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on Small Business Management |
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Issue of 2025–09–15
eighteen papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Philippe Aghion; Antonin Bergeaud; Timo Boppart; Peter J. Klenow; Huiyu Li |
| Abstract: | Firm price-cost markups may reflect (a) bigger step sizes from quality innovations that confer significant knowledge spillovers onto other firms, and/or (b) higher process efficiency than competing firms or other factors which bear no obvious knowledge externality. We write down an endogenous growth model with innovation step size and process efficiency as alternative sources of markup heterogeneity. Compared with the laissez-faire equilibrium, the social planner wants to reallocate research towards high step size firms but not high process efficiency firms. We then use price and productivity data across firms in French manufacturing to infer firm step sizes and process efficiency. We find that the planner could achieve faster growth by reallocating research toward high step size firms, and more so if high step size firms could freely license their innovations to high process efficiency firms. |
| JEL: | O31 O38 O41 O52 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34190 |
| By: | Okan Akarsu |
| Abstract: | In this paper, I explore the spillover effects of frontier firms on other firms in Türkiye, using a detailed administrative dataset with firm-level data on balance sheets, inter-firm transactions, and employment. I review key production function estimators, evaluate their assumptions and performance using a large dataset of Turkish firms, and apply estimated productivity to identify frontier firms and assess their influence on laggard firms' performance. Additionally, I contribute to the empirical literature by exploring the spillover and network effects of frontier firms on laggard firms, as well as examining the productivity convergence of laggard firms to frontier firms. The analysis reveals three key findings: (i) Frontier firms generate positive spillover effects within sectors, which enhance sales, employment, exports, and asset growth among laggard firms; (ii) detailed firm-to-firm invoice data reveals that a higher share of frontier firms in a firm’s network significantly boosts investment, net sales, and productivity growth; and (iii) laggard firms show faster productivity growth, with substantial variation across firm types and industries. |
| Keywords: | Spillover effect, Frontier firm, Total factor productivity, Production function estimation, Semiparametric estimator, Laggard firm dynamics |
| JEL: | C13 C14 C23 D24 D40 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2511 |
| By: | Jeannerat, Hugues; Butzin, Anna; Carvalho, Luís; Manniche, Jesper |
| Abstract: | While knowledge has long been central to theories of innovation-led regional development, its conceptualization within the emerging transformative innovation paradigm has remained largely implicit and undertheorized. This paper draws on insights from sustainability transitions, organizational learning, and higher education studies to develop a perspective on the action-oriented nature of knowledge, as it increasingly associates with the matters of directionality, materiality and structuration. Based on this, we articulate an idea of transformative knowledge through a triple lens, emphasising interdependencies between knowledge for action (goal- and mission-oriented), knowledge by action (generated through experimentation), and knowledge as action (situated in practice and everyday life). We apply this lens to discuss the outlines of transformative knowledge regions, proposing an expansion in the repertoire of regional innovation interventions. In doing so, the paper broadens the epistemic contours of knowledge in regional development and contribute to current debates on challenge- and mission-oriented regional innovation policy. |
| Keywords: | transformative learning, sustainability transitions, regional innovation policy, mission innovation, valuation |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iatdps:324867 |
| By: | David, Alexandra; Terstriep, Judith; Freiling, Jörg |
| Abstract: | A 'sense of belonging' is essential for migrant entrepreneurs (MEs), influencing not only their integration but also their success within entrepreneurial ecosystems (EEs). This concept transcends mere economic involvement, delving into critical psychosocial dimensions often overlooked in traditional EE research. The study highlights how a robust sense of belonging significantly enhances business success for MEs. In contrast, its absence can lead to issues such as 'ecosystem hopping'. The interim findings call policymakers and practitioners to prioritise belonging in ecosystem design, fostering environments that are equitable and supportive, thus improving the well-being and business outcomes for diverse entrepreneurial communities. |
