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on Small Business Management |
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Issue of 2026–09–28
nineteen papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Kardaslar, Berfin; Kritikos, Alexander S.; Menkhoff, Lukas |
| Abstract: | In this study, we examine the relationship between personality traits, captured by risk tolerance and the Big Five traits, and firm size, as measured by the number of employees. We show that the personality of entrepreneurs matters for the size of their firm they operate. We use a novel add-on to the German Socio-Economic Panel that includes a sub-sample of owner-managers running larger firms. High levels of risk tolerance - associated with an increased likelihood of firm exit in existing research - is positively associated with firm size for entrepreneurs in the market. High scores in extraversion are also associated with larger firms. However, a high level of openness for experience, a main driver of founding ventures, is negatively related to firm size. Overall, we show that running larger firms is associated with traits that are partially different from those that increase the likelihood of entrepreneurial entry or survival. |
| Keywords: | Entrepreneurship, Risk tolerance, Personality traits, Firm size |
| JEL: | L26 D81 J24 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1815 |
| By: | Hadžić, Faruk; Burić, Ema; Čavalić, Admir |
| Abstract: | In the growing and complex modern business environment, the importance of innovation is increasingly coming to the fore, as a key driver and factor that leads to competitiveness, but also to long-term growth of companies. As part of this paper, the mechanism that leads to incentives for innovation through internal organizational processes, as well as external cooperation of companies in Bosnia and Herzegovina, is examined. The paper relies on theoretical frameworks such as resource-based approaches and the ability of companies to be open to innovation, in order to investigate how internal factors and capacities such as research and development functions, knowledge management and external cooperation contribute to innovation results. As part of the research, 304 responses were collected from companies of different sizes and from different sectors. For the statistical analysis of the collected data, regressions, t-tests and correlation were used, which were necessary to test the hypotheses set. The results show that the existence of a research and development department has a significant positive impact on innovation results, especially in small companies, while external cooperation proved to be the most beneficial for medium-sized companies. Internal mechanisms alone have not shown a significant direct effect on innovation, but are suggested to act as complementary factors within broader innovation systems. The findings highlight the existence of different innovation pathways among firms of different sizes, underscoring the need for differentiated strategies and policies. For small firms, strengthening internal R&D capacities appears to be a priority, while medium-sized firms benefit more from external networks and knowledge flows. Large firms, in contrast, require an integrated approach of complex internal and external resources. |
| Keywords: | Innovation stimulation mechanisms, Internal processes, External collaboration, SMEs |
| JEL: | O31 O32 L26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esconf:343372 |
| By: | Antonia Manzini (Bank of Italy); Diego Scalise (Bank of Italy) |
| Abstract: | Technological innovation has profoundly transformed financial services. This paper examines the diffusion of technology-intensive firms operating in the financial sector (fintech) and the pivotal role of venture capital in supporting their development. The analysis reveals an ecosystem predominantly consisting of small fintech firms, which cluster in the financial centres of countries with more developed capital markets. These locations are home, in particular, to business-to-business (B2B) firms, which frequently develop digital solutions for financial institutions. In this environment, incumbent financial intermediaries become the natural acquirers of the most promising fintech start-ups, integrating their technologies and capabilities into their value chains. Access to diversified sources of finance is a key determinant of these firms' growth. Venture capital acts as a catalyst by fostering strategic partnerships and facilitating the integration of innovative technologies, thereby contributing to the transformation of traditional financial intermediation. The distribution of fintech firms and the evolution of their financing cycle portray a sector undergoing a transition from an initial phase of rapid expansion to one of gradual consolidation. |
| Keywords: | fintech concentration, fintech venture capital |
| JEL: | G15 G24 G34 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bdi:opques:qef_1055_26 |
| By: | Alessandro, Arrighetti; Simone, Baglioni; Andrea, Lasagni; Maria, Molinari |
| Abstract: | This paper examines migrants' remittances for entrepreneurial investments (REIs), focusing on the mechanisms that shape both entrepreneurial intention and its translation into actual business investment in countries of origin. While remittance behaviour has been widely studied, less attention has been devoted to migrants' entrepreneurial engagement and to the factors enabling the shift from intention to implementation. Using original survey data on 2, 122 first-generation migrants residing in Italy, the analysis adopts a staged framework distinguishing between non-intenders, intenders, and actual investors.Our findings indicate that entrepreneurial remittances appear more widespread than often assumed in the literature. Transnational engagement and return orientation significantly increase the likelihood of developing entrepreneurial intentions, highlighting the strategic and forward-looking nature of these projects. Most importantly, the transition from intention to implementation is primarily associated with migrants' entrepreneurial capabilities, opportunity perception, and perceived institutional constraints, rather than with demographic characteristics or general transnational orientation alone. Overall, the results support a staged interpretation of entrepreneurial remitting and underscore migrants' role as strategic transnational economic agents, with important implications for diaspora entrepreneurship policies. |
