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on Small Business Management |
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Issue of 2025–02–10
thirteen papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Dolores Añon Higón (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)); Juan A. Máñez (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)); Amparo Sanchis (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)); Juan A. Sanchis (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)) |
| Abstract: | We examine how financial constraints influence the digitalization of Spanish manufacturing firms, taking into account the business cycle. Our study covers a representative sample of Spanish manufacturing firms from 2001 to 2017. We offer empirical insights into the moderating role of the business cycle on the impact of financial constraints on firms’ digitalization efforts, distinguishing between large firms and small and medium-sized enterprises (SMEs). We build a firm-year financial score aimed to mirror the extent of financial constraints, and a synthetic index of digitalization, both at the firm level. We estimate a panel data specification for firms’ digitalization intensity using a fractional response method. Our findings highlight that financial constraints pose a hurdle to digitalization, particularly for SMEs, and show that firms’ digitalization exhibits a counter-cyclical pattern, both for SMEs and large firms. |
| Keywords: | Digitalization, manufacturing firms, financial constraints, business cycle |
| JEL: | L60 L23 M20 O33 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:eec:wpaper:2502 |
| By: | Eric Iversen; Arvid Raknerud (Statistics Norway); Marit Klemetsen; Brita Bye (Statistics Norway) |
| Abstract: | What difference does government support of business R&D make to the rate of innovation? Addressing this important question has deep theoretical roots and broadening practical applications in OECD countries. The analysis of output additionality has been hampered by incomplete data combined with adaption of problematic methodologies. In this light, we contribute to the formative literature in three main ways: we analyze comprehensive panel data of Norwegian enterprises over a 20-year period; we include trademarks and industrial designs as well as patents to broaden measures of innovation output; and we apply machine learning methods to estimate treatment effect functions, thereby addressing the problem of a practically unlimited number of potential confounding factors. Our findings support and elaborate earlier work that fiscal stimulus tends to have greatest impact on previously non-innovative firms. The impact of support measures, alone or in combination, is on the extensive rather than intensive margin. For previously R&D-active firms, our results indicate that public support has low additionality and even risks crowding-out private financing of R&D. |
| Keywords: | Innovation; R&D support; Output additionality; Intellectual property rights; Patents; Trademarks; Public policy instruments; Lasso; Double selection; Poisson regression |
| JEL: | C33 C52 O31 O34 O38 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:ssb:dispap:1020 |
| By: | Gerth, Florian; Briggs, Chad M.; Diaz, John Francis T. |
| Abstract: | This paper investigates the dynamics of entering and exiting firms in determining the long-lasting drop in aggregate Total Factor Productivity (TFP) following the Great Recession in the UK. We decompose the growth rate of UK industry productivity over the 2006-2014 period into four components; the within, the between, the entry, and the exit effect employing the Diewert and Fox (2010) method using the FAME micro-level dataset. The main factor driving the aggregate TFP decline is the within effect, which is the productivity decline within surviving firms. However, the entry and exit effects also significantly contribute to the long-lasting drop in aggregate TFP. First, exiting firms tend to have higher than average TFP. Second, newly entering firms tend to have lower than average TFP. And third, newly entering firms fail to increase their TFP levels over time, thereby depressing the within effect. |
| Keywords: | Great Recession; Firm Dynamics; United Kingdom; Total Factor Productivity; Credit Rationing |
| JEL: | D24 E13 E32 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123325 |
| By: | VEUGELERS Reinhilde; AMARAL-GARCIA Sofia (European Commission - JRC) |
| Abstract: | The EU is challenged by a persistent leadership gap in the global health innovation landscape, with the US leading in corporate health innovation and venture capital (VC) funding. The EU health innovation landscape is more concentrated in older "incumbent leading firms, " while the US has a more dynamic landscape with higher R&D growth rates. Financing constraints are highly relevant in the health sector, particularly for startups and scale-ups with risky breakthrough ideas and technologies. The EU-US gap in dynamic innovative performance in health may be partly due to differences in access to risk finance, particularly venture capital. This paper analyzes trends in VC financing for health-related innovations in Europe compared to the US, using data from Dealroom. The results show that the weakness of the European health VC market continues to hold in the early and late stages, where less progress seems to have been made. Some of the main findings include the following: the EU is lagging behind the US in the number of health VC deals, with a larger gap in late-stage deals; European deal sizes are below the US, with a larger gap in late-stage deals, the EU has a lower occurrence of co-investment deals, which does not help reduce the gap in health VC deals. Overall, the European health VC market is particularly missing larger-sized investors (investment funds) with late-stage deals. To address this gap, policy attention is needed to identify and reduce barriers for European health VC investors to grow to a critical scale and engage in a higher number and larger-sized deals. All in all, Europe should further develop and strengthen its strongest asset, i.e., its Open Single Market, reducing the fragmentation in flows of venture capital, reaching a truly single European Venture Capital market. For an EU open strategic autonomy industrial policy for health, an open single market for health remains the critical instrument to further develop and monitor. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:wpaper:202501 |
