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on Small Business Management |
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Issue of 2025–03–17
twenty papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Nunez Chaim, Gonzalo Ignacio; Overman, Henry George; Riom, Capucine Anne Veronique |
| Abstract: | We evaluate the impact of the UK's Growth Vouchers Programme, which offered subsidised business advice to 15, 207 randomly selected small and medium size enterprises. Using administrative and survey data, we show that the programme increased turnover by 8.2% but only in the short-term and potentially at the expense of non-supported firms. We find that subsidised advice appears to improve firms' capabilities and practices in a way that is consistent with the increase in turnover. We also demonstrate that propensity score matching introduces a sizeable upward bias to estimated effects on turnover and employment and that this bias grows over time. |
| Keywords: | firm performance; enterprise growth; entrepreneurship; industrial strategy |
| JEL: | D24 L25 M13 O12 L20 D20 |
| Date: | 2024–01–29 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126834 |
| By: | Carioli, Paolo; Czarnitzki, Dirk; Rammer, Christian |
| Abstract: | We investigate the effects of different channels of industry-science collaboration on new product sales at the firm-level and whether government subsidies for collaboration make a difference. We distinguish four collaboration channels: joint R&D, consulting/contract research, IP licensing, human resource transfer. Employing firm-level panel data from the German Community Innovation Survey and a conditional difference-in-differences methodology, we find a positive effect of industry-science collaboration on product innovation success only for joint R&D, but not for the other three channels. The positive effect is limited to subsidized collaboration. Our results suggest that government subsidies are required to bring firms and public science into forms of collaboration that are effective in producing higher innovation output. |
| Keywords: | Industry-science collaboration, transfer channels, product innovation, treatment effects analysis |
| JEL: | O31 O38 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312187 |
| By: | Ilmakunnas, Pekka |
| Abstract: | The age-innovation relationship is studied at the firm level, using ten waves of Finnish innovation surveys linked to register data on firms and their employees. A negative age-innovation relationship exists for a wide range of average employee ages. This is robust to using employee age group shares instead of average age, using fixed effects and continuous treatment effects estimation, and using six different measures of innovative behavior. Employee age diversity is, however, not related to innovativeness. |
| Keywords: | innovation, aging, age diversity, R&D |
| JEL: | J11 J21 O31 O32 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123630 |
| By: | Morande, Swapnil; Arshi, Tahseen; Gul, Kanwal; Amini, Mitra |
| Abstract: | This pioneering study employs machine learning to predict startup success, addressing the long-standing challenge of deciphering entrepreneurial outcomes amidst uncertainty. Integrating the multidimensional SECURE framework for holistic opportunity evaluation with AI's pattern recognition prowess, the research puts forth a novel analytics-enabled approach to illuminate success determinants. Rigorously constructed predictive models demonstrate remarkable accuracy in forecasting success likelihood, validated through comprehensive statistical analysis. The findings reveal AI’s immense potential in bringing evidence-based objectivity to the complex process of opportunity assessment. On the theoretical front, the research enriches entrepreneurship literature by bridging the knowledge gap at the intersection of structured evaluation tools and data science. On the practical front, it empowers entrepreneurs with an analytical compass for decision-making and helps investors make prudent funding choices. The study also informs policymakers to optimize conditions for entrepreneurship. Overall, it lays the foundation for a new frontier of AI-enabled, data-driven entrepreneurship research and practice. However, acknowledging AI’s limitations, the synthesis underscores the persistent relevance of human creativity alongside data-backed insights. With high predictive performance and multifaceted implications, the SECURE-AI model represents a significant stride toward an analytics-empowered paradigm in entrepreneurship management. |
| Date: | 2023–08–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:p3gyb_v1 |
| By: | Krieger, Bastian; Füner, Lena; Prüfer, Malte |
