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on Small Business Management |
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Issue of 2026–06–22
eighteen papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Henrekson, Magnus (Research Institute of Industrial Economics) |
| Abstract: | This paper analyzes Sweden’s entrepreneurial performance from an institutional and evolutionary perspective, using the concept of the collaborative innovation bloc. It argues that economic development is driven not by entrepreneurial entry per se, but by the capacity of institutional arrangements to channel entrepreneurial effort into large-scale, productivity-enhancing activities. Sweden provides an instructive case: despite strong performance in innovation and start-up formation, the economy performs less well in turning young firms into globally competitive enterprises. The analysis emphasizes the complementarity between entrepreneurs and key actors - investors, skilled employees, and competent customers - and the role of institutional incentives in coordinating their interaction over time. While past reforms have improved conditions for entry, remaining distortions in taxation, labor market regulation, and capital allocation may bias outcomes toward early exit rather than sustained growth. |
| Keywords: | collaborative innovation bloc, entrepreneurial ecosystem, entrepreneurship policy, scale-up policy, innovative entrepreneurship |
| JEL: | H50 I28 L26 O31 P16 R38 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18664 |
| By: | Alvarez, Lourdes; Bullón, Angel |
| Abstract: | Innovation is a fundamental driver of productivity, playing a pivotal role in fostering market dynamism. This study examines firm-level data from Peru, analyzing innovation activities in small and large enterprises across the manufacturing and services sectors. Employing a rigorous methodological framework—including Fligner–Policello tests, matching techniques, and unconditional quantile treatment effects—the analysis reveals that innovation significantly increases sales growth in large manufacturing firms and service-sector SMEs, while no immediate effects on productivity are detected. Regarding firm longevity, significant impacts are observed exclusively among large manufacturers. These findings indicate that, in contrast to sales, productivity gains from innovation may require a longer horizon to emerge. |
| Keywords: | Business innovation, Sales growth, Labor productivity, Firm longevity, SMEs, Manufacturing and Services. |
| JEL: | L1 O31 |
| Date: | 2025–11–19 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129105 |
| By: | Luca Fornaro; Veronica Guerrieri; Will Hotten; Lucrezia Reichlin |
| Abstract: | This paper studies how financial conditions affect research and development (R&D) by firms specialized in green innovation. Using U.S. patent data matched with Compustat, we identify “green innovators” as firms with a high cumulative share of green patents. Although they account for a small share of total green patenting, these firms occupy central positions in the green-innovation ecosystem. Estimating firm-level impulse responses to exogenous changes in broad financial conditions, we find that tightening has a disproportionately large and persistent negative effect on the R&D of specialized green innovators. In contrast, R&D by diversified innovators and non-innovators responds only weakly. Green innovators are younger, smaller, and more dependent on external finance, suggesting that financial tightening introduces a systematic bias against upstream green technological development. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1946 |
| By: | Maczulskij, Terhi |
| Abstract: | Abstract TThe EU ETS is the main climate policy instrument in the European Union. By putting a price on carbon emissions, it aims to reduce GHG emissions while encouraging firms to adopt cleaner technologies. This policy brief summarizes the results from the recent paper examining the effects of the EU ETS on productivity, innovation activity, and environmental performance among Finnish energy-intensive firms. The analysis is based on various firm-level datasets covering the period 2000–2020. The data include financial statements, emissions, energy use, innovation activity, and R&D expenditure. Causal effects are identified by exploiting the staggered difference-in-difference method. The results show that the EU ETS did not reduce firms’ productivity or R&D expenditure. At the same time, regulated firms became significantly more likely to introduce both process and product innovations. In addition, energy intensity declined by approximately ten percent following regulation. These findings suggest that carbon pricing can stimulate technological adaptation and innovation without generating measurable costs on firm competitiveness. The innovation effects appear to arise primarily through technology adoption and process improvements rather than increased R&D inputs. Overall, the results support the use of climate policies as an effective tool for promoting the green transition while maintaining economic performance. |
