Firms In Rural Areas Research Articles

Firms’ eco-innovation and Industry 4.0 technologies in urban and rural areas

ABSTRACT We investigate the extent to which firms’ propensity to eco-innovate, adopt Industry 4.0 (I4.0) technologies and leverage them to eco-innovate varies with their location. We maintain that urban firms should be more prone to eco-innovate and adopt I4.0 technologies than rural ones, and more capable to make the latter functional to the former. Using a large sample of European firms, we test and confirm these hypotheses only partially. Firms in rural areas display a higher capacity to eco-innovate notwithstanding their lower digital propensity. However, an urban location reinforces the eco-innovative impact of digital technologies, irrespectively from its size.

‘Getting along’ or ‘getting ahead’? How urban-to-rural newcomers employed at Danfoss in south Denmark build bridging, bonding and linking social capital

The ability to attract skilful workers to a rural area is of fundamental importance for achieving local economic growth (e.g., Aure et al., 2018). However, firms in rural areas often experience difficulties with both recruiting workers and integrating them, to ensure that they will stay long-term (e.g., Gieling et al., 2017). The specific role of a major firm in a rural area for attracting and integrating newcomers is however understudied. This is unfortunate, as such firms appear crucial for local demographic and economic growth. We contribute to fill this gap by exploring how newcomers employed at the Northern Als headquarter of Danfoss – a company with 40,000 employees worldwide that produces thermostatic and refrigeration units – are integrated in various local, family/friendship and firm-related social networks. Based on 10 semi-structured interviews, observations and 35 informal conversations, we investigate how these Danfoss newcomers build bridging, bonding and linking types of social capital (Putnam, 2000). We found two newcomer ideal types. The Bridging Newcomer was most successfully integrated in local communities. The Bonding Newcomer either participated in firm-related networks or sought company with family and close friends outside Northern Als.

Analysis of the gap in enterprise access to renewable energy between rural and urban areas in Cameroon

Permanent access to energy is an essential pillar of economic development. However, there is a growing evidence that contemporary energy systems are not able to provide energy to the entire population on a sustainable basis and at affordable prices. In the face of these challenges, renewable energy can play an important role, especially in rural areas where access to centralized electricity grids is difficult. This paper aims to examine the access gaps of enterprises to renewable energy between rural and urban areas in Cameroon. The analysis is based on a sample of 209,482 enterprises, taken from the Second General Census of Enterprises in Cameroon (RGE-2) carried out by the National Institute of Statistics (NIS). The econometric estimations, obtained using the Blinder-Oaxaca decomposition, reveal that access rate to renewable energy for firms in rural areas is lower than that of firms located in urban areas. An increase in the level of education of the promoter of an enterprise, obtaining credit from banks, microfinance and savings, and the formalization of enterprises in rural areas can also contribute to reducing the gap in rural areas in terms of accessing to renewable energy. The discrimination suffered by rural enterprises related to the gender of entrepreneurs, the sector of activity, the business environment and professional experience tend to increase this gap. To reduce this gap, there is a need to promote access to finance for rural enterprises and their migration from the informal to the formal sector.

BANK CREDIT AND TRADE CREDIT AFTER THE FINANCIAL CRISIS: EVIDENCE FROM RURAL GALICIA

Access to external finance is a key challenge for the creation, survival and growth of SMEs. This article delves into the “weak funding” handicap of rural small firms (SEs): the access to bank financing and the substitutive role of trade credit for entrepreneurs in rural areas when they faced bank credit constraints. Considering SEs in Galicia (Spain), a paradigmatic case in Europe of rural areas in demographic decline with a strong impact of the Spanish sovereign and banking crisis of 2008–2012. There’s evidence of firms in rural areas facing a differential negative flow of bank credit during the financial crisis, especially in the manufacturing and construction sectors, that dissipated afterwards. Then, using a panel data approach that considers the determinants of trade credit, the complementary and substitutive hypotheses are tested to estimate the impact of bank credit restrictions over trade credit.