| Abstract: | We explore which start-ups win in public procurement. Most notably, our analysis presents significant differences between firms applying for tenders with and without functional criteria. First, we use representative telephone survey data to estimate public procurement applicant and winner shares for the population of German start-ups. We find in total eleven percent of start-up firms applied for public tenders since their foundation, and 65 percent of them won at least one tender. Additionally, younger and more innovative firms tend to apply for and win tenders with functional criteria, while older and less innovative firms tend to apply for and win tenders without functional criteria. Second, we employ non-linear estimation methods to identify firm and founder characteristics predicting to win public tenders within the group of applicants. Start-ups applying for functional tenders profit from smaller foundation teams, younger founders, more industry experience, and higher innovation capacities, while start-ups applying for tenders without functional criteria, profit from larger foundation teams, older founders, more industry experience, and the absence of founding experience |
| Keywords: | Public procurement, Start-up firms, Innovation |
| JEL: | H57 L26 O38 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312190 |
| By: | Di Filippo, Mario; Panizza, Ugo G. |
| Abstract: | This paper uses a unique dataset with matched information at the firm-bank level covering 13, 000 firms and 550 banks in 36 emerging and developing economies over 2012–20. The analysis tests whether government-owned banks fulfill their social mandate by targeting credit constrained firms or firms that are more likely to generate positive externalities. The findings show that credit constrained firms are more likely to borrow from government-owned banks, and that this is especially the case in countries with good institutions. However, the paper does not find any evidence that government-owned banks target innovative firms or “green” firms. The findings show that in firms that borrow from government-owned banks, employment reacts less to business cycle conditions relative to firms that borrow from private banks. The paper further shows that employment is more stable in credit constrained firms that have a relationship with a government-owned banks with respect to credit constrained firms that borrow from a private bank. |
| Date: | 2023–03–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10384 |
| By: | Pierluigi, Angelino; Czarnitzki, Dirk; Hovdan, Brigitte |
| Abstract: | Drawing on a longitudinal database of Belgian firms over the years 2014-2020, this study investigates the joint effect of R&D grants and R&D tax credits on R&D inputs and innovation outputs. We estimate Conditional Difference-in-Difference (CDiD) models and apply both treatment effects estimators that account for heterogeneous, staggered treatments as well as standard two-way fixed effects DiD estimators. We find positive treatment effects for both grants and tax credits on R&D employment, R&D employment intensity, and total R&D expenditures. R&D tax credits have a significant positive impact on the share of sales of new or improved products. By comparing the results obtained by the two econometric methods, we also find that the standard two-way fixed effects models may lead partially to potentially wrong conclusions about the impacts of such policies, as the traditional estimators may not sufficiently account for the complexity of how the policy instrument affect firm-level outcomes. |
| Keywords: | Policy mix, innovation, R&D grants, R&D tax credits, difference-in-difference |
| JEL: | D22 H25 L53 O32 O38 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312192 |
| By: | Lenihan, Helena; Perez-Alaniz, Mauricio; Rammer, Christian |
| Abstract: | Firm-level Climate Action Response Plans (CARPs) are strategic plans comprising firms' climate change mitigation and adaptation commitments. Given the importance of CARPs for meeting climate change targets, encouraging firms to develop CARPs is paramount. When designing evidence-based approaches to drive firm-level CARPs, it is essential to know the resources and capabilities that enable firms to develop CARPs. Drawing on novel and highly detailed data on firms in Ireland, and using a direct matching approach, our study examines the characteristics that distinguish firms that develop and do not develop CARPs. We find that firms developing CARPs: (1) Exhibit strong market performance, in terms of productivity and sales; (2) Engage in international markets; (3) Are highly R&D and innovation active; and (4) Already use digital technologies. Such insights suggest that CARPs require firms to have high levels of resources and skills when designing their responses to climate change. The paper proffers potential policy and managerial implications, in terms of encouraging firms to develop CARPs. |
| Keywords: | Firm-level climate action, Climate Action Response Plans, Climate Change Adaptation, Climate Change Mitigation, Firms' R&D and innovation, Greenwashing |
| JEL: | Q54 Q56 Q57 L21 M14 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312182 |
| By: | Bradford, William D. (University of Washington); Wang, Chunbei (Virginia Tech); Lofstrom, Magnus (Public Policy Institute of California); Verchot, Michael (University of Washington) |