| Keywords: | EU ETS, Innovation, Productivity |
| JEL: | D24 O31 O33 Q52 Q58 |
| Date: | 2026–06–08 |
| URL: | https://d.repec.org/n?u=RePEc:rif:briefs:181 |
| By: | Maczulskij, Terhi |
| Abstract: | Abstract This study examines the impact of the EU Emission Trading System on firms’ productivity and innovation behavior in the Finnish energy-intensive sector. Using unique administrative data on emissions and firm characteristics from 2000 onwards, the effect of the ETS is analyzed using staggered difference-in-difference design. The results show that while firms do not increase productivity or innovation inputs, those regulated are significantly more likely to introduce both process and product innovations. Additional findings suggest that the ETS effectively reduced energy intensity. Together the findings suggest that carbon pricing may stimulate technological adaptation and environmental improvements without generating measurable losses in productivity. |
| Keywords: | EU ETS, Innovation, Productivity |
| JEL: | D24 O31 O33 Q52 Q58 |
| Date: | 2026–06–08 |
| URL: | https://d.repec.org/n?u=RePEc:rif:wpaper:139 |
| By: | Jongwon Shin (Korea Institute for Industrial Economics and Trade) |
| Abstract: | South Korea’s shared growth policy emerged as a response to structural imbalances between large firms and small and medium-sized enterprises (SMEs) embedded in the country’s industrialization model. While the policy initially aimed to correct unfair trade practices and mitigate economic polarization, its early implementation was overly paternalistic, characterized by heavy-handed government interventions.<p> Today, digital transformation driven by artificial intelligence (AI), economic security, supply chain restructuring, and expanding ESG requirements demand a fundamental shift in policy toward an ecosystem-based cooperation model to strengthen innovation, build resilience, and enhance sustainable competitiveness across the country’s industrial ecosystem. |
| Keywords: | small and medium-sized enterprises; SMEs; SME policy; large enterprises; chaebol; fair competition; competition policy; fair trade; antitrust policy |
| JEL: | D22 D30 D43 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:022846 |
| By: | Sangwon Lee (Korea Institute for Industrial Economics and Trade) |
| Abstract: | In South Korea, there are two major laws designed to improve safety management in the chemicals industry: The Act on the Registration and Evaluation of Chemical Substances (K-REACH) and the Chemical Substances Control Act. This study employs a Difference-in-Differences model to empirically analyze the effects of these important pieces of legislation on the domestic chemicals industry.<p> The analysis shows that while the overall industrial shock of these laws was limited, some regional economies experienced significant declines in manufacturing value added. The analysis also found a short-term rise in R&D spending following the implementation of the new laws’ provisions, highlighting their potential to catalyze technological innovation. The conclusion describes the implications the analysis carries for policy, proposing that a tailored policy framework that provides targeted support for vulnerable regions and small and medium-sized enterprises (SMEs) is essential to facilitate environmental safety while ensuring long-term industrial resilience. |
| Keywords: | chemicals; chemicals industry; petrochemicals; industrial policy; regulatory reform; regulation; K-REACH; Chemical Substances Control Act; CBCA; regional economics; policy evaluation |
| JEL: | L65 R11 R12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:022847 |
| By: | Yuqi Ma; Zhaoyingzi Dong; Pierre-Alexandre Balland; Hantian Sheng |
| Abstract: | Public procurement of innovation (PPI) is widely regarded as a powerful demand-side policy instrument to stimulate innovation, but its role in shaping regional technological diversification remains unclear. Drawing on evolutionary economic geography, this study examines how PPI affects technological diversification under different spatial sourcing strategies. Using 2.24 million procurement contracts and 2.41 million patents from China (2016-2021), we find that PPI facilitates path-breaking diversification, but mainly through non-local procurement. Compared with local procurement, non-local procurement is more conducive to path-breaking diversification in purchasing regions, while its benefits do not spill over symmetrically to supplying regions. By reconceptualizing PPI as a spatially embedded and relational mechanism, this study extends evolutionary accounts of regional diversification beyond a purely territorial lens and highlights how the spatial organization of public demand shapes uneven opportunities for regional technological development. |
