nep-sbm New Economics Papers
on Small Business Management
Issue of 2023‒10‒23
eighteen papers chosen by
João Carlos Correia Leitão, Universidade da Beira Interior

  1. SME internationalisation: Do the types of innovation matter? By Boumediene Ramdani; Fateh Belaid; Stéphane Goutte
  2. Growth and Innovation in the Modern Data Economy By Orlando Gomes; Roxana Mihet; Kumar Rishabh
  3. AI Adoption and Productivity of Japanese Firms: Spillover and innovation effects (Japanese) By IKEUCHI Kenta; INUI Tomohiko; KIM YoungGak
  4. The Effect of Bank Recapitalization Policy on Credit Allocation, Investment, and Productivity: Evidence from a Banking Crisis in Japan By Hiroyuki Kasahara; Yasuyuki Sawada; Michio Suzuki
  5. Mafia infiltrations in times of crisis: Evidence from the Covid-19 shock By Marco Castelluccio; Lucia Rizzica
  6. Foreign Shocks as Granular Fluctuations By Julian Di Giovanni; Andrei A Levchenko; Isabelle Mejean
  7. Patents, Innovation, and Market Entry By Dominik Jurek
  8. Garantir la soutenabilité d’un business model tout en freinant sa croissance : entre la recherche de cohérence et paradoxe By Ilana Bouhafs; Marine Boyaval
  9. An Empirical Analysis of the Impact of Employee Aging on Innovation and Productivity (Japanese) By FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug
  10. Access to Credit and the Expansion of Broadband Internet in Peru By Cusato, Antonio; Castillo, José Luis; IDB Invest
  11. AI Adoption in America: Who, What, and Where By Kristina McElheran; J. Frank Li; Erik Brynjolfsson; Zachary Krof; Emin Dinlersoz; Lucia Foster; Nikolas Zolas
  12. The social and solidarity economy as a partner along the refugee journey By OECD
  13. Empowering communities with platform cooperatives: A catalyst for local development By OECD
  14. Industry-University Collaboration and Corporate Research Performance (Japanese) By INUI Tomohiko; EDAMURA Kazuma; Russell THOMSON
  15. Management Practices and Climate Policy in China By Soo Keong Young; Ulrich J. Wagner; Peiyao Shen; Laure de Preux; Mirabelle Muȗls; Ralf Martin; Jing Cao
  16. Reluctant Entrepreneurs: Evidence from China’s SOE Reform By Hanming Fang; Ming Li; Zenan Wu; Yapei Zhang
  17. Determinants of IFRS for SMES Adoption Worldwide By Pr. Benhayoun Issam; Pr. Zejjari Ibtissam
  18. Agglomeration and human capital: an extended spatial Mankiw-Romer-Weil model for European regions By Alicia Gómez-Tello; María-José Murgui-García; María-Teresa Sanchis-Llopis

  1. By: Boumediene Ramdani; Fateh Belaid (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Stéphane Goutte (SOURCE - SOUtenabilité et RésilienCE - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines - IRD [France-Nord] - Institut de Recherche pour le Développement)
    Abstract: Existing evidence suggest that innovative Small and Medium-sized Enterprises (or SMEs) are more likely to internationalise (i.e. have a greater propensity to export) than non-innovative SMEs. However, it is not yet clear whether and to what extent different types of innovation (i.e. product, service, and process) affect SME internationalisation. To address this issue, this study uses a research model that integrates the resource and institutional perspectives and empirically test it using data from the United Kingdom (UK) Longitudinal Small Business Survey. Our results confirm that SME internationalisation is more likely to occur in firms undertaking product innovation than process and/or service innovation, and a specific configuration of resource and institutional drivers influence SME internationalisation depending on the innovation type. These results lead to major policy and managerial implications in relation to promoting SME internationalisation through different types of innovation, given the UK withdrawal from the European Union.
    Keywords: Export, Innovation, Internationalisation, SME, UK
    Date: 2023
  2. By: Orlando Gomes (Lisbon Accounting and Business School); Roxana Mihet (University of Lausanne, Swiss Finance Institute and CEPR); Kumar Rishabh (University of Basel and University of Lausanne)
    Abstract: In this paper, we formulate a growth model of the data economy, highlighting data's dual role as a business optimization tool and a cybercrime target. We investigate the impact of cybercrime on firm innovation and economic growth, finding that it unequivocally leads to reduced knowledge stocks, decreased productivity, and slower overall economic growth for all firms. However, there is a silver lining: cybercrime risk prompts data-intensive companies to pursue digital innovation, enhancing productivity in other domains. We observe increased R&D, patenting, and patent diversity in response to higher cyber risk, especially among data-intensive firms. Non-data-intensive firms do not exhibit increased general innovation in response to cyber risk. Notably, in-house cybersecurity innovation sustains this cycle, while third-party cybersecurity delegation lacks the same innovation benefits.
