nep-sbm New Economics Papers
on Small Business Management
Issue of 2023‒05‒08
seventeen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Institutional Blockholders and Corporate Innovation By Bing Guo; Dennis C. Hutschenreiter; David Pérez-Castrillo; Anna Toldrà-Simats
  2. Cost and uptake of income-based tax incentives for R&D and innovation By Silvia Appelt; Ana Cinta González Cabral; Tibor Hanappi; Fernando Galindo-Rueda; Pierce O’Reilly
  3. The SME-lender relationship network in Ireland By Gaffney, Edward; McGeever, Niall
  4. Renewal of Companies Through Product Switching By Kuosmanen, Natalia; Valmari, Nelli
  5. An Examination of the Economic and Social Impacts of Corporate Innovation and Interventions By Maestracci, Aria
  6. The Contribution of Digital Firms to Productivity Growth in the Manufacturing Sector: A Decomposition Approach By Simon Bruhn; Johanna Deperi
  7. Liquidity Constraints, Cash Windfalls, and Entrepreneurship: Evidence from Administrative Data on Lottery Winners By Hsuan-Hua Huang; Hsing-Wen Han; Kuang-Ta Lo; Tzu-Ting Yang
  8. Carbon costs and industrial firm performance: Evidence from international microdata By Arjan Trinks; Erik Hille
  9. Stereotypes about Successful Entrepreneurs By Lyonnet, Victor; Stern, Lea H.
  10. Where Have All the "Creative Talents" Gone? Employment Dynamics of US Inventors By Ufuk Akcigit; Nathan Goldschlag
  11. Industrial cyberespionage in research and development races By Stupak, O.
  12. FDI and Superstar Spillovers: Evidence from Firm-to-Firm Transactions By Mary Amiti; Cédric Duprez; Jozef Konings; John Van Reenen
  13. Individual antecedents of i-deals: the role of self-efficacy, networking abilities and perceived employability By Marino, Jorgelina; Dabos, Guillermo E.; Rivero, Andrea G.; Pujol-Cols, Lucas J.
  14. Why Do Some Small Businesses Offer Retirement Plans? By Anqi Chen; Alicia H. Munnell
  15. Digital agriculture in Europe and in France: which organisations can boost adoption levels? By Véronique Bellon-Maurel; Isabelle Piot-Lepetit; Nina Lachia; Bruno Tisseyre
  16. Social Entrepreneurship as a Tool to Promoting Sustainable Development in Low-Income Communities: An Empirical Analysis By Sauermann, Miklas Pascal
  17. Green Practices and Customer Evaluations of the Service Experience: The Moderating Roles of External Environmental Factors and Firm Characteristics By Wei Jiang; Liwen Wang; Kevin Zhou

  1. By: Bing Guo; Dennis C. Hutschenreiter; David Pérez-Castrillo; Anna Toldrà-Simats
    Abstract: Institutional investors’ ownership in public firms has become increasingly concentrated in the last decades. We study the heterogeneous effects of large versus more dispersed institutional owners on firms’ innovation strategies and their innovation output. We find that large institutional investors induce managers to increase spending in internal R&D by reducing short-term pressure. However, to avoid empire building and dilution, large institutional investors prevent acquisitions, which reduces firms’ investment in external innovation. The overall effect on firms’ future patents and citations is negative. By acquiring less innovation from external sources, firms reduce the returns of their investment in internal R&D, jeopardizing their total innovation output. We use the mergers of financial institutions as exogenous shocks on firms’ institutional ownership concentration. Our findings complement the previously found positive effects of institutional ownership on firm innovation and indicate that the effects become negative when institutional investors become large owners.
    Keywords: institutional ownership, blockholders, innovation, acquisitions
    JEL: G32 G24 O31
    Date: 2023–04
  2. By: Silvia Appelt; Ana Cinta González Cabral; Tibor Hanappi; Fernando Galindo-Rueda; Pierce O’Reilly
    Abstract: Despite the increasing adoption of income-based tax incentives for R&D and innovation in the OECD area and beyond, evidence on the availability, design, generosity and actual cost of these incentives remains scarce. This report helps fill this gap by documenting government efforts to provide preferential tax treatment of economic outputs of innovation activities. Drawing on the responses of national contact points to the OECD KNOWINTAX surveys carried out in 2020 and 2021, it presents new evidence on the cost (foregone tax revenues) and uptake of income-based-tax incentives by businesses in 2019, and tracks their distribution by firm size and industry and their evolution over the 2000-2019 period.