| Keywords: | Remittances, Entrepreneurial remittances, Transnational migrant entrepreneurship, Diaspora investments, Remittance intention–implementation process |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:343300 |
| By: | Çiğdem Ekiz; Eren Gürer; Erol Taymaz |
| Abstract: | We examine how innovation shapes firm-level workforce dynamics using rich administrative data from Türkiye, a developing economy characterized by medium-technology, incremental innovation. We find that patent-based innovation increases both firm size and average daily wages, with the largest employment gains among workers earning just above the median wage. To uncover the mechanisms behind these outcomes, we construct worker transition matrices. Relative to comparable non-innovative firms, innovative firms (i) retain incumbent workers at higher rates, particularly at the top of the wage distribution, (ii) promote retained workers into higher wage bins more frequently, and (iii) hire more new workers, disproportionately into higher wage bins. Finally, occupational composition analysis shows that employment growth is concentrated among technical and production occupations, consistent with the medium-technology, incremental nature of innovation in our sample. |
| Keywords: | innovation, patents, wages, employment, worker transitions |
| JEL: | J21 J31 O31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12986 |
| By: | Cigdem Ekiz (UNU-MERIT, Maastricht University , UNU-MERIT, Maastricht, the Netherlands); Eren Gurer (Department of Economics, Middle East Technical University, Ankara, Turkiye); Erol Taymaz (Department of Economics, Middle East Technical University, Ankara, Turkiye) |
| Abstract: | We examine how innovation shapes firm-level workforce dynamics using rich administrative data from Türkiye, a developing economy characterized by medium-technology, incremental innovation. We find that patent-based innovation increases both firm size and average daily wages, with the largest employment gains among workers earning just above the median wage. To uncover the mechanisms behind these outcomes, we construct worker transition matrices. Relative to comparable non-innovative firms, innovative firms (i) retain incumbent workers at higher rates, particularly at the top of the wage distribution, (ii) promote retained workers into higher wage bins more frequently, and (iii) hire more new workers, disproportionately into higher wage bins. Finally, occupational composition analysis shows that employment growth is concentrated among technical and production occupations, consistent with the medium-technology, incremental nature of innovation in our sample. |
| Keywords: | innovation, patents, wages, employment, worker transitions |
| JEL: | J21 J31 O31 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:met:wpaper:2604 |
| By: | Craig A. Chikis (University of Chicago); Jonathan Goldberg (Board of Governors of the Federal Reserve System); David López-Salido (Banco de España) |
| Abstract: | Firms' hurdle rates exceed their financial cost of capital. This gap varies across firms and has widened in the aggregate. In our Schumpeterian model, two frictions drive this gap: firm decision-makers require an innovator's risk premium for undiversifiable innovation risk, and innovation profits are imperfectly pledgeable. Higher undiversifiable risk lowers the financial cost of capital while hurdle rates remain sticky or even rise. Widening gaps weaken creative destruction; profits and superstar valuations rise despite firms forgoing positive-NPV projects. The calibrated model matches cross-sectional patterns in gaps, R&D, market power and firm dynamics, and explains weak productivity growth and declining dynamism. |
| Keywords: | hurdle rates, cost of capital, idiosyncratic risk, innovation, market power, firm valuations |
| JEL: | E43 G12 G31 G32 O31 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2628e |
| By: | Florian Ederer; Regina Seibel; Timothy Simcoe |
| Abstract: | This paper examines innovation outcomes before and after 1, 200 startup acquisitions by eight major technology firms. Linking patent and workforce data to these deals, we document four main findings. First, most acquired startups hold no patents, but those with patents tend to operate in technology areas where the acquirer already has a presence and that see further acquisition activity. Second, innovation typically rises before an acquisition, continues afterward only where further acquisitions follow, and falls back once acquisition activity ends. We propose a stylized model in which beliefs about commercial viability drive both startup entry and acquisitions to explain how these patterns arise through selection rather than effects of the deals. Third, acquired patents receive significantly more citations after the acquisition than comparable patents, not only from the acquirer but also from firms that hire the targets’ employees. Fourth, although 31% of employees and 23% of inventors depart within a year, inventors who stay go on to patent substantially more, while stayers and leavers were equally productive beforehand. In the aggregate, we find little evidence that acquisitions by digital incumbents suppress innovation, even though serial acquisitions go hand in hand with growing patent consolidation. |