    Keywords: Data economy, data theft, data breaches, cyber-risk, growth, artificial intelligence, innovation
    JEL: D8 O3 O4 G3 L1 L2 M1
    Date: 2023–09
  3. By: IKEUCHI Kenta; INUI Tomohiko; KIM YoungGak
    Abstract: The use of Artificial Intelligence (AI) in business has been expanding in recent years, and there is growing interest in the mechanisms and extent to which AI affects firm performance. In this study, we analyze the impact of firms’ introduction of AI on their performance using the "Basic Survey of Japanese Business Structure and Activities" of the Ministry of Economy, Trade and Industry (METI), Japan, TSR's business-to-business transaction data, press release data from NIKKEI, and IIP patent database 2020. In addition to the introduction of AI-related patents generated by a company's own R&D activity, we also try to analyze the impact of the introduction of AI within their trading partners (suppliers and customers). In addition to the efficiency gains in production processes (process innovation), the study analyzes the creation of new products and improvements in existing products (product innovation). The main results from the analyses are as follows. (1) AI-related patents positively correlate with firm productivity and have a stronger relationship with productivity than non-AI patents. (2) The relationship between AI-related patents and firm productivity strengthened even after 2009 when the number of patent applications began to decline. (3) AI-related patents mainly contribute to the productivity of firms with productivity in middle or higher status within the industry, while AI-related patents have a negative impact on the productivity of firms with low productivity. (4) We cannot confirm that the introduction of AI by a firm's business partner has a positive or negative spillover effect on the productivity of that firm. (5) AI-related patents are strongly related to product innovation, process innovation, and technological innovation of the firms, and especially high-quality AI-related patents have a mid-term and important impact on innovation.
    Date: 2023–09
  4. By: Hiroyuki Kasahara; Yasuyuki Sawada; Michio Suzuki
    Abstract: This paper examines the ramifcation of government capital injections into financially distressed banks during the 1997 Japanese banking crisis. By leveraging a unique dataset merging firm-levelfinancial statements and bank balance sheets, the study aims to examine whether the capital injections primarily benfited high-productivity firms or were misallocated to struggling "zombie" firms. The empirical results suggest that banks, post-injection, increased lending to both high-productivity non-zombie firms and low-productivity zombie firms. While the former is in line with conventional theories that prioritize high-productivityfirms for investment and productivity enhancement, the latter suggests credit misallocation towards struggling firms mainly for debt servicing. Intriguingly, the study finds no evidence that these injections promoted investments among firms, irrespective of their productivity orfinancial health status. In particular, we provide suggestive evidence that zombie firms even reduced investments, especially in infrastructure, while high-productivity non-zombie firms did not exhibit a signficant investment boost despite receiving more loans. However, these high-productivity firms displayed positive growth in labor productivity and total factor productivity, potentially driven by sales growth and increased advertisement expenses rather than employment and wage adjustments.
    Date: 2023–08
  5. By: Marco Castelluccio (Institute for Fiscal Studies); Lucia Rizzica (Bank of Italy)
    Abstract: We analyse the risk of mafia capture of firms operating in the legal economy. Specifically, we study the relationship between firm performance and mafia infiltration. To overcome possible endogeneity concerns we exploit the abrupt drop in revenues caused by the (unexpected) Covid-19 related closures imposed in Spring 2020 in Italy. Our estimates reveal that the induced sudden and significant worsening of affected firms financial conditions increased the likelihood of them being infiltrated by mafia-connected entrepreneurs. According to our preferred specification, a 10% drop in revenues leads to a 4.8% increase in the probability of a firm being infiltrated by the mafia compared to the baseline. These effects, however, were partly offset by the extraordinary measures put in place by the government to support financially distressed firms. Heterogeneity in the effectiveness of the different measures provides indirect evidence that firms are more likely to resort to mafia lending when they face temporary difficulties in repaying their debts.
