nep-bec New Economics Papers
on Business Economics
Issue of 2005‒01‒16
fourteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. The Diversified Business Group as an Innovative Organizational Model for Large State-Enterprise Reform in China and Vietnam By Berhanu Abegaz
  2. Price Competition, Business Hours, and Shopping Time Flexibility By Oz Shy; Rune Stenbacka
  3. Mergers, Investment Decisions and Internal Organisation By Albert Banal-Estaño; Inés Macho-Stadler; Jo Seldeslachts
  4. Female Labor Supply: Theory and Estimation -- Introduction By James P. Smith
  5. Are technology shocks responsible for the business cycle ? By Dufourt
  6. The strategic value of ergonomics for companies By Jan Dul
  7. Consumption Risk and the Cost of Equity Capital By Ravi Jagannathan; Yong Wang
  8. Does job loss shorten life? By Eliason, Marcus; Storrie, Donald
  9. Internationalization and the Evolution of Corporate Valuation By Ross Levine; Sergio L. Schmukler
  10. Is there any Scope for Corporatism in Stabilization Policies? By Giovanni Di Bartolomeo; Nicola Acocella; Wilfried Pauwels
  11. Trends in Competition and Profitability in the Banking Industry: A Basic Framework By Jacob Bikker; Jaap Bos
  12. Why firm-established user communities work for innovation: The personal attributes of innovative users in the case of computer-controlled music instruments By Lars Bo Jeppesen & Lars Frederiksen
  13. Reputation, Cheap Talk and Delegation By Amal Sanyal; Kunal Sengupta
  14. Why Are Americans More Productive Than Canadians? By Andrew Sharpe

  1. By: Berhanu Abegaz (Department of Economics, College of William and Mary)
    Abstract: The diversified business group (DBG) is a ubiquitous institution in developing economies. It is a formal inter-firm network that typically involves financial institutions, distributors and manufacturers. Groupwise diversification is viewed by some as a novel form of organizational innovation by entrepreneurial tycoons while others see it as an instrument for rent seeking. Inspired by Korean chaebols but chastened by Russian financial-industrial groups, China and Vietnam are creating business groups out of state enterprises. After reviewing the theory and cross-country experience, this paper concludes that selective economic grouping can be an efficient transitional organization. DBGs can facilitate government monitoring, exploitation of scale economies for scarce managerial talent, better risk management, and realization of network and scope economies. Success in incubating national champions is, however, predicated on a high technocratic capability for restraining abuse of market power, nurturing competitive market institutions, properly sequencing large scale privatization, and crafting WTO-compatible industrial and technology policies.
    Keywords: Diversified business group, Organizational innovation, State enterprises, China, Vietnam.
    JEL: G3 L2 L3 O3 P5
    Date: 2005–01–07
  2. By: Oz Shy; Rune Stenbacka
    Abstract: We analyze differentiated retail industries where shops engage in two-stage competition with respect to opening hours and prices. We explore the effects of consumers' shopping time flexibility by comparing bi-directional consumers with forward- or backward-oriented consumers, who can either postpone or advance their shopping, but not both. We demonstrate that retailers with longer opening hours charge higher prices and that opening hour differentiation softens price competition. We calculate both symmetric and asymmetric subgame perfect equilibria in closing hours and demonstrate how the equilibrium configurations depend on the cost increases associated with extended business hours, as well as the relative densities of day and night shoppers. <br> <br> <i>ZUSAMMENFASSUNG - (Preiswettbewerb, Öffnungszeiten und Flexibilität der Einkaufszeit) <br> Wir analysieren unterschiedliche Einzelhandelsindustrien, in denen Läden in einem zweistufigen Wettbewerb bezüglich Öffnungszeiten und Preisen stehen. Wir erforschen die Effekte von Kundenflexibilität, indem wir völlig flexible Kunden mit vor- bzw. rückwärtsorientierten Kunden vergleichen können, welche ihren Einkauf nur vorziehen oder verschieben können, aber nicht beides. Wir zeigen, dass Einzelhändler mit längeren Öffnungszeiten höhere Preise verlangen und dass die Differenzierung der Öffnungszeiten den Preiswettbewerb abschwächt. Wir berechnen sowohl symmetrische als auch unsymmetrische teilspielperfekte Gleichgewichte für die Öffnungszeiten und zeigen, wie die Ausgestaltung der Gleichgewichte von den zusätzlichen Kosten der ausgedehnten Öffnungszeiten und der relativen Dichte von Tag- und Nachteinkäufern abhängt.</i>
    Keywords: Business Hours, Delayed or Advanced Shopping, Differentiated Business Hours, Price Competition, Shopping Time Flexibility.
