The death of firms: exploring the effects of environment and birth cohort on firm survival in Sweden

This paper investigates the death of firms and seizes a long-term perspective. It investigates the life spans of nearly 2,200 firms in seven birth cohorts of Swedish joint-stock companies, founded during seven separate years between 1899 and 1950. Research has traditionally emphasized individual- and micro-oriented factors in explaining post-entry performance, or has often focused on the influence of firm-specific structural factors (firm age and size). A less attended field recognizes environmental forces. This paper focuses on the interaction between the micro and macro levels, and combines structural and environmental factors. Employing a cohort approach, it relates firm survival to firm age and size, as well as to the effect of cohort affiliation and environmental change over time (period effects). During macroeconomic expansion, the risk of death decreases. Cohort effects are also evident. Firms founded during times of economic crisis exhibit lower survival rates. Consequently, cohort affiliation and environmental forces, i.e. period effects, can explain differences in death rates in different firm populations.

Financial development and the growth of cooperative firms

The purpose of this article is to empirically assess the relationship existing between local financial development and the growth of firms, with a special focus on cooperatives. Using Italian data, a multiplicative interaction model is specified, so as to allow the impact of local banking development to differ between cooperative and non-cooperative firms. The main finding is that although local banking development represents a determinant of firms’ growth, regardless of their legal structure, it plays a special role in boosting the growth of cooperatives. This result provides evidence in favor to the existence of an institutional complementarity relationship between the development of local banking institutions and cooperative firms.

Firm size and productivity in Spain: a stochastic frontier analysis

This paper analyses the performance of the small and medium-sized manufacturing firms during the period 1995–2001, focusing on the degree of technical inefficiency and its determinants. We use a micro panel data set to simultaneously estimate a stochastic frontier production function and the inefficiency determinants using an unbalanced panel of manufacturing firms. Our empirical results suggest that small and medium-sized firms tend to be less inefficient than the large firms are. Also, we centre our analysis in the effect on efficiency of some organisational factors related to the managerial ability to use and adjust capital and labour properly.

Founding family leadership and industry profitability

In this article, we argue that firms in high-margin industries can benefit from founding family influence. Specifically, in more profitable markets, the influence of the founding family provides an additional corporate governance-monitoring function. The sample consists of 294 firm-year observations from 98 publicly traded companies headquartered in Sweden, representing approximately half of all non-financial traded firms. Our support that the effect of family leadership in publicly held firms should be assessed in relation to the intensity of industry competition.

Banking Competition and SMEs Bank Financing. Evidence from the Italian Provinces

This work investigates whether local differences in banking competition impact on the amount of bank debt used by Italian small and medium sized manufacturing firms. Sample selection and Double Hurdle models are adopted as the process, which results in the choice of bank financing may differ from that determining its amount. Our main finding is that more competitive banking markets seem to be associated with relatively higher usage of bank debt by less transparent firms. On the other hand, a higher banking competition seems to have no effect on the probability of receiving bank loans.

The shipping strategies of internet retailers: Evidence from internet book retailing

Managing the shipment of goods to consumers is one of the central aspects of retail competition on the internet. In this article, we analyze internet retailers’ shipping strategies using data from the internet book retailing industry. We find that, controlling for a variety of observable firm characteristics, firms with lower product prices offer lower shipping fees and higher quality shipping in terms of average delivery time, compared to firms with higher product prices. These patterns cannot be readily reconciled with a large class of models of competition under perfect consumer information. Theories based on imperfect consumer information can explain the findings better.

The export intensity of venture capital backed companies

In this study we examine how venture capital (VC) firms influence the export behavior of their investee companies. VC firms perform an important governance function for investee companies by providing monitoring and value-added activities. Drawing on agency theory, the resource-based view of the firm and governance life-cycle theory we hypothesize that the relationship between VC governance resources and investee exporting behavior is moderated by investment stage. Employing a sample of 340 VC-backed firms, our results confirm this hypothesis. Monitoring resources are most effective in promoting export behavior for late-stage ventures and value-added resources in promoting export behavior in early-stage ventures.

Innovation, R&D cooperation and labor recruitment: evidence from Finland

This article investigates the role played by one type of firm interaction, namely R&D cooperation, and also the acquisition of labor, in the promotion of industrial innovations. We employ a unique innovation dataset from Finland which combines firm specific information about the innovation performance of the firms along with their individual characteristics, as well as firm specific information regarding the origins of their recent labor acquisitions. Analyzing this data allows us to identify the different roles which the knowledge spillovers and labor markets play in the innovation process. Our results suggest that small firms are generally more innovative than large firms; R&D cooperation is an essential feature of innovation, but the variety of cooperation is of little importance; and labor acquisition appears to be only of limited importance for innovation.

