nep-sbm New Economics Papers
on Small Business Management
Issue of 2023‒08‒21
nineteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Founder personality and start-up subsidies By Chapman, Gary; Hottenrott, Hanna
  2. Serving the right menu of R&D policy instruments to firms: An analysis of policy mix sequencing By Lenihahn, Helena; Mulligan, Kevin; Perez-Alaniz, Mauricio; Rammer, Christian
  3. Intended and unintended knowledge spillovers in innovation By Kraft, Kornelius; Rammer, Christian
  4. The geography of environmental innovation: a rural/urban comparison By Danielle Galliano; Simon Nadel; Pierre Triboulet
  5. Pandemic effects: Do innovation activities of firms suffer from long-Covid? By Trunschke, Markus; Peters, Bettina; Czarnitzki, Dirk; Rammer, Christian
  6. SME upgrading in emerging market clusters: The case of Taiwan’s bicycle industry By Anna Gerke; Maureen Benson-Rea; Denis Odlin
  7. Is acquisition-FDI during an economic crisis detrimental for domestic innovation? By García-Vega, María; Gupta, Apoorva; Kneller, Richard
  8. Opposing firm-level responses to the China shock : Output competition versus input supply By P. AGHION; A. BERGEAUD; M. LEQUIEN; M. MELITZ; T. ZUBER
  9. The employment impact of AI technologies among AI innovators By Giacomo Damioli; Vincent Van Roy; Daniel Vertesy; Marco Vivarelli
  10. Mega Firms and Recent Trends in the U.S. Innovation: Empirical Evidence from the U.S. Patent Data By Serguey Braguinsky; Joonkyu Choi; Yuheng Ding; Karam Jo; Seula Kim
  11. Data-driven innovation capability of marketing for B2B firms: definition and construction process By Ludivine Ravat; Aurélie Hemonnet-Goujot; Sandrine Hollet-Haudebert
  12. The effect of staged projekt management on product innovation: Evidence from a firm survey By Haneda, Shoko; Kurihara, Koki; Ono, Arito
  13. "Catalysing Entrepreneurial Growth: Unleashing the Potential of Venture Capital and Private Equity in Developing Nations" By Asuamah Yeboah, Samuel
  14. Firm Leverage and Boom-Bust Cycles By Can Sever
  15. Data-driven innovation capability of marketing: an exploratory study of its components and underlying processes By Ludivine Ravat; Aurélie Hemonnet-Goujot; Sandrine Hollet-Haudebert
  16. Impacts of ownership changes on emissions and industrial production: Evidence from Europe By Chlond, Bettina; Germeshausen, Robert
  17. The impact of ICT adoption on productivity: Evidence from Portuguese firm-level data By João Amador; Cátia Silva
  18. How do managers form their expectations about working from home? Survey experiments on the perception of productivity By Erdsiek, Daniel; Rost, Vincent
  19. Air Pollution and Entrepreneurship By Guo, Liwen; Cheng, Zhiming; Tani, Massimiliano; Cook, Sarah; Zhao, Jiaqi; Chen, Xi

  1. By: Chapman, Gary; Hottenrott, Hanna
    Abstract: Start-up subsidies play an important role in supporting start-up innovation and performance. However, what characteristics help and hinder start-ups to seek start-up subsidies remains unclear. We study whether and how founder personality, as captured by the big five personality traits and entrepreneurial orientation, impacts entrepreneurs' seeking of start-up subsidies. We argue that greater founder openness, extraversion and entrepreneurial orientation enhance seeking of start-up subsidies, while greater founder agreeableness, conscientiousness, and neuroticism inhibits it. Additionally, we argue that entrepreneurial orientation plays a mediating role in the relationship between big five personality traits and start-up subsidies. Drawing on a large multi-sector sample of German start-ups, we find strong evidence for a positive role of founder entrepreneurial orientation. While we find little evidence for a direct effect of a founder's big five personality, we find evidence of an indirect effect through its influence on entrepreneurial orientation.
