Innovation events-the introduction of new products or processes-represent the end of a process of knowledge sourcing and transformation. They also represent the beginning of a process of exploitation which may result in an improvement in the performance of the innovating business. This recursive process of knowledge sourcing, transformation and exploitation comprises the innovation value chain. Modelling the innovation value chain for a large group of manufacturing firms in Ireland and Northern Ireland highlights the drivers of innovation, productivity and firm growth. In terms of knowledge sourcing, we find strong complementarity between horizontal, forwards, backwards, public and internal knowledge sourcing activities. Each of these forms of knowledge sourcing also makes a positive contribution to innovation in both products and processes although public knowledge sources have only an indirect effect on innovation outputs. In the exploitation phase, innovation in both products and processes contribute positively to company growth, with product innovation having a short-term 'disruption' effect on labour productivity. Modelling the complete innovation value chain highlights the structure and complexity of the process of translating knowledge into business value and emphasises the role of skills, capital investment and firms' other resources in the value creation process. Research Seminar at Durham University. We are particularly grateful for the detailed comments of Loles Añon, Paul Kattuman and three anonymous referees.

This paper adopts transaction costs perspective to explain why growth of small and medium-sized enterprises (SMEs) may vary across regions of an emerging economy. Furthermore, it is argued that young and small firms gain more from improvement of local governance than old and large firms do. In addition, depending on the institutional history, SMEs will respond differently to the incentives provided by local governance. Analysing more than 300,00 SMEs in Vietnam during the 2006-2012 period, it is shown that higher quality local governance positively influences local SME revenue growth; this effect is stronger for young and small firms, and matters more where institutional history suggests less support for entrepreneurship. JEL codes: D02, H73, L25, L26

Entrepreneurs in emerging market economies operate in weak institutional contexts, which can imply different types of government. In some countries (e.g. Russia), the government is predatory, and the main risk faced by (successful) entrepreneurs relates to expropriation. In other countries (like China) this kind of risk is lower; nevertheless the government is intrusive, and the rules of the game remain fluid. The implication of the latter for entrepreneurs is that they are more likely to spend time and resources on influence (rent seeking) activities rather than on productive activities. We illustrate this type of government by focusing on the distribution of subsidies in China. We present a simple formal model that explores not only the direct effects of rent seeking for a company but also externalities under a situation of policygenerated uncertainty in the distribution of subsidies. We explore how these effects differ for the entrepreneurial sector (young, private and small companies) compared with other sectors. We posit that while the performance of private companies is more affected than the performance of state firms, the impact of government-induced uncertainty on young and small companies is actually less pronounced. Our empirical analysis, based on a unique large dataset of 2.4 million observations on Chinese companies, takes advantage of the regional and sectoral heterogeneity of China for empirical tests.

Using a unique firm level data, this paper analyses the role of political connections in the post-entry performance of private start-up companies in China. It documents robust evidence that political affiliation enhances firms' survival and growth prospects. But interestingly politically neutral start-ups enjoy faster productivity improvements conditional on survival. In addition, the benefits of political connections are largely confined to firms associated with local or top level governments, and they are more pronounced in capital-intensive industries. We conclude that the close association between the state and a segment of the business community is leading to sub-optimal resource allocation in the economy by interfering with the process of market selection. Copyright � 2010 Blackwell Publishing Ltd.

We use a panel of 65,485 firms over the period 2000-2006 to study the financing decisions of Chinese private SMEs. Motivated by the fact that traditional capital structure theories are not fully supported by the findings of previous research in emerging economies characterized by weak institutional frameworks and underdeveloped financial systems, we propose a modified pecking-order in which financing mechanisms based on social capital supplant those based on more traditional forms of collateral, especially in the short-term. Our findings underline the importance of social capital to the financing decisions of SMEs.

There is considerable evidence that highgrowth firms (HGFs) contribute significantly to employment and economic growth. However, the literature so far does not adequately explore the link between HGFs and productivity. This paper investigates the empirical link between total factor productivity (TFP) growth and HGFs, defined in terms of sales growth, in the United Kingdom over the period 2001-2010, by examining two related research questions. Firstly, does higher TFP growth lead to HGF status and secondly, does HGF experience help firms achieve faster TFP growth? Our findings reveal that firms in both the manufacturing and services sectors are more likely to become HGFs when they exhibit higher TFP growth. In addition, firms that have had HGF experience tend to enjoy faster TFP growth following the high-growth episodes. Policy implications are drawn based on the self-reinforcing process of the high-growth phenomenon that is revealed by our results.

This paper considers the relationship between innovation, ownership and profitability for a panel of manufacturing plants in Ireland and Northern Ireland. Previous literature suggests that innovators are persistently more profitable than non-innovators, but little is known about how this link is moderated by external versus domestic ownership. We consider the link between innovation and profits separately for indigenous innovators and non-innovators and externally-owned plants. We also consider the determinants of innovation over the distribution of plant-level profitability, and find that the determinants of profitabilityincluding innovation and external ownership -vary over the distribution from low to high profitability plants. We find support for the view that innovators and non-innovators have different profitability determinants, and that the profitability of externally-owned plants depends on very different factors to those of indigenously-owned enterprises.

SUMMARY Using a rich panel data set, we provide a rigorous analysis of the relationship between access to external finance, foreign direct investment and the exports of private enterprises in China. We conclude that, in order to foster the exports of indigenous enterprises, the elimination of financial discrimination against private firms is likely to be a more effective policy tool than the reliance on spillovers from multinational firms.