| JEL: | L41 L63 L86 O31 O34 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35762 |
| By: | Wurster, Maximilian; Hellenkamp, Detlef |
| Abstract: | In knowledge-based economies, technological innovation capability, intangible assets, and intellectual property are becoming increasingly important for long-term economic performance. Patent data are widely used as indicators of innovation; however, simple patent counts do not adequately capture the quality, technological relevance, or international market coverage of individual patents. This paper therefore examines the extent to which key patents can serve as a quality-oriented indicator of technological innovation capability for analysing economic performance. Key patents are understood as particularly high-quality patents in relevant key technologies, whose patent strength derives from technological relevance and international market coverage. The paper combines a conceptual analysis of the key patent approach with literature from growth and innovation economics, as well as with an exploratory empirical plausibility assessment based on a global patent dataset on world-class patents in future technologies (Breitinger et al., 2020). Economic performance is operationalised empirically through per capita income. The empirical evidence is assessed from two complementary perspectives: an international cross-section of high-income economies and a dynamic analysis of the United States, which held a particularly prominent position in high-quality patenting across key future technologies during the period under observation. In both perspectives, the findings point to a positive association between key patents and per capita income. They should not, however, be interpreted as evidence of causality, but as empirically grounded support for the plausibility of this relationship. The contribution of this paper lies in positioning key patents as a differentiated innovation indicator that takes patent quality, technological relevance, and international reach more fully into account than mere patent volumes. The key patent approach thus offers a scientifically grounded perspective on innovation capability and economic performance in knowledge-based economies. |
| Keywords: | Key patents, Patent quality, Innovation indicators, Technological innovation capability, Knowledge-based economies, Economic performance, Intangible assets |
| JEL: | O31 O33 O34 O47 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:343662 |
| By: | Alexandra-Anca Purcel (Universitatea Babeș-Bolyai) |
| Abstract: | This study explores the effect of environmental protection effort, both the adoption and the size of environmental protection expenditure, as well as the energy dependence on total factor productivity (TFP) at the firm level. To this end, I focus on an extended sample of Romanian firms observed during the period 2020–2023. The results, consistent across different specifications, indicate that firms engaged in environmental protection activities have, on average, higher TFP than similar firms but that environmental protection expenditures induce additional costs, negatively influencing TFP. Moreover, energy intensity has a positive and significant effect on TFP. Overall, these findings provide important insights into the relationship between these indicators at the firm level and may lead to the development and improvement of more tailored associated policies. |
| URL: | https://d.repec.org/n?u=RePEc:boc:carp26:09 |
| By: | Azinovic-Yang, Li; Kepler, John D.; Speros, Ava E.; Stewart, Christopher R. |
| Abstract: | We study how the durability of customer relationships shapes competition, innovation, and the allocation of economic activity. Using novel data from M&A accounting disclosures, we construct a forward-looking measure of customer durability based on firms' expected useful lives of their customer relationship-related intangible assets, covering nearly 9, 500 acquisitions and $8 trillion in assets from 2002 through 2024. We document a substantial rise in durability across industries and examine its implications in an endogenous growth model in which longer-lasting customer relationships amplify incumbents' market power. Empirically, greater durability is associated with higher markups and profit shares, increased concentration, reduced entry and exit, lower job reallocation, slower wage growth, and a declining labor share. Consistent with our model, we also find an inverted-U relationship between durability and innovation, with high durability reducing both the quantity and quality of innovation, partly through lower R&D investment. Taken together, our findings highlight rising customer durability as a novel mechanism that helps reconcile the simultaneous increase in market power and decline in U.S. business dynamism, with important implications for competition policy. |
| JEL: | L11 L25 L41 O31 E25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:343992 |
| By: | Lundquist, Kathryn; Jha, Rahul; Vishwanath, Reetuparna; Chi Pok Cheang |
| Abstract: | With the continuing trend of digitalization and its impacts on international trade participation of firms, this paper considers how cyber-readiness impacts trade participation rates, especially of micro-, small- and medium-sized enterprises (MSMEs). First, the paper seeks to define what cyber-readiness is, exploring the multiple components that support MSME digitalization and digital transformation including digital security. The paper then presents the results of a 2023 survey of businesses and policymakers that previously engaged with the International Telecommunication Union on how cyber-readiness is viewed by these groups. Lastly, the paper builds a cyber-readiness score to explore how this concept could be tested against trade participation. Although no correlation was found between the constructed index and international trade by either MSMEs or large firms, a positive correlation emerged between the cyber-readiness score and MSME productivity. |
