nep-sbm New Economics Papers
on Small Business Management
Issue of 2023‒10‒09
sixteen papers chosen by
João Carlos Correia Leitão, Universidade da Beira Interior

  1. "The Dual Nature of FDI: Boosting Local Startups and SMEs While Posing Challenges" By Gyan, Sylvester; James Nyarkoh, Bright; Yeboah, Samuel
  2. "Harmonizing FDI and Local Entrepreneurship: Strategies for Inclusive Growth" By Yeboah, Samuel; Gyan, Sylvester; James, Bright
  3. "Navigating Global Markets: The Impact of FDI on Startups' Access to Insights, Networks, and Brand Visibility" By Yeboah, Samuel
  4. Which European firms were hardest hit by COVID-19? By Coad, Alexander; Bauer, Péter; Domnick, Clemens; Harasztosie, Péter; Pál, Rozália; Teruel, Mercedes
  5. Committing to Grow: Privatizations and Firm Dynamics in East Germany By Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
  6. Resource Misallocation in the Presence of R&D Spillovers By Li, Kun; Azacis, Helmuts; Luintel, Kul B
  7. What Predicts the Growth of Small Firms? Evidence from Tanzanian Commercial Loan Data By Mia Ellis; Cynthia Kinnan; Margaret S. McMillan; Sarah Shaukat
  8. "Empowering Communities: A Systematic Review of FDI Initiatives for Skill Development and Local Capacity Building" By Yeboah, Samuel
  9. Government Investments and Entrepreneurship By Joao Ricardo Faria; Laudo Ogura; Mauricio Prado; Christopher J. Boudreaux
  10. How to foster innovation in the social sciences? Qualitative evidence from focus group workshops at Oxford University By Fabian Braesemann; Moritz Marpe
  11. Competition and Firm Recovery Post-COVID-19 By Miriam Bruhn; Asli Demirgüç-Kunt; Dorothe Singer
  12. Declining business dynamism in Europe: The role of shocks, market power, and technology By Biondi, Filippo; Inferrera, Sergio; Mertens, Matthias; Miranda, Javier
  13. The Effect of Immigration Policy on Founding Location Choice: Evidence from Canada's Start-up Visa Program By Saerom (Ronnie) Lee; Britta Glennon
  14. Evaluation of tech ventures' evolving business models: rules for performance-related classification By Marc König; Manon Enjolras; Christina Ungerer; Mauricio Camargo; Guido Baltes
  15. Startups in Algeria From the conceptual and regulatory framework to the supporting structures and programmes By Amina Badreddine
  16. The role of university incubators in attracting and framing competencies and inovated projects “case stady of m'sila incubator” By Abdellaoui Youcef

  1. By: Gyan, Sylvester; James Nyarkoh, Bright; Yeboah, Samuel
    Abstract: This systematic review delves into the multifaceted relationship between Foreign Direct Investment (FDI) and entrepreneurial ecosystems, with a particular focus on the impact of FDI on local startups and Small and Medium-sized Enterprises (SMEs). The study investigates both the positive and negative effects of FDI, shedding light on its role as a double-edged sword in shaping local entrepreneurial landscapes. The positive effects encompass access to vital funding, enhanced resources, market expansion opportunities, the magnetism of skilled talent, and a culture of knowledge sharing. FDI serves as a lifeline, bridging the funding gap that often hampers local startups, and infusing them with the capital essential for growth, innovation, and global market access. Additionally, foreign investors bring valuable resources, advanced technologies, and managerial expertise, augmenting the capabilities of local entrepreneurs. The presence of foreign corporations also facilitates market expansion, enabling local startups to access international markets and leverage established investor networks. Furthermore, FDI acts as a talent magnet, attracting skilled professionals to the region, thereby enriching the local labour pool. Moreover, interaction with foreign investors fosters a culture of knowledge sharing, exposing local entrepreneurs to global best practices and diverse perspectives. However, alongside these positive effects, negative consequences emerge. Increased competition from foreign firms can stifle the growth prospects of local startups. An overreliance on foreign investors for funding and resources can make local startups vulnerable to shifts in investor sentiment. Unequal power dynamics may lead to unequal partnerships, where local startups have limited negotiating leverage. Moreover, the transfer of technology and knowledge raises concerns about the outflow of critical intellectual property. This systematic review critically examines these dynamics, offering valuable insights into the intricacies of FDI's impact on entrepreneurial ecosystems. The findings inform policymakers, entrepreneurs, and investors alike, guiding them in optimizing the benefits of FDI while mitigating its potential pitfalls. By understanding the complex interplay between FDI and local startups, stakeholders can foster a more vibrant and resilient entrepreneurial ecosystem, conducive to innovation, growth, and sustainability.