    Date: 2023–10–09
  6. By: Julian Di Giovanni (Federal Reserve Bank of New York, CEPR - Center for Economic Policy Research - CEPR); Andrei A Levchenko (University of Michigan System, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research, CEPR - Center for Economic Policy Research - CEPR); Isabelle Mejean (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: This paper uses a dataset covering the universe of French firm-level value added, imports, and exports over the period 1995-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. Because the largest firms are the most likely to trade internationally, foreign shocks are transmitted to the domestic economy primarily through the large firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of the observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 45 to 75% of the impact of foreign fluctuations on French GDP is accounted for by the "foreign granular residual"-the term capturing the larger firms' greater responsiveness to the foreign shocks. At the macro level, firm heterogeneity attenuates the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model.
    Keywords: granularity, shock transmission, aggregate fluctuations, input linkages, international trade
    Date: 2023–04–27
  7. By: Dominik Jurek
    Abstract: Do patents facilitate market entry and job creation? Using a 2014 Supreme Court decision that limited patent eligibility and natural language processing methods to identify invalid patents, I find that large treated firms reduce job creation and create fewer new establishments in response, with no effect on new firm entry. Moreover, companies shift toward innovation aimed at improving existing products consistent with the view that patents incentivize creative destruction.
    Keywords: intellectual property rights, creative destruction, entry, job creation, Alice decision, natural language processing
    Date: 2023–09
  8. By: Ilana Bouhafs (LUMEN - Lille University Management Lab - ULR 4999 - Université de Lille); Marine Boyaval (University of Lille, LUMEN - Lille University Management Lab - ULR 4999 - Université de Lille)
    Abstract: The aims of this paper is to explore and understand the development models induced by alternative entrepreneurial projects, more specifically the paradoxes that arise from the opposition between the genesis of the entrepreneurial project oriented towards a non commercial goal and the unexpected development of it, leading entrepreneurs to constantly define and redefine the notion of growth of their entrepreneurial project, between sustainability, ethics, market interest and the desire to change things on a large scale. For this we have observed the mechanisms put in place by entrepreneurs to maintain sustainability within their project while supporting their growth-decay. We propose to deliver here the first results, focusing on the understanding of the modes of financing and development within the framework of social entrepreneurship in the textile sector.
    Abstract: Ce travail vise à explorer et comprendre les modèles de développement induits par des projets entrepreneuriaux dits alternatifs, plus spécifiquement les paradoxes éventuels entre genèse projet entrepreneurial relativement orienté vers un but non-lucratif et le développement parfois inattendu de celui-ci. Celles-ci amènent les entrepreneurs à constamment définir et redéfinir la notion de croissance de leur projet entrepreneuriaux, entre durabilité, éthique, dynamiques de marché et volonté de changement structurel de la société Nous proposons ici de délivrer les premiers résultats d'une étude de ces paradoxes. Nous avons à cette occasion observé les mécanismes mis en place par les entrepreneurs sociaux du secteur textile pour penser un mode de développement et des modes de financement compatibles avec la soutenabilité de leur business model.
    Keywords: Entrepreneuriat alternatif, Entrepreneuriat social, croissance, business model soutenable
    Date: 2022–11–17
  9. By: FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug
    Abstract: Against the background of Japan's rapidly aging and declining working population, this study analyzes the impact of employee aging on firm innovation and productivity using data from listed firms. There are two aspects to the aging of employees. Increasing age and length of service may increase worker productivity with the accumulation of human capital through experience and learning resulting in increased proficiency in their roles in the company. On the other hand, it may slow down investment in new and ambitious innovations and businesses and organizational restructuring, leading to organizational rigidity and poor performance. In this paper, we estimate the effect of average employee age on firm productivity and innovation using data from the Development Bank of Japan's Corporate Finance Data Bank and the IIP Patent Database 2020. The main findings from the analysis are as follows. (1) While the average employee age of listed companies has continued to increase since the 1970s, there is no significant difference in average years of service. (2) Although an increase in the average age of employees increases productivity, the positive effect declines from the mid-40s and has a negative impact after the age of 45 (an inverted U-shape). (3) The increase in the average years of service of employees continues to increase corporate productivity does not form an inverted U-shape, but rather a straight line, rising to the right. (4) For relatively young firms (up to 50 years of age), years of service plays a more important role than average employee age, while for relatively old firms (51 years of age or older), average employee age is important in terms of productivity, with average years of service making little significant difference. (5) For innovation captured by patents, an increase in the average age of employees contributes positively to innovation in terms of quantity (number of patent applications), quality (number of citations within 5 years of application), novelty (number of AI and robot patents applied for), and scalability (self-similarity in patent portfolio), while an increase in average years of service has a negative impact. (6) Both average employee age and average years of service are positively related to the increase in average wages, but the age effect is larger than the effect of years of service.