| Keywords: | Cyber-readiness, cybersecurity, digitalization, digital transformation, small and medium-sized enterprises, MSMEs, firm productivity, trade participation, international trade, firmlevel survey |
| JEL: | F14 L25 M21 O33 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wtowps:343986 |
| By: | Knarik Poghosyan; Martin Kalthaus; Nadine Riedel; Michael Rothgang; Anne-Marie Scholz |
| Abstract: | We estimate the direct and indirect causal effects of Germany’s Leading-Edge Cluster Competition on firm size, inventive activity, and joint patenting. With €600 million allocated to 15 clusters, this program is one of the largest cluster policy programs in Europe. Using a staggered event-study design, we estimate the direct effect of the cluster policy on firms within the funded clusters. Additionally, we differentiate between funded and non-funded cluster members to assess the effects of the financial and the systemic components of the policy. Furthermore, we estimate the indirect spillover effect of this program on firms in close proximity to the funded clusters that are not associated with them. Our results show that the cluster policy has a direct overall positive effect on firm size and inventive activity, but a negative effect on collaboration in inventive activity. Differentiating between funded and nonfunded cluster members reveals that the latter benefit strongly from the systemic component of the cluster policy, increasing their inventive activity while having no significant effect on collaboration. In contrast, we do not observe any indirect effects on geographically proximate non-cluster firms. Our results provide causal evidence of the direct benefits of cluster policy at the firm level but call into question the anticipated indirect effects of cluster policy on neighboring non-cluster firms. |
| Keywords: | Cluster Policy, Spillover Effects, Policy Evaluation, Patent Data, Event Study |
| JEL: | O33 O38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2181 |
| By: | Babajić, Amra; Baraković Nurikić, Mirnesa |
| Abstract: | For decades, decision-makers at national, regional, and global levels have been adopting policies aimed at addressing environmental pollution. At the same time, the human population, global economy, and worldwide energy consumption continue to grow. Increasing investment in renewable energy sources has become imperative. In this context, the concept of a regenerative economy emerges, requiring investments in renewables, research, and innovation. The assumption is that countries with lower public debt have more fiscal space to invest in renewable energy, research, and development, while those with high public debt face limited opportunities for such endeavors. The main objective of this paper is to classify Southeast European (SEE) countries according to the level of development of their regenerative economies and to determine whether public borrowing serves as a catalyst for accelerating the transition toward a regenerative economy-or rather poses an obstacle to that path. The analysis will be conducted using indicators such as: Public Debt (% of Gross Domestic Product - GDP thereafter), Renewable Energy Share (%), CO₂ Emissions (tons per capita), R&D Expenditure (% of GDP), and Sustainable Development Goal 15 (SDG15), covering the period from 2010 to 2023. The main findings suggest that SEE countries differ significantly in terms of their regenerative economy development, and that public debt plays a substantial role in shaping their transition. These insights offer valuable guidance for policymakers in designing strategies to enhance national and regional competitiveness, attract foreign direct investment, and guide investors-especially since countries with higher R&D investment offer more favorable conditions for green investments and innovation development. Moreover, this cluster analysis can contribute to strengthening regional cooperation in SEE because it facilitates the identification of leader countries and countries that need additional support and knowledge transfer. |
| Keywords: | Public debt, regenerative economy, transition, Southeast Europe |
| JEL: | O40 F64 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esconf:343404 |
| By: | Cooiman, Franziska; de Groote, Julia; Stamm, Isabell; Krieg, Jan Ole |
| Abstract: | Given the centrality of entrepreneurial activity to the accumulation, reproduction, and legitimization of wealth – and conversely, of wealth in the form of capital to foster entrepreneurship – it might be reasonable to expect a plethora of research on the relationship between entrepreneurship and wealth. However, as we demonstrate in our interdisciplinary literature review, a surprising lack of engagement exists with regard to this relationship. Sociological studies of wealth inequality rarely address entrepreneurship, and entrepreneurship research rarely addresses wealth. We systematically review, discuss, and synthesize the discourse in the leading journals of both fields. In the sociological discourse on wealth, we find that entrepreneurship is seen as one of many sources of income and wealth, and as a means of legitimizing its accumulation. However, the social practices, actors, and institutions that mediate the concentration of wealth through entrepreneurship, as well as the structural power of wealth in entrepreneurial activity, are rarely addressed. Similarly, in entrepreneurship research, we show that considerable attention is paid to the role of family businesses, transgenerational wealth, and non-financial wealth (“socioemotional wealth”), whilst the fundamental role of these factors in fostering wealth concentration more broadly remains largely unremarked upon in the literature. We therefore suggest future research that systematically engages with how entrepreneurial activity shapes wealth accumulation, and how wealth, in turn, structures entrepreneurial opportunities and outcomes. With this review, we contribute to advancing debates on inequality, social mobility, and economic development. |