    Keywords: Foreign Direct Investment (FDI), entrepreneurial ecosystems, startups, Small and Medium-sized Enterprises (SMEs), funding, resources, market expansion, talent attraction, knowledge sharing.
    JEL: F21 F23 L26 L33 M13 O16 O33 O38
    Date: 2023–07–09
  2. By: Yeboah, Samuel; Gyan, Sylvester; James, Bright
    Abstract: This systematic review explores the complex dynamics between Foreign Direct Investment (FDI) and local entrepreneurial ecosystems, focusing on their impact on startups and Small and Medium-sized Enterprises (SMEs). FDI has emerged as a critical driver of economic development and innovation in an increasingly globalized world. While FDI offers numerous advantages, it also presents challenges, particularly for local startups. Positive effects of FDI include improved access to funding, enhanced resources, market expansion, talent attraction, and knowledge sharing. These benefits can boost the competitiveness and profitability of startups, enabling them to enter new markets and scale their operations. However, FDI can also have negative repercussions, such as increased competition, dependency risks, unequal partnerships, and potential loss of intellectual property. These challenges underscore the need for a nuanced approach to harness the benefits of FDI while mitigating its risks. To address these issues, strategies to maximize FDI's benefits for entrepreneurship are discussed. These strategies encompass creating supportive ecosystems, diversifying funding sources, promoting collaborative innovation, strengthening intellectual property protection, investing in education and skill development, facilitating cultural integration, and establishing startup incubation programs. Ultimately, achieving a harmonious balance between FDI and local entrepreneurship is essential for driving inclusive economic growth and sustainable innovation. This systematic review provides insights to guide policymakers, entrepreneurs, and investors in optimizing the advantages of FDI while proactively addressing its inherent challenges.
    Keywords: Foreign Direct Investment (FDI); Entrepreneurial Ecosystems; Local Startups; Small and Medium-sized Enterprises (SMEs); Economic Development; Innovation; Competition; Power Dynamics; Intellectual Property Protection; Technology Transfer
    JEL: D22 F21 F23 L25 L26 M13 M21 O31 O33 O34
    Date: 2023–06–15
  3. By: Yeboah, Samuel
    Abstract: This systematic review explores the multifaceted impact of Foreign Direct Investment (FDI) on local startups' access to global markets. FDI plays a pivotal role in facilitating the expansion of local businesses into international markets by offering valuable resources and insights. The review delves into several critical dimensions: Distribution Networks: FDI grants startups access to established distribution networks of multinational corporations (MNCs), providing a channel to reach a broader customer base. It discusses the trade-offs between distribution-oriented and production-oriented FDI, highlighting their effects on startups' global reach. Market Knowledge: Foreign investors bring invaluable market insights and intelligence, aiding startups in understanding customer preferences, cultural nuances, and competitive landscapes. This section explores how market knowledge helps foreign investors overcome the liability of foreignness and enhances their competitiveness and innovation. Brand Visibility: Partnering with well-known foreign corporations enhances startups' credibility and visibility in global markets, leading to increased trust among potential customers. It investigates the determinants of brand visibility and its role in overcoming foreignness. Local Insights: FDI provides startups with access to foreign investors' local expertise, enabling them to tailor their products or services to meet the demands of specific international markets. This paper analyses the sources and determinants of local insights. Through an examination of these dimensions, this systematic review sheds light on the transformative potential of FDI in enabling local startups to access international markets. It also emphasizes the importance of strategic partnerships, knowledge sharing, and the adaptation of strategies for success in global business environments.
