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on Small Business Management |
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Issue of 2025–10–13
thirteen papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Arenas Díaz, Guillermo; Piva, Mariacristina; Vivarelli, Marco |
| Abstract: | This study investigates the relationship between Artificial Intelligence (AI) and innovation inputs in Spanish manufacturing firms. While AI is increasingly recognized as a driver of productivity and economic growth, its role in shaping firms’ innovation strategies remains underexplored. Using firm-level data, our analysis focuses on whether AI complements innovation inputs - specifically R&D and Embodied Technological Change (ETC) - and whether AI can be considered as a Method of Invention, able to trigger subsequent innovation investments. Results show a positive association between AI adoption and both internal R&D and ETC, in a static and a dynamic framework. Furthermore, empirical evidence also highlights heterogeneity, with important peculiarities affecting large vs small firms and high-tech vs low-tech companies. These findings suggest that AI may act as both a complement and a catalyst, depending on firm characteristics. |
| JEL: | O31 O32 |
| Date: | 2025–10–03 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2025022 |
| By: | Gustavo de Souza; Gabriel Garber |
| Abstract: | We study the effect of an innovation subsidy on the long-run growth of firms in a developing country. Using administrative microdata from Brazil and a quasi-experimental design that compares near-winners to near-losers of R&D subsidy applications, we find that the program had a persistent effect on firm size: fourteen years after receiving the subsidy, subsidized firms were 59% larger. The effect is strongest among small and young firms facing high borrowing costs, which is consistent with the subsidy alleviating financial constraints. This growth, however, did not come from firms developing frontier innovations. Instead, firms used the subsidy to expand their product lines into high-tariff markets, producing local versions of foreign goods. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bcb:wpaper:631 |
| By: | Erkko Autio (Imperial College London); Kun Fu (Loughborough University London); Donghyun Park (Asian Development Bank); Shu Tian (Asian Development Bank) |
| Abstract: | Using Global Entrepreneurship Monitor and World Bank data, we produce a novel estimation for the prevalence of informal entrepreneurship in 60 countries in the period 2006– 2022. Using a real option framework, we test the effect of business regulation, property rights protection, and the rule of law on formal and informal entrepreneurship prevalence. Finally, we test the influence of a country’s informal entrepreneurship rate on entrepreneurial growth aspirations by individuals. We find that burdensome business regulations increase informal entry relative to formal entry. We also find that stronger property rights and rule of law encourage formal entrepreneurship and discourage informal entrepreneurship. Further, the analysis finds that a high rate of informal entrepreneurship discourages entrepreneurs’ growth aspirations and negatively moderates the relationship between the entrepreneur’s gender and growth aspirations. |
| Keywords: | informal entrepreneurship;institutions;business regulation;rule of law;property rights;entrepreneurial growth aspirations;multilevel |
| JEL: | L26 E26 O43 |
| Date: | 2025–10–06 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021669 |
| By: | Mustafa Erdem; Selcuk Gul |
| Abstract: | [TR] Bu calismada, Turkiye ekonomisinde sanayi uretiminin teknoloji yogunlugunun yakin donemdeki gelisimi hem makro duzeyde hem de firma duzeyinde gostergelerle ele alinmaktadir. Son on yillik donemde yuksek ve orta-yuksek teknoloji uretimi dikkat cekici bir artis kaydetmistir. Soz konusu donemde, Turkiye'nin teknoloji yogunluguna gore sanayi uretimindeki artis, Avrupa ulkelerinden olumlu yonde ayrismistir. Yuksek ve orta-yuksek teknoloji urunlerinin imalat sanayi icindeki payi halen OECD ortalamasinin altinda olmakla birlikte pandemi sonrasi donemde bu gruplarin performansi guclenmistir. Firma verilerinden mikro duzeyde hesaplanarak teknoloji gruplarina gore toplulastirilan gostergelere gore yuksek ve orta-yuksek teknoloji gruplarindaki firmalarin genel olarak likidite ve kârlilik oranlari yuksek, borcluluk oranlari ise dusuktur. Buna ek olarak, Ar-Ge harcamalari pandemi sonrasinda artis kaydetmistir. Ayrica, orta-yuksek ve yuksek teknoloji gruplarinin ihracat odakliligi diger gruplara gore daha yuksektir. Turkiye imalat sanayinin teknoloji yogunlugunda son on yillik donemde yakalanan guclu performansin surdurulmesi amaciyla Ar-Ge yatirimlarini destekleyen, isgucunun becerilerinin gelistirilmesine imkân veren, yapay zekâ ve dijitallesmeyi tesvik eden, yeni islerin ve kucuk ve orta olcekli girisimlerin daha kolay ortaya cikmasini destekleyen politikalar onemli gorulmektedir. [EN] This study examines the recent developments in the technological intensity of industrial production in the Turkish economy using indicators at both macro and firm levels. Over the past decade, there has been a notable increase in high- and medium-high-technology production. Indeed, during this period, the growth of industrial production by technological intensity in Türkiye has shown a positive divergence when compared to European countries. Although the share of high- and medium-hightechnology products in the manufacturing industry remains below the OECD average, the performance of these groups has strengthened in the post-pandemic period. According to aggregated indicators calculated at the micro level using firm data, on average, firms in high- and medium-high-technology groups generally exhibit higher liquidity and profitability ratios and lower debt ratios. In line with this, research and development (R&D) expenditures have increased in the post-pandemic period. Additionally, firms in the medium-high and high-technology groups are more export-oriented compared to other groups. To sustain the strong performance achieved in the technological intensity of Türkiye’s manufacturing industry over the past decade, policies that support R&D investments, enable workforce skill development, promote artificial intelligence and digitalization, and facilitate the emergence of new businesses and small and medium-sized enterprises (SMEs) are deemed important. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:econot:2518 |
