nep-sbm New Economics Papers
on Small Business Management
Issue of 2023‒02‒13
fourteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The Status of Start-up Policy and Tasks By Yang, Hyung Bong
  2. Knowledge Networks and their Implications for the Growth of Industrial Innovation Clusters By Kim, Jisoo; Byeon, Chang-Uk
  3. Air Pollution and Firm-Level Human Capital, Knowledge and Innovation By Tiago Cavalcanti; Kamiar Mohaddes; Hongyu Nian; Haitao Yin
  4. Structural change within versus across firms: evidence from the United States By Ding, Xiang; Fort, Teresa C.; Redding, Stephen J.; Schott, Peter K.
  5. A policy toolkit to increase research and innovation in the European Union By Teichgraeber, Andreas; Van Reenen, John
  6. Does highspeed internet boost exporting? By Lynda Sanderson; Garrick Wright-McNaughton; Naomitsu Yashiro
  7. Innovation Characteristics of Korean Service Companies By Lee, Donghee; Kang, Minsung
  8. Managerial input and firm performance. Evidence from a policy experiment By Manaresi, Francesco; Palma, Alessandro; Salvatici, Luca; Scrutinio, Vincenzo
  9. Manufacturing Innovation and Policy Issues for Economic Outcomes By Lee, Sang Hyun
  10. Smart Factory Policies and SMEs’Productivity in Korea By Ju, Hyeon
  11. The research university, invention and industry: evidence from German history By Dittmar, Jeremiah; Meisenzahl, Ralf R.
  12. Financial Constraints, Productivity, and Investment: Evidence from Lithuania By Ms. Yu Shi; Karim Foda; Maryam Vaziri
  13. Service R&D Status and Policy Demands of Innovative Manufacturing Firms in Korea By Koh, Dae-Young
  14. Measuring the digitalisation of firms: A novel text mining approach By Axenbeck, Janna; Breithaupt, Patrick

  1. By: Yang, Hyung Bong (Korea Institute for Industrial Economics and Trade)
    Abstract: As start-ups play an important role in revitalizing the economy and creating jobs, many countries are concentrating their policy efforts on stimulating entrepreneurship. In 1986, the Small and Medium Enterprise Establishment Support Act was enacted in Korea. After the foreign exchange crisis, policymakers reached a consensus that small and venture businesses could serve as a new growth engine of the Korean economy, and have gradually expanded start-up support programs since then. In 2017, eight central government ministries, including the Ministry of SMEs and Start-ups, along with 17 local governments, were found to have carried out 180 startup support projects. The Moon Jae-in government announced its five-year plan of state administration operation in July 2017, and proposed start-up and innovation growth led by small and medium-sized venture businesses as a core strategy for national administration. In addition, in its New Government Economic Policy Direction, the Korean government emphasized innovation growth along with income-driven growth, a job-centered economy and fair growth, and announced its Plan for Creating Innovative Entrepreneurship Ecosystem last November as part of a broader strategy for promoting innovation growth. Here, the key driving force behind innovation growth is the revitalization of innovative start-ups and innovative start-up-focused job-related measures, which are led by venture firms and start-ups. In the meantime, central and local governments have been concentrating their policy efforts in promoting start-ups. As a result, since the mid2000s, there has been a notable uptick in start-up activity. The number of start-ups has been steadily increased, from 50, 855 in 2008 to 74, 162 in 2012, up to 98, 330 by 2017 and 102, 042 in 2018. This paper examines the economic functions and roles of start-up, examines the status and problems of start-up support projects conducted by the central and local governments in 2017, and proposes ways in which effective start-up policies might contribute to job creation and economic growth.
    Keywords: Innovative Start-ups; Venture Firms; SMEs
    JEL: L25 M13
    Date: 2023–01–08
  2. By: Kim, Jisoo (Korea Institute for Industrial Economics and Trade); Byeon, Chang-Uk (Korea Institute for Industrial Economics and Trade)
    Abstract: A cluster is a geographic concentration of interconnected companies and associated institutions in a particular field. It is widely accepted that clusters generate better economic performance than simple aggregations of companies, as mutual influence between clustered firms makes knowledge sharing and diffusion much easier. In this process, the novelty and diversity of accumulated knowledge is an important source of sustainable innovation and growth for the cluster. The more diversified the combined knowledge, the greater the scope and possibility of new knowledge creation. This study focuses on the relationship between cluster growth, knowledge heterogeneity and knowledge networks. First, we measure the degree of knowledge heterogeneity for each regional cluster, and verify the relationship between cluster growth and heterogeneity through empirical analysis. By analyzing this relationship for each life-cycle of a cluster, we place particular emphasis on understanding the development factor of the cluster. Second, we investigate the role of knowledge networks in cluster evolution by identifying the structural characteristics of networks. The structural characteristics cover the scope, strength, and closeness of the relationships among the network members as well as a quantitative scale. This approach will provide meaningful information in seeking cluster growth policies in terms of the formation and development of knowledge relations.
