distress, SMEs, EU-27, judicial efficiency
    Date: 2022–12
  6. By: Pierre Cahuc (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics, CEPR - Center for Economic Policy Research - CEPR); Stéphane Carcillo (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics); Bérangère Patault (UvA - University of Amsterdam [Amsterdam]); Flavien Moreau (IMF - "Research Department International Monetary Fund (IMF)" - International Monetary Fund (IMF))
    Abstract: Does judge subjectivity in labor courts influence firm performance? We study the economic consequences of judge decisions by collecting information on Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias, defined as judge-specific differences on granting compensation for wrongful dismissal, has statistically significant effects on the survival and employment of small firms, especially among very small and low-performing ones. When compensation for wrongful dismissal is instrumented by judge bias, an increase in compensation of 1 percent of the payroll reduces employment growth by 5 percentage points after 3 years for those firms.
    Keywords: Dismissal compensation, Judge bias, Firm survival, Employment
    Date: 2022–03
  7. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics); Sardar, Rashedur (University of North Carolina at Greensboro, Department of Economics)
    Abstract: We quantify, using data from the World Bank’s Enterprise Surveys and the World Economic Forum’s Global Competitiveness Index, the empirical relationship between global competitiveness and R&D investment activity as well as the independent relationship between global competitiveness and R&D investments across geographic regions of economic development. We also explore alternative measures of the effectiveness of R&D investments. Our findings suggest that R&D investments are a possible policy target variable in high-income regions for policy makers to consider for increasing firms’ global competitiveness.
    Keywords: R&D; global competitiveness; entrepreneurship; regional growth; program management;
    JEL: H11 L26 O32 O38
    Date: 2023–01–04
  8. By: Anne Duquerroy (Centre de recherche de la Banque de France - Banque de France); Clément Mazet-Sonilhac (Centre de recherche de la Banque de France - Banque de France, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Jean-Stéphane Mésonnier (Centre de recherche de la Banque de France - Banque de France, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Daniel Paravisini (LSE - London School of Economics and Political Science, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: Using micro-data of the universe of bank-SME relationships in France, we show that banks specialize locally (at the branch level) by industry, and that this specialization shapes the equilibrium amount of borrowing by small firms. For identification, we exploit the reallocation of local clients from closed down branches to nearby branches of the same bank, which induced quasi-random variation in the match between a firm's industry and the industry of specialization of the lending branch. We show that branch reallocation leads, on average, to a substantial and permanent decline in small firm borrowing. This decline is twice larger for firms whose accounts are reallocated from branches less specialized in their industry than the original one.
    Keywords: Bank specialization, SMEs, Relationship banking, Branch closures
    Date: 2022–02–03
  9. By: Julian Di Giovanni (Federal Reserve Bank of New York, CEPR - Center for Economic Policy Research - CEPR); Andrei A Levchenko (University of Michigan System, CEPR - Center for Economic Policy Research - CEPR, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research); Isabelle Mejean (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: This paper uses a dataset covering the universe of French firm-level value added, imports, and exports over the period 1995-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. Because the largest firms are the most likely to trade internationally, foreign shocks are transmitted to the domestic economy primarily through the large firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of the observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 45 to 75% of the impact of foreign fluctuations on French GDP is accounted for by the "foreign granular residual"-the term capturing the larger firms' greater responsiveness to the foreign shocks. At the macro level, firm heterogeneity attenuates the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model.
    Keywords: Granularity, Shock transmission, Aggregate fluctuations, Input linkages, International trade
    Date: 2022–09–06
  10. By: Philippe Aghion (LSE - London School of Economics and Political Science, Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France); Sergei Guriev (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Kangchul Jo (BOK ERI - Bank of Korea Economic Research Institute)
    Abstract: We study firm dynamics in Korea before and after the 1997/8 Asian crisis and pro-competitive reforms that reduced the dominance of chaebols. We find that in industries that were dominated by chaebols before the crisis, labour productivity and total factor productivity of non-chaebol firms increased markedly after the reforms (relative to other industries). Furthermore, entry of non-chaebol firms increased significantly in all industries after the reform. After the crisis, the non-chaebol firms also dramatically increased their patenting activity. Finally, markups of chaebol firms declined substantially, especially within industries dominated by chaebols before the crisis. These results suggest that the crisis had the virtue of helping Korea move from catching-up growth based on investment in existing technologies to innovation-based growth.
