nep-sbm New Economics Papers
on Small Business Management
Issue of 2023‒11‒13
eighteen papers chosen by
João Carlos Correia Leitão, Universidade da Beira Interior

  1. There are different shades of green: heterogeneous environmental innovations and their effects on firm performance By Gianluca Biggi; Andrea Mina; Federico Tamagni
  2. Technological Innovations and Workers’ Job Insecurity: The Moderating Role of Firm Strategies By Mauro Caselli; Andrea Fracasso; Arianna Marcolin; Sergio Scicchitano
  3. Political risk and external finance: Evidence from cross-country firm-level data By Olayinka Oyekola; Meryem Duygun; Samuel Odewunmi; Temitope Fagbemi
  4. Empirical Determinants of Innovation in European Countries: Testing the Porter's Hypothesis By Makrevska Disoska, Elena; Tonovska, Jasna; Toshevska-Trpcevska, Katerina; Tevdovski, Dragan; Stojkoski, Viktor
  5. What Skills Lead to Entrepreneurial Success? Evidence from Non-Farm-Household Enterprises in Indonesia By Niken Kusumawardhani; Daniel Suryadarma; Luca Tiberti; Veto Tyas Indrio
  6. Exports and firm survival in times of COVID-19 – Evidence from eight European countries By Joachim Wagner
  7. Are immigrants particularly entrepreneurial? Policy lessons from a selective immigration system By Green, David A.; Liu, Huju; Ostrovsky, Yuri; Picot, Garnett
  8. Are Senior Entrepreneurs Happier than Who? The Role of Income and Health By Fritsch, Michael; Sorgner, Alina; Wyrwich, Michael
  9. R&D Subsidy and Import Substitution: Growing in the Shadow of Protection By Gustavo de Souza
  10. Mind the Knowledge Gap! The Origins of Declining Business Dynamics in a Macro Agent-Based Model By Domenico Delli Gatti; Roberta Terranova; Enrico Maria Turco
  11. What do we know about startup-valuation drivers? A systematic literature review 1 By Max Berre; Benjamin Le Pendeven
  12. An Analysis of the Impact of Minimum Wages on Firm Dynamics (Japanese) By FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug
  13. High risk, low return (and vice versa): the effect of product innovation on firm performance in a transition economy By Li, Xu; Vermeulen, Freek
  14. Designing Information Security Culture Artifacts to Improve Security Behavior: An Evaluation in SMEs By Olfa Ismail
  15. Internationalisation, specialisation and technological collaboration in the EU Outermost Regions: A patent data-based analysis By OECD
  16. Impact of Innovation on CO2 Emissions in South Asian Countries By Ashiq, Saima; Ali, Amjad; Siddique, Hafiz Muhammad Abubakar; Sumaira, Sumaira
  17. Entrepreneur Education and Firm Credit Outcomes By Yusuf Emre Akgunduz; Abdurrahman B. Aydemir; Halil Ibrahim Aydin
  18. Compliance Costs of GST for Small Business Enterprises in Tamil Nadu By S. Vishnuhadevi; D. Hima Bindu

  1. By: Gianluca Biggi; Andrea Mina; Federico Tamagni
    Abstract: Using a firm-level dataset from the Spanish Technological Innovation Panel (2003-2016), this study explores the characteristics of environmentally innovative firms and quantifies the effects of pursuing different types of environmental innovation strategies (resource-saving, pollution-reducing, and regulation-driven innovations) on sales, employment, and productivity dynamics.
    Date: 2023–10
  2. By: Mauro Caselli; Andrea Fracasso; Arianna Marcolin; Sergio Scicchitano
    Abstract: In this paper, we empirically assess whether the perceived implications of technological innovations on the probability of job loss vary according to the innovation-related strategies adopted by firms. We take advantage of a unique dataset based on a large and representative cross-sectional survey covering several characteristics of Italian workers and their firms. We find that the relationship between technological innovations and job insecurity is moderated by firms’ technology-specific training programs, their dismissal plans, and the impact of innovations on the tasks and activities performed by workers. Thus, workers’ perceptions of job insecurity vary significantly across innovative firms and the adoption of technological innovations in the workplace has a multifaceted impact on the perceptions of job insecurity of the affected workers.