    Date: 2023–10
  10. By: Cusato, Antonio; Castillo, José Luis; IDB Invest
    Abstract: We exploit the staggered expansion of the internet broadband network to firms and bank branches locations in Peru during the last decade to study non-financial firm performance and bank credit dynamics. Access to broadband unleashes firm growth, increases the chances of entry of firms and reduces the probability of exit in benefited locations. For those firms that had a borrowing relation with a bank before the expansion of broadband, the increase in sales serves as a signal to banks about their profitability, which in turn respond by providing more credit. Entry and exit from the credit market follows a similar pattern as in the case of firms, but the results take longer to materialize after the shock. We can disentangle supply and demand effects, since there is a group of firms and bank branches with different locations and asymmetrical timing for the availability of the technology. Our analysis highlights the importance of the demand channel in the reduction of the observed interest rates, which is consistent with the fact that our credit market results are concentrated among micro and small firms, and firms with thin credit files, which are often perceived as riskier.
    Keywords: Compliance;accountability;Norms;Sanctions;Argentina
    JEL: O33 L86 G21
    Date: 2023–06
  11. By: Kristina McElheran; J. Frank Li; Erik Brynjolfsson; Zachary Krof; Emin Dinlersoz; Lucia Foster; Nikolas Zolas
    Abstract: We study the early adoption and diffusion of five AI-related technologies (automated-guided vehicles, machine learning, machine vision, natural language processing, and voice recognition) as documented in the 2018 Annual Business Survey of 850, 000 firms across the United States. We find that fewer than 6% of firms used any of the AI-related technologies we measure, though most very large firms reported at least some AI use. Weighted by employment, average adoption was just over 18%. Among dynamic young firms, AI use was highest alongside more-educated, more-experienced, and younger owners, including owners motivated by bringing new ideas to market or helping the community. AI adoption was also more common in startups displaying indicators of high-growth entrepreneurship, such as venture capital funding, recent innovation, and growth-oriented business strategies. Adoption was far from evenly spread across America: a handful of “superstar” cities and emerging technology hubs led startups’ use of AI. These patterns of early AI use foreshadow economic and social impacts far beyond its limited initial diffusion, with the possibility of a growing “AI divide” if early patterns persist.
    Date: 2023–09
  12. By: OECD
    Abstract: Produced as part of the OECD Global Action “Promoting Social and Solidarity Economy Ecosystems” funded by the European Union, this paper explores the role of the social and solidarity economy (SSE) in implementing and complementing public systems for refugee protection, reception and integration. In particular, it reviews the different activities SSE entities can deploy in support of forcibly displaced populations, asylum seekers and refugees, along their journey from origin through to destination countries. Finally, it offers some policy considerations on how the SSE can help national and local governments identify win-win solutions for refugee and host communities.
    Keywords: asylum seekers, cooperative, forced displacement, local development, non profit, refugees, social and solidarity economy, social economy, social enterprise, social entrepreneurship, social innovation
    JEL: F22 J15 J61 L33 L31
    Date: 2023–10–04
  13. By: OECD
    Abstract: This policy paper explores the contribution of platform cooperatives to local development as an alternative model to conventional digital platforms. It considers their role in reducing potential negative effects of the digital transition on local communities and places, as well as the new opportunities they present to provide greater quality of life for local residents. The paper introduces the main features of platform cooperatives, explores their contributions to local development and identifies the challenges to their emergence and expansion. It then provides policy orientations that could support the development of platform cooperatives and enhance their contributions to local development.This paper was produced as part of the OECD Global Action on Promoting Social and Solidarity Economy Ecosystems, funded by the European Union’s Foreign Partnership Instrument.
    Keywords: cooperative, local development, non-profit, social and solidarity economy, social economy, social enterprise, social entrepreneurship, social innovation
    JEL: L33 L31
    Date: 2023–10–04
  14. By: INUI Tomohiko; EDAMURA Kazuma; Russell THOMSON
    Abstract: This paper quantitatively analyzes the impact of industry-university collaboration on firms' research activities and productivity using Japanese firm data from 2001 to 2020. First, we analyze the characteristics of firms that engage in industry-university collaboration in terms of R&D input, output, and productivity. Next, based on those characteristics, we match firms that do and do not engage in industry-university collaboration using the propensity score matching method, and quantitatively examine the impact of the implementation of industry-university collaboration on productivity, research expenditures, and patents using the Difference in Differences method. As a result of comparing firms with equal research scale, productivity, and characteristics of enrolled researchers, but differing in whether or not they implement industry-university collaboration, it was confirmed that research expenditures increased after industry-university collaboration, especially in terms of applied development. In addition, a comparison of the number of patents before and after industry-university collaboration shows that there was no change in the number of patents in technological fields in which patents had already been obtained through industry-university collaboration prior to the change in policy, but there was an increasing number of patents in technological fields in which patents had not been previously obtained through industry-university collaboration.
