Source of finance, growth and firm size:evidence from China

Using a comprehensive firm-level dataset spanning the period 1998-2005, this paper provides a thorough investigation of the relationship between firm size, total factor productivity growth and financial structure in China, controlling for the endogeneity of the latter. Generally, it finds financing source matters for firms of different size, and the extent to which financing source matters for firm growth is greater for small firms than big firms. Self-raised finance appears to be most effective in promoting small firms to grow, and bank loan seems to be more supportive to big firms. The relationship between size, finance and growth also depends on ownership. In addition, there exist strong complementarities between formal and informal finance, as well as between indigenous and foreign finance.

New dimensions on the economics of the entrepreneurial process

This thesis examines the transition of employees into entrepreneurship, with particular emphasis on the role of workplace characteristics in influencing this movement. The first main chapter examines whether the determinants of becoming an intrapreneur differ from those that support transitions into independent entrepreneurship. The results show that intrapreneurs resemble employees rather than entrepreneurs, contrary to what the entrepreneurship theory would suggest. Yet it shows that those intrapreneurs that expect to acquire an ownership stake in the business, unlike the rest of intrapreneurs, possess traditional entrepreneurial traits. Chapter 3 investigates how workers’ degree of specialisation determines their decision to found a firm. It shows that entrepreneurs emerging from small firms, i.e. generalists, transfer knowledge from more diverse aspects of the business and create firms more related to the main activity of their last employer. Workers in large firms, however, benefit from higher returns to human capital that increase their opportunity costs to switch to entrepreneurship. Since becoming an entrepreneur would make part of their specialised skills unutilised, the minimum quality of the idea at which they would be willing to leave will be higher and, therefore, entrepreneurs emerging from large firms will be of highest quality. Chapter 4 analyses whether the reason to terminate an employment contract is associated with the fact that the majority of entrepreneurs appear to set up their business after having worked for a small firm. Moreover, it studies how this pattern varies as the labour market conditions worsen. The effect of layoffs turns out to be a key driver in the entry to entrepreneurship and it is found to exert a greater effect the smaller the firm workers are dismissed from. This has been reflected in an overall larger flow of employees from small firms moving into entrepreneurship over the recession.

Diversifying into technical clothing manufacture:a situated learning theory perspective

An organisation’s ability to internalise external knowledge and learn from various sources in undertaking new product development and/or entering a new market is crucial to its competitive performance. Nevertheless, little attention has been paid to how growth-oriented small firms identify and exploit entrepreneurial opportunities, i.e. take entrepreneurial action, related to such methods of development, in a mature, contracting industry. The latter is particularly relevant to recent discussion and debate in academic and policy-making circles concerning the salvage of the clothing manufacture industry in developed industrialised countries, by intensifying efforts relating to diversification into high value manufacturing sectors. This paper, based on an instrumental case-firm, demonstrates analytically how learning as entrepreneurial action relating to diversifying into /technical clothing – i.e. a high value manufacturing/innovatory sector - takes place, drawing on situated learning theory. It is argued that learning relating to such entrepreneurial action is dynamic in nature and is founded on specific organising principles that foster both inter- and intracommunal learning.

Dynamic learning as entrepreneurial action in the context of open innovation:an instrumental case from a communities-of-practice perspective

Recent scholarly discussion on open innovation put forward the notion that an organisation's ability to internalise external knowledge and learn from various sources in undertaking new product development is crucial to its competitive performance. Nevertheless, little attention has been paid to how growth-oriented small firms identify and exploit entrepreneurial opportunities (i.e. take entrepreneurial action) related to such development, in an open innovation context, from a social learning perspective. This chapter, based on an instrumental case-firm, demonstrates analytically how learning as entrepreneurial action takes place, drawing on situated learning theory. It is argued that such learning is dynamic in nature and is founded on specific organising principles that foster both inter- and intracommunal learning. © 2012, IGI Global.

When moving information online diminishes change:advisory services to SMEs

Improving the performance of private sector small and medium sized enterprises (SMEs) in a cost effective manner is a major concern for government. Governments have saved costs by moving information online rather than through more expensive face-to-face exchanges between advisers and clients. Building on previous work that distinguished between types of advice, this article evaluates whether these changes to delivery mechanisms affect the type of advice received. Using a multinomial logit model of 1334 cases of business advice to small firms collected in England, the study found that advice to improve capabilities was taken by smaller firms who were less likely to have limited liability or undertake business planning. SMEs sought word-of-mouth referrals before taking internal, capability-enhancing advice. This is also the case when that advice was part of a wider package of assistance involving both internal and external aspects. Only when firms took advice that used extant capabilities did they rely on the Internet. Therefore, when the Internet is privileged over face-to-face advice the changes made by each recipient of advice are likely to diminish causing less impact from advice within the economy. It implies that fewer firms will adopt the sorts of management practices that would improve their productivity. © 2014 Taylor & Francis.

Serial innovators in the UK:does size matter?

