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on Small Business Management |
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Issue of 2025–08–18
twenty-two papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Koski, Heli |
| Abstract: | Abstract This paper examines the effects of data privacy regulation on R&D investment in the pharmaceutical and biotechnology sectors. In these industries, access to personal health data is essential for innovation, particularly in clinical research. Leveraging a firm-level panel of the world’s top R&D investors from 2013 to 2023, we exploit the staggered implementation of major data protection regimes to estimate their causal impact. Using a dynamic event-study design, we find that stricter privacy regulation leads to a significant decline in R&D spending. By year four after implementation, treated firms reduced R&D investment by approximately 39 percent. The effects are heterogeneous: firms without foreign affiliates and small and medium-sized enterprises experience larger declines. Our findings suggest that privacy regulation may constrain the foundations of data-driven innovation and shape the geographic distribution of R&D activity. |
| Keywords: | Privacy regulation, R&D investment, Innovation, Pharmaceuticals, Biotechnology, Firm-level panel, GDPR, Compliance costs |
| JEL: | D22 K23 L65 O32 O38 |
| Date: | 2025–08–11 |
| URL: | https://d.repec.org/n?u=RePEc:rif:wpaper:130 |
| By: | Kelchtermans Stijn; Goni Navarro Luis; Lindholm Dahlstrand Asa; Mifsud Solange (European Commission - JRC); Zacharewicz Thomas |
| Abstract: | "The Regional Innovation Valleys (RIV) initiative is a flagship action under the New European Innovation Agenda (NEIA), designed to strengthen innovation ecosystems across the European Union by fostering interregional collaboration and accelerating the deployment of innovation. The initiative supports partnerships between regions with varying levels of innovation performance to address key EU challenges such as energy resilience, food security, digital transformation, healthcare, and circularity.A total of 146 regions have been designated as RIVs through three mechanisms: a Call for Expression of Interest (CEI), the European Innovation Ecosystems (EIE) and the Interregional Innovation Investments (I3). The political commitment for the initiative totals €170 million, with initial funding of €116 million distributed through EIE and I3 calls.This Gap Analysis aims to (i) identify the motivations and obstacles influencing regional participation in RIV calls, particularly CEI and EIE; and (ii) provide evidence-based recommendations to enhance future calls and stimulate more effective interregional collaboration.To address these objectives, the study employed a mixed-methods approach, combining qualitative data from 30 regions (via interviews and focus groups) with survey responses from 89 regions across the EU and Horizon Europe Associated Countries. The analysis revealed four critical areas influencing regional participation. These refer to co-funding requirements, collaboration patterns, the RIV label and thematic focus areas. Based on these findings, the report proposes several policy recommendations, including simplifying co-funding mechanisms, enhancing matchmaking and capacity-building efforts, providing clearer guidance on the RIV label’s value, and improving alignment and continuity of thematic areas. By addressing these gaps, the RIV initiative can more effectively fulfil its dual mission of boosting innovation and reducing regional disparities across Europe." |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc142545 |
| By: | Xiaolin Yu (Yonsei University); Jin Seo Cho (Yonsei University) |
| Abstract: | The current study examines whether government-led digital finance initiatives promote firm-level digital innovation by leveraging the staggered rollout of China’s Fintech pilot programs as quasi-natural experiments. Our dataset comprises 26, 746 firm-year observations of A-share listed companies from 2009 to 2023. To measure innovation, we develop a text-based indicator derived from the frequency of digital-related keywords in the annual reports of the listed firms. Employing a multi-period difference-in-differences design, we find that designation as a pilot zone increases digital innovation intensity by 0.8225 per thousand report words. These results remain robust across parallel, propensity score matching, placebo, and robustness tests. Mediation analysis reveals that the part of the effect is attributable to increased R&D intensity, with the program raising the average R&D-to-sales ratio by 0.24 percentage points. Moreover, program effect is stronger among high-tech firms and those located in Central and Western China, regions characterized by relatively weaker financial and digital infrastructure. |
