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on Small Business Management |
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Issue of 2025–09–22
twenty papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Martin, Ralf; Solorzano Mosquera, Jenniffer; Thomas, Catherine; Verhoeven, Dennis |
| Abstract: | We examine the relationship between firms' markups and the economic value of their innovation, including both the private value captured by the innovating firm and the knowledge spillovers that benefit other firms. Using a sample of over 14, 500 EU firms and 2, 400 US firms granted patents between 2005 and 2014, we find that innovation by high-markup firms is more valuable privately and also creates more external value. These associations are robust to controlling for the stock of past innovation and to estimating innovation value in various ways. |
| JEL: | D24 L11 O31 O33 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129003 |
| By: | Golebiowska-tataj Daria; Reimeris Ramojus (European Commission - JRC) |
| Abstract: | In the era of global geopolitical shifts, innovation and entrepreneurship are essential to Europe’s resilience, competitiveness, and strategic autonomy. This paper focuses on increase Europe’s competitiveness through instruments feeling innovation and entrepreneurial culture. The paper analyzes the position of European Union at national and regional level according to various global innovation indexes. It examines how to leverage the power of key innovation regions in Europe and how to tap on the potential of the most dynamic innovation hubs in Central and Eastern Europe. The authors examine quantitative databased and present two cases of Paris and Vilnius. The analysis leads to a conclusion that European innovation policy needs to reexamine innovation instruments which are not sufficiently focused on competitiveness and invest more in such instruments as for example the European Innovation Council. On the other hand, the most dynamic innovation ecosystems in CEE regions should be better networked with the leading hubs and used to test new policy approaches. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc142615 |
| By: | Siavash Mohades; Giulia Piccillo; Maria Savona; Tania Treibich |
| Abstract: | This paper studies the role of capacity utilisation in explaining investment behaviour in Italian SMEs and large firms. We propose a framework in which firms with high capacity utilisation are more likely to invest in maintaining a buffer against future shocks. Using firm-level data from the Bank of Italy’s Survey of Industrial and Service Firms (2002–2024), we empirically examine how deviations from a sector-specific target capacity utilisation influence investment decisions, accounting for the roles of uncertainty and financial constraints. Our findings reveal that Italian firms with high growth potential- those at the so-called “growth window” (Coad et al., 2021)- are more likely to invest. This result is primarily driven by large firms, while SMEs do not seem to respond strongly to the presence in such growth windows. Furthermore, we find that uncertainty does not deter investment among firms operating at high capacity, but instead stimulates investment in firms with low capacity utilisation. These insights have significant implications for industrial policy that targets support to firms at critical decision points in their growth trajectory. |
| Keywords: | capacity utilisation, investment, uncertainty, financial constraints, firm growth |
| JEL: | D20 D22 D24 D81 E32 L11 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12108 |
| By: | Almeida, Teresa; Dayan, Yehuda; Krause, Helen; Lordan, Grace; Theodoulou, Andreas |
| Abstract: | Diversity, equity and inclusion (DEI) is a growing strategic focus area. However, measuring DEI remains a challenge, partly due to self-reporting biases and limitations of cross-sectional survey data. This paper proposes a novel measure of DEI using a data set of online employee reviews that encompasses more than 3.2 million reviews posted between 2015 and 2022 on the career intelligence website Glassdoor. We investigate the relationship between this measure of DEI and firm performance for 945 US and UK-listed firms. We find that DEI is associated with higher long-term market performance, with positive impacts larger for growth compared to steady state firms, but not short-term market performance. We find evidence of a mixed relationship between DEI and accounting performance, and a consistent positive relationship with higher innovation. Finally, we examine the interaction between firm DEI and senior management diversity, with results indicating that the positive effects of DEI on long-term market performance and innovation are amplified in firms with higher levels of ethnic diversity in senior management. Overall, we conclude that DEI has either a positive or neutral association with firm performance. |
| JEL: | L81 R14 J01 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129444 |
| By: | Rossmann, Felix; Greitens, Jan; Knoll, Lisa |
| Abstract: | Sustainable finance regulations and initiatives across Europe have predominantly targeted large corporations, while small and medium-sized enterprises (SMEs) are increasingly drawn into the framework, often facing challenges such as resource constraints and complex documentation requirements. To capture the dynamics of this field, a European survey conducted in 2025 with responses mainly from German and Austrian companies examined SME engagement with sustainable finance. The findings show a rising share of SMEs investing in sustainability in comparison to the preceding study in 2023, with internal funding as the dominant source. Where external financing is used, it is primarily activated on publicly supported bank loans, whereas capital markets remain largely irrelevant for SMEs. While a connection between sustainability data collection and sustainable investment exists, many SMEs invest without systematically collecting data. These results highlight the continued centrality of traditional banking relationships as the main external financing channel for SMEs, which could serve to enable and facilitate capital flows toward sustainability rather than prescribe or direct them. |