    Keywords: job insecurity, technology, innovation, firms
    JEL: J28 O33
    Date: 2023
  3. By: Olayinka Oyekola (Department of Economics, University of Exeter); Meryem Duygun (Business School, University of Nottingham); Samuel Odewunmi (Department of Economics, University of Exeter); Temitope Fagbemi (Aberdeen Business School, Robert Gordon University)
    Abstract: Drawing on the strands of literature on agency theory, institutions and financial development, this paper investigates whether, and how, political risk can explain access to external finance by 127, 542 firms in 108 countries over the period 2006 to 2021. We do this by combining international firm-specific data with a globally representative political risk measure to explore variations in access to external finance for working capital and fixed investment by firms. Our results provide robust evidence of a strong positive impact of political risk on external finance. Specifically, we find that a one-standard-deviation increase in political risk leads to a 10.89% increase in access to external finance for working capital of sampled firms. We then examine which dimensions of political risk matter for external finance, finding that bureaucratic quality, corruption, government stability, socioeconomic conditions, investment profile, external conflict, and ethnic tensions are the relevant individual components. Further analyses show that the effects of political risk on external finance for working capital are amplified for firms that are either experiencing low growth, innovative, in the service sector, or small- and medium-sized enterprises. Our results survive a battery of robustness checks, including an alternative proxy for external finance (fixed investment), controlling for additional confounding factors and outliers. Given the central importance of firms as engines of growth, our paper makes an insightful contribution to the literature on the institutional determinants of access to entrepreneurial financing by firms.
    Keywords: political risk, institutions, access to finance, external finance, working capital, firm-level evidence
    JEL: G20 G30 O16 O50 L26
    Date: 2023–10–01
  4. By: Makrevska Disoska, Elena; Tonovska, Jasna; Toshevska-Trpcevska, Katerina; Tevdovski, Dragan; Stojkoski, Viktor
    Abstract: We investigate the interplay between innovation and productivity, emphasizing the role of environmental regulations on the innovation behaviours of European firms. Anchored in the Porter hypothesis, which proposes that environmental regulations can drive technological innovation and bolster commercial competitiveness, we utilize the CDM model (Crépon, Duguet, and Mairesse, 1998) for in-depth analysis. Our approach begins by pinpointing the factors that shape firms' decisions to innovate and the associated investments, employing the Heckman correction model. Subsequently, we adopt the three-stage least squares (3SLS) methodology to analyse both innovation outputs and firm productivity in tandem. Drawing data from the Community Innovation Survey (CIS) 2018, our structured examination unveils how diverse innovation drivers can elevate labor productivity in varied institutional landscapes. By contrasting the performance of South Europe (comprising Greece, Spain, Portugal) and Central Eastern Europe (countries like Bulgaria, Estonia, Hungary) against a German benchmark, our research offers a nuanced understanding of environmental regulations' influence on innovation and productivity across European contexts.
    Keywords: innovation, productivity, CDM model, CIS, Porter`s hypothesis
    JEL: C33 C36 O31 O33
    Date: 2023–09–29
  5. By: Niken Kusumawardhani; Daniel Suryadarma; Luca Tiberti; Veto Tyas Indrio
    Keywords: cognitive skills, human capital, entrepreneurship, household firm, farm business, non-farm business
  6. By: Joachim Wagner (Leuphana Universität Lüneburg, Institut für Volkswirtschaftslehre and Kiel Centre for Globalization)
    Abstract: This paper uses firm level data from the World Bank Enterprise surveys conducted in 2019 and from the COVID-19 follow-up surveys conducted in 2020 in eight European countries to investigate the link between exporting before the pandemic and firm survival until 2020. The estimated effect of exports is positive and statistically significant ceteris paribus after controlling for various firm characteristics that are known to be related to firm survival. Furthermore, the size of this estimated effect can be considered to be large on average. Exporting helped firms to survive.
    Keywords: Exports, firm survival, COVID-19, World Bank Enterprise Surveys, Robit regression
    JEL: D22 F14 L20 L25 L29
    Date: 2023–10
  7. By: Green, David A.; Liu, Huju; Ostrovsky, Yuri; Picot, Garnett
    Abstract: Firm ownership is a defining feature of immigrant adaptation with 41% of immigrants owning a firm at some point in their first 10 years after arrival. We use rich Canadian administrative data linking immigrant arrival records with individual and firm tax data to examine the process by which immigrants enter firm ownership. We find that higher immigrant firm ownership rates are almost entirely associated with nonincorporated firm ownership, which looks like a state of last resort. Human capital plays no role in the opening of preferable incorporated firms. On balance, immigrants are not more entrepreneurial in terms of opening incorporated firms with employees and standard policy levers appear to have limited effect on this.