| Keywords: | Difference-in-differences; Fintech pilot programs; digital innovation; R&D investments; firm heterogeneity |
| JEL: | G18 G28 G38 O31 O32 O38 O53 P42 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-257 |
| By: | Agbleke, Divine Swerwzie |
| Abstract: | Abstract This study develops and tests an empirical model for quantifying Indigenous Knowledge within firms. Indigenous Knowledge is conceptualized as the cognitive and educational capacity embedded in an organization’s workforce—an intangible asset that has garnered increasing scholarly interest. The paper contributes to this discourse by proposing a measurable framework and examining its determinants. The stock of indigenous knowledge is operationalized through a weighted average of cumulative years of education, normalized by the number of employees with comparable qualifications. Using multiple regression analysis, the study evaluates the impact of training practices, organizational structures, and performance indicators on the average stock of indigenous knowledge across firms in the finance and insurance sectors. Findings reveal that access to formal documents by heads of departments, the nurturing of innovative thinking, and the implementation of effective—particularly standardized—training programs significantly enhance indigenous knowledge. Equally, an exclusive focus on productivity is associated with a reduction in knowledge stock. However, a significant interaction between productivity and incremental sales revenue suggests that the negative effects of productivity can be offset when accompanied by improved commercial performance. The study has both theoretical and practical implications. It advances the empirical measurement of indigenous knowledge in organizational contexts and provides actionable guidance for firms. Key recommendations include improving access to formal knowledge systems, integrating innovation into operational practices, designing standardized and effective training programs, and monitoring the interaction between organizational culture and structural mechanisms. Keywords: Indigenous Knowledge Knowledge Quantification Standardized Training Human Capital Firm Performance Knowledge Management |
| Date: | 2025–08–04 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:ex59m_v1 |
| By: | Maretha Roseline Syahnie (Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada); Muhammad Ryan Sanjaya (Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada) |
| Abstract: | MSMEs, also known as micro, small, and medium-sized enterprises, are the backbone of the economy in developing countries. Empirical studies indicate that SMEs generally face obstacles, particularly in financing. This study focuses on two main aspects: indexing financial inclusion using principal component analysis (PCA), and analyzing credit and financial inclusion using vector autoregression (VAR) for forecasting. Through a two-stage indexing methodology, the study emphasizes the importance of geographical reach in financial inclusion availability compared to demographic reach, with availability being the most crucial dimension compared to accessibility and usage. VAR models and forecasting were developed for the period from March 2012 to July 2022 in Indonesia, incorporating other variables, such as accessto credit, credit risk, and real GDP. The use of VAR demonstrates consistency, accuracy, and reliability in producing predictions that closely approximate reality, providing a critical basis for policymakers. |
| Keywords: | Micro, small, and medium enterprises (MSMEs) financing, principal component analysis (PCA), financial inclusion index, credit, vector autoregression (VAR), forecasting, Indonesia |
| JEL: | C32 E44 G21 O16 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:gme:wpaper:202407007 |
| By: | Searle, Nicola; Ganglmair, Bernhard; Borghi, Maurizio |
| Abstract: | A robust Research & Innovation (R&I) ecosystem is essential for progress, economic resilience, and addressing complex challenges. At the heart of this ecosystem, knowledge fuels innovation and further discovery. However, knowledge leakage (the loss of valuable information) can disrupt this cycle. This poses a challenge for what is known as Trusted Research & Innovation (TRI), a framework designed to strengthen research security, protect national interests, and build resilient research systems. Despite its significance, the challenges of TRI remain poorly understood. This report investigates knowledge leakage. It begins with an overview of the TRI context, focusing on policymaking, and then reviews the literature on knowledge leakage and related concepts. An exploratory data analysis examines novel empirical data to better understand the extent of knowledge leakage and how it impacts economic areas of defence, economic, and national security importance. The data analysis finds that industries deemed important for economic and national security (the UK's 'sensitive economic areas') have an 18% higher incidence of leakage than those that are not. |
