nep-sbm New Economics Papers
on Small Business Management
Issue of 2023‒07‒10
fifteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The resilience of business ecosystems in the post-COVID-19 era: Notes on the European Recovery and Resilience Facility By Chatzinikolaou, Dimos; Vlados, Charis
  2. Does Green Transition promote Green Innovation and Technological Acquisitions? By BOSE Udichibarna; GREGORI Wildmer; MARTINEZ CILLERO Maria
  3. Healthcare Procurement and Firm Innovation: Evidence from AI-powered Equipment By Sofia Patsali; Michele Pezzoni; Jackie Krafft
  4. SME Failures Under Large Liquidity Shocks: An Application to the COVID-19 Crisis By Pierre-Olivier Gourinchas; Şebnem Kalemli-Özcan; Veronika Penciakova; Nicholas Sander
  5. The dark side of green innovation? Green transition and regional inequality in Europe By Nils Grashof; Stefano Basilico;
  6. Financial Constraints and Firm Size: Micro-Evidence and Aggregate Implications By Miguel H. Ferreira; Timo Haber; Christian Rörig
  7. Covid-19 and Entrepreneurship By Sorgner, Alina
  8. Evaluation and Learning in R&D Investment By Alexander P. Frankel; Joshua L. Krieger; Danielle Li; Dimitris Papanikolaou
  9. Fighting the Odds: Understanding Small Business Mortality in Low-Income Countries By Yeboah, Samuel
  10. The 2022 EU Industrial R&D Investment Scoreboard By GRASSANO Nicola; HERNANDEZ GUEVARA Hector; FAKO Peter; NINDL Elisabeth; GEORGAKAKI Aliki; INCE Ela; NAPOLITANO Lorenzo; RENTOCCHINI Francesco; TUEBKE Alexander
  11. Who Is to Suffer? Quantifying the Impact of Sanctions on German Firms By Görg, Holger; Jacobs, Anna; Meuchelböck, Saskia
  12. FDI and superstar spillovers: Evidence from firm-to-firm transactions By Mary Amiti; Cédric Duprez; Jozef Konings; John Van Reenen
  13. Labour Costs and the Decision to Hire the First Employee By Bart Cockx; Sam Desiere
  14. Licensing a product innovation from an external innovator to a Stackelberg duopoly By Antelo, Manel; Bru, Lluís
  15. Assessment and analysis of financial literacy campaigns from financial institutions for Small- and Medium Size Enterprises (SME's) in Colombia By Rodríguez Pasmiño, Valentina; Berrones-Flemmig, Claudia Nelly

  1. By: Chatzinikolaou, Dimos (Democritus University of Thrace, Department of Economics); Vlados, Charis (Democritus University of Thrace, Department of Economics)
    Abstract: Today’s COVID-19 crisis drives various socioeconomic systems to a profound readjustment and restructuring. This presentation aims to examine the need to reinforce the resilience of business ecosystems, suggesting future research avenues mainly at the regional level. In terms of design, a synthesis of the resilience and business ecosystems’ concepts is approached, followed by introducing essential elements concerning the European Recovery and Resilience Facility (RRF). The conclusions are twofold. First, the resilience of business ecosystems is a significant development pillar for the post-COVID-19 era, even though the RRF does not include provisions for regional development (the national authorities are responsible). Second, the resilience of local and regional authorities is significant, especially in areas where small and medium-sized enterprises (SMEs) rely on activities affected by the pandemic, such as tourism and transport. Further research could focus on the relationship between SME innovation and critical infrastructure.
    Keywords: COVID-19 crisis; business ecosystems; resilience; Recovery and Resilience Facility
    JEL: D04 F60 F63
    Date: 2021–10–12
  2. By: BOSE Udichibarna; GREGORI Wildmer; MARTINEZ CILLERO Maria (European Commission - JRC)
    Abstract: Our study explores the implications of technological shifts towards greener and sustainable innovations on acquisition propensity between firms with different technological capacities. Using a dataset of completed control acquisition deals over the period of 2009-2020 from 23 OECD countries, we find that green acquirors (i.e., firms with green patents) are more inclined to enter into acquisition deals with green firms due to their technological proximity and informational advantages. However, after the Paris Agreement, green acquisitions by non-green acquirors increased especially from those in climate policy-relevant sectors and based in countries with low environmental standards. We also find that green acquisitions after the Paris Agreement do not show any significant impact on their post-acquisition innovation performances, raising concerns related to greenwashing behaviour by investing firms.
