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.

The effect of new business formation on regional development over time: the case of Germany

We investigate the effects of new business formation on employment change in German regions. A special focus is on the lag-structure of this effect and on differences between regions. The different phases of the effects of new business formation on regional development are relatively pronounced in agglomerations as well as in regions with a high-level of labor productivity. In low-productivity regions, the overall employment effect of new business formation activity might be negative. The interregional differences indicate that regional factors play an important role.

New business formation and employment growth: some evidence for the Spanish manufacturing industry

This paper explores the effects of new business formation on employment growth in Spanish manufacturing industries. New firms are believed to make an important contribution to economic growth but the extent of this contribution is unclear. We consider time lags of new firm formation as explanatory variables of employment change and identify how long the effect of new firm entries on employment lasts. Our main results show that the effects of new business formation are positive in the short term, negative in the medium term and positive in the long term, thus confirming the existence of indirect supply-side effects found in similar studies for other countries.

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.

The effects of new firm formation on regional development over time: The case of Great Britain

This paper re-examines the link between new firm formation and subsequent employment growth. It investigates whether it is possible to have the wrong type of entrepreneurship—defined as new firm formation which leads to zero or even negative subsequent employment growth. It uses a very similar approach to that of Fritsch and Mueller (Regional Studies, 38(8), 961–976, 2004), confirming their findings that the employment impact of new firm formation is in three discrete phases. Then, using data for Great Britain, the paper shows the employment impact of new firm formation is significantly positive in the high-enterprise counties of Great Britain. However, for the low-enterprise counties, it shows that new firm formation has a negative effect on employment. Of the 15 low-enterprise regions, eight are Scottish (of nine Scottish regions in our data base) and three are North East Counties (of four). Our findings imply that having the “wrong type of entrepreneurship” is indeed possible.

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.

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.

Employment effects of business dynamics: Mice, Gazelles and Elephants

Much of the theoretical work on industry dynamics focuses on the role of ‘noisy’ selection and incomplete information on firm entry and survival. We extend this research by looking at the impact of firm heterogeneity on employment effects for 320 U.S. Metropolitan Statistical Areas (MSA). We find that only start-ups with greater than 20 and less than 500 employees have persistent employment effects over time and only in large diversified metropolitan regions. Therefore, both the type of entry (Gazelles) and the characteristics of the region are important for employment growth.

Entrepreneurship,regional development and job creation: the case of Portugal

This paper investigates whether a high level of new business formation in a region stimulates employment growth in that region. We look at the lag structure of these effects using a data set covering a fairly large time span (1982–2002). We find that indirect effects of new firm births on subsequent employment growth are stronger than direct effects. However, indirect effects only occur about 8 years after new firm formation. In particular, and unlike the findings from studies of other countries using a similar approach, positive indirect effects do not seem to tail off in the Portuguese case. This is likely due to a general pattern of results in which lags appear to be longer for Portugal. In view of these results, we suggest that the lag times and magnitudes the effects on new firm formation on subsequent employment growth are likely dependent on the types and qualities of start-ups.

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.

Legal reform and aggregate small and micro business bankruptcy rates: evidence from the 1997 Belgian bankruptcy code

Many Continental European countries recently reformed their bankruptcy legislations to stimulate reorganization and firm survival. We show that the Belgian 1997 bankruptcy code reform, which implemented several international best practice recommendations, significantly reduced aggregate small and micro business bankruptcy rates. However, using distributed lag models to control for the relationship between bankruptcy rates and macroeconomic variables such as real GDP growth, consumer confidence, inflation, etc., we find that the new code’s impact is not the same for all types of companies. Specifically, while the beneficial effect of the reform is largely similar between small firms (i.e. stock corporations) and micro firms (i.e. partnerships), it is only significant in certain industries (manufacturing and trade). Overall, our results indicate that especially the measures taken to limit domino bankruptcy effects are likely to have had a substantial impact. Our findings have several policy implications for the evaluation and modification of the bankruptcy system.

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.

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.

The roles of R&;D in new firm growth

Innovative start-ups are an important driver of economic growth. This article presents empirical evidence on the effects of research and development (R&D) on new product development, interfirm alliances and employment growth during the early life course of firms. We use a dataset that contains a sample of new firms that is representative of the whole population of start-ups. This dataset covers the first 6 years of the life course of firms. It is revealed that R&D plays several roles during the early life course of high-tech as well as high-growth firms. The effect of initial R&D on high-tech firm growth is through increasing levels of interfirm alliances in the first post-entry years. R&D efforts enable the exploitation of external knowledge. Initial R&D also stimulates new product development later on in the life course of high-tech firms, but this does not seem to affect firm growth. R&D does not affect the growth rate of new low-tech firms, which seem to be driven mainly by the growth ambitions of the founding entrepreneur. The results show that R&D matters for a limited but important set of new high-tech and high-growth firms, which are key in innovation and entrepreneurship policies.

Credit market failure intervention: Do government sponsored small business credit programs enrich poorer areas?

Using local market employment rates as our measure of economic performance, we find a positive and significant correlation between the average annual level of employment in a local market and the level of SBA guaranteed lending in that local market. Furthermore, the intensity of this correlation is much larger in low-income markets. Indeed, our results suggest that this correlation is positive and significant only in low-income markets. This result has important implications for public policy in general and SBA guaranteed lending in particular.

Technical Progress and Labour Demand in Swedish Manufacturing Firms

Controlling firms’ sales in the labour demand model, this paper investigates effects of trade and R&D via technical progress on labour demand in a dynamic framework, based on a panel of Swedish manufacturing firms for 1990s. The main results of this study indicate that employment elasticities with respect to different characteristics of firms (wages, total sales, exports and R&D efforts) and industrial import penetration could vary across respective skilled sectors. There is some indication to that import penetration from fourteen ‘old members’ of European Union could induce capital-saving technical progress and result in the rise in demand for labour for firms in medium-low skilled sector, whilst those from the ten ‘new members’ of European Union could induce x-efficiency and labour-saving technical progress for firms in low-skilled sector. Furthermore, the effects of R&D intensity on demand for labour are positive and significant for firms in medium-high-skilled and high-skilled sectors.

The business-to-business relationship dimensions in financial services markets

This paper discusses the nature of financial business relationships by drawing on the IMP Group’s theory of industrial relationships. It discusses, among other aspects, the interaction process between banks and their corporate clients, the longevity of relationships, the interdependence between both sides, and the atmosphere of financial services relationships. The conclusions are thought to be interesting and useful for the managers of firms and financial services when setting relationship marketing policies and for academic research on business-to-business services relationships. The field research was done in Portugal and the case method was used.

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.

Internationalisation of technology-oriented firms in Germany and the UK

Based on longitudinal data, this article examines empirically the long-term export behaviour of German and British technology-oriented firms founded between 1987 and 1996. Applying logit models, the results show that firms can overcome high entry costs by acquiring firm-specific assets. Similarly, firm-specific resources prevent high-tech companies from exiting the international market. The strategic role of investment in R&D is stressed in particular by the data.

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.