    Keywords: Start-up subsidies, start-up financing, entrepreneurship policy, entrepreneurial orientation, big five personality traits, venture capital
    JEL: G24 L26 O25 O31
    Date: 2023
  2. By: Lenihahn, Helena; Mulligan, Kevin; Perez-Alaniz, Mauricio; Rammer, Christian
    Abstract: The R&D policy instrument mix concept has become increasingly important for understanding how public R&D support drives firm-level R&D. To-date, empirical studies have conceptualised the instrument mix as a static unit, whereby firms receive multiple policy instruments at one point in time. However, firms can also receive multiple instruments in a sequence, over time. While sequencing is well rehearsed heoretically, this remains a major gap in the empirical literature. Our study evaluates, for the first time, how R&D policy instrument mix sequencing impacts firm-level R&D. We construct a unique dataset, containing almost 25, 000 firm-year observations over a 17-year period for Ireland. Our analysis focuses on R&D grants, R&D tax credits, and publicly-supported academic-industry collaborations, and develops two novel approaches to measure R&D policy instrument mix sequencing. Our results suggest that R&D policy instrument mix sequencing is highly effective at driving firm-level R&D, but that some sequences are more effective than others. These findings highlight opportunities to realise superior policy outcomes through targeted sequencing.
    Keywords: Policy mix, Policy instrument mix sequencing, Public R&D support, R&D grant, R&D tax credit, Academic-industry collaboration
    JEL: O25 O30 D04 O38 D22 O31
    Date: 2023
  3. By: Kraft, Kornelius; Rammer, Christian
    Abstract: Firms can use different sources of external knowledge for developing and implementing innovations. Some knowledge is provided deliberately by the source and constitutes intended knowledge spillovers, e.g., knowledge disclosed in publications or patent files. Other sources represent unintended knowledge spillovers, such as reverse engineering of technologies or hiring workers from other firms. Based on data from the Community Innovation Survey, this paper analyses the role of different types of intended and unintended knowledge spillovers for innovation output at the firm level. Among intended knowledge spillovers, using knowledge from patents shows the strongest link to innovation output, particularly in case of product innovations with a high degree of novelty (world-first innovations). Knowledge from publications is not associated with a significantly higher innovation output. Among unintended spillovers, both reverse engineering and hiring of workers positively contribute to innovation output of firms, with stronger effects for reverse engineering. Interestingly, there is a strong link between reverse engineering and process innovation output (unit cost reduction), which reflects the fact that firms using this knowledge source operate in a market environment characterized by high price competition, which incentivizes an innovation strategy based on cost efficiency.
    Keywords: Knowledge sources, innovation output, intended knowledge spillovers, unintended knowledge spillovers, reverse engineering
    JEL: O31 O33 D83
    Date: 2023
  4. By: Danielle Galliano (AGIR - AGroécologie, Innovations, teRritoires - Toulouse INP - Institut National Polytechnique (Toulouse) - UT - Université de Toulouse - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Simon Nadel (CLERSÉ - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Pierre Triboulet (AGIR - AGroécologie, Innovations, teRritoires - Toulouse INP - Institut National Polytechnique (Toulouse) - UT - Université de Toulouse - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: This paper aims to contribute to enlarge a geography of eco-innovation. The objective is to study what kind of spatial externalities (specialization, related and unrelated variety) has the most positive impact on eco-innovation, according to firm's location (rural, peri-urban, urban). We empirically test this framework using a hurdle negative binomial model on firm-level data drawn from the French Community Innovation Survey (CIS). The results show that spatial externalities have different effects depending on the firm's engagement and breadth of eco-innovation as well as on its location. Marshallian specialization has a positive effect both on engagement and breadth of eco-innovations unlike unrelated variety, which negatively impacts breadth of eco-innovation. With regard to the firm's location, related variety is particularly correlated with the eco-innovation breadth of rural firms, whereas specialization is positively correlated with the breadth of eco-innovations of peri-urban firms. As for urban firms, spatial externalities seem to have less impact on their eco-innovation related behavior.