| By: | Sara Amoroso (DIW Berlin); Simone Vannuccini (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | The participation of top R&D investors in publicly funded research collaborations is a common, yet largely unexplored phenomenon. It creates opportunities for knowledge spillovers and may increase the chance for a project to be funded. At the same time, the unbalanced nature of such partnerships could exacerbate power asymmetries and hinder the overall performance of such collaborations. In this paper, we examine whether cooperating with top R&D companies affects the innovative performance of publicly funded research consortia. We build a fit-for-purpose dataset that matches information from the European Union's Seventh Framework Programme (FP7) on R&D collaborative projects and proposals with data on the world's top 2, 500 companies with the highest R&D investment (R&D Scoreboard). Accounting for both sample selection and endogeneity in the participation of top R&D investors in a two-part count model framework, we find that teaming up with leading R&D companies increases the probability of obtaining funds. However, this comes at the cost of hindering the innovative performance of the funded projects, both in terms of patents and publications. In light of this evidence, the tradeoffs of mobilizing top R&D players should be carefully leveraged in the evaluation and design of innovation policies aimed at R&D collaboration and technology diffusion. |
| Keywords: | Research collaboration, Public funding, Innovation performance, Appropriability, Top R&D investors |
| JEL: | L24 L25 O33 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-41 |
| By: | Boeing, Philipp; Brandt, Loren; Dai, Ruochen; Lim, Kevin; Peters, Bettina |
| Abstract: | China's patenting activity has surged over the past two decades, yet questions remain about the quality and sources of innovation. We develop a new method to measure the importance of a patent for innovation, based on the use of a Large Language Model to process patent text data and a new theory of the innovation process. We apply this method to study the evolution of patenting in China from 1985 until recently, and also classify patent ownership using a comprehensive business registry. Our method and data yield several novel facts about Chinese patenting. Among these are that the patents which are important for innovation have become less important on average; that knowledge within China has become more important than knowledge outside of China for directing innovation in China; and that knowledge produced by Chinese entities has been more important than knowledge produced by foreign entities in China. These findings have implications for China's growth trajectory and reflect both global trends in the decline of innovativeness and potential effects of domestic policy. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewpbs:328016 |
| By: | Ayusha Fayyaz; Zoltan Bartha |
| Abstract: | The goal of this research is to uncover the channels through which research and development (R&D) impacts economic growth in developing countries. The study employed nine variables from three broader categories in the World Economic Forum database, each covering 32 countries from the lower-middle-income group for the year 2019. The theoretical framework is based on the R&D ecosystem, which includes components such as Institutions, Human capital, Capital market, R&D, and Innovation. Each of these components can contribute to the economic development of the country. Using Structural Equation Modelling (SEM), we build a path diagram to visualize and confirm a potential relationship between the components. R&D features had a positive impact on innovation (regression weight estimate: +0.34, p = 0.001), as did capital market institutions (regression weight estimate: +0.12, p = 0.007), but neither had a significant impact on growth. According to the Schumpeterian institutional interpretation, R&D and innovation efforts may not lead to sustained growth in middle-income countries. We find no significant connection between innovation performance and economic growth. This suggests that while R&D and capital markets may contribute to innovation through entrepreneurship, this contribution is not impactful enough to drive economic growth in developing countries. Our findings provide further evidence of the middle-income trap. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.19413 |
| By: | Siddharth George; Mr. Divya Kirti; Nils Olle Herman Lange; Maria Soledad Martinez Peria; Rajesh Vijayaraghavan |
| Abstract: | We study how access to bank financing affects product innovation in a developing country context by analyzing a reform that broadened credit eligibility for many small Indian manufacturing firms. Newly eligible firms borrow more but, on average, do not introduce new or more complex products or expand product scope. Many firms appear to operate below efficient scale and use credit to expand existing product lines rather than innovate. Moreover, most firms face several additional barriers that weaken the impact of credit on innovation. Among firms that do not face these additional barriers, credit access boosts innovation, as in advanced economies. |
| Keywords: | Innovation; SMEs; financial frictions; market barriers |
| Date: | 2025–09–26 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/192 |
| By: | Sérgio R. R. de Queiroz; Nicholas S. Vonortas; Otaviano Canuto |