    Date: 2023
  8. By: Fritsch, Michael (University of Jena); Sorgner, Alina (John Cabot University); Wyrwich, Michael (University of Groningen)
    Abstract: We propose an extension of the standard occupational choice model to analyze the life satisfaction of senior entrepreneurs as compared to paid employees and particularly retirees in Germany. The analysis identifies income and health status as main factors that shape the relationship between occupational status and life satisfaction. Senior entrepreneurs enjoy higher levels of life satisfaction than retirees and senior paid employees. This higher life satisfaction is mainly due to their higher income. Physical and mental health play a crucial role in determining both an individual's occupational status and their overall life satisfaction. We find that senior self-employed report to be healthier compared to other groups of elderly individuals. However, when controlling for health, retirees exhibit an even higher level of life satisfaction compared to their self-employed counterparts. Heterogeneity analysis of various types of senior entrepreneurs and senior paid employees confirms this general pattern. In addition, we find some evidence indicating that senior entrepreneurs may compromise their leisure time, a main asset of retired individuals. Implications for research, policy, and practitioners are discussed.
    Keywords: senior entrepreneurship, health conditions, well‐being, life satisfaction, age
    JEL: L26 I31 J10 D91
    Date: 2023–10
  9. By: Gustavo de Souza
    Abstract: I study the effect of an innovation subsidy on the growth of firms in a developing country. Using administrative microdata for Brazil and difference-in-differences, I find that innovation subsidies drive firm growth by facilitating firm entry into high-tariff markets with domestically produced versions of foreign goods. After receiving an innovation subsidy, firms issue more patents, expand their workforce, and diversify their product line. However, these patents receive minimal citations, while also heavily citing foreign patents. Firms increase imports of foreign inputs and expand their product line towards products with high import tariff. Despite that, in the most conservative estimate, every $1 of innovation subsidy generated $10 in present value wages.
    Keywords: R&D; Industrial policy; Industrial development
    JEL: O3 O14 O25
    Date: 2023–10–05
  10. By: Domenico Delli Gatti; Roberta Terranova; Enrico Maria Turco
    Abstract: In this paper we replicate most of the stylized facts characterizing the decline in business dynamism in the USA highlighted by Akcigit and Ates (2021) and provide an explanation of their emergence by means of a macroeconomic agent-based model populated by two types of firms: innovators who generate new and more productive capital goods, and entrepreneurs who employ labor and capital goods to produce consumption goods. A key ingredient of the model is the assumption that the entrepreneurs’ access to new and better capital goods depends on the knowledge gap, i.e., the wedge between the firm’s technical knowledge and the state of technology embodied in new capital goods. Within this framework, we investigate the obstacles to knowledge diffusion subsequently leading to declining business dynamism. Our findings indicate that only when knowledge diffusion decreases in both the technology imitation and adoption processes does it lead to high market concentration and markups, falling labor share and productivity growth. Patents are an important obstacle to knowledge diffusion. We find an inverse U-shaped relationship between patent strength and growth: moderate levels of patent protection can stimulate growth, but strong protection leads to rising market power and slower growth.
    Keywords: innovation, imitation, knowledge diffusion, knowledge gap, patents
    JEL: O31 O32 O33 O34
    Date: 2023
  11. By: Max Berre (Audencia Business School, UJML - Université Jean Moulin - Lyon 3 - Université de Lyon); Benjamin Le Pendeven (Audencia Recherche - Audencia Business School)
    Abstract: Startup-valuation is a critical area of research within entrepreneurial finance, but research on this topic is less consistent and thorough than overall valuation research. Peer-reviewed studies express a range of divergent views and approaches, and the focus varies widely. To bring clarity to this fragmented field, we conduct a systematic literature review, examining 87 peer-reviewed studies published between 1985 and 2020. We analyze these publications in detail and identify 36 startupvaluation drivers and cluster them into five macro-themes: Entrepreneur Characteristics; Firm Characteristics; Investor Characteristics; Market Conditions; and Deal Conditions. We then describe the valuation-impact of these drivers on startups. The range of drivers identified in the literature gives rise to construction of an integrative meta-model based on the macro-themes, placed into appropriate chronological position in the valuation process Our study also identifies key research-gaps and highlights promising directions for exploring the startup-valuation field.