    Keywords: Eco-innovation, spatial externalities, related variety, rural, French industry
    Date: 2023
  5. By: Trunschke, Markus; Peters, Bettina; Czarnitzki, Dirk; Rammer, Christian
    Abstract: The COVID-19 pandemic has affected firms in many economies. Exploiting treatment heterogeneity, we use a difference-in-differences design to causally identify the short-run impact of COVID-19 on innovation spending in 2020 and expected innovation spending in subsequent years. Based on a representative sample of German firms, we find that negatively affected firms substantially reduced innovation expenditure not only in the first year of the pandemic (2020) but also in the two subsequent years, indicating 'Long-Covid' effects on innovation. In 2020, innovation expenditure fell by 4.7 % due to the pandemic. In 2022, innovation spending was even 5.4 % lower compared to the counterfactual scenario without the pandemic. Firms with higher pre-treatment digital capabilities show higher innovation resilience during the pandemic. Moreover, COVID-19 leads to a decrease in innovation spending not only in firms that were strongly negatively affected by the pandemic, but also in those firms that experienced a positive demand shock from the pandemic, presumably to increase production capacity.
    Keywords: COVID-19, innovation, difference-in-differences, economic crisis, resilience
    JEL: O31 O33
    Date: 2023
  6. By: Anna Gerke (Audencia Business School); Maureen Benson-Rea (University of Auckland [Auckland]); Denis Odlin (University of Auckland [Auckland])
    Abstract: Existing arguments on the economic upgrading of small and medium-sized enterprises (SMEs) in emerging markets emphasise the role of multinational enterprises (MNEs) from developed markets in providing the necessary new knowledge based on a top-down logic. Adopting the Taiwanese bicycle industry cluster as a case study, we investigate alternative factors influencing the upgrading of SMEs in emerging markets through vertical and horizontal relationships within global value chains and clusters. The findings show that knowledge exchange and collaboration via horizontal, trustbased linkages between SMEs within a cluster and the development of formal and informal institutions by leading local MNEs are crucial for the upgrading of locally clustered SMEs. We provide typologies for vertical and horizontal interfirm linkages and show how the combination of linkages affects the upgrading of these emerging market SMEs. Our typologies can assist practitioners with identifying options for successful upgrading through strategic engagement and development in interfirm relationships.
    Keywords: Global value chain, Cluster, Upgrading, Bicycle industry, Interfirm relationship, Linkage
    Date: 2023–09
  7. By: García-Vega, María; Gupta, Apoorva; Kneller, Richard
    Abstract: We study how acquisition-FDI during economic crises affects R&D investments of target firms as compared to acquisitions made during periods of economic growth. Using a panel of Spanish firms, we find that foreign multinationals cherry-pick the best domestic firms, irrespective of timing of acquisition. Using matching and difference-in-difference regressions, we find that firms acquired during crises experience smaller declines in R&D than those acquired during periods of growth. Our results are consistent with the opportunity cost theory of R&D over the business cycle, as we also find that crisis-acquired firms prioritize new product creation over achieving economies of scale.
    Keywords: Foreign Acquisition, Recession, Innovation, Business cycle
    JEL: G34 O31 G01 D22
    Date: 2023
  8. By: P. AGHION (Collège de France, LSE and INSEAD); A. BERGEAUD (Banque de France and CEP); M. LEQUIEN (Insee); M. MELITZ (Harvard and NBER); T. ZUBER (Banque de France)
    Abstract: We decompose the “China shock” into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the output shock is detrimental to firms’ sales, employment, and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the input supply shock on firms’ sales, employment and innovation.