| Keywords: | migrant entrepreneurship, sense of belonging, community, entrepreneurial ecosystems |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iatfor:324900 |
| By: | E. Marrocu; R. Paci; L. Serafini |
| Abstract: | This paper investigates the impact of digital and green programmes within Smart Specialisation Strategies on regional productivity growth across European regions. It examines the combined influence of digital and green priorities (Twin Transition) and how their effects vary according to regions' initial economic conditions. The analysis reveals a U-shaped relationship - the Twin Transition is positively and significantly associated with productivity growth in low-productivity regions, whereas regions with intermediate productivity levels exhibit weaker or even negative associations. Conversely, high-productivity regions experience modest yet stabilising effects. These findings highlight the significance of the middle-income trap and the need for context-sensitive policy design. |
| Keywords: | Green policies;Digital policies;Twin Transition;Smart Specialisation Strategy;regional economic growth;european regions |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cns:cnscwp:202510 |
| By: | Chuyen Thi NGUYEN (School of Economics and Management, Hanoi University of Science and Technology, Hanoi, Vietnam Author-2-Name: Ngoc Thi Kim PHAM Author-2-Workplace-Name: School of Economics and Management, Hanoi University of Science and Technology, Hanoi, Vietnam Author-3-Name: Dan Thi Thanh NGUYEN Author-3-Workplace-Name: School of Economics and Management, Hanoi University of Science and Technology, Hanoi, Vietnam Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | " Objective - The wave of technology startups in Vietnam is growing strongly, significantly contributing to national economic growth. This research aims to develop a comprehensive research model to identify key factors affecting the success of technology startups in Vietnam. Methodology/Technique - This study employs a quantitative research method, utilizing desk research and an in-depth review of the foundation and current research on technology start-ups and related topics. Finding - Based on indepth literature analysis, research identifies ten (10) key factors influencing on the succes of technology start up including: 1) Technology monitoring, (2) Knowledge absorption capacity, (3) Perceived performance, (4) Customer satisfaction level, (5) Stage-based funding, (6) Innovation ecosystem, (7) Innovation and entrepreneurial culture, (8) Government support, (9) Network size and quality, and (10) Founding team capabilities Novelty - The novelty of this study lies in constructing a comprehensive model that integrates endogenous and exogenous factors within Vietnam's specific context, serving as a foundation for future empirical research and appropriate policy recommendations Type of Paper - Empirical" |
| Keywords: | Technology startups, success factors, startup ecosystem, Vietnam, research model. |
| JEL: | L26 O32 M13 O25 |
| Date: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:gtr:gatrjs:gjbssr664 |
| By: | L. Serafini; R. Paci; E. Marrocu |
| Abstract: | This paper investigates the impact of green, digital, and twin transition investments on firm performance in Italy during the 2014-2020 programming period. Drawing on detailed project-level data from the OpenCoesione platform on ERDF-funded initiatives, we classify investments according to their thematic focus and apply a staggered Difference-in-Differences approach to estimate their effects on value added, employment, and labour productivity. Our results show that firms supported through twin transition projects, those combining green and digital components, achieve the most substantial and sustained gains in value added and productivity. These integrated interventions appear particularly effective in enhancing firm performance and capacity utilisation, with employment effects emerging more gradually. Purely green and digital projects also yield positive outcomes, though with more moderate and variable effects. We further document significant heterogeneity across regions and sectors, with stronger impacts observed among firms located in Northern and Southern Italy and in knowledge-intensive sectors. Our findings highlight the importance of strategic investment design - transition-oriented and multi-dimensional projects consistently outperform single-focus initiatives. These results suggest that EU cohesion policy plays a pivotal role in supporting structural transformation, particularly when funding is targeted to integrated projects that align with broader environmental and digital policy goals. |
| Keywords: | Twin Transition;Green policies;Digital policies;Innovation and firm Performance;Cohesion Policy;Counterfactual Impact Analysis |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cns:cnscwp:202511 |
| By: | Joshua S. Gans |