| Abstract: | This study uses survey data on small business loans granted 2022 -2023 to explore racial disparities in the terms of loans to small firms. Similar data has not been available since the 2003 Survey of Small Business Finances (SSBF). We find that for Hispanic-, Asian American- and Black-owned firms, the interest rate paid was higher than for comparable white-owned firms, adjusting for risk factors determining interest rate on loans, including the firm's industry, financial attributes, owner traits, credit history and type of loan. We also find that while Black-owned firms pay higher interest rates in states with greater broad racial disparity, while it is not statistically significant for the other minority groups. We conducted robustness tests to verify the strength of these results. If our results are nationally representative of firms that borrowed during the period we observe, then collectively on average, Asian, Black-, and Hispanic-owned businesses annually pay $9.1 billion more in interest than white-owned firms of equivalent risk attributes. Another component of credit is collateral. We find that co-signatures from third parties are required more frequently for minority firms than is justified by our economic analysis. |
| Keywords: | entrepreneurship, self-employment, business ownership, racial disparity, minority, loan pricing |
| JEL: | D4 G2 J15 L26 M |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17730 |
| By: | Brucal, Arlan Zandro Ilagan; Grover, Arti Goswami |
| Abstract: | Most crises have a disproportionately larger negative effect on micro-sized firms. Yet, the heterogeneity of impact within micro-sized firms is lesser known. Using five waves of the World Bank's Business Pulse Survey data, this paper finds that firms with zero to four employees have a much larger drop in sales and slower recovery rate compared to micro-sized firms with five to nine employees. The overall differences in the resilience between the two groups of micro-sized firms could potentially be due to a uniformly lower productivity level of firms with zero to four employees. Within the two groups of micro-sized firms, resilience is correlated with their liquidity position, managerial attitudes as well as their abilities. Using discriminant analysis, this paper confirms that a significant proportion of micro-sized firms mimic the behavior of larger firms in terms of their resilience to shocks and could potentially be “misclassified” as micro-sized. These findings have important implications for targeting and tailoring support for enhancing businesses' resilience to shocks. |
| Date: | 2023–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10556 |
| By: | De Nicola, Francesca; Melecky, Martin; Iootty De Paiva Dias, Mariana |
| Abstract: | This paper studies the effect of bank ownership on product innovation by borrowing firms, highlighting the role of the state, foreign, and combined foreign-state bank ownership. It uses Enterprise Survey data for more than 22, 000 firms in 49 countries from 2016 to 2020, linked to Fitchconnect data on banks: their ownership, soundness indicators, and legal origins. The paper confirms that a firm's access to bank credit is associated with a greater probability of product innovation, even when adjusting for possible reverse causality. If the credit is provided by a state-owned bank, the probability that the borrowing firm will innovate increases. The analysis does not find a similarly positive effect for foreign bank ownership. But when considering the combined effect of foreign state ownership, the results are most statistically and economically significant. Although the results ma y not be extendable to research and development spending (a key input to innovation), the findings show that foreign state banks can serve as an additional financing vehicle to stimulate radical innovation alongside equity financiers. |
| Date: | 2023–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10458 |
| By: | Amin, Mohammad; Khalid, Usman |
| Abstract: | Ethnic fractionalization has both positive and negative consequences. It is contended that the positive effects due to skill complementarity in the production process apply to large firms that have more complex and diversified production structures. Because small businesses rely more on public goods and have less access to institutions, the negative effects of lower quality public goods and higher transaction costs have a greater impact on them. Consistent with this viewpoint, it is found that a larger firm size significantly mitigates the negative impact of higher ethnic fractionalization on the level and growth rate of labor productivity in manufacturing firms across 84 developing countries. There is no robust and significant impact of ethnic fractionalization on large firms for the main and most of the other firm size categorizations considered. The results are confirmed by the instrumental variables estimation method, which uses the duration of early human settlement in each country to instrument ethnic fractionalization. Evidence is provided on the potential mechanisms by which ethnic fractionalization affects small versus large firms. The findings have significant policy implications, which are discussed in detail. |
| Date: | 2023–03–27 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10375 |
| By: | Islam, Asif Mohammed; Rodriguez Meza, Jorge Luis |