| Keywords: | knowledge leakage, research security, theft of IP, economic security, national security, Trusted Research & Innovation |
| JEL: | F52 O25 O33 O34 O38 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:321868 |
| By: | Nandwani, Bharti; Roychowdhury, Punarjit; Shankar, Binay |
| Abstract: | This paper examines the impact of a large-scale rural road construction program-the Pradhan Mantri Gram Sadak Yojana (PMGSY)-on the performance of rural manufacturing firms in India. While these firms provide vital non-farm employment in rural areas, their growth is often thought to be constrained by inadequate infrastructure. Leveraging administrative data and the quasi-random rollout of the program, we estimate effects using a two-way fixed effects framework. We find no evidence that improved road connectivity affects turnover, profits, or employment for formal enterprises. In contrast, informal firms experience significant gains in turnover, expenditure, profits, employment, and wage bills. These effects appear to be driven by reductions in infrastructure-related constraints: treated firms report fewer operational problems and less competition from larger firms, particularly in marketing and distribution. Our findings highlight the heterogeneous effects of rural infrastructure expansion and the greater responsiveness of informal enterprises. |
| Keywords: | Firms, India, Infrastructure, Roads, Rural |
| JEL: | D22 O12 O18 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1650 |
| By: | Timothy F. Bresnahan; Shane Greenstein; Pai-Ling Yin |
| Abstract: | Advances in a general-purpose technology (GPT) enable many firms to invent complementary inventions, or co-inventions, making the GPT more valuable. This study examines the empirical implications of a straightforward model in which firms choose either incremental or novel co-invention. Incremental co-inventors aspire to small gains at low costs and with less uncertainty. Novel co-inventors introduce new products or services with the potential for large returns, but do so at high costs and with uncertain outcomes. Similar firms investing in incremental co-invention will create value proportional to their existing business, a benchmark we illustrate with the experiences at local radio and newspapers. The study then examines the value of co-inventions for the World Wide Web and mobile ecosystems, focusing on success in 2013, using data from many sources. This data supports analysis comparing the incremental and novel regimes. The latter should display a distinctly different upper tail of the distribution of returns. We show that the value distributions for incremental and novel co-invention are far apart. Incremental co-invention is more widely distributed across regions, industries, and firms. Success from novel co-invention is rare, challenging, and the source of the largest value. In the aggregate, novel co-invention creates the most value, so the overall value distribution remains concentrated in a few industries, regions, and firms. |
| JEL: | L80 L86 M15 O31 O33 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34090 |
| By: | Blaufus, Kay; Bock, Julian; Peuthert, Benjamin |
| Abstract: | Using unique tax audit data of 499 German firms, we analyze whether family firms, public firms, financially constrained firms, and those firms with managers with low tax morale substitute two tax strategies, book-tax conforming and nonconforming tax avoidance strategies, and examine the effect on overall tax avoidance. The empirical results are in line with family firms and those firms with low tax morale managers substituting conforming for nonconforming tax avoidance strategies, whereas public and financially constrained firms do the opposite. Moreover, we find that family firms differ from nonfamily firms only in their strategic implementation but not in the overall amount of tax avoidance. With respect to public, financially constrained firms and those firms with low tax morale managers, we find a positive association with the total level of tax avoidance. |
| Keywords: | conforming tax avoidance, tax planning, nontax costs, book-tax conformity |
| JEL: | H26 M41 G32 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:323205 |
| By: | Miguel Acosta-Henao (CENTRAL BANK OF CHILE); María Alejandra Amado (BANCO DE ESPAÑA); Montserrat Martí (CENTRAL BANK OF CHILE); David Pérez-Reyna (UNIVERSIDAD DE LOS ANDES) |