| Abstract: | This paper examines firm ownership structures in competitive general equilibrium by introducing a model where ownership rights emerge endogenously rather than being assumed. By embedding the property rights theory of the firm into general equilibrium analysis, the model demonstrates how market forces determine both initial firm formation by entrepreneurs and subsequent trading of ownership rights. The key finding is that, in equilibrium, firms are created by managers who have long-term importance to performance, but these founder-managers then sell ownership to outside investors. This pattern emerges because managers can capture value through both the sale price and their ongoing employment relationship, while outside owners can only benefit through ownership. The model thus provides a novel theoretical foundation for observed patterns of entrepreneurial exit and reconciles competing approaches to firm ownership in general equilibrium theory. Additionally, it identifies a distinct economic definition of an entrepreneur as an agent whose human capital is valuable for firms even when they do not remain long-term owners. The framework generates insights into firm formation, ownership dynamics, and the nature of entrepreneurship while maintaining the core structure of competitive general equilibrium analysis. |
| JEL: | D23 D50 L22 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34187 |
| By: | Hoang, Van Thang |
| Abstract: | This paper examines the challenges and strategies of agricultural e-commerce platforms in enhancing digital visibility, with a focus on the case of Nông Sản Bán Buôn in Vietnam. Using a case study approach, the research highlights how early adoption of search engine optimization (SEO) enabled rapid growth, but also how structural vulnerabilities, shifting digital algorithms, and the impact of the COVID-19 pandemic disrupted platform stability. The findings show that small and medium-sized enterprises (SMEs) in agriculture face unique barriers to sustaining online presence, including limited resources, technological dependence, and competitive asymmetries compared to larger players. By situating these experiences within broader academic debates on digital marketing, platform economies, and rural development, the study contributes to understanding the systemic inequalities embedded in digital commerce. The paper concludes with practical recommendations for SMEs to diversify marketing strategies, balance SEO with multi-channel engagement, and strengthen resilience in rapidly changing digital environments. |
| Date: | 2025–08–26 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:5h7fr_v1 |
| By: | Gavin Wang; Lynn Wu |
| Abstract: | Although AI has the potential to drive significant business innovation, many firms struggle to realize its benefits. We examine how the Lean Startup Method (LSM) influences the impact of AI on product innovation in startups. Analyzing data from 1, 800 Chinese startups between 2011 and 2020, alongside policy shifts by the Chinese government in encouraging AI adoption, we find that companies with strong AI capabilities produce more innovative products. Moreover, our study reveals that AI investments complement LSM in innovation, with effectiveness varying by the type of innovation and AI capability. We differentiate between discovery-oriented AI, which reduces uncertainty in novel areas of innovation, and optimization-oriented AI, which refines and optimizes existing processes. Within the framework of LSM, we further distinguish between prototyping focused on developing minimum viable products, and controlled experimentation, focused on rigorous testing such as AB testing. We find that LSM complements discovery oriented AI by utilizing AI to expand the search for market opportunities and employing prototyping to validate these opportunities, thereby reducing uncertainties and facilitating the development of the first release of products. Conversely, LSM complements optimization-oriented AI by using AB testing to experiment with the universe of input features and using AI to streamline iterative refinement processes, thereby accelerating the improvement of iterative releases of products. As a result, when firms use AI and LSM for product development, they are able to generate more high quality product in less time. These findings, applicable to both software and hardware development, underscore the importance of treating AI as a heterogeneous construct, as different AI capabilities require distinct organizational processes to achieve optimal outcomes. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.16334 |
| By: | Okan Akarsu; Mehmet Selman Colak; Hatice Karahan; Huzeyfe Torun |