    Keywords: regional clusters; knowledge heterogeneity; cluster growth
    JEL: O32 O38 R58
    Date: 2023–01–08
  3. By: Tiago Cavalcanti; Kamiar Mohaddes; Hongyu Nian; Haitao Yin
    Abstract: This paper investigates the long-run effects of prolonged air pollution on firm-level human capital, knowledge and innovation composition. Using a novel firm-level dataset covering almost all industrial firms engaged in science and technology activities in China, and employing a regression discontinuity design, we show that prolonged pollution significantly diminishes both the quantity and the quality of human capital at the firm level. More specifically, we show that air pollution affects firm-level human capital composition by reducing the share of employees with a PhD degree and master’s degree, but instead increasing the share of employees with bachelor’s degree. Moreover, the difference in the composition of human capital materially change the knowledge and innovation structure of the firms, with our estimates showing that pollution decreases innovations that demand a high level of creativity, such as publications and inventions, while increasing innovations with a relatively low level of creativity, such as design patents. Quantitatively, on the intensive margin, one μg/m3 increase in the annual average PM2.5 concentration leads to a 0.188 loss in the number of innovations per R&D employee. Overall, we show that air pollution has created a gap in human capital, knowledge, and innovation between firms in the north and south of China, highlighting the importance of environmental quality as a significant factor for productivity and welfare.
    Keywords: Pollution, human capital, knowledge, innovation and China
    JEL: O15 O30 O44 Q51 Q56
    Date: 2023–01
  4. By: Ding, Xiang; Fort, Teresa C.; Redding, Stephen J.; Schott, Peter K.
    Abstract: We document the role of intangible capital in manufacturing firms' substantial contribution to non-manufacturing employment growth from 1977-2019. Exploiting data on firms' "auxiliary" establishments, we develop a novel measure of proprietary in-house knowledge and show that it is associated with increased growth and industry switching. We rationalize this reallocation in a model where firms combine physical and knowledge inputs as complements, and where producing the latter in-house confers a sector-neutral productivity advantage facilitating within-firm structural transformation. Consistent with the model, manufacturing firms with auxiliary employment pivot towards services in response to a plausibly exogenous decline in their physical input prices.
    Keywords: structural transformation; professional services; intangible knowledge; economic growth
    JEL: D24 L16 O47
    Date: 2022–06–01
  5. By: Teichgraeber, Andreas; Van Reenen, John
    Abstract: What research and innovation (R&I) policies should Europe adopt? The world faces a challenge to rebuild after the pandemic, but also faces the same structural slowdown of productivity growth that occurred in the decades before the COVID crisis. We need to have a plan around innovation policy to address the challenge. We show that Europe is less innovative on many dimensions compared to other advanced regions, such as the US and parts of Asia. We review the econometric evidence on R&I policies and argue that there is good evidence for the efficacy of many of them. A mix of R&D subsidies, reinvigorated competition and a big push on expanding the quantity and quality of human capital is needed. These could be bound together around the need for green innovation in order to achieve the mission to radically reduce carbon emissions.
    Keywords: innovation; R&D; human capital; Europe
    JEL: O31 O32 J24
    Date: 2022–02–25
  6. By: Lynda Sanderson (Productivity Commission); Garrick Wright-McNaughton (FNZ Group); Naomitsu Yashiro (International Monetary Fund)
    Abstract: This paper examines the links between uptake of high-speed internet and entry into exporting among New Zealand firms. The analysis draws on rich, longitudinal information about firms' use of ICT captured in Stats NZ's Business Operations Survey to both identify firms which shifted to UFB and infer differences across firms in their capability to exploit the faster internet connections. It shows that firms that shifted to fibre broadband in the early years of New Zealand's Ultra-Fast Broadband rollout were subsequently more likely than otherwise similar firms to start exporting, and that the strength of this relationship depends upon both the industry in which firms operate and their pre-existing use of the internet for core business activities. To explore the causality lying behind this relationship, the paper makes use of a policy choice to prioritise schools in the rollout of the new fibre broadband infrastructure as an instrument for early uptake. While the results are consistent with a positive effect of UFB uptake on export entry, the instruments are not strong enough to draw firm conclusions on causality.