The impact of entrepreneurs' environmental analysis strategy on organizational performance

Abstract The purpose of this paper is to assess the impact of entrepreneurial innovation strategies in environmental analysis and its impact on the performance of rural SMEs in developing countries, particularly in Kenya. The paper argues that improvements in rural SMEs through sustainable environmental analysis strategies can boost the performance of small firms in rural areas. A sample of 272 rural enterprises in Kenya was used as a framework. Partial least squares regression and correlation models are used for content analysis. The results show a nonsignificant influence of environmental instability on the performance of small firms in rural areas. However, by incorporating entrepreneurial invention strategies into environmental scanning, the results indicate a positive impact on the performance of rural SMEs. Entrepreneurs need to be aware of the importance of environmental innovation strategies to cope with disturbances and dynamism of the environment underpinning the performance of rural SMEs. The study suggests that policymakers need to create a conducive business environment through entrepreneurship training and business incubation programs for rural SMEs. The results provide information on the environmental analysis strategy and innovation management theory in defining the future of small business reengineering in rural areas.

Determinants of investing in innovative activities by agri-food and KIBS firms in rural areas: An exploratory analysis

ABSTRACT Using a database on innovation activities by Spanish firms, we perform an exploratory analysis on a frequently overlooked area of research: innovation investment decisions by small firms in rural areas where socioeconomic indicators are weak. We focus on two quite different sectors of interest there, agri-food and t-KIBS firms, to explore how the regional context influences the capacity and the nature of innovation. Following the TOE approach as a conceptual framework, we perform a multivariate statistical analysis based on MCA and PCA combined, to identify the most relevant factors among a list of 73 indicators in four broad domains, including innovation decisions as well as organizational, technological, and environmental determinants. The exploratory results obtained suggest an open field of research. Thus, we observe a distinctive behavior of marketing innovation by agri-food firms that is related to former ICT experience, whereas services innovation by t-KIBS would be related to the objective of entering new market niches. Some results confirm previous results for SMEs outside rural areas, such as financial constraints, lack of qualified personnel, and strong competition being relevant barriers to invest in R&D by t-KIBS firms. Contrariwise, we dispute the assertion that agri-food firms are primarily oriented toward product and process innovation: what comes together is product and organizational innovation.

Support and development of small and new firms in rural areas: a case study of three regional initiatives

This paper is based on qualitative analysis and addresses the important topic of small business entrepreneurialism in rural areas and its special conditions and needs. Our aim is to present examples of and suggestions for how to encourage firm start-ups and the continuation possibly also the development and growth of existing firms. The paper is based on three cases that illustrate (1) challenges in the support system in rural areas, (2) various forms of support that could be used in rural areas, and (3) expectations that are eligible to put upon support activities designed for rural areas. The main findings are that (1) that successful support of rural businesses requires a critical mass of regional entrepreneurs, firms, and support actors, (2) diversity is critical, and the various actors must be coordinated to carry out the desired measures effectively, (3) expectations for growth and orientation of the firms must be realistic because broad support is more important than targeted support, and (4) we were able to show that a cross-boundary collaborative work culture that avoids both thought silos and business silos and places no value on prestige should pervade all areas of business support.

Access to Collateral and the Democratization of Credit: France's Reform of the Napoleonic Security Code

ABSTRACTFrance's Ordonnance 2006‐346 repudiated the notion of possessory ownership in the Napoleonic Code, easing the pledge of physical assets in a country where credit was highly concentrated. A differences‐test strategy shows that firms operating newly pledgeable assets significantly increased their borrowing following the reform. Small, young, and financially constrained businesses benefitted the most, observing improved credit access and real‐side outcomes. Start‐ups emerged with higher “at‐inception” leverage, located farther from large cities, with more assets‐in‐place than before. Their exit and bankruptcy rates declined. Spatial analyses show that the reform reached firms in rural areas, reducing credit access inequality across France's countryside.