| Keywords: | Public procurement of innovation; Technological diversification; Path-breaking innovation; Non-local procurement; Evolutionary economic geography |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2609 |
| By: | Nargelle Adnaoui (Université Hassan II de Casablanca, Faculté des Sciences Juridiques, Économiques et Sociales – Aïn Chock); Hicham Mesk |
| Abstract: | This paper examines the implications of Morocco's transition toward a more flexible exchange rate regime for the competitiveness of small and medium-sized enterprises (SMEs), within a context of gradual economic openness. The analysis draws on core exchange rate theories, contemporary approaches to firm competitiveness, and the structural specificities of Moroccan SMEs. The study shows that fluctuations in the dirham directly affect firms' costs, profit margins, and strategic decisions. These effects are heterogeneous and depend on SMEs' profiles and their degree of exposure to international markets. Firms endowed with strong internal resources, well-developed organizational capabilities, and greater strategic flexibility display a higher capacity to adapt to exchange rate volatility, whereas less structured SMEs appear more vulnerable to monetary shocks. The findings also highlight the critical role of the institutional environment. Administrative burdens, limited access to financing, and payment delays may amplify SMEs' vulnerability and moderate the potential benefits of increased exchange rate flexibility. This research adopts a conceptual approach based on an integrative literature review. It proposes a structured theoretical framework linking exchange rate flexibility, internal resources, adaptive strategies, and institutional factors. The analysis suggests that exchange rate flexibility represents both a source of risk and a potential lever of competitiveness for Moroccan SMEs. |
| Abstract: | Cet article examine les implications de la transition vers un régime de change plus flexible au Maroc sur la compétitivité des petites et moyennes entreprises (PME), dans un contexte d'ouverture économique progressive. L'analyse mobilise les principales théories des taux de change, les approches contemporaines de la compétitivité ainsi que les spécificités structurelles des PME marocaines. L'étude met en évidence que les fluctuations du dirham influencent directement les coûts, les marges et les choix stratégiques des entreprises. Les effets apparaissent différenciés selon le profil des PME et leur degré d'exposition aux marchés internationaux. Les entreprises disposant de ressources internes solides, de capacités organisationnelles développées et d'une flexibilité stratégique accrue présentent une meilleure capacité d'adaptation face à la volatilité du taux de change, tandis que les PME moins structurées apparaissent plus vulnérables aux chocs monétaires. Les résultats soulignent également le rôle déterminant de l'environnement institutionnel. Les contraintes administratives, les difficultés d'accès au financement et les délais de paiement peuvent amplifier la vulnérabilité des PME et moduler les effets d'une flexibilité accrue du taux de change. Cette recherche adopte une approche conceptuelle fondée sur une revue intégrative de la littérature. Elle propose un cadre théorique structuré reliant la flexibilité du taux de change, les ressources internes, les stratégies d'adaptation et les facteurs institutionnels. L'analyse met en évidence que la flexibilité du dirham constitue simultanément un facteur de risque et un levier potentiel de compétitivité pour les PME marocaines. |
| Keywords: | Institutional quality, Organizational resilience, Moroccan SMEs, SME competitiveness, Qualité institutionnelle, Résilience organisationnelle, PME marocaines, Compétitivité des PME, Flexibilité du taux de change |
| Date: | 2026–02–22 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05524530 |
| By: | Tamilina, Larysa; Akaliyski, Plamen |
