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on Small Business Management |
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Issue of 2025–04–21
eight papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Jesus Fernandez-Villaverde; Yang Yu; Francesco Zanetti |
| Abstract: | Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction. This mechanism helps explain the simultaneous rise in R&D spending and decline in TFP growth in the US economy over recent decades. We develop a simple model highlighting the critical role of the inelastic supply of research labor in enabling this effect. Empirical evidence confirms that the research labor supply in the US is indeed inelastic and supports other model predictions: incumbent R&D spending is negatively correlated with creative destruction and sectoral TFP growth while extending incumbents’ lifespan. All these effects are amplified when ideas are harder to find. An extended version of the model quantifies these mechanisms’ implications for productivity, innovation, and policy. |
| Keywords: | productivity growth, innovation, R&D, patents, creative destruction |
| JEL: | E22 L11 O31 O33 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-15 |
| By: | FABBRI Emanuele (European Commission - JRC); ZIVKOVIC Lazar; STRBAC Dijana; LJUMOVIC Isidora |
| Abstract: | This report, aligned with the JRC's efforts under the Global Gateway strategy as EU flagship investment plan underpinning the external dimension of EU policy across the world, provides insights into Information and Communication Technologies (ICT) collaboration in the Western Balkans, crucial for advancing regional development agendas. It addresses urgent questions on leveraging ICT for digitalisation and green transformation, recognizing high stakes for economic growth and sustainability. Through a mixed-methods approach, it identifies a strong commitment to ICT cooperation among Western Balkan economies, emphasizing the need for targeted interventions to overcome financial constraints and limited awareness. Key possible policy implications include establishing regional cooperation platforms, creating regional support financial instruments for Smart Specialisation Strategies (S3) implementation, and harmonising legal frameworks to foster cross-border cooperation, all essential for enhancing regional competitiveness and innovation capacity. The report underscores the importance of regional partnerships, digital skill enhancement, and strategic alignment to unlock the full potential of the ICT sector in driving economic resilience and growth in the Western Balkans. This study sheds light on the main challenges ahead and opportunities in the region, to be possibly tackled also in the context of the Growth Plan for the Western Balkans. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc140887 |
| By: | Colin Davis; Ken-ichi Hashimoto |
| Abstract: | This paper investigates how the cash-in-advance (CIA) constraints that firms face in production and innovation decisions affect the long-run relationship between monetary policy and innovation-based economic growth. Firms produce differentiated product varieties and invest in process innovation to reduce production costs. With imperfect knowledge diffusion across countries, the country with the greater share of industry has relatively productive firms. We find that when innovation has a stricter CIA requirement than production, an increase in the nominal interest rate in the country with the larger (smaller) share of industry reduces the industrial share of that country, thereby decreasing (increasing) the rate of productivity growth. We also examine the implications of improvements in knowledge diffusion for the optimal nominal interest rate policy of each country. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1278 |
| By: | Fazekas, Mihaly; Poltoratskaya, Viktoriia; Marc Tobias Schiffbauer; Tóth, Bence |
| Abstract: | This paper assesses the impact of favoritism in public procurement on private sector productivity growth. To this end, it combines three novel microeconomic data sets: administrative data on firms, including more than 4 million firm-year observations and rich financial and ownership information; public procurement transaction data for 150, 000 published contracts and their tenders; and a newly assembled data set on firms’ political connections, drawing on asset declarations, sanction lists, and offshore leaks. This comprehensive data set allows tracing the impact of favoritism in allocating government contracts to economic growth. The findings show that politically connected firms are 18 to 32 percent more likely to win public procurement contracts due to their preferential access to uncompetitive tenders. Public procurement results in higher subsequent productivity and employment growth only if it has been awarded through competitive tenders. Firms winning contracts through uncompetitive procedures have flat growth but higher profit margins. Consistent with these findings, the paper shows that firms that are awarded uncompetitive public procurement contracts obtain rents of 9 to 11 percent from overpaid contracts. The results suggest that aggregate annual total factor productivity growth would have been 8 percent higher in the absence of favoritism in public procurement. |
| Date: | 2025–03–13 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11085 |
| By: | Heierhoff, Sebastian |
| Abstract: | The rapidly evolving technological landscape does, in the form of digital innovations, create opportunities for organizations and consumers alike. At the same time, it does, however, confront both parties with increasing cybersecurity challenges. This dissertation deals with the conflicting demands of maintaining competitive advantage and leveraging the benefits of digital innovation while ensuring cybersecurity. It explores the resulting tensions and potential trade-offs from both a consumer and organizational perspective, seeking to provide theoretical and practical contributions on how the interplay between digital innovation and cybersecurity can be optimized and how the two domains can be balanced effectively. Thereby, the dissertation is guided by three overarching research questions: First, how do consumers' attitudes towards innovation and cybersecurity influence their acceptance of digital innovations? Second, how do organizations perceive and navigate the trade-offs between digital innovation and cybersecurity? Third, what are the implications of organizational design in general and organizational ambidexterity in specific for the interplay of digital innovation and cybersecurity capabilities? These research questions are dealt with in four empirical studies. The first study focuses on the consumer perspective and the trade-offs they make in their technology acceptance decisions. Therefore, the Technology Acceptance Model is extended by four constructs - Personal innovation affinity, personal risk appetite, perceived innovativeness, and perceived cybersecurity risk. Participants of an online survey are presented with three fictitious products from the mobility sector, where digital innovations such as connected vehicles