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on Small Business Management |
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Issue of 2017‒12‒03
twenty-one papers chosen by João Carlos Correia Leitão Universidade da Beira Interior |
| By: | Mercedes Teruel (GRIT, Universitat Rovira i Virgili); Agustí Segarra-Blasco (GRIT, Universitat Rovira i Virgili) |
| Abstract: | Previous results show that gender diversity increases the probability firms’ innovation. This paper explores the relationship between gender diversity of R&D departments and their capacity to patent. Based on the Spanish Community Innovation Survey between 2004 and 2014, we have applied a two-step procedure control for endogeneity. Our results show that gender diversity affects a firm’s capacity to patent in different manners depending on the coverage of the patents. On the one hand, gender diversity affects OEPM patents negatively, while the impact becomes positive for patents with an international coverage (EPO, USPTO, or PCT). This analysis is relevant in order reveal the dual effect of gender diversity within R&D teams on their capacity to process and register patents. |
| Keywords: | gender diversity, patent generation |
| JEL: | O30 O31 J16 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2017-09&r=sbm |
| By: | Baumöhl, Eduard; Iwasaki, Ichiro; Kočenda, Evžen |
| Abstract: | We analyze firm survival determinants in four new European Union member states (Czech Republic, Hungary, Poland, and Slovakia). We employ the Cox proportional hazards model on firm-level data over the period of 2006–2015. We show that less concentrated control of large shareholders, higher solvency, and more board directors are linked with increased probability of firm survival in all four countries. However, an excessive number of board directors shows a detrimental effect. Firms with foreign owners and higher returns on their assets exhibit better survival chances. On the other hand, larger firms and those hiring international auditors show lower probabilities of survival. A number of determinants specifically influence firm survival in different ways across countries. This fact emphasizes that differences in business conditions are important when studying firm survival. |
| Keywords: | firm survival, new EU member states, survival and exit determinants, hazards model, panel data |
| JEL: | D22 G01 G33 G34 P34 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2017-5&r=sbm |
| By: | Benjamin W. Pugsley (University of Notre Dame); Petr Sedlacek (Centre for Macroeconomics (CFM); University of Oxford); Vincent Sterk (Centre for Macroeconomics (CFM); University College London (UCL)) |
| Abstract: | Only half of all startups survive past the age of ve and surviving businesses grow at vastly dierent speeds. Using micro data on employment in the population of U.S. businesses, we estimate that the lion's share of these differences is driven by ex-ante heterogeneity across firms, rather than by ex-post shocks. We embed such heterogeneity in a firm dynamics model and study how ex-ante differences shape the distribution of firm size, "up-or-out" dynamics, and the associated gains in aggregate output. "Gazelles" - a small subset of startups with particularly high growth potential - emerge as key drivers of these outcomes. Analyzing changes in the distribution of ex-ante firm heterogeneity over time reveals that gazelles are driven towards extinction, creating substantial aggregate losses. |
| Keywords: | Firm dynamics, Startups, Macroeconomics, Big data |
| JEL: | D22 E23 E24 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1737&r=sbm |
| By: | Heyen, Daniel |
| Abstract: | Technological innovation is a key strategy for tackling climate change and other environmental problems. The required R&D expenditures however are substantial and fall on self-interested countries. Thus, the prospects of successful innovation critically depend on innovation incentives. This paper focuses on a specific mechanism for strategic distortions in this R&D game. In this mechanism, the outlook of future conflicts surrounding technology deployment directly impacts on the willingness to undertake R&D. Apart from free-riding, a different deployment conflict with distortive effects on innovation can occur. Low deployment costs and heterogeneous preferences might give rise to 'free-driving' (Weitzman 2015): The country with the highest preference for technology deployment, the free driver, may dominate the deployment outcome to the detriment of others. The present paper develops a simple two stage model for analysing how technology deployment conflicts, free-riding and free-driving, shape R&D incentives of two asymmetric countries. The framework gives rise to rich findings, underpinning the narrative that future deployment conflicts extend to the R&D stage. While the outlook of free-riding unambiguously weakens innovation incentives, the findings for free-driving are more complex, including the possibility of excessive R&D as well as incentives for counter-R&D. |