| Abstract: | This study examines the impact of monetary policy surprises on credit usage, borrowing costs, default probabilities, and foreign-currency (FX) trading behavior, emphasizing heterogeneity by firm size, leverage, export orientation, and sector. Using a comprehensive administrative dataset linking firm-level balance sheets, employment, firm–bank credit records, and FX transactions, we document four main results: (1) unexpected tightening reduces borrowing, raises loan rates, and increases default risk, with markedly stronger effects for SMEs and highly leveraged firms than for large and less-leveraged firms; (2) export-oriented firms are relatively resilient, consistent with diversified foreign-currency revenues and broader funding options; (3) sectoral responses are uneven—construction is most responsive, services are intermediate, and industry is least affected; and (4) policy surprises reallocate FX flows—following unexpected tightening, firms (especially SMEs and non-exporters) reduce FX purchases and increase FX sales, while exporters adjust less. Collectively, the findings underscore systematic variation in firms’ responses to monetary policy shaped by size, financial structure, export orientation, and sectoral characteristics. |
| Keywords: | Monetary policy transmission, Monetary policy surprises, Credit, Firm heterogeneity |
| JEL: | E12 E24 E52 E58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2514 |
| By: | Takpara, Moukaila Mouzamilou |
| Abstract: | The article investigates the contribution of trade facilitation to productivity growth in Sub-Saharan African (SSA) countries. We include four trade facilitation indicators (i.e., physical infrastructure, ICT, business and regulatory environment, border, and transport efficiency) as explanatory factors for productivity growth measured by both total factor productivity and labor productivity. The empirical evidence is based on both Pooled Ordinary Least Squares (POLS) and the Instrumental Variable Two-Stage Least squares (IV-2SLS) in a sample of 29 SSA countries over the period 2004-2017. The main results from the study show that trade facilitation contributes positively and significantly to total factor productivity as well as labor productivity in SSA. Based on this finding, SSA countries need to improve border procedures as well as the business and regulatory environment to generate substantial productivity gains and boost the competitiveness of micro, small and medium-sized enterprises (MSMEs), given the job creation potential of MSMEs. |
| Keywords: | Trade facilitation, Productivity, Sub-Saharan Africa, 2SLS |
| JEL: | F13 F14 O11 O47 |
| Date: | 2025–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125818 |
| By: | Dong, Sarah (Australian National University); Satyadini, Agung (Australian National University); Sinning, Mathias (Australian National University) |
| Abstract: | Both theory and evidence suggest an ambiguous relationship between business tax compliance and geographic proximity to tax offices. We study this issue using a large-scale natural field experiment with Indonesia’s tax authority involving 12, 000 micro, small, and medium enterprises (MSMEs). Businesses were randomly assigned to receive deterrence, information, or public goods letters, or no message. All letters improved compliance, with deterrence messages producing the largest gains - substantially increasing filing rates and raising monthly tax payments. Each dollar spent on deterrence letters generated about US$30 in additional revenue over the course of a year. We observe high compliance among non-treated MSMEs near metropolitan tax offices and find that enforcement messages successfully raise compliance in non-metropolitan regions to comparable levels. However, targeting already compliant MSMEs near metropolitan tax offices backfires, underscoring the need for geographically tailored tax administration strategies. These results provide novel experimental evidence on the relation between geographic proximity and the effectiveness of tax enforcement, helping to reconcile mixed findings in the tax compliance literature. |
| Keywords: | behavioral insights, natural field experiment, tax compliance |
| JEL: | C93 D90 H25 H26 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18108 |
| By: | Patrick Arnold, Marc Möller, Catherine Roux |
| Abstract: | Uncertainty about the value of a contested innovation induces leaders and laggards to update their expectations in opposite directions. We characterize situations in which firms that have obtained an initial advantage are not the most likely to achieve final success. In spite of amplifying a leader’s advantage, greater contest intensity facilitates this effect, challenging the view that laggards require support to remain competitive. |
| Keywords: | innovation contests, learning, competitive balance, leapfrogging |
| JEL: | C72 D82 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ube:dpvwib:dp2025 |
| By: | Mishra, Sarmistha; Sahoo, Dukhabandhu; Mohapatra, Souryabrata |
