Strategic Renewal and its Effect on Small Firm Performance

In this paper, we investigate the relationship between strategic renewal and the performance of smaller firms (less than 100 employees). We use a panel of micro data on about 1000 Dutch firms. The dataset contains information on aspects of strategic renewal, including process innovation and knowledge management. In our regression analyses we explain the variation in firm performance and we explicitly control for reversed causality, business cycle effects, sector effects, and firm age. We find that market research, an active external network for knowledge acquisition and strategic efforts into the improvement of internal processes are positively related to turnover growth. Furthermore, codification of knowledge, cooperation with partner firms and the provision of training to employees directly relates to employment growth. The results emphasize the importance of both knowledge absorption and knowledge creation to the success of innovative efforts in small firms. We find that the impact of the various measures varies with firm size. One further notable finding is that the ownership of patents negatively impacts small firm performance, particularly for the smallest firms in our sample.

Start-ups as drivers of market mobility: An analysis at the region-sector level for the Netherlands

We investigate the impact of start-up rates on a measure of competition among incumbent firms called market mobility. While recent literature suggests that competition among incumbent firms is caused by (lagged) start-up rates, this relation has not yet been tested using a direct measure of competition among these firms. In the present paper we estimate a regression model, at the region-sector level for the Netherlands, where the mobility rate is explained by (lagged) start-up rates and control variables. Using data for 40 regions and five sectors over the period 1993-2006 we find that the impact of start-ups on market mobility varies by sector. We find a strong positive relation between start-up rates and mobility rates for industry sectors (manufacturing and construction) but an insignificant relation for services sectors. These results suggest there are differences in the types of entry between sectors and in the roles start-ups play in different sectors. �

Innovation and firm performance

In this paper, the current state of knowledge regarding the relation between innovation and firm performance is reviewed. The relationship is empirically tested. There is a special focus on small and medium-sized firms. In the literature, there is a trend towards a system approach. Empirical studies using this approach distinguish four parts in the innovation-performance relationship. First of all, a company decides whether or not to innovate. Secondly, if a company decides to innovate, what is the level of input in innovation. The innovative input will be transformed into innovative output. And finally, the innovative output will result in a better firm performance. In the model several feedback loops are incorporated, for instance, from firm performance to innovative input.

Innovation and firm performance

Understanding the relation between innovation and performance in both large, medium, and small firms is of crucial importance for ongoing economic growth, but still hardly understood. The topic of understanding innovations and their relationship with firm performance has become more relevant since the EU stated, in March 2000 in Lisbon, the ambition to become the world's most competitive and innovative region by 2010. The underlying rationale is that encouraging firms to innovate will lead to a better economic performance; higher growth, more jobs and higher wages. Is this rationale empirically validated, and is there a preferential one-size-fits-all innovation trajectory for all European companies? The objective of this paper is to depict the current state of knowledge regarding the relation between innovation and performance in general, and for SMEs in particular.

Measuring business dynamics among incumbent firms in The Netherlands

Business dynamics in an industry is generally seen as an important indicator of the industry's level of competitiveness and economic performance. Two types of business dynamics may be distinguished: business dynamics reflecting competition by new-firm entries and business dynamics reflecting competition among incumbent firms. A growing literature pays attention to the important role of the former type of business dynamics (the starting up of new firms) for achieving economic growth. However, the latter type of business dynamics tends to be overlooked in this type of literature. In part this is due to the large requirements, both in terms of data and in terms of methodology, of measuring competition among incumbent firms. A sophisticated indicator for measuring the extent of business dynamics among incumbent firms in an industry is the mobility index. In the current paper we compute mobility indices for 16 industries -covering the whole private sector except for the primary sectors of economy- in the Netherlands over the period 2000-2006, and compare the values of the mobility indices across the sectors.

The relationship between knowledge management, innovation and firm performance: evidence from Dutch SMEs

This article investigates the relationship between knowledge management (KM), innovation and firm performance of smaller firms (less than 100 employees), based on a panel of more than 400 Dutch firms. Regression analyses explain the variations in sales turnover growth from various measures of KM strategies. We distinguish between KM input, throughput and output (or innovation) strategies. We find that KM input strategies related to knowledge acquisition are positively related to sales turnover growth. In contrast, we do not find a relation between KM throughput and KM output (innovation) measures and firm performance. The results emphasize the importance of both knowledge absorption and knowledge creation to the success of innovative efforts in small firms. This is an updated version of Scales-paper N200322.

Start-up intensity, competition and regional economic development

We investigate the impact of start-up rates on regional economic development. We argue that in line with Schumpeter's view this effect is mediated by a process of creative destruc-tion: Start-ups spark a process of creative destruction which in turn leads to regional eco-nomic development. Koster et al. (2010) investigate the former relationship. This paper fo-cuses on the latter. Interactions between new and incumbent firms play an important role in the process of eco-nomic growth, and more knowledge on these interactions is required. Our paper fits in a re-cent strand of empirical research at the regional level (see Fritsch, 2008, for a survey) which suggests that competition among incumbent firms is caused by (lagged) start-up rates. Contrary to earlier research the present paper employs a direct measure of the level of competition between incumbents, which is called mobility (Cantner and Krüger, 2004). The mobility rate measures to what extent the relative performance of firms (with respect to each other) in a market changes over time. Based on Joseph Schumpeter's theory of creative destruction we hypothesise that the mobility rate positively influences regional economic development. New firms challenge existing firms by introducing new products and services and market selection will cause the best firms to survive and grow and the least competitive firms to downsize or exit. In the present paper we test our hypothesis by estimating a regression model at the region-sector level for the Netherlands, where regional economic development (employment growth) is explained by the mobility measure, (lagged) startup rates and control variables. In order to mitigate endogeneity problems we adopt a 2SLS approach

Start-ups as drivers of market mobility:an analysis at the region-sector level for The Netherlands

Although recent literature suggests that competition among incumbent firms is caused by the entry of new firms, this relationship has not yet been tested directly. In this study a regression model is established in which a direct measure of competition among incumbent firms, the market mobility rate, is explained by start-up rates and control variables. The results show that the effect of start-ups on market mobility varies by sector. There is a strong positive relationship for industry sectors but an insignificant relationship for service sectors. These results suggest differences in the types of entry between sectors and in the roles start-ups play in different sectors

Innovation, strategic renewal and its effect on small firm performance

In this paper, we investigate the relationship between strategic renewal and the performance of smaller firms (less than 100 employees). We use a panel of micro data on about 1000 Dutch firms. The dataset contains information on aspects of strategic renewal, including process innovation and knowledge management. In our regression analyses we explain the variation in firm performance and we explicitly control for reversed causality, business cycle effects, sector effects, and firm age. We find that market research, an active external network for knowledge acquisition and strategic efforts into the improvement of internal processes are positively related to turnover growth. Furthermore, codification of knowledge, cooperation with partner firms and the provision of training to employees directly relates to employment growth. The results emphasize the importance of both knowledge absorption and knowledge creation to the success of innovative efforts in small firms. We find that the impact of the various measures varies with firm size. One further notable finding is that the ownership of patents negatively impacts small firm performance, particularly for the smallest firms in our sample