| Keywords: | Environmental innovation; R&D game; innovation incentives; externalities; strategic conflicts; climate engineering; geoengineering; free driver externality |
| JEL: | D62 H41 O31 Q54 Q55 |
| Date: | 2016–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:68104&r=sbm |
| By: | MOTOHASHI Kazuyuki |
| Abstract: | This paper shows the results of a survey on big data use in manufacturing firms and innovation, conducted in November 2015. The survey investigated (1) firms'organization of big data use, (2) collection and business use of big data by type of data, and (3) use of datasets outside firms, with 539 respondents out of 4,000 firms. We divided the entire manufacturing process into three parts, i.e., development, mass production, and after services, and find that big data are widely used in all activities. In addition, firms with dedicated big data use function are more likely to conduct big data activity across various departments, as well as demonstrate a higher performance impact. However, we also find great disparity in terms of the usage style, particularly by firm size. For example, more than half of small and mid-sized enterprises (SMEs) responded that they have heard of Internet of Things (IoT), yet they are unaware of how to respond to such trend. Policy implications based on the results include (1) promoting diffusion of big data use, particularly for SMEs, (2) supporting human capital development for big data use, and (3) strategic standardization activities of IoT. |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:eti:polidp:17027&r=sbm |
| By: | Ali-Yrkkö, Jyrki; Kotiranta, Annu; Ylhäinen, Ilkka |
| Abstract: | This report is a synthesis of the previous literature analyzing the role of different types of companies on economic growth and employment, and an overlook on the impacts of different policy measures on companies. The role of large companies in the economy is still significant, although diminishing. However, the size of a company is nearly always determined at the company level, rather than at the group level, which brings some uncertainty to the interpretation of the results. Majority of the research on public corporate funding concerning Finland focuses on R&D subsidies; there are fewer studies covering other business subsidies and public venture capital investments. R&D subsidies have mostly positive impacts on employment, especially among young and small companies. Impacts on the productivity are, however, uncertain. Cooperation of public and private investors maximizes the impact of public venture capital investments. The other business subsidies may help firms to grow larger but do not improve their productivity. |
| Keywords: | Growth, company, employment, firm size, small, SME, value added, productivity |
| JEL: | L25 O14 O47 J21 J23 |
| Date: | 2017–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:rif:report:79&r=sbm |
| By: | Fitjar, Rune Dahl; Hubert, Franz; Rodríguez-Pose, Andrés |
| Abstract: | This paper analyses how the formation of collaboration networks affects firm-level innovation by applying the ‘Goldilocks principle’. The ‘Goldilocks principle’ of optimal distance in innovation networks postulates that the best firm-level innovation results are achieved when the partners involved in the network are located at the ‘right’ distance, i.e. ‘not too close and not too far’ from one another, across non-geographical proximity dimensions. This principle is tested on a survey of 542 Norwegian firms conducted in 2013, containing information about firm-level innovation activities and key innovation partners. The results of the ordinal logit regression analysis substantiate the Goldilocks principle, as the most innovative firms are found among those that collaborate with partners at medium levels of proximity for all non-geographical dimensions. The analysis also underscores the importance of the presence of a substitution–innovation mechanism, with geographical distance problems being compensated by proximity in other dimensions as a driver of innovation, while there is no support for a potential overlap–innovation mechanism. |
| Keywords: | proximities; innovation; collaboration; Goldilocks principle; Norway |
| JEL: | J50 |
| Date: | 2016–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:84304&r=sbm |
| By: | Freixanet, Joan; Churakova, Iya Yu. |
| Abstract: | The purpose of this study is to explore the relationship between innovation, internationalization, and organizational learning in small businesses. Emergent approaches go beyond the linear causality that has traditionally linked these concepts in previous research in favor of holistic, complex approaches that stress mutual or circular causality. Based on this approach, and after analyzing 285 interviews and 54 companies from various industries, the authors find that the three activities are reciprocally linked to each other, forming a complex system. The firmsÙ evolution over a period of nine years also shows that, faced with various change elements, they evolved and adopted four kinds of configurations, characterized by low and high incremental and radical innovation, local and global internationalization, and adaptive and generative learning. The findings are relevant to scholars, managers, and government policymakers. |