    Keywords: Acquisitions, Green patents, Firm Innovation, Paris Agreement, Green Transition
    Date: 2023–05
  3. By: Sofia Patsali (Université Côte d'Azur, France; CNRS, GREDEG); Michele Pezzoni (Université Côte d'Azur, France; CNRS, GREDEG; Observatoire des Sciences et Techniques, HCERES, France; ICRIOS, Bocconi University, Italy); Jackie Krafft (Université Côte d'Azur, France; CNRS, GREDEG)
    Abstract: In line with the innovation procurement literature, this work investigates the impact of becoming a supplier of a national network of excellence regrouping French hospitals on the supplier's innovative performance. It investigates whether a higher information flow from hospitals to suppliers, proxied by the supply of AI-powered medical equipment, is associated with higher innovative performance. Our empirical analysis relies on a dataset combining unprecedented granular data on procurement bids and equipment with patent data to measure the firm's innovative performance. To identify the firm's innovative activities relevant to the bid, we use an advanced neural network algorithm for text analysis linking firms' equipment descriptions with relevant patent documents. Our results show that firms becoming hospital suppliers have a significantly higher propensity to innovate. About the mechanism, we show that supplying AI-powered equipment further boosts the suppliers' innovative performance, and this raises potential important policy implications.
    Keywords: Innovation performance, public procurement, medical equipment, hospitals, artificial intelligence
    JEL: H57 D22 O31 C81
    Date: 2023–03
  4. By: Pierre-Olivier Gourinchas; Şebnem Kalemli-Özcan; Veronika Penciakova; Nicholas Sander
    Abstract: We study the effects of financial frictions on firm exit when firms face large liquidity shocks. We develop a simple model of firm cost-minimization that introduces a financial friction that limits firms’ borrowing capacity to smooth temporary shocks to liquidity. In this framework, firm exit arises from the interaction between this financial friction and fluctuations in cash flow due to aggregate and sectoral changes in demand conditions, as well as more traditional shocks to productivity. To evaluate the implications of our model, we use firm-level data on small and medium-sized enterprises (SMEs) in 11 European countries. We confirm that our framework is consistent with official failure rates in 2017–2019, a period characterized by standard business cycle fluctuations in demand. To capture a large liquidity shock, we apply our framework to the COVID-19 crisis. We find that, in the absence of government support, SME failure rates would have increased by 6.01 percentage points, putting 3.1 percent of employment at risk. Our results are consistent with the premise that financial frictions lead to inefficient exit as, without government support, the firms failing due to COVID-19 have similar productivity and past growth to firms that survive the COVID-19 crisis.
    Keywords: Firm dynamics; International topics; Coronavirus disease (COVID-19)
    JEL: D22 E65 H81
    Date: 2023–06
  5. By: Nils Grashof; Stefano Basilico;
    Abstract: This study explores the regional diversification processes into green technologies (2000- 2017) and their implications for regional inequalities. Utilizing patent and Eurostat data, we analyze these processes along the economic strength of regions and the nature of their knowledge base. Our findings reveal that both structurally strong and weak regions can successfully diversify into green technologies if they possess related technological capabilities. However, brown regions cannot do so. Already existing patterns of divergence between these two types of regions are unlikely to be exacerbated by a green transition, but new regional disparities between brown regions and other regions could emerge.
    Keywords: dark side of innovation, inequality, regional diversification, regional inequality, green innovation, green transition
    JEL: O32 O33 R11
    Date: 2023–06
  6. By: Miguel H. Ferreira (QMUL and CEPR); Timo Haber (De Nederlandsche Bank); Christian Rörig (QuantCo)
    Abstract: Using a unique dataset covering the universe of Portuguese firms and their credit situation we show that financially constrained firms are found across the entire firm size distribution, even in the top 1%. Incorporating a richer, empirically supported, productivity process into a standard heterogeneous firms model generates a joint distribution of size and credit constraints in line with the data. The presence of large constrained firms in the economy, together with their elevated capital share, explains about 66% of the response of output to a financial shock. We conclude by providing micro-evidence in support of the model mechanism.