| Abstract: | This paper investigates the granular transmission of U.S. monetary policy shocks to deviations from the uncovered interest rate parity (UIPDs) in emerging economies. Using a comprehensive dataset from Chile that accounts for firm-bank relationships and the time-variant characteristics of both firms and banks, we uncover several key findings: (1) Shocks to the federal funds rate (FFR) increase banks’ costs of foreign borrowing. (2) These higher credit costs disproportionately affect small firms, raising their UIPDs more than for large firms. (3) This size-differentiated impact stems from the relatively higher interest rates on domestic currency loans faced by small firms. (4) In contrast, interest rates on dollar-denominated loans respond homogeneously across all firms. (5) We find no differential effect on loan quantities, suggesting an active role of credit supply and demand. We rationalize these findings with a small open economy model of corporate default that incorporates heterogeneous firms borrowing from domestic banks in both foreign and domestic currencies. In our model, a higher FFR reduces the marginal cost of defaulting on domestic-currency debt for small firms more than for large firms. |
| Keywords: | uncovered interest rate parity, U.S. monetary policy, bank lending, firm financing, firm heterogeneity |
| JEL: | E43 E44 F30 F41 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2530 |
| By: | Luisa Corrado (DEF and CEIS, Università di Roma "Tor Vergata"); Stefano Grassi (DEF and CEIS, Università di Roma "Tor Vergata"); Aldo Paolillo (Università di Roma "Tor Vergata") |
| Abstract: | Recent studies suggest that space activities generate significant economic benefits. This paper attempts to quantify these effects by modeling both business cycle and long-run effects driven by space sector activities. We develop a model in which technologies are shaped by both a dedicated R&D sector and spillovers from space-sector innovations. Using U.S. data from the 1960s to the present day, we analyze patent grants to distinguish between space and core sector technologies. By leveraging the network of patent citations, we further examine the evolving dependence between space and core technologies over time. Our findings highlight the positive impact of the aerospace sector on technological innovation and economic growth, particularly during the 1960s and 1970s. |
| Keywords: | Aerospace, Space Economy, Growth |
| JEL: | A1 C5 E00 O10 |
| Date: | 2025–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:609 |
| By: | Diego R. Känzig; Maximilian Konradt; Lixing Wang; Donghai Zhang |
| Abstract: | This paper examines the relationship between green innovation and the business cycle, revealing that while non-green innovation is procyclical, green innovation is countercyclical. This pattern holds unconditionally over the business cycle and conditional on economic shocks. Motivated by these findings, we develop a business cycle model with endogenous green and non-green innovation to explain their distinct cyclical behavior. The key mechanism operates through a ‘green is in the future’ channel: green patents are expected to generate higher profits in the future, making green patenting less sensitive to short-term economic fluctuations. In general equilibrium, this channel is reinforced, making green and non-green innovation effective substitutes. We provide direct evidence supporting the model mechanism using data on market-implied values of green and non-green patents. |
| JEL: | E32 O31 Q55 Q58 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34041 |
| By: | Breithaupt, Patrick; Gottschalk, Sandra |
| Abstract: | Past studies have successfully shown that the level of anonymisation of scientific use files (SUF) is sufficiently high to protect against disclosure attacks that use data from traditional firm databases. However, with the increasing availability of online data about firms, new challenges for the provision of SUFs arise. In this paper, we therefore focus on a scenario, where an attack against the Mannheim Innovation Panel SUF is performed using data from the Mannheim Enterprise Panel and Mannheim Web Panel. We find that the disclosure risk of our attack is small and increases only slightly if data from the Mannheim Web Panel are considered. Data protection officers may use our findings when researchers want to publish SUFs. |
| Keywords: | matching, firms, text as data, scientific use files |
| JEL: | L00 C8 C55 C61 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:321871 |
| By: | Valerio De Stefano; Maddalena Mula; Manuel Sebastian Mariani; Andrea Zaccaria |