The entrepreneur–opportunity nexus: discovering the forces that promote product innovations in rural micro-tourism firms

ABSTRACTThe aim of this study is to investigate what sets in motion the process that results in product innovations in rural micro-tourism firms. The point of departure is to place entrepreneurship as a process that precedes innovations. This approach enables the application of the opportunity-based perspective, on the study of 40 new tourism products. Data were collected through in-depth interviews with owner-managers of micro-tourism firms in rural Sweden. The focus of the analysis is on the formation of the entrepreneur–opportunity nexus. The findings suggest that in forming the nexus, three types of forces are at play: internal, supply chain dynamics and reaction to changes. The notion of triggering forces adds a new dimension to the study of entrepreneurial opportunities. The theoretical contribution of this paper to tourism research is twofold. First, it points at the generating moment as a step towards theorising innovations, and second, the findings contribute to the growing knowledge base about entrepreneurial behaviour in micro-tourism firms in rural areas. Finally, in a practical manner, the findings of this study should encourage tourism entrepreneurs to invest in exploring the value chain, regard tourists as sources of knowledge and be attentive to changes in circumstances.

Broadband Internet and New Firm Location Decisions in Rural Areas

Improving rural broadband access has been touted as a rural development strategy, but there is limited evidence that broadband service affects rural economic growth. We measure the effect of broadband deployment on location decisions of new rural firms. Location‐specific fixed effects are controlled by a counterfactual baseline that measures how local broadband service in the early 2000s affected local new firm entry in the early 1990s before broadband was available anywhere. The change in location choice probability of new firms from the counterfactual baseline to the actual response ten years later is the difference‐in‐differences estimate of the effect of broadband deployment on locations of new firms. We find that broadband availability has a positive and significant effect on location decisions of new firms in rural areas, which is confirmed by a robustness test using ZIP Code dummy variables. The broadband effect is largest in more populated rural areas and those adjacent to a metropolitan area, suggesting that this effect increases with agglomeration economies.

A long-term mortality analysis of subsidized firms in rural areas: an empirical study in the Portuguese Alentejo region

Studies have demonstrated that public policies to support private firms’ investment have the ability to promote entrepreneurship, but the sustainability of subsidized firms has not often been analysed. This paper aims to examine this dimension specifically through evaluating the mortality of subsidized firms in the long-term. The analysis focuses on a case study of the LEADER+ Programme in the Alentejo region of Portugal. With this purpose, the paper examines the activity status (active or not active) of 154 private, rural, for-profit firms in Alentejo that had received a subsidy to support investment between 2002 and 2008 under the LEADER+ Programme. The methodology is based on binary choice models in order to study the probability of these firms still being active. The explanatory variables used are the following: (1) the characteristics of entrepreneurs and managers’ strategic decisions, (2) firm profile and characteristics, (3) regional economic environment. Data assessment showed that the cumulative mortality rate of firms on 31st December 2013 is over 20 %. Interpretation of the regression model revealed that the probability of firms’ survival increases with higher investment, firm age and regional business concentration, whereas the number of applications made by firms has a negative impact on their survival. So it seems that for subsidized firms the amount of investment is as important as its frequency.

Experience Innovation for Small Food and Tourism Firms

This article focuses on experience innovation as a means to create value for small food and tourism firms in rural areas. Innovation is viewed as an essential part of experience staging. However, research on innovation in the experience economy literature constitutes an immature field of study that requires further investigation. The article seeks to address this gap by investigating how small food and tourism firms can enhance experience innovation. The research approach is a qualitative experimental design. Methods for collecting empirical material consist of observations, semi-structured interviews, and documents. The main contribution is a three-phased model that can inspire small food and tourism firms to generate, select, and develop new ideas for experience innovation that are aligned with their capabilities, experience DNA, and available resources.