    Keywords: Firm size, business cycle, financial accelerator
    JEL: E62 E22 E23
    Date: 2023–06–14
  7. By: Sorgner, Alina
    Abstract: This chapter presents the results of a systematic review of literature (SLR) on impacts of Covid-19 on entrepreneurship published in the first three years since the outbreak of the Covid-19 pandemic, covering the period between January 2020 and January 2023. Main developments in the literature over time, space and themes are identified. The literature body has been growing constantly over time, with most studies included in this SLR published in 2022 that remained unconsidered in previous SLRs. In terms of spatial distribution of published research, a significant number of studies focus on North American and European countries, while low-income countries and countries in Latin American, Sub-Saharan and South Asian regions are underrepresented. Six main themes (and multiple sub-themes) were identified in the literature: entrepreneurial process, resilience and opportunity, entrepreneurial finance, policy responses to the Covid-19 crisis, gender, and well-being. Research on the impact the pandemic has had on entrepreneurial process, sources of financing, resilience of start-up firms, and opportunities emerging from the crisis has been dominating the literature since the early days of the pandemic and has been growing since then. Emerging themes include policy responses to the Covid-19 crisis and their (unintended) consequences for entrepreneurship, as well as differential impact of Covid-19 on female and male entrepreneurs. Studies on well-being of entrepreneurs, including their physical and mental health, represent a relatively low share of the literature on Covid-19 and entrepreneurship. Implications of the results for entrepreneurship research and practice are discussed.
    Keywords: Entrepreneurship, Covid-19, Systematic literature review
    JEL: L26
    Date: 2023
  8. By: Alexander P. Frankel; Joshua L. Krieger; Danielle Li; Dimitris Papanikolaou
    Abstract: We examine the role of spillover learning in shaping the value of exploratory versus incremental R&D. Using data from drug development, we show that novel drug candidates generate more knowledge spillovers than incremental ones. Despite being less likely to reach regulatory approval, they are more likely to inspire subsequent successful drugs. We introduce a model where firms are better able to evaluate the viability of incremental drugs, but where investing in novel drugs helps firms learn about future projects. Firms appear to put more value on evaluation versus learning, and those patterns are in-part driven by the appropriability of spillovers.
    JEL: G11 L65 O31 O32 O34
    Date: 2023–05
  9. By: Yeboah, Samuel
    Abstract: This systematic review examines the factors influencing small business mortality in low-income countries. Small businesses play a vital role in economic development, job creation, and poverty reduction. However, they often face significant challenges that lead to high mortality rates. This review analyses the internal and external factors contributing to small business failure, including poor management, lack of entrepreneurial skills, economic downturns, market competition, regulatory burdens, and technological advancements. The implications of small business mortality, such as job losses, reduced economic output, and personal distress, are also explored. Additionally, the review highlights policy implications, including the importance of strengthening entrepreneurial skills, improving access to finance, streamlining regulatory processes, and facilitating market linkages. Future research directions, such as longitudinal studies and the impact of technology adoption, are identified to further deepen understanding in this area. By addressing the challenges faced by small businesses in low-income countries, policymakers can foster their sustainability and contribute to inclusive economic development.
    Keywords: Small business mortality, low-income countries, factors, implications, policy, entrepreneurship
    JEL: L26 M13 O12
    Date: 2022–06–12
  10. By: GRASSANO Nicola (European Commission - JRC); HERNANDEZ GUEVARA Hector (European Commission - JRC); FAKO Peter (European Commission - JRC); NINDL Elisabeth (European Commission - JRC); GEORGAKAKI Aliki (European Commission - JRC); INCE Ela (European Commission - JRC); NAPOLITANO Lorenzo (European Commission - JRC); RENTOCCHINI Francesco (European Commission - JRC); TUEBKE Alexander (European Commission - JRC)
    Abstract: The main objective of the EU Industrial R&D Investment Scoreboard (the Scoreboard) is to benchmark the performance of EU innovation-driven industries against major global counterparts and to provide an R&D investment database that companies, investors and policymakers can use to compare individual company performances against the best global competitors in their sectors. The 2022 edition of the Scoreboard analyses the 2500 companies that invested the largest sums in R&D worldwide in 2021. These companies, with headquarters in 41 countries, and more than 900k subsidiaries all over the world, each invested over EUR 48.5 million in R&D in 2021. The total investment across all 2500 companies was EUR 1093.9 billion - an amount equivalent to 86% of the world’s business-funded R&D and passing the trillion Euro mark for the first time. The results of this report reveal challenges and opportunities for the EU as it seeks to improve its technology capabilities and reinvigorate its industrial base in the context of increasing global competition pressure and ongoing green and digital transformations.