    Keywords: high-speed internet, UFB, export propensity, digital capability
    JEL: F14 O33 H54
    Date: 2022–12
  7. By: Lee, Donghee (Korea Institute for Industrial Economics and Trade); Kang, Minsung (Korea Institute for Industrial Economics and Trade)
    Abstract: In recent years, the importance of the service industry has been steadily increasing in terms of GDP and employment. In general, it is known that the service sectors of developed countries make significant contributions to overall economic productivity compared to those in less developed countries. However, the development of Korea’s service industry rates poorly compared to advanced countries. Employment in the service industry has been increasing since the 1990s, but growth in value-added has been stagnant for the last 10 years. In addition, while the employment creation effect of the service industry is large, the proportion of low-wage workers is high, and it is estimated that most service companies are small in scale. For comparison, in 2017 the proportion of workers with an average monthly wage of less than 2 million won is 29.3 percent in the manufacturing industry and 48.1 percent in the service industry. With such a high proportion GDP and employment in service industry, awareness of the problem of low productivity in the service sector is growing and the issue is naturally attracting policy attention to service innovation, that is, service R&D investment. In this paper, we analyze the characteristics of R&D investment behavior in order to derive policy implications for innovation investment in Korean service companies. The authors performed a principal component analysis (PCA) and a cluster analysis on Korean service and manufacturing based on innovation behavior. In the analysis, the firms are classified by the innovation behavior rather than Standard Industry Classification (SIC). Even if two companies are possess the same SIC designation, there may be various differences in innovation behavior depending on the management environment and capacity of each individual company. Therefore, classifying business groups based on innovation behavior rather than SIC is a better approach to understanding companies in terms of innovation.
    Keywords: R&D Investment Behavior; Innovation Investment; Korea Service Industry
    JEL: L80 O33
    Date: 2023–01–08
  8. By: Manaresi, Francesco; Palma, Alessandro; Salvatici, Luca; Scrutinio, Vincenzo
    Abstract: We study the effects of a subsidy program designed to boost small and medium enterprises' export capabilities through a Temporary Export Manager (TEM), hired for at least 6 months to provide consulting on how to reach foreign markets. Firms applied online for the subsidy and vouchers to hire TEMs were allocated on a first-come, first-served basis. We use a difference-in-differences design to compare the performances of firms that nearly got the subsidy with those that barely did not. Eligible firms experienced a large increase in revenues, return on equity, profits and value added per employee, accompanied by a significant growth in export in extra-EU markets four years after receiving the subsidy. The gains were larger for the least productive and smaller firms and effects were heterogeneous across TEM providers. TEMs were also effective in stimulating 'good' labor demand: besides intensifying exports, firms increased their workforce by nearly 13%, mainly in full-time and permanent employees. Results of a survey conducted on TEM providers confirm our econometric results and revealed that the benefits of voucher extended beyond the initial subsidized service.
    Keywords: SMEs; export subsidy; labor demand; natural experiment; click-day
    JEL: L20 O40 F14 H20 F20
    Date: 2022–10–05
  9. By: Lee, Sang Hyun (Korea Institute for Industrial Economics and Trade)
    Abstract: With the advent of Fourth Industrial Revolution, being a leader is crucial to economic survival as well as corporate and national competitiveness. At the same time, standards of competitiveness in manufacturing are shifting, from efficiency to value creation through manufacturing capability. Since manufacturing leaders possess the ability to develop and apply new technologies, innovation that supports those abilities will determine who gets ahead in the new era of 4IR. From this aspect, Korea has a great advantage in terms of innovation capability. With active and continuous R&D investment, Korea is equipped with scientific innovation capabilities. It was selected as the most innovative country in the Bloomberg Innovation Index for six years in a row. However, Korean manufacturing is losing its vitality, with a continuous decline in production, exports and the ratio of value added. In addition, the manufacturing ecosystem is tottering and polarization is increasingly stark as the productivity discrepancy between firms is growing larger. The Korean economy is now facing a “Korean Paradox”. To bridge the gap between innovation and practical economic value creation, we need to take different view from the previous research. Previous studies put weight on the efficiency of R&D activity and its fruits, such as new technologies and products. So most studies propose policy suggestions supporting R&D activity and improving the innovation system at the national and regional scale. Such a views is based on the simple assumption that R&D outcomes directly translate to economic value. However, the economic value creation process is more complicated in the real world and involves the performance of firms and industries. Therefore, we differentiate ourselves by taking a manufacturing innovation point of view which include firms and industries. The path of economic value creation in this study includes two more steps before ultimately arriving at value creation at firms and industries.