| Abstract: | Innovation is widely recognized as a fundamental driver of long-term economic and societal prosperity, prompting extensive research into its determinants. Although culture and formal institutions are increasingly acknowledged as critical antecedents of innovation, empirical evidence remains limited regarding how these factors combine to either facilitate or constrain national innovation performance. This study investigates the joint effects of individualism–collectivism and formal institutions on both low and high innovation. Using fuzzy-set qualitative comparative analysis (fsQCA) on a sample of 80 countries, we identify multiple configurations of cultural and institutional conditions associated with divergent innovation outcomes. Our findings indicate that innovation is shaped by asymmetric patterns of sufficiency between cultural and institutional factors. High innovation requires their joint presence, while low innovation can arise from multiple forms of institutional or cultural deficiency. Building on this asymmetric relationship, we propose a novel typology of national innovation regimes. |
| Keywords: | Innovation, culture, individualism-collectivism, formal institutions, fsQCA |
| JEL: | C1 Z0 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129487 |
| By: | Kyriakos Andreou; Andreas Fousteris; Sotirios Kokas; Alexandros Kontonikas; Emmanouil Pyrgiotakis |
| Abstract: | This paper examines the prevalence, dynamics, and failure risk of zombie firms in Greece during the post-crisis and post-Covid period, using firm-level Orbis data over the period 2015–2023. Building on the composite zombie classifica?on introduced in PwC (2015), which does not rely mechanically on interest coverage ra?os and is well suited to the Greek corporate environment, we document four main findings. First, the share of zombie firms declined substan?ally over the recovery period, despite a temporary increase during the Covid-19 episode. Second, zombifica?on is predominantly transitory: most zombie firms recover, while a non-negligible frac?on remains persistently weak or exits the market. Third, using a Cox propor?onal hazards model, we show that zombie status is associated with a hazard of firm failure approximately 2.7 ?mes higher, even a?er controlling for standard firm-level characteris?cs. Fourth, we document pronounced heterogeneity across firm size, with zombie incidence and failure risk par?cularly elevated among micro firms. The results highlight zombifica?on as a dis?nct firm state associated with materially higher failure risk. |
| Keywords: | Greek non-financial corpora?ons, zombies, survival, Cox model |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:hel:greese:216 |
| By: | Benoit Cornet; Marc-André Chavy-Macdonald; Dominique Foray |
| Abstract: | The space sector has become far more dynamic and innovative, with new actors (e.g., start-ups, venture capital) entering and the ever-growing importance of private firms. In this paper we introduce a novel concept, innovatisation, to understand this phenomenon. Innovatisation describes the transformation of a sector between two modes. In a mode of technological achievements (TA), only technological (not economic) performance matters, primarily for prestige purposes; in innovation, customer preferences, commercial opportunities, and costs become essential. Studying the economics of Apollo and the commercialization attempts of the 1980s, we show how the space sector has long featured a logic of TA. Then, analyzing recent trends, we provide quantitative empirical evidence (e.g., costs) that innovation now shapes the sector, thanks to various driving forces. The driving forces behind the innovatisation process are identified building on Jones (2022) and the disruptive innovation theory. |
| JEL: | O38 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35254 |
| By: | Katariina Nilsson Hakkala (Asian Development Bank) |
| Abstract: | This study examines the effects of special economic zones (SEZs) on firm growth and the regional business environment in Viet Nam, highlighting their key role as a policy tool to attract foreign investors. Using detailed panel data from Viet Nam’s 63 provinces from 2006 to 2020 and instrumental variables (IV) estimations, this study provides new insights into how SEZs impact firm growth and several dimensions of economic governance. SEZs are found to play a dual role. Provinces with broader SEZ coverage experienced increases in employment, revenues, and the number of foreign-invested enterprises. In contrast, domestic private firms faced declines in both revenues and numbers. SEZ exposure had negative effects on several aspects of provincial economic governance including land access, transparency in policy-making, and informal charges. In addition, the approval of the first SEZ was also associated with increased prevalence of informal charges and preferential treatment of foreign-invested enterprises and other big companies, which may indicate heightened inefficiencies and rent-seeking concerns. |