    Keywords: industrial R&D
    Date: 2023–05
  11. By: Görg, Holger (Kiel Institute for the World Economy); Jacobs, Anna (University of Bielefeld); Meuchelböck, Saskia (Kiel Institute for the World Economy)
    Abstract: In this paper, we use a novel firm level dataset for Germany to investigate the effect of sanctions on export behaviour and performance of German firms. More specifically, we study the sanctions imposed by the EU against Russia in 2014 in response to the annexation of Crimea and Russia's countermeasures. We find a substantial negative effect on both the extensive and intensive margin of German exports. While the negative effects are strongest for firms exporting products subject to trade restrictions, we provide further evidence on the indirect effects of sanctions. Analysing the impact on broader measures of firm performance, we document that the cost of sanctions is heterogeneous across firms but overall modest. Our results reveal that the negative impact of the shock was concentrated primarily among a small number of firms that were highly dependent on Russia as an export market and those directly affected by the sanctions.
    Keywords: sanctions, foreign policy, trade, firm behaviour, Germany
    JEL: F1 F14 F51 L25
    Date: 2023–05
  12. By: Mary Amiti (Federal Reserve Bank of New York. 33 Liberty Street, New York, NY 10045); Cédric Duprez (National Bank of Belgium and University of Mons); Jozef Konings (Nazarbayev University Graduate School of Business and KULeuven); John Van Reenen (London School of Economics and MIT.)
    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.
    Keywords: Productivity, FDI, spillovers.
    JEL: F23 O30 F21
    Date: 2023–06
  13. By: Bart Cockx; Sam Desiere
    Abstract: Firms without paid employees account for up to 80% of all firms, but only a small minority ever hires. This paper investigates the relationship between labour costs and the decision to hire a first employee and become an employer. Leveraging a unique policy in Belgium that permanently reduced the labour cost of the first employee by 13%, we find that the number of new, first-time employers jumped by 31% immediately following the reform. The elasticity of the probability to hire the first employee with respect to the labour cost is −2.39 [95% CI: −3.45, −1.25].
    Keywords: nonemployers, hiring decisions, payroll taxes, small businesses
    JEL: D22 H25 J08 J23 L26 M13
    Date: 2023
  14. By: Antelo, Manel; Bru, Lluís
    Abstract: We study the licensing of a product innovation from an external innovator in a duopoly of firms that compete sequentially with each other through quantities or prices. We find that the innovation is only licensed to a single firm, regardless of market competition. However, both the licensee and contractual terms under quantity competition differ from those under price competition. In the first case, the innovation is licensed to the market-leading firm through a non-distorting contract, and in the second case, to the market-following firm by means of a two-part tariff (distorting) contract involving a per-unit royalty.
    Keywords: Product innovation, licensing, Stackelberg duopoly, quantity competition, price competition
    JEL: D43 D45
    Date: 2023
  15. By: Rodríguez Pasmiño, Valentina; Berrones-Flemmig, Claudia Nelly
    Abstract: The lack of financial literacy in SMEs is one of the main obstacles to SMEs finance (Zavatta, 2008). This problem is even greater in developing countries where the informal economy, the low levels of education and the low bancarization rates are known to be high in this region. One of the relevant trends in SME Finance are innovative financial instruments in "capacity building" mainly financial literacy campaigns (or financial education offerings) from financial institutions (Imanbaeva et al., 2017). The main research question of the present study is: Do financial literacy campaigns (or financial educational offerings) provide an adequate level of financial education for SMEs in Colombia? This research project was carried out applying a qualitative methodology. The primary data has been obtained through different types of 11 indepth interviews from the perspective of the financial institutions and also from Chambers of Commerce that provide the trainings. From the assessment and analysis of the financial literacy campaigns, the main results show that the programs that are designed for rural areas of the country do not have all the necessary components that the OECD recommends for a person to be considered financially educated. The financial education offerings carried out in the big cities (offered by the Banco de Bogota, the Chamber of Commerce of Bogota and Cali) provide SMEs with key mechanisms in financial education of great value, according with the components that the OECD recommends. Other important aspects from the results show that the financial education trainings are very short, so that it is not possible to cover all the required topics from the OECD to consider someone financial educated. Furthermore, several participants of the financial trainings are not able to finish due to her/his responsibilities as entrepreneur. Besides, for most of the offerings, there is not an impact evaluation (post-evaluation) about the effect of the trainings regarding the application of the knowledge in financial matters.
    Keywords: SME Finance, financial literacy campaigns, financial education, financial inclusion
    JEL: M O
    Date: 2023

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