This article aims to shed light on the presence and importance of a significant number of small firms amongst serial innovators. Contrary to the common expectation in the innovative persistence literature, we posit that small serial innovators also benefit from operating within patterns of creative accumulation. However, it is in the quality of the technology and in the very nature of the knowledge accumulation process that the differences between small and large serial innovators can be found. Using a sample of 811 UK-based, highly innovative companies that patented over 66,000 inventions from 1990 to 2006, we find evidence in support of our theory. While large serial innovators experience higher innovation rates due to the scale of their innovation efforts, small serial innovators benefit more from processes of search depth characterized by the internal recombination of their previous knowledge. We find that important differences exist also in the very nature of the technologies being developed by small and large serial innovators.

The impact of university research on corporate patenting

This paper analyses the association between the number of patenting manufacturing firms and the quantity and quality of relevant university research across UK postcode areas. We show that different measures of research `power' and `excellence' positively affect the patenting of small firms within the same postcode area. Patenting by large firms, in contrast, is unaffected by research undertaken in nearby universities. This confirms the commonly held view that location matters more for small firms than large firms. We also investigate specific channels of technology transfer, finding that university-industry knowledge transfer occurs through both formal and informal channels. From a methodological point of view, we contribute to the existing literature by accounting for potential simultaneity between university research and patenting of local firms by adopting an instrumental variable approach. Moreover, we also allow for the effects of the presence of universities in neighbouring postcode areas to influence firms' patenting activity by incorporating spatial neighborhood effects.

Firm dynamics and job creation in the United Kingdom:1998–2013

This article is motivated by a very simple question – ‘what types of firms create the most jobs in the UK economy?’ One popular answer to this question has been High-Growth Firms (HGFs). These firms represent only a small minority – the ‘Vital 6%’ – of the UK business population yet, but have a disproportionate impact on job creation and innovation. We re-visit the discussion launched by the 2009 National Endowment for Science, Technology and the Arts (NESTA) reports, which identified the 6% figure and, using more recent data, confirm the headline conclusion for job creation: a small number of job-creating firms (mostly small firms) are responsible for a significant amount of net job creation in the United Kingdom. Adopting our alternative preferred analytical approach, which involves tracking the growth performance of cohorts of start-ups confirms this conclusion; however, we find an even smaller number of job-creating firms are responsible for a very significant proportion of job creation. We conclude by considering the question – ‘what are the implications for policy choices?’.

A critical reflection on Irish industrial policy:a strategic choice approach

Abstract: This paper offers a critical evaluation of recent Irish industrial policy (IP) experience. It argues that whilst Ireland managed to get some things “right” through its IP, substantial tensions arose through making foreign direct investment (FDI) attraction the centrepiece of policy, without at the same time adopting a more holistic approach in IP which inter alia also placed an emphasis on indigenous firms and entrepreneurship more generally. In particular, greater efforts should have been made much earlier in attempting to embed transnational corporation (TNC)-led activity better into the wider economy, in fostering domestic small firms and entrepreneurship, in promoting clusters, and more generally in evaluating IP more fully – notwithstanding the context which mitigated against such actions. As a result, Ireland as an economy remained vulnerable to strategic decisions made elsewhere by TNC decision makers, with IP effectively contributing to a situation that can be characterised as institutional and strategic failure. Overall, the paper suggests that wholesale emulation of the Irish IP approach is problematic.

What counts versus what can be counted:the complex interplay of market orientation and marketing performance measurement

Market orientation (MO) and marketing performance measurement (MPM) are two of the most widespread strategic marketing concepts among practitioners. However, some have questioned the benefits of extensive investments in MO and MPM. More importantly, little is known about which combinations of MO and MPM are optimal in ensuring high business performance. To address this research gap, the authors analyze a unique data set of 628 firms with a novel method of configurational analysis: fuzzy-set qualitative comparative analysis. In line with prior research, the authors find that MO is an important determinant of business performance. However, to reap its benefits, managers need to complement it with appropriate MPM, the level and focus of which vary across firms. For example, whereas large firms and market leaders generally benefit from comprehensive MPM, small firms may benefit from measuring marketing performance only selectively or by focusing on particular dimensions of marketing performance. The study also finds that many of the highest-performing firms do not follow any of the particular best practices identified.

Quantity-setting games with a dominant firm

We consider a possible game-theoretic foundation of Forchheimer's model of dominant-firm price leadership based on quantity-setting games with one large firm and many small firms. If the large firm is the exogenously given first mover, we obtain Forchheimer's model. We also investigate whether the large firm can emerge as a first mover of a timing game.

On Forchheimer's Model of Dominant Firm Price Leadership

We show that in a simple price-setting game with one large firm and many small firms the large firm does not accept the role of the price leader.