| Keywords: | internationalization, innovation, organizational learning, complex system, complexity theory, small business, SME, incremental innovation, radical innovation, multiplecase study, dynamic model, adaptive learning, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:sps:cpaper:8621&r=sbm |
| By: | Kazantcev, Anatoly K.; Logacheva, Anna V.; Veselova, Anna S. |
| Abstract: | Following the logic of resource-based view and dynamic capabilities, exploration and exploitation concepts the present study addresses the concept of firmÙ³ innovation resources and innovation capabilities. Empirical testing of measurement model conducted on the sample of 55 Russian industrial enterprises identified a set of six components of innovation capabilities: financial, technological, informational (exploration and exploitation), human and organizational. Information exploration component is found to be the most important for firmÙ³ innovation capabilities formation, while financial component is found to be critical to form firmÙ³ innovation resources. |
| Keywords: | innovation capabilities, innovation measurement, information exploration, resource-based view, dynamic capabilities, innovation resources, innovative firm, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:sps:cpaper:8671&r=sbm |
| By: | Hong, Sungki (Federal Reserve Bank of St. Louis) |
| Abstract: | This paper studies the importance of firm-level price markup dynamics for business cycle fluctuations. The first part of the paper uses state-of-the-art IO techniques to measure the behavior of markups over the business cycle at the firm level. I find that markups are countercyclical with an average elasticity of -0.9 with respect to real GDP, in line with the earlier industry-level evidence. Importantly, I find substantial heterogeneity in markup cyclicality across firms, with small firms having significantly more countercyclical markups than large firms. In the second part of the paper, I develop a general equilibrium model that matches these empirical findings and explore its implications for business cycle dynamics. In particular, I embed customer capital (due to deep habits as in Ravn, Schmitt-Grohe, and Uribe 2006) into a standard Hopenhayn (1992) model of firm dynamics with entry and exit. A key feature of the model is that a firm's decision about markups becomes dynamic {firms accumulate customer capital in the periods of fast growth by charging low markups, and choose to exploit it by charging high markups in the downturns. In particular, during recessions, the endogenous higher exit probability for smaller firms implies that they place lower weight on future profits, leading them to charge higher markups. This mechanism serves to endogenously increase the dispersion of firm sales and employment in recessions, a property that is consistent with the data. I further show that the resulting input misallocation amplifies both the volatility and persistence of the exogenous productivity shocks driving the business cycle. |
| Date: | 2017–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2017-033&r=sbm |
| By: | Danakol, Seçil Hülya; Estrin, Saul; Reynolds, Paul; Weitzel, Utz |
| Abstract: | There are conflicting predictions in the literature about the relationship between FDI and entrepreneurship. This paper explores how foreign direct investment (FDI) inflows, measured by lagged cross-border mergers and acquisitions (M&A), affect entrepreneurial entry in the host economy. We have constructed a micro panel of more than two thousand individuals in each of seventy countries, 2000-2009, linked to FDI by matching sectors. We find the relationship between FDI inflows and domestic entrepreneurship to be negative across all economies. This negative effect is much more pronounced in developed than developing economies and is also identified within industries, notably in manufacturing. Policies to encourage FDI via M&A need to consider how to counteract the prevailing adverse effect on domestic entrepreneurship. |
| Keywords: | foreign direct investment; entrepreneurship; new firm entry; spillovers |
| JEL: | J1 |
| Date: | 2017–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:68118&r=sbm |
| By: | Brand, Thomas; Isoré, Marlène; Tripier, Fabien |
| Abstract: | We develop a business cycle model with gross flows of firm creation and destruction.The credit market is characterized by two frictions. First,entrepreneurs undergo a costly search for intermediate funding to create a firm. Second, upon a match, a costlystate-verification contract is set up. When defaults occurs, banks monitor firms, seize their assets, and a fraction of financial relationships are severed. The model is estimated using Bayesian methods for the U.S. economy. Among other shocks, uncertainty in productivity turns out to be a major contributor to both macro-financial aggregates and firm dynamics. |