| Keywords: | special economic zones;foreign direct investment;business environment and development |
| JEL: | F21 F23 L53 |
| Date: | 2026–05–29 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:022604 |
| By: | Koski, Heli |
| Abstract: | Abstract Geopolitical tensions have increasingly extended to the development of strategic technologies. In particular, technological rivalry between the United States and China has reshaped firms’ international innovation networks and the organization of research and development activities. Patent data from leading 5G firms indicate that the effects of geopolitical fragmentation are strongest among firms whose innovation networks were previously highly integrated across geopolitical blocs. In these firms, the increase in geopolitical fragmentation is associated with a reduction of approximately 2.1 percentage points in the likelihood of collaboration between cross-block inventors, equivalent to roughly one quarter of the average level of collaboration. Geopolitical fragmentation also reduces inventor team diversity and the participation of inventors from rival geopolitical blocs. The effects were the broadest among Chinese firms. The findings suggest that geopolitical rivalry affects not only trade, investment, and technology transfer but also innovation networks through which new technologies are developed. In strategic industries such as 5G, geopolitical fragmentation may narrow the channels of international knowledge exchange and reshape the structure of global innovation networks. |
| Keywords: | 5G, Geopolitical fragmentation, Innovation networks, Crossborder collaboration, Patents |
| JEL: | F51 O31 O33 L96 |
| Date: | 2026–06–09 |
| URL: | https://d.repec.org/n?u=RePEc:rif:briefs:182 |
| By: | Baumann, Ursel; Faia, Ester; Ferrando, Annalisa; Rariga, Judit; Cullen, Zoe; Perez-Truglia, Ricardo |
| Abstract: | How well does innovation diffuse across geographic boundaries? To shed light on this question, we present a large-scale field experiment involving 3, 300 firms across twelve European Union countries. We elicit firms’ perceptions of the share of similar firms in their own country that had invested in artificial intelligence (AI), as well as the corresponding share among similar firms in Germany, France, and Italy. We randomly provide half of the sample with accurate information about both domestic and foreign AI investment. We show that firms substantially underestimate competitors’ current AI investment, both domestically and abroad, and that they update their expectations about competitors’ future AI investment in response to the information treatment. The treatment also causes a statistically significant increase in firms’ own expected AI investment rate. We find strong strategic complementarities within borders: a 1 pp increase in the expected share of domestic peers investing in AI raises a firm’s own expected AI investment rate by 0.570 pp. These complementarities are absent across borders: the effect of an increase in the expected share of foreign peers investing in AI on a firm’s own expected AI investment rate is statistically insignificant. Overall, our evidence shows that innovation diffusion and strategic complementarities in AI investment are much stronger domestically than internationally. JEL Classification: O33, D22, C93, L21 |
| Keywords: | artificial intelligence, field experiment, innovation diffusion, survey data |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263246 |
| By: | Katariina Nilsson Hakkala (Asian Development Bank); Abhishek Kumar (University of Southampton) |
| Abstract: | Distressed and zombie firms are widespread in economies with weak insolvency regimes. This study investigates whether reforming insolvency laws can reduce capital misallocation. We introduce a framework for decomposing financial misallocation and derive metrics adequate to capture two conceptually distinct sources of inefficiency. The first refers to composition misallocation from inefficient leverage distribution, while the second refers to scale misallocation from suboptimal capital allocation among firms. Using firm-level data from 22 economies between 2003 and 2024, we find that effective reforms significantly reduce scale misallocation, especially in sectors with a high concentration of distressed and zombie firms. Event studies reveal a steady decline in scale misallocation following reform, mirroring higher recovery rates and shorter insolvency durations, leading to a 3.5% productivity gain over 5 years. We present additional firm-level evidence substantiating these gains: reforms reduce debt among distressed and zombie firms, increase their borrowing costs, and enable previously credit-constrained firms to access greater funding for investment, thereby improving overall capital allocation. |