Explaining intermittent exporting:exit and conditional re-entry in export markets

Intermittent exporting is something of a puzzle. In theory, exporting represents a major commitment, and is often the starting point for further internationalisation. However, intermittent exporters exit and subsequently re-enter exporting, sometimes frequently. We develop a conceptual model to explain how firm characteristics and market conditions interact to affect the decision to exit and re-enter exporting, and model this process using an extensive dataset of French manufacturing firms from 1997 to 2007. As anticipated, smaller and less productive firms are more likely to exit exporting, and react more strongly to changes in both domestic and foreign markets than larger firms. Exit and re-entry are closely linked. Firms with a low exit probability also have a high likelihood of re-entry, and vice versa. However, the way in which firms react to market conditions at the time of exit matters greatly in determining the likelihood of re-entry: thus re-entry depends crucially on the strategic rationale for exit. Our analysis helps explain the opportunistic and intermittent exporting of (mainly) small firms, the demand conditions under which intermittent exporting is most likely to occur, and the firm attributes most likely to give rise to such behavior.

Internal Capital, External Knowledge, and Random Draws: Three Drivers of Organizational Structure

This dissertation explores the complex interactions between organizational structure and the environment. In Chapter 1, I investigate the effect of financial development on the formation of European corporate groups. Since cross-country regressions are hard to interpret in a causal sense, we exploit exogenous industry measures to investigate a specific channel through which financial development may affect group affiliation: internal capital markets. Using a comprehensive firm-level dataset on European corporate groups in 15 countries, we find that countries

with less developed financial markets have a higher percentage of group affiliates in more capital intensive industries. This relationship is more pronounced for young and small firms and for affiliates of large and diversified groups. Our findings are consistent with the view that internal capital markets may, under some conditions, be more efficient than prevailing external markets, and that this may drive group affiliation even in developed economies. In Chapter 2, I bridge current streams of innovation research to explore the interplay between R&D, external knowledge, and organizational structure–three elements of a firm’s innovation strategy which we argue should logically be studied together. Using within-firm patent assignment patterns,

we develop a novel measure of structure for a large sample of American firms. We find that centralized firms invest more in research and patent more per R&D dollar than decentralized firms. Both types access technology via mergers and acquisitions, but their acquisitions differ in terms of frequency, size, and i\ntegration. Consistent with our framework, their sources of value creation differ: while centralized firms derive more value from internal R&D, decentralized firms rely more on external knowledge. We discuss how these findings should stimulate more integrative work on theories of innovation. In Chapter 3, I use novel data on 1,265 newly-public firms to show that innovative firms exposed to environments with lower M&A activity just after their initial public offering (IPO) adapt by engaging in fewer technological acquisitions and

more internal research. However, this adaptive response becomes inertial shortly after IPO and persists well into maturity. This study advances our understanding of how the environment shapes heterogeneity and capabilities through its impact on firm structure. I discuss how my results can help bridge inertial versus adaptive perspectives in the study of organizations, by

documenting an instance when the two interact.

The quality of financial information in the extractive industries: a value relevance analysis

The extractive industry is characterized by high levels of risk and uncertainty. These attributes create challenges when applying traditional accounting concepts (such as the revenue recognition and matching concepts) to the preparation of financial statements in the industry. The International Accounting Standards Board (2010) states that the objective of general purpose financial statements is to provide useful financial information to assist the capital allocation decisions of existing and potential providers of capital. The usefulness of information is defined as being relevant and faithfully represented so as to best aid in the investment decisions of capital providers. Value relevance research utilizes adaptations of the Ohlson (1995) to assess the attribute of value relevance which is one part of the attributes resulting in useful information. This study firstly examines the value relevance of the financial information disclosed in the financial reports of extractive firms. The findings reveal that the value relevance of information disclosed in the financial reports depends on the circumstances of the firm including sector, size and profitability. Traditional accounting concepts such as the matching concept can be ineffective when applied to small firms who are primarily engaged in nonproduction activities that involve significant levels of uncertainty such as exploration activities or the development of sites. Standard setting bodies such as the International Accounting Standards Board and the Financial Accounting Standards Board have addressed the financial reporting challenges in the extractive industry by allowing a significant amount of accounting flexibility in industryspecific accounting standards, particularly in relation to the accounting treatment of exploration and evaluation expenditure. Therefore, secondly this study examines whether the choice of exploration accounting policy has an effect on the value relevance of information disclosed in the financial reports. The findings show that, in general, the Successful Efforts method produces value relevant information in the financial reports of profitable extractive firms. However, specifically in the oil & gas sector, the Full Cost method produces value relevant asset disclosures if the firm is lossmaking. This indicates that investors in production and non-production orientated firms have different information needs and these needs cannot be simultaneously fulfilled by a single accounting policy. In the mining sector, a preference by large profitable mining companies towards a more conservative policy than either the Full Cost or Successful Efforts methods does not result in more value relevant information being disclosed in the financial reports. This finding supports the fact that the qualitative characteristic of prudence is a form of bias which has a downward effect on asset values. The third aspect of this study is an examination of the effect of corporate governance on the value relevance of disclosures made in the financial reports of extractive firms. The findings show that the key factor influencing the value relevance of financial information is the ability of the directors to select accounting policies which reflect the economic substance of the particular circumstances facing the firms in an effective way. Corporate governance is found to have an effect on value relevance, particularly in the oil & gas sector. However, there is no significant difference between the exploration accounting policy choices made by directors of firms with good systems of corporate governance and those with weak systems of corporate governance.