| Keywords: | Sustainable Finance, Small and Medium-sized Enterprises, Sustainability Investment, Sustainability Reporting, Bank Financing |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cfswop:325834 |
| By: | Aniket Baksy; Daniele Caratelli; Luke M. Olson |
| Abstract: | Cyber risk analysis reveals that mid-size firms face the highest vulnerability while small firms are less targeted and large firms are well-defended. |
| Date: | 2025–09–18 |
| URL: | https://d.repec.org/n?u=RePEc:ofr:ofrblg:25-12 |
| By: | Bijan Aghdasi; Abhijit Tagade |
| Abstract: | Do markets price knowledge spillovers? We show that patent grants influence the stock returns of firms that are connected through technological knowledge dependencies. Using directed patent citations among publicly listed companies in the United States, we construct a granular measure of each firm's exposure to new patents granted to its technologically upstream firms. Patents granted to these upstream companies significantly boost its abnormal stock returns during the week of the grant. We find that these financial spillovers are predominantly localized within a firm's immediate technological connections. Additionally, we provide a novel empirical decomposition of financial spillovers generated from patent grants, by distinguishing those spillovers emerging from sources of technological knowledge, from those emerging from product market rivals (negative effect) and suppliers (positive effect). Our findings are robust to alternative specifications and placebo tests, and they suggest that technological knowledge spillovers create important market-priced ties between firms that are not fully captured by traditional product market relationships. |
| Keywords: | innovation, networks, spillovers, patents, stock returns, supply chains |
| Date: | 2025–08–13 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2117 |
| By: | Manuela Magalhâes (Universidad de Málaga); Jesús Rodríguez-López (Universidad Pablo de Olavide) |
| Abstract: | Spanish aggregate productivity was negatively correlated with the business cycle from 2000 to 2014, but this correlation later turned positive between 2015 and 2019. In this paper, we ask if this change is related to financial restrictions and firm creation and destruction in Spain. Using firm- level administrative data, we reach the following conclusions. First, during the 2000–07 expansion, low-productivity firms with access to financial resources were able to continue operating; in turn, this led to a crowding-out of financial resources, and forced high-productivity but financially vulnerable firms to close. We find that on average exiting firms were significantly larger and more productive than entering firms, a situation that entailed productivity losses in this period. Second, following the tightening of credit conditions after 2008, we find a more efficient selection at both exit and entry margins: exiting firms were less productive than entering firms. Both findings help explain, at least in part, the change in the productivity-GDP correlation. Finally, in a counterfactual exercise we quantify the effects of type-I selection errors, i.e., the closure of productive but financially vulnerable firms: had market selection not presented type-I errors, relative total factor productivity at the exit margin would have been 3% to 6.5% higher, while gains in relative labor productivity would have ranged between 27% and 46%. |
| Keywords: | Firm exit and entry, business cycle, cleansing effects, miss-selection, firm survival. |
| JEL: | E23 E32 E44 G32 L11 L25 L60 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pab:wpaper:25.02 |
| By: | Yundan Guo; Han Liang; Li Shen |
| Abstract: | Against the backdrop of rapid technological advancement and the deepening digital economy, this study examines the causal impact of digital transformation on corporate financial asset allocation in China. Using data from A-share listed companies from 2010 to 2022, we construct a firm-level digitalization index based on text analysis of annual reports and differentiate financial asset allocation into long-term and short-term dimensions. Employing fixed-effects models and a staggered difference-in-differences (DID) design, we find that digital transformation significantly promotes corporate financial asset allocation, with a more pronounced effect on short-term than long-term allocations. Mechanism analyses reveal that digitalization operates through dual channels: broadening investment avenues and enhancing information processing capabilities. Specifically, it enables firms to allocate long-term high-yield financial instruments, thereby optimizing the maturity structure of assets, while also improving information efficiency, curbing inefficient investments, and reallocating capital toward more productive financial assets. Heterogeneity analysis indicates that firms in non-eastern regions, state-owned enterprises, and larger firms are more responsive in short-term allocation, whereas eastern regions, non-state-owned enterprises, and small and medium-sized enterprises benefit more in long-term allocation. Our findings provide micro-level evidence and mechanistic insights into how digital transformation reshapes corporate financial decision-making, offering important implications for both policymakers and firms. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.09095 |
| By: | Nils H. Lehr |
| Abstract: | This paper provides evidence that rising misallocation in the R&D sector contributed to the recent slowdown in U.S. productivity growth. I develop a growth accounting framework allowing for misallocation of R&D resources across firms captured by wedges between their marginal cost and benefits of R&D. I show that R&D wedges can be measured from R&D returns and document large and persistent differences in R&D returns across US-listed firms. Combining data and model, I estimate that frictions reduced productivity growth by 18% over 1975–2014 and that rising misallocation in the R&D sector accounts for 25% of the growth slowdown. |
| Keywords: | R&D; productivity growth; growth slowdown |