    Keywords: innovation, research and development, tax incentives
    JEL: O34 O38 H25
    Date: 2023–04–20
  3. By: Gaffney, Edward (Central Bank of Ireland); McGeever, Niall (Central Bank of Ireland)
    Abstract: In this Note, we examine the relationship between non-bank lenders and Irish small and medium enterprises (SMEs). We review the relevance of non-bank lending to financial stability. We then describe the SME-lender relationship network in Ireland. We find that 36 per cent of SME company borrowers owe money to a non-bank lender, with 15 per cent borrowing exclusively from nonbanks and 21 per cent borrowing from both banks and non-banks. We also show that 71 per cent of borrowers have only one lender. Finally, we characterise the firms that rely on non-bank lenders for credit. We find that SMEs that borrow from non-banks are younger, less liquid, and have higher leverage than SMEs that borrow from banks.
    Date: 2022–11
  4. By: Kuosmanen, Natalia; Valmari, Nelli
    Abstract: Abstract The past few decades have witnessed a slowdown in productivity growth in many advanced economies, including Finland. Against this backdrop, this study investigates product switching in Finnish manufacturing firms during the period of 2009–2019. The findings indicate a growing trend towards specialization, with more firms focusing on a single product. In general, product diversity has decreased over time. Multi-product firms and those with diverse output tend to be larger in terms of value added, sales, and employment. Additionally, these firms are also more likely to export their products compared to single-product firms. While single-product firms outperform multi-product firms in productivity, the study shows that product diversity is positively related to productivity. Furthermore, the study demonstrates that there is a positive relationship between product scope expansion and contraction and an increase in firm size, as compared to firms where product scopes remain unchanged. These findings suggest that product switching is closely related to the economic outcomes of Finnish manufacturing firms.
    Keywords: Manufacturing firms, Multi-product firms, Product switching
    JEL: D22 D24 L11 L25 O14
    Date: 2023–04–21
  5. By: Maestracci, Aria
    Abstract: There has been a major shift in the concept of innovation as one of the key factors of production, as a factor that drives and sustains a company's productivity and competitiveness, of innovation as a key factor ofproduction. Despite the fact that the importance of innovation continues to grow, it is observed that existing studies have produced a variety of results regarding the factors that drive firm-level innovations, despite the increasing importance placed on innovation. Throughout the world, there are a number of factors that drive innovation in a company, whether it is in the service sector or in the manufacturing sector, and this study examines some of these factors. A number of research results suggest thatcertain aspects of the business environment, such as policy instability, legal institutions, corruption, and informal competition, have a negative impact on the introduction of non-technological innovations, as indicated in the research findings. Additionally, the results indicate that both technological and non-technological innovations are positively impacted by formal training, multinational technology companies, and research and development. These effects have both marginal and additional effects. The paper aims at providing practical implications for firm managers and policymakers around the world concerning how the business environment can be improved in order to make it more conducive to innovative activity at the firm level, thus making it a more conducive business environment for generating innovations at the firm level.
    Keywords: Innovative technologies; technological interventions and innovations; the business environment; society and technology; policy institutions; multinational corporations and innovation.
    JEL: O1 O10 O3 O30 O31 O33 O35
    Date: 2023–01–04
  6. By: Simon Bruhn (Ilmenau University of Technology, Ilmenau, Germany); Johanna Deperi (Universita degli Studi di Brescia, Italy; Université Côte d'Azur, CNRS, GREDEG, France)
    Abstract: We show that digital and non-digital firms differ significantly with respect to their contribution to productivity growth. Conducting a decomposition analysis on panel data of publicly listed U.S. manufacturing firms covering the 1990-2015 period, we demonstrate that (i) firmlevel productivity improvements of digital firms consistently exceed those of non-digital firms; (ii) the market selection process works more efficiently for digital firms; and (iii) the negative correlation between productivity changes and changes in market shares is decisively less pronounced for digital than for non-digital firms. We show that these observed differences in productivity growth can be linked to the idiosyncratic characteristics of digital firms, namely the profound exploitation of digital technologies, the scalability of digital business models and the complementarity of digital and labor investments.
    Keywords: Digital firms, industry dynamics, productivity growth, decomposition, labor reallocation
    JEL: E24 J24 L11 L25 O33 O47
    Date: 2022–12
  7. By: Hsuan-Hua Huang; Hsing-Wen Han; Kuang-Ta Lo; Tzu-Ting Yang
    Abstract: Using administrative data on Taiwanese lottery winners, this paper examines the effects of cash windfalls on entrepreneurship. We compare the start-up decisions of households winning more than 1.5 million NTD (50, 000 USD) in the lottery in a particular year with those of households winning less than 15, 000 NTD (500 USD). Our results suggest that a substantial windfall increases the likelihood of starting a business by 1.5 percentage points (125% from the baseline mean). Startup wealth elasticity is 0.25 to 0.36. Moreover, households who tend to be liquidity-constrained drive the windfall-induced entrepreneurial response. Finally, we examine how households with a business react to a cash windfall and find that serial entrepreneurs are more likely to start a new business but do not change their decision to continue the current business.