The impact of public guarantees on credit to SMEs

This article provides an in-depth evaluation of the impact of public credit guarantees to SMEs in increasing credit availability and reducing borrowing costs, without compromising their financial sustainability. Extensive econometric tests have been carried out by comparing the performance of the SMEs that benefited from such guarantees in Italy with a sample of comparable firms. The findings confirm the presence of a causal relationship between the public guarantee and the higher debt leverage of guaranteed firms, as well as their lower debt cost. Italy’s guarantee instrument has proved to be an effective instrument in these respects.

Succession and firm growth: results from a non-parametric matching approach

The article analyses the relationship between succession and firm performance. Applying a non-parametric matching approach on a panel of roughly 4,000 Austrian family firms we evaluate the impact of actual (past) succession as well as planned (future) successions on employment growth. Analysing succession plans, we do not find a significant difference in employment growth between firms that plan to transfer the firm in the next 10 years and those who do not. In contrast, past succession exerts a significant and positive employment growth effect, which becomes stronger over time.

Effect of credit guarantee policy on survival and performance of SMEs in Republic of Korea

This study evaluates the effect of credit guarantee on SMEs at the firm level. To estimate the effect of credit guarantee, we analyze relations between credit guarantee, the survival of guaranteed firms, and their productive performance. The result indicates that credit guarantee frequency enabled guaranteed firms to achieve good performances in general. On the contrary, the effect of guarantee amounts is ambiguous in that there is difference between the contemporary effect and the lagged effect. Therefore, we conclude that credit guarantee satisfied partially its goal to alleviate SMEs’ difficulty in acquiring finance and to stabilize employment.

Effectiveness of R&;D tax incentives in small and large enterprises in Québec

In this paper we evaluate the effectiveness of R&D tax incentives in Quebec, using manufacturing firm data from 1997 to 2003 originating from R&D surveys, annual surveys of manufactures and administrative data. The estimated price elasticity of R&D is –0.10 in the short run and –0.14 in the long run, with slightly higher elasticities for small firms than for large firms. We show that there is a deadweight loss associated with level-based R&D tax incentives that is particularly acute for large firms. For small firms it is not sizeable enough to suppress the R&D additionality, at least not for quite a number of years after the initial tax change. Incremental R&D tax credits do not suffer from this deadweight loss and are from that perspective preferable to level-based tax incentives.

The impact of new firm formation on regional development in the Netherlands

This paper examines the relationship between new firm formation and regional employment change in The Netherlands. Using a new regional data base for the period 1988–2002, we examine the time lags involved in the relationship. We also investigate whether the relationship differs by sector and by degree of urbanization. We find that the maximum effect of new businesses on regional development is reached after about 6 years. Our results also suggest that the overall employment impact of new-firm start-ups is positive but that the immediate employment effects may be small in The Netherlands. Furthermore, we find that the employment impact of new firms is strongest in manufacturing industries and that the employment impact of new firms is stronger in areas with a higher degree of urbanization.

Export stimulation of micro- and small locally owned firms from emerging environments: New evidence

This paper reports the findings from an empirical investigation into the export stimulation behaviour of micro- and small locally owned firms. It investigates whether the decision to initiate exporting in these smaller firms is a result of a systematic planned investigation into foreign market opportunities or is a mere response to fortuitous circumstances. This issue has received extensive attention in the literature on the internationalisation of firms from large developed environments, but very little is known about it in emerging environments especially small, open economies. This study will add to the literature by investigating export stimulation from a small, emerging Caribbean economy, Jamaica. Using a quantitative approach supported by insights from qualitative data gained during the fieldwork, the study analysed 20 stimuli that are demonstrated to impact export initiation decision. The key finding reveals that export initiation is a result of a planned systematic approach to international market rather than a mere response to fortuitous circumstances. The originality of this finding is in its extension of earlier work from developed economies to an emerging, resource-poor, open economy and its departure from analysing large and multinational firms to focus on micro- and small locally owned firms.