    Keywords: Global Markets; Distribution Networks; Market Knowledge; Brand Visibility; Local Insights; Startups; International Expansion; Market Entry; Multinational Corporations (MNCs)
    JEL: D22 F21 F23 L25 L26 L86 M13 O32
    Date: 2023–05–17
  4. By: Coad, Alexander; Bauer, Péter; Domnick, Clemens; Harasztosie, Péter; Pál, Rozália; Teruel, Mercedes
    Abstract: The COVID-19 shock hit firms hard, on average, but how did it hit in the distribution of firms, differently between the high-growth superstars and the firms that were already struggling to survive? This paper implements graphical techniques and quantile regression to analyse the effect of the COVID-19 shock across the distribution of firms. It impacted negatively the growth of sales and value added all across the growth rate distribution with an effect that was slightly larger at the lower quantiles. For employment growth, while the effect was null for most firms, it was not at the lower tail. Analysis of subsamples, as well as quantile regressions with interaction terms, emphasize that firms that received policy support and those from the service sector were relatively more strongly affected by the COVID-19 shock, especially those that were fast decreasing ones. The results confirm the view that the COVID-19 policy support reached the intended recipients.
    Keywords: Firm growth, growth rates distribution, COVID-19 shock, quantile regression, hanging rootogram
    Date: 2023
  5. By: Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
    Abstract: This paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates. Our empirical analysis, using a novel dataset and instrumental variable approach, confirms these findings. We estimate a 22% points higher annual employment growth rate, a 14% points higher annual productivity growth, and a 3.6% points higher probability of exit for firms with binding employment targets. Our calibrated model further demonstrates that without these targets, aggregate employment would have been 15% lower after 10 years. Additionally, an alternative policy of productivity investment subsidies proved costly and less effective in the short term.
    JEL: D22 D24 J08 O4
    Date: 2023–08
  6. By: Li, Kun (Cardiff Business School); Azacis, Helmuts (Cardiff Business School); Luintel, Kul B (Cardiff Business School)
    Abstract: We study resource misallocation by explicitly modelling R&D input and knowledge spillovers. The effects of R&D and spillovers on firm-level productivity are extensively studied in applied work, but not in the context of resource misallocation. We establish that, in the presence of spillovers, efficient resource allocation requires that more productive firms face higher R&D input prices. Analysing UK firm-level data, we find that the output gains from correcting misallocation are greatly overestimated when spillovers are ignored. Output losses due to capital distortions dominate those from labour and R&D inputs. Adopting a wrong R&D policy could lead to significant output losses.
    Keywords: resource misallocation, productivity, R&D spillover, the UK manufacturing firms
    JEL: D24 D61 O30 O47
    Date: 2023–09
  7. By: Mia Ellis; Cynthia Kinnan; Margaret S. McMillan; Sarah Shaukat
    Abstract: Not all firms have equal capacity to absorb productive credit. Identifying those with higher potential may have large consequences for productivity. We collect detailed survey data on small- and medium-sized Tanzanian firms who borrow from a large commercial bank, which in turn raises funds via international capital markets. Using machine learning methods to identify predictors of loan growth, we document, first, that we achieve high rates of predictive power. Second, “soft” information (entrepreneurs’ motivations for entrepreneurship and constraints faced) has predictive power over and above administrative data (sector, age, etc.). Third, there is a different and larger set of predictors for women than men, consistent with greater barriers to efficient capital allocation among female entrepreneurs.
    JEL: G14 J16 O16
    Date: 2023–08
  8. By: Yeboah, Samuel
    Abstract: Foreign Direct Investment (FDI) has emerged as a significant driver of skill development and local capacity building within host countries. This systematic review explores the mechanisms through which FDI initiatives contribute to skill enhancement, knowledge transfer, and the overall development of local talent and economies. By examining various channels of knowledge exchange, including training programs, joint ventures, technology licensing, mentorship, research collaborations, and more, this review provides insights into the dynamic synergy created when global expertise meets local talent. The review highlights the multifaceted benefits of FDI for communities, including improved competitiveness, innovation, and sustainable growth. Through a systematic and comprehensive analysis of existing literature, this review sheds light on the pivotal role FDI plays in empowering communities and fostering continuous development. Policymakers, scholars, and practitioners seeking to leverage FDI for local capacity building will find this review to be a valuable resource.