| JEL: | D8 E3 E4 E5 |
| Date: | 2017–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2017_034&r=sbm |
| By: | Iwasaki, Ichiro |
| Abstract: | Using a unique firm-level dataset obtained from a large-scale questionnaire survey conducted in late 2015, we examined the generality and heterogeneity of corporate governance systems between the eastern and western regions of Russia. The survey results strongly suggest that various characteristics of corporate governance systems observed in industrial firms and listed companies are, in fact, common and long-term trends that are seen across all Russian business sectors. At the same time, however, we also found pronounced regional heterogeneity between the eastern and western regions, with companies in the east being more reluctant than those in the west to introduce a governance system to monitor and supervise top management. Regression analysis shows that this finding is robust, even after a series of firm-level attributes are simultaneously controlled for. |
| Keywords: | corporate governance system, legal form of incorporation, board of directors, audit system, regional heterogeneity, Russia |
| JEL: | D22 G34 L22 M42 P25 P31 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:hit:rrcwps:72&r=sbm |
| By: | Herv\'e Lebret |
| Abstract: | Startups have become in less than 50 years a major component of innovation and economic growth. Silicon Valley has been the place where the startup phenomenon was the most obvious and Stanford University was a major component of that success. Companies such as Google, Yahoo, Sun Microsystems, Cisco, Hewlett Packard had very strong links with Stanford but even these vary famous success stories cannot fully describe the richness and diversity of the Stanford entrepreneurial activity. This report explores the dynamics of more than 5000 companies founded by Stanford University alumni and staff, through their value creation, their field of activities, their growth patterns and more. The report also explores some features of the founders of these companies such as their academic background or the number of years between their Stanford experience and their company creation. |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1711.00644&r=sbm |
| By: | Nelson Sobrinho |
| Abstract: | Using an overlapping-generations growth model featuring financial intermediation, I find that inefficiencies in technology to deal with private debt distress (bankruptcy technology), and obstacles to entrepreneurship (high costs of doing business) have significant negative effects on the income per capita and welfare of developing countries. These inefficiencies may also interact in perverse ways, futher amplifying the negagtive effects in the long run. The results provide strong rationale for structural reforms that simultaneously speed up the resolution of private sector insolvency, improve creditor protection, and eliminate obstacles to entrepreneurship. |
| Date: | 2017–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:17/188&r=sbm |
| By: | Albert Queralto; Patrick Donnelly Moran |
| Abstract: | To what extent can monetary policy impact business innovation and productivity growth? We use a New Keynesian model with endogenous total factor productivity (TFP) to quantify the TFP losses due to the constraints on monetary policy imposed by the zero lower bound (ZLB) and the TFP benefits of tightening monetary policy more slowly than currently anticipated. In the model, monetary policy influences firms incentives to develop and implement innovations. We use evidence on the dynamic effects of R&D and monetary shocks to estimate key parameters and assess model performance. The model suggests significant TFP losses due to the ZLB. |
| Keywords: | Endogenous Technology ; Business Cycles ; Monetary Policy |
| JEL: | E32 F41 F44 G15 |
| Date: | 2017–11–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1217&r=sbm |
| By: | McKenzie, David J.; Paffhausen, Anna Luisa |
| Abstract: | Small firms are an important source of income for the poor in developing countries, and the target of many interventions designed to help them grow. But there is no systematic information on the failure or death of such firms. We put together 16 panel surveys from 12 different developing countries to develop stylized facts from over 14,000 firms on how much firm death there is; on which types of these firms are most likely to die; and on why they die, paying careful attention to issues of measurement and attrition. We find small firms die at an average rate of 8.3 percent per year over the first five years of following them, so that half of all firms observed to be operating at a given point in time are dead within 6 years. Death rates are higher for small firms in richer countries, younger firms, retail firms, less productive and less profitable firms, and those whose owners are female and not middle-aged. We propose three theories of why small firms die: firm competition and firm shocks, occupational choice, and non-separability from the household. We find the cause of firm death to be heterogeneous, with different subgroups of firms more likely to die for reasons consistent with each of these theories. |