    JEL: L1 L81 M2
    Date: 2004–12
  3. By: Albert Banal-Estaño; Inés Macho-Stadler; Jo Seldeslachts
    Abstract: We analyse the effects of investment decisions and firms’ internal organisation on the efficiency and stability of horizontal mergers. In our framework synergies are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more efficiency and may even lead to efficiency losses. These mergers lead to lower welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effectively realised. Moreover, the paper offers a possible explanation for merger failures. <br> <br> <i>ZUSAMMENFASSUNG - (Fusionen, Investitionsentscheidungen und unternehmensinterne Organisation) <br> Wir analysieren die Auswirkungen von Investitionsentscheidungen und internen Organisationsstrukturen auf die Effizienz und Stabilität von horizontalen Firmenzusammenschlüssen. In unserer Untersuchung sind Synergien endogen und es können interne Konflikte in dem fusionierten Unternehmen auftreten. Es zeigt sich, dass "stabile" Fusionen häufig nicht zu mehr Effizienz, sondern sogar zu Effizienzverlusten führen können. Da solche Firmenzusammenschlüsse zu einer geringeren Wohlfahrt führen, sollte der Regulierer nicht ungeprüft annehmen, dass potentielle Wohlfahrtsgewinne auch immer tatsächlich erreicht werden. Außerdem bietet das Papier eine mögliche Erklärung für das Scheitern von Fusionen.</i>
    Keywords: Horizontal Mergers, Investment, Efficiency gains, Internal Conflict.
    JEL: L22 D43
    Date: 2004–12
  4. By: James P. Smith (The Rand Corporation)
    Abstract: This Introduction has a threefold purpose: (1)to relate the volume to the existing literature so that the reader is better able to appreciate the motivation for the essays, the problems they are attempting to resolve, and their departure from conventional methods of analysis; (2)to highlight the main theoretical and econometric innovations of the individual essays; and (3)to attempt to synthesize the principal empirical findings with an eye toward identifying the major similarities and differences emerging from the separate papers.
    JEL: J
    Date: 2005–01–10
  5. By: Dufourt (BETA - University Louis Pasteur - Strasbourg I)
    Abstract: I use the restrictions implied by standard stochastic growth models to investigate whether technology shocks played a major role in the US business cycle. Business cycles are defined as fluctuations around an exogenously evolving productivity trend, identified through appropriate restrictions. My main findings can be summarized as follows: Business cycles implied by technology/supply shocks are mildly correlated to overall fluctuations, and help account for a few episodes of US postwar recessions. However, typically less than 20% of US fluctuations can be explained by these shocks. Most fluctuations seem instead to be due to 'nominal demand' shocks, ie. shocks which move output and prices in the same direction, but whose effects on output are ultimately transitory. In accordance with a recent, growing literature, our empirical results therefore cast new doubts on the view that technology shocks are a predominant source of economic fluctuations.
    Keywords: Business cycles, technological shocks, demand shocks
    JEL: E32 C32 C52
    Date: 2005–01–08
  6. By: Jan Dul (Rotterdam School of Management)
    Abstract: The discipline of ergonomics studies the interaction between man and the designed technical and organizational environment. In product ergonomics, this knowledge is used to develop user-friendly products and in production ergonomics to design human-friendly (production) processes. Beside social goals, ergonomics can contribute to economic goals of an organization. With user-friendly products, a company can deliver benefits to its customers, which exceed those of competing products. With human-friendly production processes, a company can increase labor productivity and consequently can reach important cost-reductions. The growing consciousness of the importance of humans (customers and workers) for the success of organizations, implies that ergonomics can have a strategic value for the management of organizations. In this paper a model is presented how ergonomics can be integrated in the decision-making and design processes of organizations, and examples are given to show possible business benefits.
    Keywords: Competitive advantage, labor productivity, human centered design, product development, process development
    JEL: L
    Date: 2005–01–10
  7. By: Ravi Jagannathan; Yong Wang
    Abstract: We demonstrate, using data for the period 1954-2003, that differences in exposure to consumption risk explains cross sectional differences in average excess returns (cost of equity capital) across the 25 benchmark equity portfolios constructed by Fama and French (1993). We use yearly returns on stocks to take into account well documented within year deterministic seasonal patterns in returns, measurement errors in the consumption data, and possible slow adjustment of consumption to changes in wealth due to habit and prior commitments. Consumption during the fourth quarter is likely to have a larger discretionary component. Further, given the availability of more leisure time during the holiday season and the ending of the tax year in December, investors are more likely to review their asset holdings and make trading decisions during the fourth quarter. We therefore match the growth rate in the fourth quarter consumption from one year to the next with the corresponding calendar year return when computing the latter's exposure to consumption risk. We find strong support for our consumption risk model specification in the data.