    Date: 2023–09
  15. By: Soo Keong Young; Ulrich J. Wagner; Peiyao Shen; Laure de Preux; Mirabelle Muȗls; Ralf Martin; Jing Cao
    Abstract: We investigate how management quality moderates the impact of carbon pricing on Chinese firms. Based on interviews with managers and lead engineers at manufacturing firms in Hubei and Beijing, we construct a novel index on climate-change related management practices and link it to firm data from various sources. We document higher average productivity and more green innovation among firms that are well managed according to this index. In an event study of the introduction of regional cap-and-trade schemes for CO2, we analyze how these management practices interact with treatment. While treated firms reduced coal consumption more than control firms, this effect is statistically significant only for well-managed firms. The reduction could have been 25% greater if badly managed firms had been well managed. Our study highlights that good management practices, in particular energy monitoring, enhance the effectiveness of market-based climate policies by enabling firm to rationally comply with them.
    Keywords: climate policy; firm behavior; management practices; emissions trading scheme; policy evaluation
    JEL: D22 O31 Q48 Q54
    Date: 2023–09
  16. By: Hanming Fang; Ming Li; Zenan Wu; Yapei Zhang
    Abstract: We study the impact of state-owned enterprises (SOEs) on the quality of entrepreneurship in China. Using long series of firm registration and performance data, we document that the massive SOE downsizing in the late 1990s significantly improved the quality of entrepreneur- ship. Compared with entrepreneurs in other time periods, firms founded by the reluctant entrepreneurs induced by the SOE layoffs have better performances. To explain these results, we present a simple model of occupational choices where high-skilled individuals obtain a higher value than low-skilled individuals from the benefits offered by SOE jobs, leading them to select into the SOE sector in the pre SOE reform era. When the SOE sector was downsized, some high-skilled SOE employees were reluctantly unleashed into entrepreneurship. We also provide corroborating evidence for other implications of the model.
    JEL: J08 J28 J68 L26
    Date: 2023–09
  17. By: Pr. Benhayoun Issam (UMI - Université Moulay Ismail); Pr. Zejjari Ibtissam (USMBA - Université Sidi Mohamed Ben Abdellah)
    Abstract: The main purpose of this study is to analyze whether there is a relationship between macroeconomic factors and the adoption of IFRS for SMEs in order to help answer the question of why some countries adopt IFRS for SMEs while others do not. We used logistic regression analysis to investigate 150 countries, including 85 jurisdictions that have adopted IFRS for SMEs. The main results indicate that a country is more likely to adopt IFRS for SMEs if it has an unfavorable political climate and a non-Anglo-Saxon culture. Nonetheless, there is no evidence that the country's economic growth, the existence of a capital market, the educational level, and the legal system are associated with the decision to adopt IFRS for SMEs.This study contributes to a better understanding of the factors influencing the adoption of IFRS for SMEs on a country level and could be used to predict a country's decision to adopt this standard. It also adds to the literature on international accounting harmonization by examining country-level determinants that influence the adoption of IFRS for SMEs by all companies.
    Keywords: IFRS, IFRS for SMEs, macroeconomic factors, country-level, adoption, Accounting harmonization
    Date: 2023–09–17
  18. By: Alicia Gómez-Tello (University of Valencia); María-José Murgui-García; María-Teresa Sanchis-Llopis
    Abstract: Over the last two decades a handful of very rich European regions have increased the gap separating them from the European average in terms of labour productivity. In this paper we extend a spatial version of the Mankiw, Romer and Weil model (MRW, 1992) as developed by Fischer (2011) to accommodate human capital spillovers linked to agglomeration. After modelling this specific spillover, we go on to test empirically whether its effect has been to stimulate labour productivity growth in those European regions with the greatest potential to benefit from agglomeration economies. The theoretical model leads to a cross-sectional spatial Durbin model specification. The empirical analysis is carried out for 121 European regions for the period 1995-2014. We find significant conditional b-convergence, positive impacts of investment in physical and human capital, and a negative impact of population growth. Our most notable result involves the specific spillover effect that enhances the impact of investment in human capital in the most highly agglomerated regions. We find this externality significant in explaining labour productivity growth and therefore also in increasing labour productivity disparities across European regions.
    Keywords: Human capital, labour productivity, spatial externalities, European region
    JEL: R
    Date: 2023

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