Rural Consumer Behavior and Strategic Marketing Innovations: An Exploratory Study in Eastern India

Rural India, of late, has received much desired attention from the marketers given the fact that the urban markets have either become saturated or sales have leveled off. Furthermore, given the fact that more than 60% of the Indian population lives in rural areas, it became worthwhile to investigate rural consumer behavior. The study also explores whether innovative marketing activities of firms targeted towards the rural consumers are meeting the criterion of affordability, accessibility, availability, and awareness. The present study addresses these research questions with the help of an exploratory study conducted across four villages in the state of West Bengal, India. The major findings from the study indicate that: 1) media used for advertisements or awareness differed across occupational categories, 2) grocery purchase is mostly on credit in contradiction to what is generally believed, 3) consumers were, at most, willing to travel 12 km to purchase grocery items, 4) consumption level may not be low, but low disposable income leads to purchases in small amounts, and 5) innovative marketing activities undertaken by firms in rural areas, though they meet the accessibility and awareness factors, are affected by problems related to affordability and availability, which act as major hindrances for the rural consumers.

Adoption of solar home lighting systems in India: What might we learn from Karnataka?

Karnataka has been among the most successful markets for solar lighting systems (SLS) among Indian states. In order to understand the dynamics of systems adoption and operation, that have fostered market based adoption of solar lighting, we interviewed rural households from six districts that had purchased solar lighting systems using loans at market rates, the rural banks that provided loans and the solar firms that marketed the technology. We found that a large proportion of households in our sample were connected to the grid but chose to install solar lighting because they considered the power supply from the grid to be unreliable. Households in our sample reported savings on electricity costs and reduced kerosene usage for lighting. In addition to providing credit, banks also play a key role in ensuring good service and maintenance; the viability of the SLS market is thus critically dependent on the role that the banks play as intermediaries between consumers and solar firms in rural areas. Government programs should be carefully designed to match the incentives of firms, banks and consumers if the successes of the ‘Karnataka model’ are to be repeated and amplified.

Toward a transaction cost economics of rural development

It has long been recognized that voluntary organizations contribute to the economic development of rural areas in all parts of the world. This paper argues that the developmental role of voluntary organizations in rural areas can be explained in terms of a rurality-specific transaction cost that lowers the profit obtainable by ordinary profit-maximizing firms in rural areas. As voluntary organizations pursue non-profit objectives, their operation is not hindered by the rurality-specific transaction cost. The paper provides preliminary evidence and calls for empirical research on the relationship between rurality and the rural voluntary sector.

CRER

PurposeThe purpose of this paper is to present a methodology for incubating business ideas in rural communities in Portugal. The work provides an example of a bottom‐up approach to rural entrepreneurship.Design/methodology/approachThe paper analyses case study of an entrepreneurial support organisation conceived and used in rural European regions and aiming at local development through entrepreneurial boost.FindingsAlthough the methodology for incubating business ideas was adapted from a similar situation in France, its originality comes from the description of how the awareness of local specificities requires a calibration of the framework.Research limitations/implicationsThe case study is the outcome of a pioneering study of incubation of business ideas in rural areas. Further research needs to be taken in order to claim generalisability of these findings to other less favoured target groups.Practical implicationsThe incubation of business ideas can be used to encourage local development in declining rural regions. It is important to calibrate the framework used to the local/regional reality.Originality/valueApart from being innovative in providing a supportive entrepreneurial infrastructure with mentoring people‐based support in the creation of new firms in rural areas, it is also a nation‐wide entrepreneurial service innovation.

How social and human capital influence opportunity recognition and resource mobilization in India's handloom industry

Small-scale firms in rural areas play an extremely important role in the development of any country, and especially in developing countries. To understand entrepreneurs who operate in a low-technology industry, we rely on the network perspective on entrepreneurship. In this paper, we investigate how the social and human capital of entrepreneurs (in this case master weavers in the handloom industry) influence their ability to recognize opportunities and mobilize resources. In addition to examining the direct effects, we also explore the possibilities of social capital mediating between human capital, on the one hand, and opportunity recognition and resource mobilization on the other. This paper adds to existing literature in two ways: firstly, we expand the social capital paradigm by including different cultural settings and links to existing studies regarding small enterprises. Secondly, we provide additional evidence to the ongoing debate as to what constitutes a ‘good network’.