| Keywords: | distressed firms;zombie lending;insolvency reform;capital allocation;event studies |
| JEL: | D21 D22 G21 G32 G33 |
| Date: | 2026–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:022616 |
| By: | Arvind Ashta |
| Abstract: | While existing research documents barriers facing informal entrepreneurs, it treats these largely as independent constraints. This paper reconceptualizes informality as a self-reinforcing system—a vicious circle where the conditions created by informal status make escape progressively more difficult. Extending Nurkse's (1952) macro-level vicious circle of poverty to the micro level of individual entrepreneurs, this conceptual framework identifies three interlocking feedback loops: financial exclusion (lack of documentation prevents credit access, which prevents formalization), human capital traps (informal work depletes resources needed for skill acquisition), and legitimacy deficits (informal status generates exclusion from formal networks and markets). Drawing on resource-based theory and institutional economics, the framework explains why informal entrepreneurs remain informal despite documented disadvantages—a persistence puzzle existing research cannot adequately address. Three lock-in mechanisms operate simultaneously: the documentation paradox (need credit to formalize, need formalization to access credit), threshold traps (fixed formalization costs exceed variable informal earnings), and capability constraints (lacking bridging social capital to navigate bureaucracy). The framework reveals why piecemeal interventions fail: addressing single barriers leaves other feedback loops active. This reconceptualization has direct policy implications, requiring simultaneous, coordinated interventions across five pillars: tailored finance access, education and training, institutional simplification, social network strengthening, and digital empowerment. Breaking these feedback loops addresses not only resource constraints but also legitimacy deficits, enabling transitions from informality that foster social mobility, gender equity, and sustainable development. This framework-building exercise provides foundations for future empirical validation and guides design of multi-actor interventions for disrupting persistent informality in emerging economies. |
| Keywords: | Informality; Entrepreneurship; Emerging Economies; Vicious Circle; Feedback Loops; Legitimacy; Financial Inclusion; Institutional Theory; Policy Framework; Sustainable Development |
| JEL: | L26 O12 O17 O35 J16 |
| Date: | 2026–06–05 |
| URL: | https://d.repec.org/n?u=RePEc:sol:wpaper:2013/408007 |
| By: | Brink, Siegrun; Schröder, Christian; Nielen, Sebastian; Günther, Christina |
| Abstract: | Previous research shows that innovations help companies to overcome crises. But it is still unclear whether and to what extent external shocks force companies without or less pre-existing innovation experience to innovate and how successful these innovations are to improve the economic situation. This study investigates how innovations may help companies to perform better during macroeconomic crisis. In doing so we distinguish between innovators with and without pre-existing innovation experience. Our results show that companies which are affected by the crisis are more likely to innovate as a reaction. These innovations out of necessity have a significant positive effect on the economic situation of companies. Innovators without preexisting innovation experience can even gain a competitive advantage over non-innovative companies by acting proactively during the crisis. But these positive effects are stronger for companies with pre-existing innovation experience. Hence, we observe that pre-existing innovation experience is helpful to implement innovations during a crisis in a successful way. |
| Abstract: | Frühe Studien zeigen, dass Innovationen Unternehmen dabei helfen können, Krisen zu überwinden. Unklar beleibt bisher jedoch, ob und inwiefern externe Schocks Unternehmen ohne oder mit wenig Innovationserfahrung dazu zwingen, innovativ zu werden - und wie erfolgreiche solche Innovationen sind. Im Working Paper weist das Autorenteam nach, insbesondere Unternehmen ohne vorherige Innovationserfahrung durch proaktives Innovationsverhalten Wettbewerbsvorteile erzielen können. Bei Unternehmen mit bestehenden Innovationserfahrungen sind die positiven Effekte jedoch stärker ausgeprägt. |
| Keywords: | Innovation, Crisis, Business Development |
| JEL: | O31 O32 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifmwps:341400 |