    Date: 2023–03
  8. By: Arjan Trinks (CPB Netherlands Bureau for Economic Policy Analysis); Erik Hille (HHL Leipzig Graduate School of Management)
    Abstract: Entrepreneurs seem to be adapting their business operations to climate policy, instead of relocating their business to countries without or with less stringent climate policies. There is little to no evidence that climate policy has depressed the profit, productivity or turnover of an average industrial firm. This follows from a CPB study into the effect of carbon costs for approximately 3 million firms in 32 countries between 2000 and 2019.
    JEL: D22 H23 Q41 Q48 Q52 Q58
    Date: 2023–04
  9. By: Lyonnet, Victor (Ohio State U); Stern, Lea H. (U of Washington)
    Abstract: What comes to mind when thinking about a successful entrepreneur? Belief formation models suggest that what comes to mind is an oversimplified picture of the characteristics of successful entrepreneurs, i.e, stereotypes about successful entrepreneurs. Using French administrative data on 48, 767 new firms, we show that some characteristics are stereotypical of success and have distributions that can generate miscalibrated beliefs. To illustrate how stereotypical thinking can lead to biased assessments, we report the discrepancies between the implied fraction of successful entrepreneurs under Bayesian vs. stereotypical thinking for several stereotypes. We discuss the consequences of stereotyping for venture capital allocation.
    JEL: D8 D83 G24 G41 J16 L26 M13
    Date: 2023–03
  10. By: Ufuk Akcigit; Nathan Goldschlag
    Abstract: How are inventors allocated in the US economy and does that allocation affect innovative capacity? To answer these questions, we first build a model of creative destruction where an inventor with a new idea has the possibility to work for an entrant or incumbent firm. If the inventor works for the entrant the innovation is implemented and the entrant displaces the incumbent firm. Strategic considerations encourage the incumbent to hire the inventor, offering higher wages, and then not implement the inventor's idea. To test this prediction, we combine data on the employment history of over 760 thousand U.S. inventors with information on jobs from the Longitudinal Employer-Household Dynamics (LEHD) Program at the U.S. Census Bureau. Our results show that (i) inventors are increasingly concentrated in large incumbents, less likely to work for young firms, and less likely to become entrepreneurs, and (ii) when an inventor is hired by an incumbent, compared to a young firm, their earnings increases by 12.6 percent and their innovative output declines by 6 to 11 percent. We also show that these patterns are robust and not driven by life cycle effects or occupational composition effects.
    JEL: O3 O4
    Date: 2023–03
  11. By: Stupak, O.
    Abstract: This paper examines a dynamic R&D race in which competitors can conduct cyberespionage against each other. We develop a framework that analyses the influence of cyberespionage on innovative incentives, companies’ payoffs and the quality of the end product. We demonstrate that industrial espionage has an ambiguous influence on the overall investments exerted in the race and companies’ expected payoffs and might even be beneficial for the quality of innovative end-products under certain circumstances.
    Keywords: Firm Strategy, Enterprise Policy, Innovation, Inventions.
    JEL: L51 L53 O31 O34
    Date: 2023–04–27
  12. By: Mary Amiti; Cédric Duprez; Jozef Konings; John Van Reenen
    Abstract: Despite competition concerns over the increasing dominance of global corporations, many argue that productivity spillovers from multinationals to domestic firms justify pro- FDI policies. For the first time, we use firm-to-firm transaction data in a developed country to examine the impact of forming a new relationship with a multinational, and find a TFP increase of about 8% three or more years after the event. Sales to other buyers, trade and customer quality also increase. However, we also document that starting to supply other “superstar firms” such as those who heavily export or are very large also increases performance by similar amounts, even if the superstar is a non-multinational. Placebos on starting relationships with smaller firms and novel identification strategies relying solely on demand shocks to superstar firms support a causal interpretation. A model of technology transfer rationalizes these effects and also correctly predicts (i) falls in post-event markups; (ii) the type of firms who form superstar relationships and (iii) bigger treatment effects from superstars intensive in R&D, IT and/or human capital. In addition to productivity spillovers, we document the transmission of “relationship capabilities” and “dating agency” effects as the increase in new buyers is particularly strong within the superstar firm’s existing network. These results suggest an important role for raising productivity through the supply chains of superstar firms regardless of their multinational status.