    Keywords: manufacturing; Korean manufacturing; innovation; innovation capacity; R&D
    JEL: L60 O32
    Date: 2023–01–08
  10. By: Ju, Hyeon (Korea Institute for Industrial Economics and Trade)
    Abstract: This study focuses on the demand sector of smart factories, especially policies related to the introduction of smart factories by small and medium sized manufacturers. D Discussions focusing on SMEs are important because the gap in capacity and resources between large corporations and SMEs is very large and most large corporations in Korea are already pushing the full utilization of smart factories on their own. This study review Korean policies to support SMEs in introducing smart factories and to improve the industrial ecosystem surrounding smart factories.
    Keywords: smart factories; SMEs; small and medium-sized enterprises; SME policy; smart factory policy; innovation; R&D; Korea; SME ecosystem; industrial ecosystem; industrial policy; industrial strategy; productivity; manufacturing; competitiveness; competition policy; productivity growth; digital transition; digital transformation
    JEL: D21 D23 D24 D25 E23 G31 G38 H23 J22 J24 L11 L23 L52 L60 O31 O32 O33 O38
    Date: 2022–06–16
  11. By: Dittmar, Jeremiah; Meisenzahl, Ralf R.
    Abstract: We examine the role of universities in knowledge production and industrial change using historical evidence. Political shocks led to a profound pro-science shift in German universities around 1800. To study the consequences, we construct novel microdata. We find that invention and manufacturing developed similarly in cities closer to and farther from universities in the 1700s and shifted towards universities and accelerated in the early 1800s. The shift in manufacturing was strongest in new and high knowledge industries. After 1800, the adoption of mechanized technology and the number and share of firms winning international awards for innovation were higher near universities.
    Keywords: industrialization; invention; universities; cities
    JEL: O14 O18 O30 N13 R10
    Date: 2022–06–30
  12. By: Ms. Yu Shi; Karim Foda; Maryam Vaziri
    Abstract: This paper studies the relation between firms' access to finance, labor productivity and investment using Lithuanian firm-level data from 2000–2018. To do so, we construct a measure of financial constraints. We estimate that, given firm characteristics, removing these constraints can improve average productivity and investment of firms in Lithuania by 0.51 percent and 7.2 percent, respectively. Our results further suggest that policies targeting firm age and size together will be more effective in mitigating the impact of financial constraints as the relationship between firm age and size with financial constraints exhibits non-linearities.
    Keywords: Financial Constraints; Productivity; Investment; SMEs; Transition Economies; financing constraint; firm age; evidence from Lithuania; firm's age distribution; balance sheet information; Labor productivity; Aging; Financial statements; Global
    Date: 2022–12–09
  13. By: Koh, Dae-Young (Korea Institute for Industrial Economics and Trade)
    Abstract: In order to establish effective policies, it is necessary to ascertain the status of service R&D in the manufacturing sector. We need to know which manufacturing firms participate in service R&D (service R&D participation), and which manufacturing firms make large investments in service R&D (service R&D investment). In addition, in order to establish a policy to revitalize service R&D at manufacturing firms, which is currently at a low level, it is necessary to understand what kind of support policies Korean manufacturing firms demand. Considering that, this study attempts to define the concept of service R&D in the manufacturing sector, and based on that, presents policy directions for revitalizing service R&D in manufacturing by identifying the status of service R&D and the policy demands of innovative manufacturing firms in Korea using survey data.
    Keywords: service industry; service R&D; R&D investment; innovation; innovation policy; service industry policy; industrial policy; manufacturing; manufacturing policy; manufacturing innovation; service innovation; manufacturing-service convergence; convergence policy
    JEL: D25 E22 L80 L88 O30 O32 O38
    Date: 2022–12–01
  14. By: Axenbeck, Janna; Breithaupt, Patrick
    Abstract: Due to the omnipresence of digital technologies in the economy, measuring firm digitalisation is of high importance. However, current indicators show several shortcomings, e.g., they lack timeliness and regional granularity. In this study, we show that advances in text mining and comprehensive firm website content can be leveraged to generate real-time and large-scale estimates of firm digitalisation. We use a transfer learning approach to capture the latent definition of digitalisation. For this purpose, we train a random forest regression model on labeled German newspaper articles and apply it on firm's website content. The predictions are used as a continuous indicator for firm digitalisation. Plausibility checks confirm the link to established digitalisation indicators at the firm and sectoral level as well as for firm size classes and regions. Lastly, we illustrate the indicator's potential for giving timely answers to pressing economic issues by analysing the link between digitalisation and firm resilience during the Covid-19 shock.
    Keywords: web-mining, text as data, machine learning, digitalisation
    JEL: C53 C81 O30
    Date: 2022

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