| Date: | 2025–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/183 |
| By: | Howell, Sabrina T.; Rathje, Jason; Van Reenen, John; Wong, Jun |
| Abstract: | For governments procuring innovation, one choice is whether to specify desired products (a “Conventional” approach) or allow firms to suggest ideas (an “Open” approach). Using a U.S. Air Force R&D grant program, where Open and Conventional competitions were held simultaneously, we find that Open awards increase both commercial innovation and technology adoption by the military. In contrast, Conventional awards have no positive effects on new technology, but do create more program lock-in. We present evidence that openness matters independently from inducing differential selection, for example of less well-established firms. These results suggest benefits from open approaches to innovation procurement. |
| Keywords: | innovation; defense; R&D; procurement |
| JEL: | O31 O32 O38 H56 H57 |
| Date: | 2025–09–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128343 |
| By: | Kentaro ASAI; Mitsuhiro HARADA; Katsuyuki KUBO; Daisuke MIYAKAWA; Junichi YAMANOI; Masaki YANAOKA |
| Abstract: | Although private firms are not subject to discipline from capital markets, it remains unclear what factors deter them from engaging in organizational misconduct. Despite their numerical dominance, there is limited empirical evidence on misconduct by private firms and its antecedents. Using a unique dataset of administrative dispositions, representing the occurrence of organizational misconduct among Japanese private small- and medium-sized construction companies from 2010 to 2024, we empirically examine the factors that lead to such misconduct. Our analysis reveals that more mature firms and smaller firms are less likely to engage in organizational misconduct. Furthermore, we find that family firms are more prone to misconduct when they experience strong financial performance. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25086 |
| By: | De Haas, Ralph; González-Uribe, Juanita |
| Abstract: | We review the literature on the effectiveness of public policies to facilitate firms’ access to finance. The rationale for such policies is to address market failures that cause financial constraints. Using a simple taxonomy, we discuss the current evidence on common interventions to tackle these constraints: public lending through state and development banks, public lending through private banks, subsidized credit, credit guarantee schemes, export credit agencies, publicly backed venture capital, and tax incentives for equity investors. Based on the quantity and quality of the available evidence, we summarize the policies that have proven most effective in helping firms access external financing. In addition, we highlight areas where future research is needed to address current knowledge gaps and to provide more definitive policy guidance. |
| Keywords: | entrepreneurship; small business finance; public policy; financial constraints |
| JEL: | G20 G28 H25 H81 |
| Date: | 2025–08–06 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129139 |
| By: | Ina Ganguli; Megan MacGarvie |
| Abstract: | This paper examines the evolving trends and policy dynamics of international student migration, focusing on their implications for STEM workforce development and innovation. While the United States has remained a leading destination for international students, recent years have seen a plateau or decline in incoming students, contrasted by growth in countries like Canada, Australia, and emerging hubs such as China and India. International students, particularly in STEM fields, play a critical role in shaping host countries' innovation ecosystems, often transitioning to permanent residents and STEM workers. We review immigration policies, including post-graduation work and residency pathways, highlighting their varying impacts on student inflows and innovation. Policies in Canada and Australia have until recently eased these transitions, while restrictive measures in the U.S. and U.K. have posed challenges. By documenting these trends and policy shifts, we identify gaps in the literature and outline directions for future research at the intersection of international education, immigration, and innovation. |
| JEL: | I23 O31 J61 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34212 |
| By: | Weber, Jan David |
| Abstract: | Firms are not abstract, profit-seeking units as often assumed in neoclassical models, but historically situated, socially embedded, and organizationally adaptive entities. Firms evolve through continuous interaction with their environment, shaped by routines, bounded rationality, and the co-development of institutions and technologies. This comprehensive lens provides a richer understanding of firm behavior, accounting for the observed diversity across firms, the persistence of structural asymmetries, and the heterogeneous conditions under which firms grow, stagnate, or exit the market. These firm-level dynamics unfold within markets that are themselves evolving systems. Rather than tending toward a stable equilibrium, markets are shaped by feedback loops, path dependencies [path dependency], and innovation-driven competition. Entry and exit, firm growth, and shifts in market structure are not merely responses to price signals but outcomes of learning processes, strategic interactions, and institutional arrangements [Institutions]. As a result, market outcomes reflect complex adaptive dynamics rather than simple allocative efficiency. In this view, successful industrial policy is not limited to correcting market failures or achieving short-term efficiency gains. Rather, industrial policy is a dynamic and systemic process. This process contributes to long-term learning, structural transformation, and the strategic capacities of economies. Effective policies must therefore be reflexive, transparent, and collaborative, evolving alongside the systems they intend to shape. |
| Keywords: | Firm Size, Industrial Policy, Firm Activity |
| JEL: | D83 L11 O25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifsowp:325500 |
| By: | Takafumi KAWAKUBO; Takafumi SUZUKI |