| By: | Wong, Sara; Petreski, Marjan |
| Abstract: | This paper investigates the effects of competition laws and regulations on manufacturing firms productivity in Latin American countries (LACs), addressing a gap in existing research. Leveraging firm-level panel data from the World Bank Enterprise Surveys across 14 LAC economies and competition law indicators from the Comparative Competition Law initiative, the study employs total factor productivity (TFP) measures to analyze the effects of competition laws on manufacturing productivity through key mediators: firm size, distance to the frontier, and broader institutional arrangements. Utilizing various empirical methodologies that address potential biases, the findings reveal a nuanced relationship between competition law stringency, enforcement practices, and productivity outcomes across different industries and countries. Results reveal heterogeneous effects of competition law and enforcement on productivity, with certain aspects showing a positive relationship with productivity, particularly when controlling for firm size, while stronger enforcement measures weaken the positive association between competition law and productivity, potentially due to increased compliance costs and legal uncertainty. The study suggests a need for policymakers to strike a balance between regulatory stringency and enforcement in competition to avoid stifling innovation and hindering productivity growth, particularly in industries nearing technological frontiers. Accounting for industry-specific factors are essential for fostering fair competition and market efficiency without unduly burdening businesses. |
| Keywords: | Competition law and regulations;Firm productivity;Enforcement |
| JEL: | K21 L11 O54 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13963 |
| By: | Kim, Minho |
| Abstract: | South Korea's 'national champion policy, ' designed to foster global enterprises, has yet to deliver measurable outcomes in sales and productivity, suggesting inefficiencies in resource allocation linked to 'the risk of picking winners.' Accordingly, the incentive structure of growth policies for Small- and Medium-Sized Enterprises (SMEs) needs an operational shift, moving away from conventional subsidy assistance toward a bespoke model that integrates private investment, consulting, and networks to address their business challenges collaboratively. Furthermore, in order to enhance policy accountability and effectiveness, it is crucial to consolidate support details and performance outcomes while ensuring transparency through public disclosure. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kdifoc:309587 |
| By: | David Gonzalez-Jimenez (Erasmus University Rotterdam); Francesco Capozza (WZB - Wissenschaftszentrum Berlin für Sozialforschung); Thomas Dirkmaat; Evelien van de Veer; Amber van Druten; Aurélien Baillon (EM - EMLyon Business School) |
| Abstract: | Prior experiences are crucial in shaping risk prevention behavior. Previous studies have shown that experiencing a simulated phishing attack (a "phishing drill") reduces the likelihood of clicking on unsafe links and disclosing one's password. In a large field experiment involving 670 small and medium-sized enterprises (SMEs) and their 33, 000 employees, we examined the impact of experience on individuals' ability to detect cyber-security threats, and whether this effect persisted over several months. We collected data at both the company and individual levels, including risk preference, time preference, and trust. Our findings indicate only a non-systematic, short-term effect of previous phishing emails on clicking behavior. A cluster of individuals with greater patience, trust, and risk seeking was more likely to click on phishing links in the first place but then also more likely to benefit from phishing drills. |
| Keywords: | Field experiment, Replication, Phishing drill, Prevention, Patience, Risk attitude |
| Date: | 2025–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04875787 |
| By: | Silvia Appelt; Matej Bajgar; Chiara Criscuolo; Fernando Galindo-Rueda |
| Abstract: | Recent firm-level studies find R&D tax incentives to be much more effective at stimulating firms' R&D investment than what aggregate analyses indicate. Based on a distributed analysis of official R&D survey and administrative tax relief micro-data for 19 OECD countries, we show that two factors can reconcile these contrasting results. Firstly, a limited uptake of R&D tax incentives in most countries makes aggregate studies underestimate the effectiveness of R&D tax incentives. Secondly, R&D tax incentives are (much) less effective for large and R&D-intensive firms, which account for a small share of R&D-performing firms but most aggregate R&D tax relief, making firm-level studies overstate the aggregate effectiveness of R&D tax incentives. |
| Keywords: | mental health, employment, earnings, policy evaluation, psychological therapies |
| Date: | 2025–01–29 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2071 |
| By: | Dirk Czarnitzki; Robin Lepers; Maikel Pellens |