    Keywords: Competition shock, patent, firms, import
    JEL: F14 O19 O31 O33 O34
    Date: 2023
  9. By: Giacomo Damioli; Vincent Van Roy; Daniel Vertesy; Marco Vivarelli
    Abstract: This study supports the labour-friendly nature of product innovation among developers of artificial intelligence (AI) technologies. GMM-SYS estimates on a worldwide longitudinal dataset covering 3, 500 companies that patented inventions related to AI technologies over the period 2000-2016 show a positive and significant impact of AI patent families on employment. The effect is small in magnitude and limited to service sectors and younger firms, which are front-runners of the AI revolution. We also detect some evidence of increasing returns suggesting that innovative companies more focused on AI technologies are those obtaining larger impacts in terms of job creation.
    Keywords: Innovation, technological change, artificial intelligence, patents, employment, job-creation
    Date: 2023–07–12
  10. By: Serguey Braguinsky; Joonkyu Choi; Yuheng Ding; Karam Jo; Seula Kim
    Abstract: We use the U.S. patent data merged with firm-level datasets to establish new facts about the role of mega firms in generating “novel patents”—innovations that introduce new combinations of technology components for the first time. While the importance of mega firms in novel patents had been declining until about 2000, it has strongly rebounded since then. The timing of this turnaround coincided with the ascendance of firms that newly became mega firms in the 2000s, and a shift in the technological contents, characterized by increasing integration of Information and Communication Technology (ICT) and non-ICT components. Mega firms also generate a disproportionately large number of “hits”—novel patents that lead to the largest numbers of follow-on patents (subsequent patents that use the same combinations of technology components as the first novel patent)—and their hits tend to generate more follow-on patents assigned to other firms when compared to hits generated by non-mega firms. Overall, our findings suggest that mega firms play an increasingly important role in generating new technological trajectories in recent years, especially in combining ICT with non-ICT components.
    JEL: L10 O30 O32 O33
    Date: 2023–07
  11. By: Ludivine Ravat (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon, AMU IAE - Institut d'Administration des Entreprises (IAE) - Aix-en-Provence - AMU - Aix Marseille Université); Aurélie Hemonnet-Goujot (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon, AMU IAE - Institut d'Administration des Entreprises (IAE) - Aix-en-Provence - AMU - Aix Marseille Université); Sandrine Hollet-Haudebert (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)
    Abstract: Big data knowledge-driven offerings are changing innovation practices for marketing organizations. Although B2C companies are coping with this digitalized-centered innovation reality, it remains a major concern for B2B industries, and, to date, little research studied digital marketing capabilities for innovation purpose. This study explores the concept of data-driven innovation capability within the marketing perspective. We conducted a systematic literature review of 40 scientific papers followed by qualitative research of 10 one-to-one interviews of C-level executives and managers. The analysis provides a first theoretical marketing anchoring definition of data-driven innovation capability and highlights a three-step construction process capability, market-oriented and fueled by dynamic process re-engineering.
    Keywords: Big Data, data-driven innovation capability, digital marketing capabilities, B2B marketing, marketing strategy
    Date: 2023–06–21
  12. By: Haneda, Shoko; Kurihara, Koki; Ono, Arito
    Abstract: This study examines whether staged project management is beneficial or harmful for making product innovations. Using a unique firm urvey for Japan, we find that firms that employed staged project management had a higher likelihood of introducing new products to the market. Additional estimations show that the positive effect of staged project management on product innovation is stronger when firms provided feedback at the interim stages. In contrast, whether and how firms set milestones was not associated with the likelihood of product innovation. The marginal effect of feedback was larger for new-to-market product innovation than for new-to-firm product innovation, and the feedback from non-R&D organizations within the firm in the initial stages was particularly beneficial for the introduction of new-to-market products. Our findings suggest that staged project management is beneficial for product innovation, but its effectiveness depends on how firms set milestones and feedback as well as the nature of innovation.