| Abstract: | A rich theoretical and empirical literature investigated the link between export diversification and firm performance. Prior theoretical works hinted at the key role of capability accumulation in shaping production activities and performance, without however producing product-level indicators able to forecast corporate growth. Building on economic complexity theory and the corporate growth literature, this paper examines which characteristics of a firm's export basket predict future performance. We analyze a unique longitudinal dataset that covers export and financial data for 12, 852 Italian firms. We find that firms exporting products typically exported by wealthier countries -- a proxy for greater product sophistication and market value -- tend to experience higher growth and profit per employee. Moreover, we find that diversification outside of a firm's core production area is positively associated with future growth, whereas diversification within the core is negatively associated. This is revealed by introducing novel measures of in-block and out-of-block diversification, based on algorithmically-detected production blocks. Our findings suggest that growth is driven not just by how many products a firm exports, but also by where these products lie within the production ecosystem, at both local and global scales. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.21754 |
| By: | Joshua S. Gans |
| Abstract: | This paper examines how entrepreneurs strategically design experiments to convince venture capitalists (VCs) to fund their projects when investors interpret data through heterogeneous statistical frameworks. Drawing on Liang (2021)'s model of games with incomplete information played by statistical learners, we translate her abstract theoretical framework into a practical venture capital setting. We characterise how entrepreneurs balance funding plausibility against equity dilution by strategically choosing experiments along two critical dimensions: sample size (precision) and dimensionality (breadth of metrics). Our analysis reveals that for genuinely high-quality projects, increased precision helps by forcing VC beliefs to converge toward true quality. For low-quality projects, funding depends on preserving disagreement through sparse, high-dimensional experiments. The entrepreneur's optimal design depends critically on their prior beliefs: confident entrepreneurs choose high-precision, low-dimensional experiments that minimise equity dilution, while uncertain entrepreneurs opt for sparse, high-dimensional experiments that maximise the probability some VC will hold sufficiently optimistic beliefs. The framework provides a rigorous foundation for understanding how entrepreneurs and investors can rationally disagree when observing identical evidence, with significant implications for strategic information design in entrepreneurial settings. |
| JEL: | D83 G24 L26 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34085 |
| By: | Stefan Sauer; Klaus Wohlrabe |
| Abstract: | The ifo Business Climate Index is one of the most important leading indicators for the German economy. It is based on a monthly survey of approximately 9, 000 firms and reflects responses to two core questions: the assessment of the firms' current business situation and their expectations for the next six months. These questions are deliberately formulated without precise definitions, allowing each respondent to draw on its own relevant factors. This paper investigates which factors firms actually consider, whether they differ across sectors and firm types, and how their importance has changed over time. To this end, we conducted a dedicated meta-survey in 2019 and repeated it as part of the regular ifo Business Survey in 2025. Our results show that internal factors - such as profit situation, demand, and turnover - are the primary drivers of firms' assessments. However, external influences, particularly the economic policy framework and general economic sentiment, have gained importance in recent years. These findings enhance the interpretability of the index and contribute to understanding its strong forecasting performance. The identified factors may also prove valuable for applied business cycle analysis. |
| Keywords: | business climate, economic sentiment, expectation formation, firm survey, ifo Business Survey |
| JEL: | C53 C83 L20 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12007 |
| By: | Rachel Cho; Christoph Görtz; Danny McGowan; Max Schröder |
| Abstract: | We propose a new approach to identify firm-level financial constraints by applying artificial intelligence to text of 10-K filings by U.S. public firms from 1993 to 2021. Leveraging transformer-based natural language processing, our model captures contextual and semantic nuances often missed by traditional text classification techniques, enabling more accurate detection of financial constraints. A key contribution is to differentiate between constraints that affect firms presently and those anticipated in the future. These two types of constraints are associated with distinctly different financial profiles: while firms expecting future constraints tend to accumulate cash preemptively, currently constrained firms exhibit reduced liquidity and higher leverage. We show that only firms anticipating financial constraints exhibit significant cash flow sensitivity of cash, whereas currently constrained and unconstrained firms do not. This calls for a narrower interpretation of this widely used cash-based constraints measure, as it may conflate distinct firm types – unconstrained and currently constrained – and fail to capture all financially constrained firms. Our findings underscore the critical role of constraint timing in shaping corporate financial behavior. |