| Abstract: | The circular economy represents a systematic shift in production and consumption, aimed at extending the life cycle of products and materials while minimizing resource use and waste. Achieving the goals of the circular economy presents firms with the challenge of innovating new products, technologies, and business models, however. This paper explores the role of artificial intelligence as an enabler of circular economy innovations. Through an empirical analysis of the German Community Innovation Survey, we show that firms investing in artificial intelligence are more likely to introduce circular economy innovations than those that do not. Additionally, the results indicate that the use of artificial intelligence enhances firms’ abilities to lower production externalities (for instance, reducing pollution) through these innovations. The findings of this paper underscore artificial intelligence’s potential to accelerate the transition to the circular economy. |
| Keywords: | Circular economy, Innovation, Artificial intelligence |
| Date: | 2025–01–23 |
| URL: | https://d.repec.org/n?u=RePEc:ete:msiper:758339 |
| By: | Meng, Zhiyi |
| Abstract: | AI is emerging as a key disruptor of local economies. The impact of AI technologies including machine learning, automation and precision farming in reshaping local business landscape, unlocking innovation, enhancing productivity and creating net new jobs, is yet to be fully appreciated. This paper provides an analysis of the role of AI in revitalising local economies: how AI technologies are enabling small and medium sized enterprises (SME) to improve productivity, how rural economies can overcome labour shortages and supply chain issues and how to realise AIs transformative potential in the near term. It goes on to discuss the impact of AI on labour markets, the creation of net new jobs in data and drone related occupations and need for reskilling and upskilling. It also discusses the role of local governments in encouraging AI adoption through public-private partnerships, tax incentives and infrastructure improvements. The paper concludes with a discussion about how AI shapes the future of work, the need to address the digital divide and the role of AI in fostering sustainable economic development at the local level. This paper analyses the impact of AI on productivity, consumer engagement, supply chain optimisation and workforce transformation. |
| Keywords: | artificial intelligence; local economies; business innovation; workforce transformation |
| JEL: | J1 R14 J01 |
| Date: | 2024–11–15 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127002 |
| By: | Greenland , William (University of Sydney); Toth , Russell (University of Sydney) |
| Abstract: | This paper examines the resilience of micro, small, and medium-sized enterprises (MSMEs) in Fiji against the economic impacts of major shocks including the coronavirus disease (COVID-19) pandemic and climate-related hazards, using a survey of 2, 400 MSMEs from early 2023. The analysis focuses on the effectiveness of government concessional loans in aiding pandemic recovery and evaluates MSMEs’ strategies for climate resilience. Findings indicate that while government support has been pivotal in mitigating pandemic-related economic downturns, its effectiveness is varied, highlighting the necessity of accessible and targeted financial support. Furthermore, experiences with natural hazards significantly influence MSMEs’ future resilience strategies, with a notable preference for self-funding recovery efforts among MSMEs that had experienced a significant climate-related disaster. The study underscores the importance of integrating immediate financial support with long-term climate adaptation strategies for MSMEs, offering insights for policy formulation aimed at enhancing economic resilience in emerging markets in the Pacific and beyond. |
| Keywords: | micro; small; and medium-sized enterprises; COVID-19 pandemic; concessional loans; climate resilience; Fiji |
| JEL: | L53 O56 Q54 |
| Date: | 2025–01–29 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:0765 |
| By: | Milovanska-Farrington, Stefani (The University of Tampa); Mateer, Dirk (University of Texas at Austin) |
| Abstract: | This paper builds upon the work of McCaffrey (2016) who explores how economics can enhance entrepreneurship education. We extended the work of McCaffrey in two distinct ways. First, we emphasize the economic understanding every private enterprise needs to be successful. Second, we developed teaching guides which feature three successful Gen Z entrepreneurs – Max Hayden, Mikaila Ulmer, and Alexandr Wang. Their stories embody business acumen and the entrepreneurial ability necessary to succeed in a rapidly changing world. The lessons build upon the work of Milovanska-Farrington et al. (2023) and DeWind et al. (2023) who illustrate foundation-level economic concepts in an engaging way that resonates with Gen Z students. |
| Keywords: | entrepreneurs, principles of economics, private enterprise, Gen Z, Max Hayden, Mikaila Ulmer, Alexandr Wang |
| JEL: | A20 A21 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17638 |
| By: | Paul Gertler; Sean Higgins; Ulrike Malmendier; Waldo Ojeda |
| Abstract: | Firms frequently fail to adopt profitable business opportunities even when they do not face informational or liquidity constraints. We explore three behavioral frictions that explain inertia among individuals—present bias, limited memory, and distrust—in a managerial setting. In partnership with a FinTech payments company in Mexico, we randomly offer 33, 978 firms the opportunity to pay a lower merchant fee. We vary whether the offer has a deadline, reminder, pre-announced reminder, and the size of the fee reduction. Reminders increase take-up by 15%, suggesting a role of memory. Announced reminders increase take-up by an additional 7%. Survey data reveal the likely mechanism: When the FinTech company follows through with the pre-announced reminder, firms' trust in the offer increases. The deadline does not affect larger firms, implying limited or no present bias, but does increase take-up by 8% for smaller firms. Overall, behavioral frictions contribute significantly to explaining profit-reducing firm behavior. |
| JEL: | D9 G4 M1 O14 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33387 |