| Abstract: | This paper aims to demonstrate how certain transformations in the international economy since the 1980s¾notably the globalization of firms and industries¾combined with a set of domestic challenges, disrupted the path of industrial and technological development that Brazil had pursued since the 1930s. In essence, growth strategies based on the scale of the domestic market ceased to be effective. The innovation and economic challenges the country now faces cannot be addressed without a clear understanding of these processes. The analysis carries important policy implications, centered on the need for less protectionism and greater internationalization of firms. Reversing the inward-looking orientation of THE Brazilian industry is a key objective for any policy aiming to stimulate increased business R&D and innovation. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rpaeco:rp03_25 |
| By: | YoungGak KIM; Kazuyuki MOTOHASHI |
| Abstract: | Using the "Survey on AI and Data Utilization" we conducted an empirical analysis of the management benefits of AI utilization in companies and the complementary assets (human resources, data, and organization) involved. AI is utilized in various aspects of corporate activities. Here, we broadly divided these uses into three categories: those aimed at improving operational efficiency, primarily through cost reduction; those aimed at enhancing marketing to create customer value; and those aimed at creating innovation, such as new product development and new business development. We then analyzed the differences in the complementary assets required for each category. Our results revealed that with regard to data assets, utilizing internal company data is important for improving operational efficiency, while external data is also necessary for enhancing marketing and creating innovation. Furthermore, we found that utilizing internal company data to produce innovations and enhance marketing through AI requires the use of data scientists. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:eti:rdpsjp:25025 |
| By: | Brandtjen, Roland |
| Abstract: | This study proposes a comprehensive theoretical framework for regional identity formation across 95 European regions integrating Social Identity Theory, constructivist approaches, and nested identity theory. Using virtual snowball sampling from 2019 to 2024, participants selected their region's most salient characteristic among language, history, culture, societal norms, political autonomy, and economic independence. Findings show culture as the dominant identifier in 64% of regions, history in 26%, with notable language prominence in Spanish regions and varied autonomy emphasis in microstates and small European territories. Demographic correlations reveal stronger cultural identification among younger and economically vulnerable groups, whereas older participants favoured societal norms. These results support social identity and constructivist models, highlighting cultural identity's role as a stable bridge between local and supranational attachments and suggesting policy implications for fostering territorial cohesion within European integration. |
| Keywords: | Regional Identity Formation, Social Identity Theory, Cultural Identity, Nested Identity, European Integration |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iubhbm:327996 |
| By: | Holger Görg, Toshihiro Okubo, Eric Strobl, Maximilian von Ehrlich |
| Abstract: | In this paper we use comprehensive historic firm level data for 1925 to 1938 to estimate productivity spillovers from Japanese textile companies’ affiliates in China (Zaikabo) to local cotton producers in China. We geo-localized firms in order to capture the important role of distance in facilitating productivity spillovers. Our results provide clear evidence for positive productivity spillovers from Zaikabo to local Chinese firms. This goes hand-in-hand with a change in production technology towards greater use of capital (spindles). We also find that spillovers are very localised, being strongest within a radius of up to 10km around the Zaikabo. Furthermore, evidence for spillovers is particularly strong for firms in Shanghai. Our paper is the first to provide evidence for such spillovers from foreign firms in a historical context. |
| JEL: | F23 N65 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:ube:dpvwib:dp2506 |
| By: | Kurter, Zeynep O. (University of Warwick; Department of Economics); Bhatti, Balaaj (University of Warwick; Department of Economics) |
| Abstract: | While artificial intelligence (AI) has become increasingly prevalent, empirical evidence on its impacton firm value is limited. This inaugural UK market study uses event study methodology to assess stock market reactions to AI investment announcements by FTSE 100 companies from 2019-2023. Analysing 138 announcements from 53 companies, the research reveals that AI investments have a marginally positive, but statistically insignificant impact of 0.114% on the announcement day, affirmed by both parametric and non-parametric tests. Further subsample analysis shows that high credit rating firms and early adopters experience significantly negative impacts on firm value, indicating investor risk-aversion and tentative evidence of a second-mover advantage. Crosssectional analysis demonstrates that industry and the type of AI investment critically influence returns, and confirms the size effect with larger firms experiencing more negative returns than smaller ones. Earnings before interest, taxes and amortization (EBITDA) margins and cyber risk ratings, however, do not significantly impact returns. This study advances AI literature by examining market dynamics associated with AI investments, providing a foundation for future research, and providing practical insights for investors and corporate managers aiming to maximize risk-adjusted returns and firm value |
| Keywords: | Artificial intelligence ; AI ; firm value ; event study ; abnormal returns ; United Kingdom JEL classification: G11 ; G14 ; O33 ; M21 ; L1 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1581 |