    Date: 2021–10–01
  11. By: Alex Clymo (University of Essex); Filip Rozsypal (Danmarks Nationalbank; Centre for Macroeconomics (CFM))
    Abstract: Using administrative micro data we document how firms’ sensitivities to business cycles differ by size and age. Among the youngest firms, small firms are more cyclical than large, but the reverse is true among older firms. The differences in cyclicality are large: “young and small firms” are nearly twice as cyclical as large firms, who respond one-and-half to one to the aggregate business cycle. In contrast, “old and small” firms are almost acyclical on average. High leverage firms are more cyclical than low leverage firms which—when combined with the age-profiles and cyclicalities of financial variables—suggests that financial frictions are likely to explain the excess cyclicality of “young and small” firms, but not of large firms. Augmenting a dynamic heterogeneous-firm model with heterogeneous returns-to-scale and entrant wealth allows it to replicate these findings, and implies that financial policies targeted at young firms become less effective in stimulating aggregate output while the opposite is true for direct labor subsidies.
    Keywords: firm age, firm size, cyclicality, financial frictions
    Date: 2022–05
  12. By: Mindsponge, AISDL
    Abstract: A recent study published in Frontiers in Psychology offers some insights into how entrepreneurs’ creativity and company growth can be affected by entrepreneurial openness and creative personality
    Date: 2022–11–03
  13. By: MIEDZINSKI Michal (European Commission - JRC); COENEN Lars; LARSEN Henrik; MATUSIAK Monika (European Commission - JRC); SARCINA Angela (European Commission - JRC)
    Abstract: This report introduces a tested reflection framework addressed to policy practitioners and experts working in regions and countries willing to strengthen the sustainability dimension of their Smart Specialisation strategies. The framework features reflection questions based on extensive theoretical research and tested in practice. The questions are illustrated with examples of current practices and practical insights from policy makers about each step of the Smart Specialisation process. The framework was co-developed in a close collaboration with more than 30 policy practitioners from 12 regions and countries in Europe and beyond. It was designed to sparkle inspiration on how to mobilise research and innovation to address the SDGs in diverse territorial contexts, including places facing institutional and structural challenges. The framework is underpinned by an inclusive approach to thinking about innovation and innovation policy considering them fundamental for fostering sustainability transition in all territories.
    Keywords: Smart specialisation, SDGs, innovation for sustainability
    Date: 2022–12
  14. By: Shai Bernstein; Rebecca Diamond; Abhisit Jiranaphawiboon; Timothy McQuade; Beatriz Pousada
    Abstract: We characterize the contribution of immigrants to US innovation, both through their direct productivity as well as through their indirect spillover effects on their native collaborators. To do so, we link patent records to a database containing the first five digits of more than 230 million of Social Security Numbers (SSN). By combining this part of the SSN together with year of birth, we identify whether individuals are immigrants based on the age at which their Social Security Number is assigned. We find immigrants represent 16 percent of all US inventors, but produced 23 percent of total innovation output, as measured by number of patents, patent citations, and the economic value of these patents. Immigrant inventors are more likely to rely on foreign technologies, to collaborate with foreign inventors, and to be cited in foreign markets, thus contributing to the importation and diffusion of ideas across borders. Using an identification strategy that exploits premature inventor deaths, we find that immigrant inventors create especially strong positive externalities on the innovation production of their collaborators, while natives have a much weaker impact. A simple decomposition illustrates that immigrants are responsible for 36% of aggregate innovation, two-thirds of which is due to their innovation externalities on their native-born collaborators.
    JEL: J6 O31
    Date: 2022–12
  15. By: Gutiérrez, Antonio
    Abstract: This paper empirically analyses the entrepreneurship gender gap and geographic variations of the entrepreneurship culture in the United States. To do so, we use Google search engine queries. First, we construct a composite index using factor analysis on searches related to entrepreneurship. Second, we explored the degree of local sexism that exists across the United States. Therefore, we use a simple index that represents sexist queries made on the search engine. The results indicate a positive and statistically significant correlation between the composite index and the number of companies based in each market area. The local sexism index fails to explain the gender gap in entrepreneurship. Conversely, it is intra-household decisions and the proportion of individuals in each age group that show statistically significant correlations with the entrepreneurship gender gap.
    Keywords: entrepreneurship; gender gap; entrepreneurship culture; Google Trends; Big Data
    JEL: J16 J71 L26 O51
    Date: 2023–01
  16. By: Miglo, Anton
    Abstract: This article provides an overview of literature related to capital structure theories for entrepreneurial firms. It identifies gaps and controversial areas in existing literature and also discusses potential directions for future research. Credit rationing, signalling by risk-bearing, the learning market demand idea, and the flexibility theory of capital structure are consistent with many patterns of financing of entrepreneurial firms. Credit rationing is the dominant area of research. Several directions have emerged that need answers such as for example which channel of credit rationing represents its main driving force. More empirical research is expected in signalling by risk-bearing. More theoretical and empirical research is expected regarding learning market demand and flexibility ideas. Pecking-order theory and trade-off theory play a significant role in large corporations but not so much in SMEs. More research is required investigating modified versions of each theory.
    Keywords: entrepreneurial finance, small business financing, capital structure, credit rationing, signalling by risk-bearing, flexibility theory, learning market demand
    JEL: G30 G32 L26 M13 M21
    Date: 2022

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