| Keywords: | financial constraints, artificial intelligence, expectations, cash, cash flow, corporate finance behavior |
| JEL: | G31 G32 D92 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12054 |
| By: | Morten Bennedsen (University of Copenhagen); Esther Chevrot-Bianco (Goethe University Frankfurt); Guido Friebel (Goethe University Frankfurt,); Maria Schlier (University of Copenhagen) |
| Abstract: | We measure value-based leadership (VBL) – the strength of personal values and to what extent they penetrate firms’ organization – in a survey of 1, 500 Danish CEOs. First, VBL is more common in family firms and women CEOs. It is not correlated with the CEO’s IQ or management practices. Second, VBL correlates with firm performance; CEO turnover and hospitalizations establish the causality of this link. Third, firm policies are different: (i) during the pandemic, VBL firms have lower employee turnover; (ii) in normal times, they have flatter organizational structures. Fourth, factor analysis confirms robustness of the findings. Other factors derived from a deep survey on CEO characteristics and opinions do very little to explain firm outcomes. We conclude that value-based leadership contributes in explaining the value added of CEOs for firms. |
| Keywords: | CEOs, Values, Leadership, Performance |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2530 |
| By: | Di Cataldo, Marco; Renzullo, Elena |
| Abstract: | The EU Cohesion Policy, with its capacity to shape the socio-economic development of European regions and cities, also holds the potential to influence the political preferences of citizens. While existing research has explored the effects of EU funding on national electoral outcomes, its impact on local elections remains underexamined, overlooking the inherently territorial nature of Cohesion Policy and the crucial role local policy-makers play in its activation and implementation. This study leverages detailed administrative data on European development projects to examine how EU funds affect political support for incumbent local politicians in Italy. It analyses the relationship between the inflow of European funds and the electoral support for Italian mayors, considering different project types that reflect the mayors’ ability to attract European funds. The findings demonstrate that Cohesion Policy significantly shapes local voting behaviour. Larger, more visible projects significantly increase the likelihood of mayoral re-election. Moreover, municipalities experiencing faster economic growth, where EU projects contribute to public service improvements, witness the strongest electoral gains for incumbents. These results highlight the critical importance of project design, visibility, and effectiveness in determining the political consequences of EU redistributive policies. |
| Keywords: | EU cohesion policy; incumbent re-election; political preferences; redistribution; local voting behaviour |
| JEL: | D72 I38 H70 R58 |
| Date: | 2025–06–27 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128651 |
| By: | Taheri Hosseinkhani, Nima (Auburn University) |
| Abstract: | Purpose: This study synthesizes and evaluates the empirical evidence on the transfer and diffusion of artificial intelligence (AI) by analyzing whether its implementation delivers productivity gains that consistently exceed those of previous general-purpose technologies (GPTs), such as information and communication technology (ICT) and electricity. It aims to clarify the magnitude, mechanisms, and contextual dependencies of AI's impact, framing the issue as a challenge in technology transfer from development to widespread economic application. Methodology: A systematic literature review was conducted following the PRISMA 2020 framework. The search utilized the Consensus academic search engine, covering sources like Semantic Scholar and PubMed, with 22 targeted queries across seven thematic groups. The process involved identifying 1, 100 papers, screening 630, assessing 491 for eligibility, and conducting a full-text analysis and narrative synthesis of the 50 most relevant studies. Methodologies of the included papers range from large-scale panel data regressions and randomized controlled trials to systematic reviews and macroeconomic analyses. Findings: The evidence consistently shows that AI implementation delivers measurable productivity gains at the firm and process levels across various sectors. Key mechanisms for this value capture include cost reduction, process automation, skill-biased labor enhancement, and