    Keywords: Valuation Startup Systematic Literature Review Venture Capital Entrepreneurial Finance, Valuation, Startup, Systematic Literature Review, Venture Capital, Entrepreneurial Finance
    Date: 2023–10–09
  12. By: FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug
    Abstract: The recent minimum wage increase may have a cleansing effect by raising labor costs and causing inefficient firms to exit, while it may encourage firm dynamics by stimulating the entry and growth of more productive firms due to the reduced competition caused by the exit of firms. In addition to previous studies that have focused on manufacturing establishments and firms, this study analyzes the impact of minimum wage increases on industrial dynamics including entry and exit of firms and establishments and employment changes in a market economy that includes mainly non-manufacturing industries by utilizing data from Economic Census for Business Frame and Economic Census for Business Activity of the Ministry of Economy, Trade and Industry and the Ministry of Internal Affairs and Communications. The main findings from the analysis are as follows. (1)Minimum wage increases are positively related to increases in labor productivity and TFP of firms, but this positive relationship is limited to firms and prefectures with higher productivity and wages. (2) Japanese firms responded to minimum wage increases in 2011-2015 by reducing capital and regular employees and significantly increasing temporary employees. The total number of employees was not affected, but temporary employees replaced regular employees. The decrease in regular employees was more pronounced in firms with lower average wages and total factor productivity. (3) Although this reduced the capital-labor ratio of firms, firms increased TFP supposedly by introducing IT technology such as e-commerce, with labor productivity increased. (4) Raising the minimum wage is positively associated with encouraging firms to exit.
    Date: 2023–10
  13. By: Li, Xu; Vermeulen, Freek
    Abstract: Common wisdom suggests that high-risk strategies will be associated with high expected returns and vice versa. Focusing on the effect of new product development on firm performance, in this paper we argue that this relationship may reverse in a market undergoing substantial institutional transition. We examine domestic pharmaceutical firms in China during the 1990s and find that in this context, introducing new products was associated with lower average firm profitability but higher variance. In conformity with our predictions, these relationships were stronger in areas where the rate of institutional change was higher and for product types that took longer to develop. Thus, we explain why, for particular strategic actions, high risk may be associated with low returns. A key conceptual corollary of these findings—and for strategic management research in general—is that firms may sometimes be more focused on the potential upside of their actions than on the expected value of those actions.
    Keywords: technology and innovation management; business policy and strategy; quantitative orientation
    JEL: J50
    Date: 2021–10–27
  14. By: Olfa Ismail (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris] - Nantes Univ - IAE Nantes - Nantes Université - Institut d'Administration des Entreprises - Nantes - Nantes Université - pôle Sociétés - Nantes Univ - Nantes Université - IUML - FR 3473 Institut universitaire Mer et Littoral - UM - Le Mans Université - UA - Université d'Angers - UBS - Université de Bretagne Sud - IFREMER - Institut Français de Recherche pour l'Exploitation de la Mer - CNRS - Centre National de la Recherche Scientifique - Nantes Université - pôle Sciences et technologie - Nantes Univ - Nantes Université - Nantes Univ - ECN - École Centrale de Nantes - Nantes Univ - Nantes Université)
    Abstract: This article examines the relationship between the information system security culture and the security behaviors of users of the information system (IS). This research follows the design science in information systems research guidelines proposed by [43] to conceptualize the IS security culture in its context, where we propose a model based on Schein's three-level culture model (1985) [15], and evaluated at the level of our research context, which is SMEs, through a qualitative study conducted with twenty-two users belonging to eight French small and medium-sized enterprises (SMEs). The results of this study show that there is a strong relationship between IS security culture and user behaviors related to IS security, in the sense that a positive security culture is conducive to the creation of security behaviors.
