Viewing 14 posts categorized under Small- and Medium-Sized Enterprises

Credit access and market access: the SME-Leader program

June 25, 2024

This paper shows that credit access is a key barrier to exporting. It focuses on the implementation of a unique credit guarantee scheme for SMEs (Small and Medium Enterprises) in Portugal between 2008 and 2014 — the SME-Leader program (programa PME-Líder). By exploiting firm eligibility for this scheme, the paper establishes a causal impact of access to finance on firm export dynamics. The paper finds that access to the credit guarantee and subsequent access to credit sharply increase the probability of exporting: qualifying firms were approximately 12% more likely to export than similar non-qualifying firms.

Supporting small firms through recessions and recoveries

March 30, 2023

Small firms often struggle in getting access to credit. This is especially true during recessions, when banks tighten credit supply. To overcome this, governments around the world have implemented different programs to help small firms. Despite the widespread implementation of these programs, evidence on their effectiveness is mixed and often challenged by difficulties in pinpointing the causal effects of the programs. For example, these programs are usually available to all small firms, who decide whether or not to enter the program.

Firm adaptation to the COVID-19 crisis

February 22, 2023

The COVID-19 crisis triggered a multitude of economic effects. At the microeconomic level, they varied across economic agents, notably firms, with some showing greater resilience than others, depending on intrinsic characteristics such as size and participation in international trade. Zooming in on firm size, the crisis was deeply felt by smaller firms. As for participation in international trade, stronger connections abroad increased firms’ exposure to global adverse shocks, while providing a broader scope for resilience-enhancing decisions about production and market management.

Knowledge inheritance and performance of spinouts

February 2, 2023

Evidence about the performance of entrepreneurial ventures shows that “spinouts” – new firms started by former employees of established companies – are usually more successful than other start-ups. This is particularly the case when the new venture is started in the same industrial sector where the founder’s former employer operates. The main reason for this superior performance is that spinout founders bring to the new venture specific organizational and technological knowledge acquired while working for their former employers.

Entry of IKEA and small and medium firms' response

January 3, 2023

Using novel and primary data on local SMEs belonging to the Portuguese furniture production cluster this study addresses the changing nature of competition and local firm’s strategic response to IKEA’s entry and its impact on their performance. The study focuses on clusters, firm strategy and multinational corporations (MNCs) by assessing (i) how local firms, predominantly SMEs, respond to the MNC entry, (ii) which factors explain their strategic response, and (iii) the impact of strategic responses on their performance.

Investment grants and firm productivity

December 31, 2022

This paper evaluates the effectiveness of awarding multiple investment grants to the same firm. Several factors have contributed to bringing public subsidies back to the limelight: the COVID-19 pandemic, trade wars between the US and China, the war in Ukraine, and the disruption in global supply chains. These factors contributed to a global wave of public subsidies in China, in the United States, and in the European Union. This research assesses the impact of investment grants by the European Regional Development Fund (ERDF) on the productivity of Portuguese firms in 2007-2018.

The struggle of small firms to retain high-skill workers

July 18, 2022

Small knowledge firms struggle to keep their best employees: highly-skilled workers are needed for growth and success, but small firms cannot hold onto them. Advanced knowledge increases the productivity of skilled workers. Because large firms are more innovative and technological, this knowledge-skill complementarity may be different for small and large firms. This paper applies discrete-time proportional hazards models with unobserved heterogeneity for several worker skill measures and human capital accumulation, interacted with firm-size categories and industry knowledge-intensity to ascertain how knowledge-skill complementarities are influenced by firm size.

Are online platforms killing the offline star?

June 22, 2022

Online platforms that facilitate the exchange of goods and services, including delivery services, accommodation, or retail products, have become widespread over the last decade. The COVID-19 shock has further contributed to the accelerated the digitalization of economies. This development has underpinned hopes for a productivity revival. However, significant differences across countries in factors such as access to communication networks and digital skills raise questions about the scope for platform use to underpin broad-based increases in productivity.

Entrepreneurship and industry clusters

May 12, 2022

The clustering of successful firms within small geographical areas is a feature of many industries that is usually attributed to the greater availability of economically valuable information and a specialized workforce. However, it is regularly observed that entrepreneurs locate their firms in their home region rather than being attracted by agglomerations. This paper reconciles these views by arguing that industry clusters can emerge because employees of incumbent firms often leave to create their own successful firms (usually called “spinoffs” or “spinouts”).

The real effects of FinTech lending on SMEs

January 10, 2022

Despite the attention that FinTech has received over the past years, the drivers and consequences of FinTech disruptive forces on financial markets remain open to debate. For example, an important open question relates to the impact that FinTech lending availability has on SMEs financing and investment policies. This paper addresses this question using a unique data set from a FinTech platform containing the universe of loan applications. The paper finds that FinTech serves larger, high profitability SMEs, who already have access to bank credit.

Helping the government promote its policies

July 1, 2021

Governments around the world devote substantial resources to support small and medium sized firms struggling with the consequences of economic and financial crises. A key question is whether the firms that stand to benefit most from government programs—for example, smaller firms or those with limited access to traditional financing—face information frictions that hamper access to aid. This paper tests whether informational frictions prevent firms from accessing government support measures. The paper considers the impact of providing detailed information on two COVID-19 assistance measures—a layoff support program and a guaranteed credit line scheme—on firm take-up using a sample of over 170,000 Portuguese firms (see figure).

Indebtedness in export-led SMEs

May 17, 2021

This study finds that Portuguese small and medium enterprises (SME) with a higher degree of export intensity rely more on internal funds. This finding arises from examining the determinants of corporate leverage on a sample of 7,676 Portuguese SMEs and by focusing on the impact of export intensity on firms’ capital structure. In addition, the analysis reveals that more profitable SMEs and those with more asset tangibility and business risk have lower debt ratios, but that SMEs with larger growth opportunities (measured either by sales growth or the ratio between CAPEX and total assets) are more levered.

Small- and medium-sized enterprises and the financial crisis

May 5, 2021

This article studies the growth determinants of small and medium-sized firms (SMEs) before and after the 2008 subprime crisis. SME’s growth correlates positively with firm-level cash flow and GDP, whereas it correlates negatively with firm-level debt, firm size and age, as well as with the economy-wide risk-free interest rate. After 2008, the financial crisis with the associated implementation of austerity measures in the Portuguese context, produced a negative effect on SME growth.

Debt financing and internationalization of Portuguese SMEs

June 4, 2018

This paper examines the relationship between the capital structure of Portuguese small and medium enterprises (SMEs) and their export performance. The Portuguese industrial firms are of great importance for the domestic economy and played a significant role in the country’s economic recovery amid the recessionary environment of the last decade. Being smaller and privately owned, and thus with less publicly available information, SMEs tend to face greater agency and asymmetric information problems that impact investment and performance generally, and export performance more specifically.