| Abstract: | The transition to a circular economy (CE) is a crucial global goal aimed at promoting sustainable production and consumption. However, its adoption among Micro, Small, and Medium Enterprises (MSMEs) in developing economies remains constrained by multiple barriers. This study builds upon prior research that identified sixteen key barriers to CE adoption through a systematic literature review. Employing the Weighted Influence Non-linear Gauge System (WINGS) method, the study ranks the barriers in terms of their internal strength as well as their intensity to influence other barriers in the specific context of MSMEs. Expert evaluations indicate that lack of investment support, financial constraints, lack of resource efficiency, inadequate infrastructure, and limited potential knowledge are the most influential barriers. The WINGS analysis also reveals that lack of investment support and lack of information are the two primary barriers affecting the greatest number of other barriers. Hence, the findings of our study suggest the urgent need for targeted policy interventions to enhance financial capacity, knowledge dissemination, and infrastructural support, collectively facilitating MSMEs’ transition to CE practices. This study contributes to the literature by identifying and prioritising the key barriers, as well as identifying the interconnectedness among them, which serves as a guide in order to design effective strategies supporting MSMEs in overcoming CE adoption barriers, thereby fostering sustainable economic growth in developing economies. |
| Keywords: | Barriers, Circular Economy, Developing Economies, MSMEs, WINGS |
| JEL: | C44 M13 O31 Q5 R19 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125808 |
| By: | Nicholas A. Carollo; Elior Cohen; Jingyi Huang |
| Abstract: | Using novel occupational data from the United States between 1860 and 1940, we evaluate Adam Smith’s core propositions regarding the division of labor, market size, innovation, and productivity. We document significant growth in occupational diversity during this period using new measures of labor specialization that we construct from workers’ self-reported job titles in the decennial census. Consistent with Smith’s hypotheses, we find strong empirical evidence that labor specialization increases with the extent of the market, is facilitated by technological innovation, and is ultimately associated with higher manufacturing productivity. Our findings also extend Smith’s narrative by highlighting the role of organizational changes and innovation spillovers during the Second Industrial Revolution. These results speak to the enduring relevance of Smith’s insights in the context of an industrializing economy characterized by large firms, complex organizational structures, and rapid technological change. |
| Keywords: | division of labor; occupations; productivity growth; technological change |
| JEL: | N11 O14 J24 D24 |
| Date: | 2025–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:101725 |
| By: | Jonas Heim; Thomas Nitschka |
| Abstract: | This paper evaluates whether CO2 emission levels or emission intensities are firm characteristics that drive Swiss firms’ stock returns. We show that standard characteristics such as size and the book-to-market equity ratio are more important determinants of firm-level stock returns than are CO2 levels (intensities). Brown firms (high CO2 levels or intensities) tend to be large and exhibit low book-to-market equity ratios, whereas their green counterparts are small and exhibit high book-to-market equity ratios. This explains why return differences between brown and green firms are statistically indistinguishable from zero after controlling for exposures to standard risk factors. |
| Keywords: | Climate change, CO2 emissions, Event study, Risk premium |
| JEL: | G12 Q54 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:snb:snbwpa:2025-13 |
| By: | Carlos Alberto Coca Gamito (Asian Development Bank); Silvia Garcia Mandico (Asian Development Bank) |
| Abstract: | Young people in Bhutan face rising rates of exclusion from employment, education, or training, and limited access to quality jobs, despite gains in education. Entrepreneurship is often viewed as an alternative pathway, but most youth-led ventures remain necessity-driven, informal, and short-lived. Using data from the 2018–2023 Labor Force Survey and the 2024 Jobs and Skills Survey, this paper examines youth entrepreneurship dynamics, including motivations, earnings, productivity, and sectoral patterns. Findings show that opportunity-driven entrepreneurs—especially young women—achieve higher earnings and productivity, but few business ventures by young people transition beyond the early stages. A shift from necessity-driven to opportunity-driven entrepreneurship could yield economic gains equivalent to 1.4% of gross domestic product. Realizing this potential requires gender-responsive, stage-specific support and embedding entrepreneurship within a broader strategy for decent work and inclusive growth. |
| Keywords: | youth employment;entrepreneurship;decent work;gender and labor market;labor market dynamics |
| JEL: | J13 J21 J24 L26 O17 |
| Date: | 2025–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021528 |