innovation acceleration. For instance, specific applications like generative AI have been shown to reduce task completion time by 40% and improve output quality by 18%. However, the evidence that these gains consistently surpass those of earlier GPTs is nuanced, revealing lags and barriers characteristic of historical technology transfers. The diffusion of benefits is uneven, disproportionately favoring larger, digitally mature firms with higher absorptive capacity. At the macroeconomic level, AI's contribution to aggregate productivity growth remains limited, echoing the "productivity paradox" observed during the initial transfer of ICT and electricity. Implications: The findings suggest that while AI is a potent productivity driver, realizing its full economic potential is contingent on overcoming key barriers to technology transfer, including the need for complementary investments, organizational restructuring, and workforce upskilling. For policymakers and technology managers, this underscores the need for strategic initiatives that address expertise gaps and integration challenges, thereby fostering more inclusive and widespread technology diffusion and productivity growth. The historical parallels with previous GPTs suggest that the transformative impact of AI may materialize over a longer time horizon than currently anticipated, dependent on the efficiency of these transfer mechanisms. |
| Date: | 2025–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:hqp28_v2 |
| By: | Yukihiro Nishimura (Osaka University and CESifo) |
| Abstract: | Value-added tax (VAT) has two major problems in its enforcement: taxing foreign vendors which do not have a business entity in the destination country, and taxing small and medium-sized enterprises (SMEs) with small tax bases. As a solution of these problems, some countries attempt to utilize online platform, to let the platformer pay the foreign firms’ and SMEs’ VAT according to the sales each firm made (platform tax for the destination principle and formalization of informal sector). In the monopolistic market where the platformer determines the fees for the network entry and the commission fee of the platform services, standard-good’s price, we show that taxing foreign developers increases the tax burden laid on the standard good, and we show that the increased tax burden is born 100% by the domestic standard-good’s consumers. We also investigate whether or not the prevention of tax leaks by platform taxes improves the vendors’ entry and tax revenue of the destination country. The effect of the tax reform on home developers crucially depends on the responsiveness of the developers’ entry to the number of network users, which is decreasing in the VAT rate. The derived formula of marginal value of public funds suggests that, due to the simultaneity of price and quantity, more fully fledged structural analysis may be necessary. Additionally, we show that the VAT serves as a Pigouvian tax to ease congestion externalities, and our results are robust with platform competition. In the context of formalization of SMEs, the strength of network externalities matters to see if the existing formal sector receives windfall gains or losses. |
| Keywords: | Digital economy; Platform; Network externality |
| JEL: | F23 H26 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2506 |
| By: | Evžen Kočenda; Ichiro Iwasaki; Evžen Kocenda |
| Abstract: | We investigate the determinants of firm survival in 17 emerging European markets during the dual crises of the COVID-19 pandemic and the Russo-Ukrainian war. Using a large dataset of over 59, 000 firms and employing a Cox proportional hazards model, the study evaluates how firm-specific characteristics, regional socio-economic conditions, and institutional quality shaped survival outcomes between 2020 and 2023. The analysis reveals that firm exit was more prevalent in EU member states, likely due to stricter crisis-related restrictions. Socio-economic variables such as population density, tourism dependence, and health expenditures played a critical role, while institutional quality, contrary to expectations, was associated with higher exit rates during crises. The banking sector played a role in influencing firm resilience through credit provision and financial support mechanisms. The Russo-Ukrainian war further amplified survival risks, especially for firms located in countries geographically or economically exposed to the conflict. The findings offer valuable insights for designing targeted policy interventions aimed at enhancing business resilience in vulnerable and institutionally diverse environments. |
| Keywords: | firm survival, banking sector, covid pandemic, Russo-Ukrainian war, Central and Eastern Europe, emerging markets, survival and exit determinants |
| JEL: | C14 D02 D22 G33 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12005 |