    Keywords: Skill Development; Local Capacity Building; Knowledge Transfer; Training Programs; Joint Ventures; Technology Licensing; Mentorship; Research Collaborations; Empowerment; Sustainable Development; Innovation; Global Expertise; Local Talent; Community Development
    JEL: F21 F23 I25 O32 O33 O35 O38
    Date: 2023–06–10
  9. By: Joao Ricardo Faria; Laudo Ogura; Mauricio Prado; Christopher J. Boudreaux
    Abstract: How can governments attract entrepreneurs and their businesses? The view that new business creation grows with the optimal level of government investments remains appealing to policymakers. In contrast with this active approach, we build a model where governments may adopt a passive approach to stimulating business creation. The insights from this model suggest new business creation depends positively on factors beyond government investments--attracting high-skilled migrants to the region and lower property prices, taxes, and fines on firms in the informal sector. These findings suggest whether entrepreneurs generate business creation in the region does not only depend on government investments. It also depends on location and skilled migration. Our model also provides methodological implications--the relationship between government investments and new business creation is endogenously determined, so unless adjustments are made, econometric estimates will be biased and inconsistent. We conclude with policy and managerial implications.
    Date: 2023–09
  10. By: Fabian Braesemann; Moritz Marpe
    Abstract: This report addresses challenges and opportunities for innovation in the social sciences at the University of Oxford. It summarises findings from two focus group workshops with innovation experts from the University ecosystem. Experts included successful social science entrepreneurs and professional service staff from the University. The workshops focused on four different dimensions related to innovative activities and commercialisation. The findings show several challenges at the institutional and individual level, together with features of the social scientific discipline that impede more innovation in the social sciences. Based on identifying these challenges, we present potential solutions and ways forward identified in the focus group discussions to foster social science innovation. The report aims to illustrate the potential of innovation and commercialisation of social scientific research for both researchers and the university.
    Date: 2023–09
  11. By: Miriam Bruhn (World Bank; IZA); Asli Demirgüç-Kunt (Center for Global Development); Dorothe Singer (World Bank)
    Abstract: This paper examines the impact of the COVID-19 crisis on the reallocation of economic activity across firms, and whether this reallocation depends on the competition environment. The paper uses the World Bank’s Enterprise Surveys COVID-19 Follow-up Surveys for about 8, 000 firms, including both small and large firms, in 23 emerging and developing countries in Europe and Central Asia, matched with 2019 Enterprise Surveys data. It finds that during the COVID-19 crisis, smaller firms were hit harder, and economic activity was reallocated toward firms with higher pre-crisis labor productivity. Countries with a strong competition environment experienced more reallocation from less productive to more productive firms than countries with a weak competition environment. The evidence also suggests that reallocation from low- to high-productivity firms during the COVID-19 crisis was stronger compared with pre-crisis times. Finally, the analysis shows that government support measures implemented in response to the crisis may have adverse effects on competition and productivity growth since support went to less productive and larger firms, regardless of their pre-crisis innovation.
    Keywords: Creative destruction, productivity, competition, firms, COVID-19, government support, Europe and Central Asia (ECA)
    JEL: D22 D24 H81 O47
    Date: 2023–03–03
  12. By: Biondi, Filippo; Inferrera, Sergio; Mertens, Matthias; Miranda, Javier
    Abstract: We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms' employment changes have become less responsive to productivity. However, the dispersion of firms' productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms' productivity, market power, and technology to job reallocation and firms' responsiveness.
    Keywords: business dynamism, European cross-country data, market power, productivity, responsiveness of labor demand
    JEL: D24 J21 J23 J42 L11 L25
    Date: 2023
  13. By: Saerom (Ronnie) Lee; Britta Glennon
    Abstract: To spur entrepreneurship and economic growth, an increasing number of countries have introduced immigration policies that provide visas to skilled entrepreneurs. This paper investigates whether these policies influence the founding location choice of immigrant founders, by leveraging the introduction of Canada's Start-up Visa Program in 2013. We demonstrate that this immigration policy increased the likelihood that U.S.-based immigrants have a start-up in Canada by 69%. Our results show that Asian immigrants (who have a higher representation in Canada than in the U.S.) are disproportionately more likely to migrate to Canada to start their businesses, whereas Hispanic immigrants (who have a smaller representation in Canada than in the U.S.) are less inclined to do so. We also find that this propensity varies with the size of co-ethnic immigrant communities in the origin location. Overall, our study unveils the importance of immigration policies in determining founding location choice and has important implications for countries competing for global talent.