    Keywords: staged project management, product innovation, milestones, feedback, exploration, exploitation
    JEL: D22 G32 M11 O31
    Date: 2023
  13. By: Asuamah Yeboah, Samuel
    Abstract: This systematic review examines the importance, role, and challenges of venture capital (VC) and private equity (PE) in driving entrepreneurial activities in developing nations. The review synthesizes existing literature and identifies key findings related to the impact of VC and PE on entrepreneurial growth and economic development. It explores barriers to accessing VC and PE, regulatory and legal challenges, as well as cultural and institutional factors that shape the VC and PE landscape in developing nations. The review also provides policy recommendations and highlights areas for further research, emphasizing the potential impact of VC and PE in driving entrepreneurial activities and fostering sustainable economic development in developing nations.
    Keywords: Venture capital, private equity, entrepreneurship, economic development, developing nations, access to capital, regulatory framework, institutional factors
    JEL: G24 L26 O16
    Date: 2023–06–12
  14. By: Can Sever
    Abstract: This paper explores the dynamic relationship between firm debt and real outcomes using data from 24 European economies over the period of 2000-2018. Based on macro data, it shows that a rise in credit to firms is associated with an increase in employment growth in the short-term, but employment growth declines in the medium-term. This pattern remains similar, even when the changes in credit to households are accounted for. Next, using data from a large sample of firms, it shows that firm leverage buildups predict similar boom-bust growth cycles in firm employment: Firms with a larger increase in leverage experience a boost in employment growth in the short-term, but employment growth decreases in the medium-term. Relatedly, the volatility of employment growth increases in the aftermath of firm leverage buildups. Finally, this paper provides suggestive evidence on the role of a financial channel in the relationship between firm leverage buildups and employment growth. The results show that a rise in firm leverage is associated with a persistently higher debt service ratio, pointing the drag on finances. Consistently, boom-bust growth cycles in the aftermath of firm leverage buildups are not limited to employment growth, but are also pronounced for investment. Moreover, the medium-term decline in firm employment growth as predicted by leverage buildups becomes even larger if aggregate financial conditions tighten. The findings are in favor of “lean against the wind” approach in policy making.
    Keywords: Firm leverage; firm debt; household debt; leverage cycles; employment; investment; boom-bust cycles; ORBIS; leverage buildup; employment growth; leverage cycle; growth cycle; cycles in the aftermath; Business cycles; Credit; Consumer credit; Credit booms; Europe; Global
    Date: 2023–06–16
  15. By: Ludivine Ravat (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon, AMU IAE - Institut d'Administration des Entreprises (IAE) - Aix-en-Provence - AMU - Aix Marseille Université); Aurélie Hemonnet-Goujot (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon, AMU IAE - Institut d'Administration des Entreprises (IAE) - Aix-en-Provence - AMU - Aix Marseille Université); Sandrine Hollet-Haudebert (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)
    Abstract: The expanding digitalization of the innovation activity is of major concern for B2B industries. While management research is paying increased attention to this new data-driven innovation paradigm for firm specified operational purposes, little research has explained the phenomenon from the marketing organizational perspective. Given the essential role played by B2B marketing department in new products and services development, one may wonder how it can strategically shift its innovation capability to become data-centric. This study is aimed at describing how to build a data-driven innovation capability for B2B marketing organizations, by identifying its components and underlying processes. Based on 10 semi-structured interviews of B2B marketing directors, consultants, sales managers and CEO, the analysis sheds light to a market-oriented and dynamic capability, through the identification of a threestep construction process and four continued renewal capabilities reconfigurations.