| Abstract: | This study examines how becoming a supplier to a newly established large-scale plant influences the performance of incumbent small plants. Exploiting detailed plant-level data, records of new large-plant openings, and supply chain information, we construct a quasi-experimental setting based on the spatial distribution of new entrants. Our event-study estimates show that while local supplier plants benefit significantly—both statistically and economically—from large-scale plants, non-supplier plants in the same region face negative impacts, likely due to intensified competition spurred by the newly-contracted suppliers. The results underscore that such entries create “winners and losers†not only across different regions but also within the same locality. From a policy perspective, these insights highlight the importance of facilitating effective partnerships between large-scale entrants and local suppliers, as well as offering support to disadvantaged non-supplier firms. Overall, our findings illuminate the nuanced local economic consequences of large-scale plant entries and offer guidance for future industrial and regional policies. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25083 |
| By: | Kerola, Eeva; Norring, Anni |
| Abstract: | We use confidential loan-level data from the European Central Bank to investigate how changes in the countercyclical capital buffer requirement in Germany affect lending to firms. We find evidence showing that tightening the countercyclical capital buffer leads German banks to reduce the volume of corporate loans and increase the price of new loans. These effects take place immediately after the announcement, given 12 months before the change was implemented. Importantly, we find that the reduction in credit availability notably affects small and medium-sized enterprises, which experience both a significant decrease in available credit and an increase in credit costs. In contrast, large firms are not affected. |
| Keywords: | Macroprudential policy, Countercyclical capital buffer, Loan level data |
| JEL: | E58 G21 G28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofrdp:325482 |
| By: | Daryna Grechyna; Pamela Efua Ofori |
| Abstract: | This study examines the impact of Conference of the Parties (COP) summits on innovation using an event study framework. Innovation is measured by patent grants, distinguishing between the total number of patents and the number of patents in environmental technologies, based on the World Intellectual Property Organization classification. We find that hosting a COP summit leads to a significant and lasting increase in the total number of patent grants, with an average rise of about 35 percent per year from the seventh to the thirteenth year after the summit, but has only a limited effect on the number of patent grants in environmental technologies. We further examine potential heterogeneity in the effects of COP summits by analyzing the impact of hosting a summit on patents in environmental technology compared to other technologies separately for each host country. The results suggest that while hosting a COP summit generally promotes environmental patenting, the effect is negative in some countries. We discuss possible reasons, including diminishing returns in green innovation and the influence of large industrial emitters. The findings are robust across alternative estimators, the inclusion of control variables, and different measures of patenting activity. |
| Keywords: | COP summits, environmental technologies, patents, innovation, event study |
| JEL: | O34 O44 Q54 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12120 |
| By: | Lin William Cong; Stephen Q. Yang |
| Abstract: | We develop an empirical approach for analyzing multi-dimensional discrimination using multimodal data, combining human perception measures with language-embedding-based, nonlinear controls for latent quality to relax restrictive assumptions in causal machine learning. Applying it to the U.S. patent examination process, we find that, ceteris paribus, applications from female inventors are 1.8 percentage points less likely to be approved, and those from Black inventors are 3 percentage points less likely—inconsistent with legally prescribed criteria. Jointly studying multiple bias dimensions and their intersections for the first time, we uncover new biases, including an affiliation bias—individual inventors are disadvantaged by 6.6 percentage points relative to employees of large, public firms, a disparity larger than any demographic gap. Moreover, innovation quality, location, and other factors can mitigate or compound discrimination, and the disparities interact: for example, racial gaps vanish among public-firm employees, masking more severe discrimination against individuals. Existing theories such as homophily cannot fully explain the results, but a simple model of correlation neglect does. |
| JEL: | G30 J15 J16 O31 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34197 |
| By: | Kiyoyasu TANAKA |
| Abstract: | Cross-border mergers and acquisitions (M&A) are a prominent mode of foreign direct investment. However, there remains mixed and inconclusive evidence for the impact of foreign acquisition on acquired domestic firms. This paper contributes to the literature by employing a staggered difference-in-differences approach to address the timing variation in foreign acquisitions and constructing a novel panel dataset on Japanese firms that precisely captures the post-acquisition period for acquired firms. The results show statistically insignificant estimates for the aggregate effects of foreign acquisition on the post-acquisition productivity, suggesting neither productivity gains nor adverse effects for acquired firms. Even after accounting for general acquisition effects, foreign ownership changes have no influence on post-acquisition productivity. By contrast, canonical two-way fixed effects regressions yield significantly positive estimates, highlighting the need for methodological refinement in the literature to address heterogeneous treatment effects of foreign acquisition. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25085 |