| Keywords: | firm death; microenterprise dynamics; survival |
| JEL: | D22 L26 O12 O17 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12401&r=sbm |
| By: | Uwe Jirjahn |
| Abstract: | From a theoretical viewpoint the relationship between foreign ownership and unionization is ambiguous. On the one hand, foreign owners have better opportunities to undermine workers' unionization. On the other hand, workers of foreign-owned firms have an increased demand for the protection provided by unions. Which of the two opposing influences dominates can vary according to moderating circumstances. This study shows that firm size and industry-level bargaining play a moderating role. The relationship between foreign ownership and unionization is negative in larger firms whereas it is positive in smaller firms. Coverage by industry-level collective bargaining makes a positive relationship both stronger and more likely. |
| Keywords: | Corporate Globalization, Foreign Direct Investment, Union Membership, Firm Size, Centralized Collective Bargaining |
| JEL: | F23 J51 J52 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:trr:wpaper:201709&r=sbm |
| By: | Greenwood, Jeremy (University of Pennsylvania); Han, Pengfei; Sanchez, Juan M. (Federal Reserve Bank of St. Louis) |
| Abstract: | The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, VCs provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., the average cash-on-cash multiple and statistics by funding round concerning the success rate, failure rate, investment rate, equity shares, and the value of an IPO. Raising capital gains taxation reduces growth and welfare. |
| Date: | 2017–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2017-035&r=sbm |
| By: | Feng, Xunan (Southwestern University of Finance and Economics); Johansson, Anders C. (Stockholm China Economic Research Institute) |
| Abstract: | Social media platforms are becoming increasingly important channels for information dissemination. This study examines how microblogging by top executives affects the information environment for listed firms in an emerging market. Using manually collected set from Sina Weibo, one of China’s most popular and largest social media platforms, we find that a board chair having a Weibo account is associated with the dissemination of more firm-specific information to the capital market. This result holds up to a battery of robustness tests. We also show that the relationship between board chairs’ Weibo usage and information dissemination is stronger for smaller firms, firms that went public more recently, and firms characterized by less analyst coverage. Findings in this study have important implications for the understanding of the role of social media in the dissemination process of corporate information. |
| Keywords: | Social Media; Information dissemination; Capital market; Investors; China |
| JEL: | G12 G14 M41 N20 |
| Date: | 2017–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hascer:2017-047&r=sbm |
| By: | Camuffo, Arnaldo; Cordova, Alessandro; Gambardella, Alfonso |
| Abstract: | A classical approach to collecting and elaborating information to make entrepreneurial decisions combines search heuristics such as trial and error, effectuation, and confirmatory search. This paper develops a framework for exploring the implications of a more scientific approach to entrepreneurial decision making. The panel sample of our randomized control trial includes 116 Italian startups and 16 data points over a period of about one year. Both the treatment and control groups receive 10 sessions of general training on how to obtain feedback from the market and gauge the feasibility of their idea. We teach the treated startups to develop frameworks for predicting the performance of their idea and to conduct rigorous tests of their hypotheses very much like scientists do in their research. We let the firms in the control group, instead, follow their intuitions about how to assess their idea, which has typically produced fairly standard search heuristics. We find that entrepreneurs who behave like scientists perform better, pivot to a greater extent to a different idea, and do not drop out less than the control group in the early stages of the startup. These results are consistent with the main prediction of our theory: a scientific approach improves precision – it reduces the odds of pursuing projects with false positive returns, and raises the odds of pursuing projects with false negative returns. |
| Keywords: | decision-making; entrepreneurship; randomized control trial; scientific method; startup |
| JEL: | L21 L26 M13 M21 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12421&r=sbm |