    Keywords: IS security culture, Security-related behaviors, Design science research, IS security culture security-related behaviors design science research, security-related behaviors, design science research
    Date: 2022–06–01
  15. By: OECD
    Abstract: This paper explores the innovation dynamics of the EU Outermost Regions (EU ORs) through patenting behaviour. It emphasises the potential for international collaborations with a wide range of partners, and recommends to mobilise the resources and strategies provided by the EU to strengthen research and innovation in the private sector; enhance the impact of public research centres and universities; and foster intra-regional co-operation. It also calls for stronger ties with African countries, the Latin American and Caribbean region, as well as Small Island Developing States (SIDS), to foster innovation-based collaborations, particularly around sustainable agriculture, renewable energy and the ocean economy. The paper is developed within the framework of the EU-OECD project on Global Outermost Regions.
    Keywords: EU Outermost Regions, Global Value Chains, Intellectual Property Rights, Research and Development, Technological Innovation
    JEL: O33 O34 O52 O55 R11 R58 O54
    Date: 2023–10–30
  16. By: Ashiq, Saima; Ali, Amjad; Siddique, Hafiz Muhammad Abubakar; Sumaira, Sumaira
    Abstract: Across the globe, human lifestyles are accelerating carbon emissions, and this phenomenon is especially pronounced in developing nations. As the world grapples with the compelling imperative to address severe environmental challenges, technology has emerged as a steadfast ally. Over recent decades, the advancement of cutting-edge technology and the granting of patent rights have ignited a profound discourse on novel approaches to mitigating environmental threats. In recent years, there has been a growing interest in investigating how innovations might assist in reducing carbon emissions. The current study looks at how innovation affects carbon dioxide emissions in South Asian nations. The goal of this study is to use panel OLS and fixed effects methodologies to examine the influence of innovation on CO2 emissions in five South Asian nations from 1980 to 2019. The study's findings show that carbon dioxide emissions are negatively impacting environmental quality, while technological developments help to lower these carbon emissions. The findings argue for the development of initiatives to foster and expand technical innovation, particularly in South Asian countries. This research underscores the imperative of harnessing innovation to confront the immediate environmental challenges that loom large in the twenty-first century, as we strive for a more sustainable and environmentally responsible future.
    Keywords: Innovation, CO2 emissions, environment, South Asia
    JEL: O3 Q5
    Date: 2023
  17. By: Yusuf Emre Akgunduz; Abdurrahman B. Aydemir; Halil Ibrahim Aydin
    Abstract: We estimate the causal effects of entrepreneur education on credit outcomes. We link credit and business registries and identify the effects of education on access to credit, loan terms and default using a compulsory schooling reform implemented in Türkiye. More educated cohorts have higher access to credit, receive 3.3 percent larger loans and pay 0.23 percentage points lower interest rates compared to less educated cohorts despite no differences in borrowers' creditworthiness. We test alternative explanations for our findings and conclude that education reduces credit search costs and enables borrowers to shop around banks for better loan terms.
    Keywords: Compulsory schooling, Entrepreneurship, Bank loans
    JEL: G21 I25 O16
    Date: 2023
  18. By: S. Vishnuhadevi (PhD student, Department of Economics, Stella Maris College, Chennai); D. Hima Bindu (Associate Professor, Department of Economics, Stella Maris College, Chennai)
    Abstract: The main objective of this study is to examine the level of compliance burden through estimating the GST compliance costs incurred by the small businesses in Tamil Nadu. Further, to estimate the aggregate GST compliance costs incurred by the business in absolute terms and relative to Gross State Domestic Product (GSDP) and GST revenue of Tamil Nadu for the year 2019-20, and finally to identify the factors associated with the GST compliance costs using classical regression analysis. The results reveal that the overall weighed mean of the GST compliance costs is Rs. Rs. 32091 and the aggregate GST compliance costs is Rs. 17844 million which is around 0.10 percent and 4.65 percent of GSDP and GST revenue respectively. Further, the GST compliance costs incurred by the smallest firms is 1.45 percent of their annual turnover, and the same for largest firms it is only about 0.02 percent, which shows the regressive nature of the compliance costs as reported in the previous studies. Lastly, the regression results reveal that the volume of business, sector of the business, size of the business, firms with refund claims, and the manner with which the GST returns are completed are the important factors that are associated with the GST compliance costs incurred by the small businesses in Tamil Nadu.
    Keywords: tax compliance costs; GST compliance costs; VAT compliance costs; small businesses; India; Tamil Nadu
    JEL: H20 H25 H29

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