    JEL: F21 F23 O30
    Date: 2023–04
  13. By: Marino, Jorgelina; Dabos, Guillermo E.; Rivero, Andrea G.; Pujol-Cols, Lucas J.
    Abstract: Purpose: This study aims to examine the direct and indirect effects of self-efficacy, networking abilities and perceived employability on the negotiation of idiosyncratic deals (i-deals) between individual workers and their employers. Design/methodology/approach: In total, 213 managerial professionals - a non-random sample - working for different small and medium-sized enterprises from several industries in Argentina were surveyed online. Hypotheses were tested using structural equation modeling. Findings: The results revealed that self-efficacy and networking abilities exert an indirect effect on i-deal negotiation through perceived employability. Those individuals with higher levels of self-efficacy or greater networking abilities tend to develop more positive perceptions of their employability and, therefore, are more prompted to negotiate i-deals with their employers. Research limitations/implications: This research sheds light on the dynamics underlying the relationship of employees' characteristics and skills with i-deal negotiation. Besides, it provides further evidence that individual bargaining has become widespread in professional employment contexts, above and beyond the collective labor agreements that prevail in most Latin American countries. Practical implications: Self-efficacy and networking abilities can be relevant individual factors in understanding i-deal negotiation, given that both shape employees' perceptions of employability. Originality/value: Although the impact of employee characteristics and skills on the idiosyncratic negotiation of employment terms has been broadly recognized, scholars have called for further exploration of the mechanisms underlying this relationship. By simultaneously investigating the impact of self-efficacy, networking abilities and perceived employability on i-deals, this study provides a more comprehensive understanding of how an individual's personal characteristics and skills facilitate the idiosyncratic negotiation of employment terms.
    Keywords: Acuerdos Idiosincráticos; Negociación Colectiva; Negociación Individual;
    Date: 2022–02–14
  14. By: Anqi Chen; Alicia H. Munnell
    Abstract: At any given time, only about half of private sector workers in the United States are covered by an employer-sponsored retirement plan, and few workers save without one. As a result, many households end up with no retirement saving and entirely dependent on Social Security, while others move in and out of coverage throughout their careers and end up with only modest balances in a 401(k) account. Numerous studies have shown that offering a retirement plan is closely related to firm size; firms with fewer than 100 employees are much less likely to offer a plan than larger firms. As a result, observers tend to dismiss small firms as a source for future growth in coverage. In fact, though, a meaningful share of small businesses do offer retirement plans. This brief, which is based on a recent study, attempts to identify the characteristics of sponsoring firms and their employees to determine which small businesses may be more likely to offer a retirement plan in the future. The discussion proceeds as follows. The first section describes the limited information available from data sets that focus on the firms. The second section summarizes the information about firm coverage that can be gleaned from nationally representative surveys of employees. The third section explores why many small firms do not provide coverage. Surveys suggest that financial uncertainty and lack of employee interest are real hurdles. Respondents also suggest that plans are too costly, but companies are often either poorly informed or misinformed about costs. The final section offers a two-step agenda. First, the nature of plan costs should be clarified and publicized. Second, the most comprehensive survey dates from 1998, so a new survey would be invaluable.