| Abstract: | This study develops a measure of firm-level credit constraints by leveraging refinements in survey instruments for a widely used database. Using data on more than 65, 000 firms across 109 economies, the study uncovers several insights. Around 30 percent of firms in the formal private sector are credit constrained. Firms that are credit-constrained tend to be smaller and negatively correlated with performance. The more developed the economy, the lower the share of credit-constrained firms. One striking finding is that 52 percent of firms do not apply for loans as they have sufficient credit. For some economies, this may be more indicative of poor opportunities for the expansion of firms and thus the lack of demand for credit. The findings suggest that for policies that improve access to credit to be effective, they should go hand in hand with interventions that provide opportunities for firms to expand. |
| Date: | 2023–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10502 |
| By: | Boeing, Philipp; Peters, Bettina |
| Abstract: | We investigate the misuse of R&D subsidies and evaluate its consequences for policy effectiveness. Developing a theoretical framework and using Chinese firm-level data for 2001-2011, we identify that 42% of grantees misappropriated R&D subsidies for non-R&D purposes, accounting for 53% of total R&D subsidies. Misuse leads to a substantial loss in the causal impact of R&D subsidies, as measured by the difference between the intention-to-treat and complier average causal effect. R&D expenditures could have been stimulated beyond the subsidy amount (additionality), but misuse (noncompliance) resulted in medium-level partial crowding out, reducing the effectiveness of China’s R&D policy by more than half. |
| Keywords: | R&D subsidies, policy evaluation, misuse, China |
| JEL: | O31 O38 C21 H21 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312195 |
| By: | Dupont-Sinhsattanak, Alexandre |
| Abstract: | In light of China’s objective of achieving complete military modernization by 2035 and becoming a world-class military by 2049, whether it will successfully modernize its military or not is a crucial question for the 21st century. Historically reliant on foreign technologies, China now faces challenges in developing indigenous innovation capabilities. Utilizing a mixed-methods approach, combining quantitative analysis of financial data from Chinese listed companies with case studies, this paper assesses the impact of military-civil fusion (MCF) on innovation in China’s defence-technological industry. Findings indicate that MCF pushed state-owned enterprises (SOE) to be more efficient and to recentre on core businesses, while encouraging the gradual entry of private firms into the industry. Yet, several limitations exist. SOEs continue to enjoy greater subsidies and better integration into the national innovation system, cementing their advantage over their private counterparts. Private companies function as suppliers of large conglomerates, which remain the only ones capable of assembling advanced weapon systems. By examining the interaction between market dynamics and state-driven strategies, this paper explores the evolving role of China’s private sector in military modernization and underscores the synergies between government support and market interests in fostering innovation. |
| Keywords: | China; defence-technological industry; Innovation; military modernization; military-civil fusion |
| JEL: | L64 O31 O38 |
| Date: | 2025–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127136 |
| By: | Amin, Mohammad; Jolevski, Filip; Islam, Asif Mohammed |
| Abstract: | This study analyzes the difference in the decline in sales between small and medium-size enterprises and large firms (the “gap”) following the outbreak of COVID-19 in 19 developing countries. The decline in sales as a percentage of the pre-pandemic level was bigger for small and medium-size enterprises by 12.2 percentage points. The paper uses the Kitagawa-Oaxaca-Blinder and quantile decomposition methods to estimate individual factors’ contributions to the gap at the mean and across the sales decline distribution. Several important results emerge. First, relative to large firms, small and medium-size enterprises faced greater incidence of input supply disruptions during the pandemic, had lower initial labor productivity levels, and were concentrated in country-industry cells with a bigger sales declines. These differences in the level of factors widened the gap. Small and medium-size enterprises also suffered more than large firms from a given level of financial constraints, input supply disruptions, and country-industry-specific factors, and benefitted less from a given level of initial labor productivity. These differences in the returns to factors also widened the gap. Second, the gap was much larger at the relatively high quantiles of sales decline distribution, indicating that relative to large firms, small and medium-size enterprises were much less resilient to large shocks than small shocks. Third, individual factors’ contribution to the gap varied across the sales decline distribution. Thus, the optimal policy mix depends on the size of the shock. Fourth, there were some important differences between geographical regions in what drove the gap. Thus, an eclectic policy approach is needed that duly accounts for the prevailing local conditions. |