    JEL: F20 F22 J60 M13
    Date: 2023–08
  14. By: Marc König (Karlsruher Institute for Technology, EnTechnon,); Manon Enjolras (ERPI - Equipe de Recherche sur les Processus Innovatifs - UL - Université de Lorraine); Christina Ungerer (Konstanz University of Applied Sciences, IST Institute for Strategic Innovation and Technology Management); Mauricio Camargo (ERPI - Equipe de Recherche sur les Processus Innovatifs - UL - Université de Lorraine); Guido Baltes (Konstanz University of Applied Sciences, IST Institute for Strategic Innovation and Technology Management)
    Abstract: At the early stage of a successful tech venture's life cycle, it is assumed that the business model will evolve to higher quality over time. However, there are few empirical insights into business model evolution patterns for the performance-related classification of early-stage tech ventures. We created relevant variables evaluating the evolution of the venture-centric network and the technological proposition of both digital and non-digital ventures' business models using the text of submissions to the official business plan award in the German State of Baden-Württemberg between 2006 and 2012. Applying a principal component analysis/rough set theory mixed methodology, we explore performance-related business model classification rules in the heterogeneous sample of business plans. We find that ventures need to demonstrate real interactions with their customers' needs to survive. The distinguishing success rules are related to patent applications, risk capital, and scaling of the organisation. The rules help practitioners to classify business models in a way that allows them to prioritise action for performance.
    Keywords: network theory, business model, life cycle, RST, rough set theory, PCA, principal component analysis, tech ventures
    Date: 2022
  15. By: Amina Badreddine (UMBB - Université M'Hamed Bougara Boumerdes)
    Abstract: The main objective of this paper is to analyze the environment in which the Algerian Start-ups have been confronted since their creation, together with the main actors and mechanisms made available to these groups. Besides, we have firstly provided definition to the conceptual framework of the Start-up in Algeria in terms of legal and economic regulations with everything pertaining to the labeling and creation of Startups. Afterwards, we dared to establish a diagnosis of the environment in which they evolve, throughout analyzing the strengths and weaknesses of the main actors and mechanisms dedicated to Start-ups. In virtue of which, we noted the awareness of the Algerian public authorities of the limits of the existing mechanisms dedicated to promoting entrepreneurship in Algeria. As consequence, we advocated the need to adapt the regulatory framework by implementing specific tools for the creation and support of Start-ups, in respect such as incubation and acceleration structures along with the financing formulas and means that are better adapted to the increased needs of Start-ups.
    Keywords: Startups Incubators Business plan Algeria JEL Classification Codes: M13 O32, Startups, Incubators, Business plan, Algeria JEL Classification Codes: M13, O32
    Date: 2023–06–04
  16. By: Abdellaoui Youcef (Blida2 University Lounici Ali)
    Abstract: This research paper aims at taking knowledge of the role of the university incubators in framing and accompaying competencies in order to create startups furthermore, to shade light on services offered for the incubated students through m'sila incubators, in its capacity as the most dynamic incubator at the national level , some of the most important of its activites and the different patents and label certaficates have been highlighted. Among the most important results of the studies, the experience of the m'sila incubator was obviously very successful, the fact that its director was nomineted at the top of the national coordination commitee to follow UP inovation and university incubators where this commitee was founded in sptember 27 th , 2022and which ensures the implentation of the ministeriel decesion12/75.
    Keywords: competencies business incubator innovative projects start-ups. JEL Classification Codes: M12 . M13, competencies, business incubator, innovative projects, start-ups. JEL Classification Codes: M12 . M13
    Date: 2023–06–04

This nep-sbm issue is ©2023 by João Carlos Correia Leitão. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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