    Date: 2022–12
  15. By: Véronique Bellon-Maurel (UMR ITAP - Technologies et Méthodes pour les Agricultures de demain - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement, Institut Convergences Agriculture Numérique #DigitAg - IRSTEA - Institut National de Recherche en Sciences et Technologies pour l'Environnement et l'Agriculture); Isabelle Piot-Lepetit (UMR MoISA - Montpellier Interdisciplinary center on Sustainable Agri-food systems (Social and nutritional sciences) - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - IRD - Institut de Recherche pour le Développement - CIHEAM-IAMM - Centre International de Hautes Etudes Agronomiques Méditerranéennes - Institut Agronomique Méditerranéen de Montpellier - CIHEAM - Centre International de Hautes Études Agronomiques Méditerranéennes - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement, Institut Convergences Agriculture Numérique #DigitAg - IRSTEA - Institut National de Recherche en Sciences et Technologies pour l'Environnement et l'Agriculture); Nina Lachia (UMR ITAP - Technologies et Méthodes pour les Agricultures de demain - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement, Institut Convergences Agriculture Numérique #DigitAg - IRSTEA - Institut National de Recherche en Sciences et Technologies pour l'Environnement et l'Agriculture); Bruno Tisseyre (UMR ITAP - Technologies et Méthodes pour les Agricultures de demain - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement, Institut Convergences Agriculture Numérique #DigitAg - IRSTEA - Institut National de Recherche en Sciences et Technologies pour l'Environnement et l'Agriculture)
    Abstract: This paper presents the way the digital transformation of the agricultural sector is implemented in Europe and in France. It describes the main European and national strategies, the structure of research and innovation initiatives, and the investment in capacity building to foster innovation, adoption and use. More specifically, the French research and innovation ecosystem on digital agriculture is described. The actors involved come from different organisations, such as research and higher educational institutes, government agencies, agricultural technology (AgTech) companies, farmer unions etc., and work together by means of associations (e.g. Robagri), networks (e.g. RMT Naexus, DigiFermes, Fermes Leader), or living labs (e.g. Occitanum) on both digital technology assessment and co-design. Additionally, support is devoted to capacity building (e.g. Le Mas numérique, Mobilab) and a better understanding of the drivers of adoption and use of digital technologies (e.g. FrOCDA). Among these various organisations, #DigitAg, the Digital Agriculture Convergence Lab, has been created to foster interdisciplinary research on digital agriculture. All these initiatives aim to use digital technologies to support the European Green Deal, Farm-to-Fork and Biodiversity strategies as well as the French orientation towards more agroecological practices for safer and more sustainable food systems. Even though this organisational ecosystem is developing fast, the objective of encouraging the coevolution of both digital and green transformations is not without challenges that still need to be overcome, either through new research, innovations, initiatives or collaborations between the actors involved.
    Keywords: #DigitAg, digital agriculture, digitalisation, Farm-to-Fork, green deal, innovation adoption, innovation ecosystems, innovation use, Digital agriculture Innovation ecosystems Green deal Farm-to-Fork Innovation adoption Innovation use Digitalization #DigitAg, Digital agriculture, Innovation ecosystems, Green deal, Innovation adoption, Innovation use, Digitalization
    Date: 2023
  16. By: Sauermann, Miklas Pascal
    Abstract: Social entrepreneurship has emerged as a critical driver for promoting sustainable development in low-income communities facing pressing social and environmental challenges. However, the factors that contribute to the success of such initiatives and the obstacles faced by social entrepreneurs remain poorly understood. This study employs a mixed-methods approach, drawing on data collected from surveys of 60 community members and interviews with 20 social entrepreneurs operating in low-income communities to examine the role of social entrepreneurship in fostering sustainable development. The results reveal that successful social entrepreneurship initiatives in low-income communities require strong leadership, community engagement, funding accessibility, and adaptability. Moreover, social entrepreneurship has the potential to advance sustainable development through the provision of innovative solutions to complex social and environmental problems, the promotion of local economic development, and the enhancement of community resilience. However, the study also highlights several challenges social entrepreneurs face in low-income communities, including navigating complex regulatory environments, securing funding, and establishing community trust. Addressing these obstacles requires collaboration between social entrepreneurs, policymakers, and other stakeholders, as well as the development of tailored support mechanisms that address the unique needs of social entrepreneurship initiatives.
    Keywords: Social Entrepreneurship, Sustainable Development, Low-Income Communities, Impact Assessment
    JEL: L31 Q01
    Date: 2023–03–27
  17. By: Wei Jiang (Xiamen University); Liwen Wang (Shenzhen Audencia Business School, Shenzhen University, SAFTI - Shenzhen Audencia Financial Technology Institute); Kevin Zhou (HKU - The University of Hong Kong)
    Abstract: Given that services differ from goods in terms of intangibility, heterogeneity, and inseparability, customers may evaluate green services differently from how they evaluate green goods. Previous research has investigated customers' perceptions and purchase decisions regarding green products. However, limited attention has been paid to the impact of green practices on customer evaluations of the service experience as well as important contingencies that bear on this relationship. Drawing on stakeholder theory, our study examines the impact of green practices on customer evaluations and further considers the influences of environmentaland firm-level contingencies. We test our model with a multi-source dataset in the Chinese hotel industry. The findings indicate that green practices improve customer evaluations of the service experience. This positive impact is, however, weaker in external environments characterized by high internet penetration and market complexity but is stronger for hotels with innovative services and for business hotels. Our findings provide novel insights into the environmental ethics and stakeholder management literatures by revealing the role of green practices in promoting positive service evaluations as well as the contingent influences of external environments and internal firm-level characteristics.
    Keywords: Green practices customer evaluations internet penetration market complexity service innovativeness hotel industry, Green practices, customer evaluations, internet penetration, market complexity, service innovativeness, hotel industry
    Date: 2022–01–17

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