| Date: | 2023–09–08 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10562 |
| By: | Calice, Pietro |
| Abstract: | Access to finance is a key obstacle for the growth and development of small and medium-sized enterprises in fragile and conflict affected situations. This paper provides empirical evidence on the key macrofinancial and institutional drivers of financial inclusion of small and medium-sized enterprises in a large sample of countries, highlighting the comparative importance of factors affecting countries with and without fragile and conflict affected situations. The results show that macroeconomic and institutional stability, along with reduced informality, banking sector soundness, and improved credit information environment, are associated with higher financial inclusion of small and medium-sized enterprises. The results also show that strengthening the rule of law, government effectiveness, and control of corruption while increasing financial depth and reducing public sector borrowing and banking market concentration could help close the small and medium-sized enterprise financial inclusion gap between fragile and conflict affected situation countries and the best performing countries. These effects are generally stronger in middle-income countries with fragile and conflict affected situations than in low-income countries with fragile and conflict affected situations. The results point to the importance of adopting comprehensive macrofinancial and institutional strategies to improve financial inclusion of small and medium-sized enterprises in countries with fragile and conflict affected situations, tailoring reforms to country contexts. |
| Date: | 2023–03–14 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10363 |
| By: | Gaétan de Rassenfosse; Adam B. Jaffe |
| Abstract: | Ensuring broad access to the patent system is crucial for fostering innovation and promoting economic growth. To support this goal, the U.S. Patent and Trademark Office offers reduced fees for small and micro entities. This paper investigates whether fee rates affect the filing of applications by small and micro entities. Exploiting recent fee reforms, the study evaluates the relationship between fee changes and the number of new entrants, controlling for potential confounding factors such as legislative changes. The findings suggest that fee reductions alone are insufficient to significantly increase participation in the patent system among small and micro entities. |
| JEL: | O30 O31 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33492 |
| By: | di Giovanni, Julian; Garcia Santana, Manuel Jose; Jeenas, Priit; Moral Benito, Enrique; Pijoan-Mas, Josep |
| Abstract: | This paper provides a framework to study how different allocation systems of public procurement contracts affect firm dynamics and long-run macroeconomic outcomes. It builds a novel panel dataset for Spain that merges public procurement data, credit register loan data, and quasi-census firm-level data. The paper provides evidence consistent with the hypothesis that procurement contracts act as collateral for firms and help them grow out of their financial constraints. The paper then builds a model of firm dynamics with asset- and earnings-based borrowing constraints and a government that buys goods and services from private sector firms, and uses it to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. The findings show that policies which promote the participation of small firms have sizeable macroeconomic effects, but the net impact on aggregate output is ambiguous. While these policies help small firms grow and overcome financial constraints, which increases output in the long run, these policies also increase the cost of government purchases and reduce saving incentives for large firms, decreasing the effective provision of public goods and output in the private sector, respectively. The relative importance of these forces depends on how the policy is implemented and the type and strength of financial frictions. |
| Date: | 2023–07–24 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10522 |
| By: | Joshua S. Gans |
| Abstract: | This paper examines the relationship between Knightian uncertainty and Bayesian approaches to entrepreneurship. Using Bewley's formal model of uncertainty and incomplete preferences, it demonstrates that key predictions from Bayesian entrepreneurship remain robust when accounting for Knightian uncertainty, particularly regarding experimentation, venture financing, and strategic choice. The analysis shows that while Knightian uncertainty creates a more challenging decision environment, it maintains consistency with the three pillars of Bayesian entrepreneurship: heterogeneous beliefs, stronger entrepreneurial priors, and Bayesian updating. The paper also explores connections to effectuation theory, finding that formal uncertainty models can bridge different entrepreneurial methodologies. |
| JEL: | D81 O30 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33507 |