Economies of scale and firm size optimum in rural water supply

This article is focused on modeling and analyzing the cost structure of water‐supplying companies. A cross‐sectional data set was collected with respect to water firms in rural areas of former East and West Germany. The empirical data are analyzed by applying a symmetric generalized McFadden (SGM) functional form. This flexible functional form allows for testing the concavity required by microeconomic theory as well as the global imposition of such curvature restrictions without any loss of flexibility. The original specification of the SGM cost function is modified to incorporate fixed factors of water production and supply as, for example, groundwater intake or the number of connections supplied. The estimated flexible and global curvature correct cost function is then used to derive scale elasticities as well as the optimal firm size. The results show that no water supplier in the sample produces at constant returns to scale. The optimal firm size was found to be on average about three times larger than the existing one. These findings deliver evidence for the hypothesis that the legally set supplying areas, oriented at public administrative criteria as well as local characteristics of water resources, are economically inefficient. Hence structural inefficiency in the rural water sector is confirmed to be policy induced.

Small tourist firms in rural areas: agility, vulnerability and survival in the face of crisis

This paper reports on the quintessential rural small firm, the tourist service provider and explores the impact of the recent foot and mouth outbreak. A theoretical framework is employed which proposes that many rural small firms capture and commodify the values that are inherent in the countryside. Part of this process is the portrayal of image and is an essential element of the new economy of signs and symbols. This image was critically challenged during the outbreak and thus affords us a unique opportunity to examine what happens, the impacts and effects, on small rural business when the image is tarnished. The findings show that small firms in rural areas suffered badly, even in areas where there was no disease. This leads one to argue that the effects of the disease were generated, less by fact, and more by the production of image. However, it was also found that rural small firms were extremely flexible in their responses to the crisis. In turn this seems to suggest that many small rural businesses may have a particular resilience which augurs well for sustainability.

Rural business use of information and communications technologies (ICTs): a study of the relative impact of collective activity in rural Scotland

Abstract There has been limited systematic or comprehensive research on the use and impact of ICTs on rural small and medium size firms (SMEs), yet the use and take‐up of ICTs has been highlighted as an important strategic factor in the development of both rural firms and rural communities by a number of studies. Indeed, several empirical studies have found that rates of ICT adoption in SMEs lag behind those in larger businesses. This investigates the extent to which this can be seen to be the case in rural Scotland, and investigates the use of ICTs in rural firms. A review of the literature is undertaken and relevant recent policy developments considered. Quantitative data is used to determine the rate and extent of ICT take‐up in rural SMEs. Using both quantitative and qualitative methods, attempts are made to examine a novel support mechanism — the Internet forum — based on rural locality or rural locality‐specific industry. Contrary to previous literature, the survey evidence suggests that ICT use in business is high by small firms in rural areas, including utilizing on‐line sources for markets and suppliers. Internet forums appear to be significant for utilizing ICT‐related technologies for business growth, especially for increasing sales and accessing international markets. Internet forums may also have encouraged relatively high use of public sector sources of advice and support. Qualitative findings show that Internet business forums exist due to complicated reasons that are more related to local and individual human factors rather than market forces. That is, they have often arisen where local communities or local individuals have been able to raise funding, or where they have been the target of public sector initiatives and funding. This paper supports the view that the establishment of Internet‐based business forums can have beneficial advantages for local rural firms. However, it is recognized that where such forums exist it is likely that it is the more growth‐orientated firms that will join them and that strategies for sustainability of forums, while desirable, were not observed. Copyright © 2004 John Wiley & Sons, Ltd.