Associations versus registration as alternative strategies of small firms

Small firms, especially those in developing countries, face several serious problems: (1) costs of regulation, including corruption, (2) contract enforcement, and (3) idiosyncratic risks that leave their owners with high costs of finance. To deal with these problems, it is recognized that firms exercise choice over their degree of formality. Little attention, however, has been given to the alternative strategies that firms may choose in gaining formality and dealing with these problems. This article examines the choice between two different strategies: (1) registering with official entities, and (2) participating in private associations. We develop hypotheses concerning factors that would favor one such choice over the other and then test these hypotheses with data taken from a large sample survey of Mexican microenterprises. The results provide support, in some cases strong support, for most of the hypotheses.

Agglomeration, Relative Wage Costs and Foreign Direct Investment—Evidence from Swedish MNCs 1974–1998

This paper examines the relationship between agglomeration economies and relative wage costs in influencing location of multinational corporations. An inflow of firms to certain regions and industries is likely to increase demand for labor. If mobility of labor is low increased costs can be expected to deter additional inflows of firms, albeit agglomeration economies may compensate for higher wages. Despite its important policy implications this relationship has to our knowledge not been exposed to empirical testing. The empirical analysis finds that foreign direct investment has become increasingly sensitive to differences in wage cost across industrialized countries, but also that agglomeration economies related to knowledge externalities positively influences higher costs. The relative strength of these two forces impacts the spatial distribution of production.

Science parks: seedbeds of innovation? A duration analysis of firms’ patenting activity

This article investigates the role of Science Parks (SPs) as seedbeds of innovation. It aims to verify if and to what extent firms’ innovative performance is affected by relocating inside a SP. The analysis is structured in the form of a duration model that holds patenting as a repeated and event-dependent phenomenon and accounts for the persistence of innovative activities and the cumulativeness of knowledge. Estimates are based on a conditional risk-set model. The study relies on an original database regarding Finnish SPs: 252 firms that in the year 2002 were located in the Parks and the firms’ lifetime patenting activity, over a 33-year-period. We find support for the existence of spillovers and for the positive role of incubators over those firms joining SPs when very young.

Corporate diversification and CEO turnover in family businesses: self-entrenchment or risk reduction?

Our study investigates differences in CEO turnover between focused and diversified firms to determine whether diversification strategies are necessarily associated with governance efficiency in family businesses. We find that large family CEO firms are more likely to engage in corporate diversification than are small non-family CEO firms and their CEOs are seldom replaced. Large family CEO diversified firms also have lower turnover sensitivity relative to focused firms. The results imply that the CEOs of diversified firms have entrenched themselves, thereby increasing agency costs within family businesses. However, we fail to find diversification discounts in family businesses. It is interesting that CEOs tend to diversify their businesses in order to decrease firm risk. Founding families favor risk-reducing decisions in order to maintain family wealth and prestige; suggesting that family businesses are more interested in survival than growth. Although family businesses may benefit from risk reduction, a negative relationship between diversification level and CEO turnover is still evidence of poor corporate governance. Agency theory may not completely account for the adoption of diversification strategies in family businesses and corporate diversification may weaken the effectiveness of internal monitoring mechanisms.

Innovation and productivity in SMEs: empirical evidence for Italy

Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture. Therefore, in this paper, we develop a structural model of innovation that incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures. We then apply the model to data on Italian SMEs from the “Survey on Manufacturing Firms” conducted by Mediocredito-Capitalia covering the period 1995–2003. The model is estimated in steps, following the logic of firms’ decisions and outcomes. We find that international competition fosters R&D intensity, especially for high-tech firms. Firm size and R&D intensity, along with investment in equipment, enhances the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on firm’s productivity, especially process innovation. Among SMEs, larger and older firms seem to be less productive.

Back to basics: The Comanor–Wilson MES index revisited

The present article attempts to investigate the validity of the Comanor–Wilson Minimum Efficient Size (MES) measure. The basic assumption is that firms that have exhausted scale economies are in non-increasing returns to scale. The same firms are also assumed to have a size greater than MES estimated on sales (total turnover), employment or fixed assets. Data Envelopment Analysis (DEA) is used, on a sample of firms in three Greek manufacturing industries, to classify firms in operation according to increasing or non-increasing returns to scale. On the basis of the results of the DEA input oriented model, the MES measure correctly predicts over 85% of the cases. A probit model is applied to those cases that are not identically predicted by MES concerning returns to scale. Results indicate that technical efficiency, size and age are the factors that compel MES to yield the same prediction as the DEA approach.