and smart mobility solutions are emerging rapidly. The findings from the first study underline that consumers sometimes neglect cybersecurity when innovative product characteristics promise substantial benefits. For certain product types, consumers do, however, seem to have increased cybersecurity concerns that organizations need to consider. The study suggests that consumer education and transparency about a product’s cybersecurity maturity are essential for informed technology acceptance decisions. Studies two, three, and four deal with the organizational perspective of the interplay between digital innovation and cybersecurity. The second study focuses on the automotive industry, exploring how organizations perceive the conflicting demands and balance them through organizational ambidexterity. The study follows a qualitative research approach drawing on nine experts questioned in semi-structured interviews. Its findings confirm the perception of a trade-off between the two domains in the automotive industry, with factors like the importance of time-to-market for digital innovations leading organizations to deprioritize and postpone cybersecurity aspects. The study suggests that strategic and operational elements of organizational ambidexterity, including corporate culture, management commitment, communication, and early integration of cybersecurity, can help minimize trade-offs and even turn cybersecurity into a competitive advantage. The third study focuses on the German logistics industry in a comparable research approach using semi-structured interviews with 14 experts for digital innovation and cybersecurity. Their analysis suggests that there are different types of tensions between digital innovation and cybersecurity capabilities negatively influencing innovation efforts in three ways: by slowing down (temporally), requiring more resources (economically), or restricting innovative freedom (functionally). Furthermore, triggers like rapid technological changes and increased market competition as well as resolving factors like flexible governance structures and an early integration of cybersecurity into digital innovation efforts are identified. Awareness of these factors helps organizations achieve a digital innovation-cybersecurity equilibrium. The fourth and final study included in this dissertation investigates how organizations can achieve ambidexterity and integrate the two domains in the context of digital innovation units. The cross-industry interview study, analyzed following the Grounded Theory methodology, leverages Galbraith’s star model as a frame of reference. Embedded within this frame, different types of innovation units and three organizational design patterns that impact the consideration of cybersecurity within these types of units, are identified. The findings underline that, depending on strategic, structural, and processual aspects, the different types of digital innovation units are more or less likely to ill- or over-consider cybersecurity. Besides the study's theoretical contribution to organizational design literature, this framework has practical implications for the setup of innovation units in practice. Collectively, the four studies contribute to a deeper understanding of the interplay between digital innovation and cybersecurity. Theoretically, while contributing to technology acceptance, organizational design, and ambidexterity theory in general, this dissertation advances the literature on digital innovation management and cybersecurity in specific by advocating for a more integrated approach that considers the conflicting demands of the two domains. Practically, it provides insights for consumers and organizations trying to navigate the resulting tensions, for example, by promoting consumer awareness or by creating an organizational culture that equally promotes both digital innovation and cybersecurity. The frameworks developed in the four studies provide a foundation for future studies on the digital innovation-security nexus, for example in further industries, and offer practical guidance, for example, concerning product marketing or digital innovations strategy. In conclusion, this dissertation highlights the importance of considering digital innovation and cybersecurity as complementary instead of opposing forces of an organization’s digital transformation. Organizations should not restrict cybersecurity to being a technical issue but see it as a strategic necessity to be embedded into their digital innovation efforts. In the long run, this will lead to more secure digital innovations, increased consumer trust, and competitive advantages. |
| Date: | 2025–03–17 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:153541 |
| By: | Molica Francesco (European Commission - JRC); Cappellano Francesco; Makkonen Teemu; Hassink Robert |
| Abstract: | This paper explores the extent to which established policy frameworks, particularly Smart Specialisation Strategies (S3s), can incorporate a mission-oriented approach (MOA). We build an analytical framework based on MOA key features and apply it to three case studies of S3s with a transformative ambition (Catalonia, Northern Netherlands, Brussels). Our findings reveal that shifting regional innovation strategies towards a mission-led or challenge-oriented dimensions entails trade-offs between strategic directionality and the bottom-up flexibility and face challenges in engaging societal actors in the governance, as well as in aligning policies and diversifying policy instruments beyond cohesion policy ones. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:trater:202501 |
| By: | Roibu, Tib |
| Abstract: | This paper explores the role of the locus coeruleus (LC) in driving innovation and adaptive thinking through its uncertainty-processing mechanisms. The research examines how this small brainstem nucleus orchestrates cognitive flexibility and creative problem-solving through targeted norepinephrine release. By understanding these neural mechanisms, a method is proposed—the Blue Spot Method—that systematically leverages LC-mediated cognitive processes through integrated cognitive modules, that work in harmony with the brain’s natural uncertainty-processing mechanisms. |
| Date: | 2025–03–25 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:e9xfc_v1 |
| By: | Qazi Haque; Oscar Pavlov; Mark Weder |
| Abstract: | Recent decades have seen a rise in the market power of large firms. We propose a theory in which their technology involves the ability to produce multiple products. Large firms interact with smaller competitors and market share reallocations via product creation generate heterogeneous markup dynamics across the firm types. Higher market shares of large firms increase the parameter space for macroeconomic indeterminacy. Bayesian estimation of the general equilibrium model suggests the importance of the endogenous amplification of the product creation channel and animal spirits play a non-trivial role in driving U.S. business cycles. |
| Keywords: | indeterminacy, business cycles, multi-product firms, animal spirits, Bayesian estimation |
| JEL: | E32 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-20 |