    Keywords: Strategic marketing, B2B marketing, digital marketing capabilities, data-driven innovation, process-oriented
    Date: 2023–01–19
  16. By: Chlond, Bettina; Germeshausen, Robert
    Abstract: Firm ownership is a major determinant for the economic performance of firms, and emissions of pollutants are often by-products of industrial production. We investigate the impact of ownership on pollutant emissions of firms and their in- dustrial facilities in Europe jointly with their output, productivity, and other key economic outcomes. To disentangle the influence of ownership from other firm characteristics, we analyse the effects of ownership changes in an event-study approach. We find that industrial facilities and firms decrease their emissions and industrial output after a change in ownership. Emissions intensity and productivity do not change suggesting that reductions in emissions follow proportional reductions in output rather than reflecting changes in pollution abatement technology. We find some evidence for positive spillover effects on productivity and profits of other facilities and firms owned by the acquiring parent company after a change in ownership.
    Keywords: Ownership changes, pollution, productivity, event study
    JEL: D22 D23 Q53
    Date: 2023
  17. By: João Amador; Cátia Silva
    Abstract: In this paper we study the impact of ICT adoption on the level of labour productivity and TFP of Portuguese firms in the period 2004-2018. For this purpose we combine firm-level annual survey data for different dimensions of ICT adoption and balance sheet variables that allow for the computation of productivity and control for several dimensions of heterogeneity. The paper uses a Bartik (1991) shift-share type instrumental variable and results state that there is a positive and sizeable impact from ICT adoption on TFP and labour productivity. One standard deviation increase in the first principal component that captures overall ICT adoption by the firm leads to an increase of 25 percent in TFP and an increase of 58 percent in labour productivity. When the analysis is made separately, online sales and the creation of a website stand out as the most relevant dimensions for productivity gains.
    JEL: J24 O3 O4
    Date: 2023
  18. By: Erdsiek, Daniel; Rost, Vincent
    Abstract: The recent shift towards working from home (WFH) has far-reaching implications for social and economic outcomes. While firms are gatekeepers for the ongoing diffusion of flexible work arrangements, there is little evidence on how firms decide to offer WFH. We leverage two survey experiments among nearly 800 knowledge-intensive services firms in Germany to analyse whether managers' beliefs about the productivity effects of WFH affect their adoption decisions. Exploiting exogenous variation in managers' information set, we find that managers update their beliefs about the productivity effects of WFH when they receive information on workers' self-assessed WFH productivity. In addition, the information treatment significantly increases managers' willingness to adopt or intensify WFH policies. Combining our main survey experiment with two follow-up surveys, we find persistent information treatment effects on both managers' beliefs about WFH productivity and firms' expected WFH intensity after the Covid-19 pandemic. A complementary survey experiment confirms our results pointing to a causal relationship between managers' beliefs about WFH productivity and the adoption of WFH practices. These findings have implications for potential policy measures targeting firms' WFH adoption.
    Keywords: working from home, survey experiment, information provision, firm-level, managers, expectations
    JEL: D22 D23 L22 O33 M54
    Date: 2023
  19. By: Guo, Liwen (University of New South Wales); Cheng, Zhiming (University of New South Wales); Tani, Massimiliano (University of New South Wales); Cook, Sarah (University of Nottingham); Zhao, Jiaqi (Peking University); Chen, Xi (Yale University)
    Abstract: We investigate the effect of exposure to air pollution on an individual's likelihood towards entrepreneurship using panel data in China. To address omitted variable bias and endogeneity arising from self-selection into entrepreneurship and location choice, we employ an individual fixed effects model with an instrumental variable approach. Our findings show that individuals exposed to higher levels of air pollution are less likely to become entrepreneurs or diversify their entrepreneurial activities. Specifically, a one standard deviation increase in air pollution leads to a 21 percentage points decrease in the propensity for entrepreneurship and a 34 percentage points decrease in the likelihood of entrepreneurial diversification. Our study identifies potential channels through which air pollution impacts entrepreneurship. In addition, our findings reveal that air pollution has a more significant negative impact for older individuals, people residing in less populated areas, and those with lower education levels compared to their counterparts.
    Keywords: air pollution, entrepreneurship, China
    JEL: J24 L26 Q53
    Date: 2023–07

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