| Date: | 2026–09–15 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:5j4rp_v2 |
| By: | Dunia, Arsène Buzima |
| Abstract: | Does debt overhang distort only investment? This paper analyzes the subsequent effects of debt overhang on firm-level outcomes. Using an event study for German firms from 2004 to 2021, we find that, relative to comparable firms in the same industry and year, highly indebted firms do not merely invest less, which is the classic overhang result. They also hire less, and the two margins together translate into slower sales growth. The composition of the adjustment, however, depends on the firm's growth regime. Highly indebted firms that keep expanding slow their hiring but raise capital per worker over the long run, substituting capital for labour along a flatter expansion path. Highly indebted firms that contract shed workers with no offsetting change in capital intensity: they scale down rather than restructure. These patterns hold in normal times as well as in crises and are concentrated among small and medium-sized limited-liability firms. Debt overhang is therefore not a pure investment wedge but a persistent drag on firm scale, whose incidence across inputs is determined by whether the firm is growing or shrinking. |
| Keywords: | capital-labour substitution, debt overhang, employment, firm growth, firm leverage |
| JEL: | D22 E22 E24 G31 G32 J23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:344000 |
| By: | Brad Cannon; David Hirshleifer; Joshua Thornton |
| Abstract: | Using Facebook friendship data, we study how three aspects of social capital shape innovative activity. We find that the most important aspect of social capital in explaining innovation is Economic Connectedness (EC)--the share of high-income friendships. One standard deviation greater EC is associated with 97% more patents per capita among patenting ZIP Codes and 45% more breakthrough patents per capita among ZIP Codes with breakthrough patents. Reverse-causality tests, a within-inventor relocation design, and a quasi-experiment using fracking-driven economic shocks to non-local friends support a causal interpretation. Mechanism tests provide evidence consistent with a financing channel. |
| JEL: | D14 D25 D83 D85 D9 G32 G41 G51 O16 O3 O33 O35 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35732 |
| By: | Dean Karlan; Natalia Rigol; Benjamin N. Roth |
| Abstract: | Evaluations of microenterprise credit typically measure effects only on borrowing firms. But what about their customers? If microenterprises sell relatively undifferentiated goods and services, as is often hypothesized, credit may simply reallocate sales across firms and create little consumer benefit. In a randomized controlled trial in Chile, large loans increased treated firms’ profits by USD 292 per month, a 13.4% increase. Customer survey data indicate even larger benefits for customers: a gain of USD 494 per month in consumer surplus. Furthermore, using a sample of more than 125, 000 non-treated firms operating in the same markets, we find little evidence of business stealing. The welfare gains from credit expansion thus extend well beyond the borrowers themselves. |
| JEL: | D53 L26 O12 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35729 |
| By: | Papadonikolaki, Eleni; Krystallis, Ilias; Morgan, Bethan |
| Abstract: | Absorptive capacity in construction is crucial for effectively managing change amidst the twin transition (digital and green transitions) that is significantly affecting existing practices in the sector. Concentrating on construction sector, this research examines how firms assimilate and use digital decarbonisation practices to improve their performance. Building on a multi-method qualitative dataset comprising interviews with 53 industry experts in the UK construction sector, archival data, and validation of our findings through focus group data, the study highlights the vital role of absorptive capacity in enabling firms to navigate and benefit from digitalisation and sustainability initiatives. The findings indicate that the potential absorptive capacity (acquisition and assimilation of knowledge) takes place mainly in firms whereas the realised absorptive capacity (transformation and exploitation) takes place mainly in the boundaries of projects they deliver. This offers a mutually reinforcing cycle of exploration and exploitation that can equip firms to meet contemporary challenges and institutional demands effectively to cope against the twin transition. Our study contributes with a four-phase process model for understanding the organisational change management processes required for the twin transition in project-based settings. Most existing research on absorptive capacity focuses on either organisational or industry-level dynamics, our study examines the loci of absorptive capacity (e.g., by examining firm and project boundaries) in a highly complex, project-driven industry such as construction. |
| Keywords: | dynamic capabilities;green transitition;knowledge absorption;net zero;digitalisation;digital innovation |
| JEL: | R14 J01 |
| Date: | 2026–03–02 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140977 |