    JEL: G12
    Date: 2005–01
  8. By: Eliason, Marcus (Department of Economics, School of Economics and Commercial Law, Göteborg University); Storrie, Donald (Department of Economics, School of Economics and Commercial Law, Göteborg University)
    Abstract: We examine whether there is a causal relationship from job displacement to mortality. The study is based on employees who lost their job from all establishment closures in 1987 and 1988 in Sweden and, as a control group, a large random sample of employees not experiencing displacement at that time. The registers follow all these individuals, between 1983 and 2000 with minimal attrition. They also provide much relevant information on individual, family and establishment characteristics, and predisplacement health and labor market history. Using propensity score matching, we find higher mortality among the displaced up to the eighth follow-up year, mainly due to suicide and heart diseases. Estimates of all-cause mortality risk show significant effects for displaced men, but not for women, up to nine years after displacement. An important methodological conclusion is that research that focuses only on those who leave late in the closure process may over-state the impact of displacement on mortality. <p>
    Keywords: Plant closure; displaced workers; mortality; propensity score matching
    JEL: I12 J63 J65
    Date: 2004–12–01
  9. By: Ross Levine; Sergio L. Schmukler
    Abstract: By documenting the evolution of Tobin's "q" before, during, and after firms internationalize, this paper provides evidence on the bonding, segmentation, and market timing theories of internationalization. Using new data on 9,096 firms across 74 countries over the period 1989-2000, we find that Tobin's "q" does not rise after internationalization, even relative to firms that do not internationalize. Instead, "q" rises significantly one year before internationalization and during the internationalization year. But, then "q" falls sharply in the year after internationalization, relinquishing the increases of the previous two years. To account for these dynamics, we show that market capitalization rises one year before internationalization and remains high, while corporate assets increase during internationalization. The evidence supports models stressing that internationalization facilitates corporate expansion, but challenges models stressing that internationalization produces an enduring effect on "q" by bonding firms to a better corporate governance system.
    JEL: G15 F36 F20
    Date: 2005–01
  10. By: Giovanni Di Bartolomeo (University of Rome La Sapienza); Nicola Acocella (University of Rome La Sapienza); Wilfried Pauwels (University of Antwerp)
    Abstract: This paper studies corporatism as the outcome of bargaining between the government and a representative labor union. When negotiations between these two parties only relate to macroeconomic stabilization, we show that corporatism can never be beneficial to both parties. As corporatist policies are nevertheless commonly observed in this context, we also discuss in an informal way possible explanations that reconcile the theory with actual observations. The policy implications of these explanations are also discussed.
    Keywords: Social pacts, Axiomatic bargaining, Unions, Issue linkage
    JEL: E00 E58 E61 J50
    Date: 2004–12
  11. By: Jacob Bikker; Jaap Bos
    Abstract: This paper brings to the forefront the assumptions that we make when focussingon a particular type of explanation for bank profitability. We evaluate a broad field of research by introducing a general framework for a profit maximizing bank and demonstrate how different types of models can be fitted into this framework. Next, we present an overview of the current major trends in European banking and relate them to each model's assumptions, thereby shedding light on the relevance, timeliness and shelf life of the different models. This way, we arrive at a set of recommendations for a future research agenda. We advocate a more prominent role for output prices, and suggest a modification of the intermediation approach. We also suggest ways to more clearly distinguish between market power and effciency, and explain why we need time-dependent models. Finally, we propose the application of existing models to different size classes and sub-markets. Throughout we emphasize the benefits from applying several, complementary models to overcome the identification problems that we observe in individual models.
    JEL: G21 L11 L22 L23
    Date: 2004–11
  12. By: Lars Bo Jeppesen & Lars Frederiksen
    Abstract: Studies of the sources of innovations have recognized that many innovations are developed by users. However, the fact that firms employ communities of users to strengthen their innovation process has not yet received much attention. In firm-established user communities users freely reveal innovations to a firm’s product platform, which in turn puts the firm in a favorable position (a) because these new product features become available to all users by sharing on a user-to-user basis, or (b) because it allows the firm to pick up the innovations and integrate them in future products and then benefit by selling them to all users. We study the key personal attributes of the individuals responsible for innovations and the creation of value in this organizational context, namely the innovative users, to explain why firm-established user communities work. Analyzing data derived from a web-based questionnaire generating 442 answers we find that innovative users are likely to be (i) hobbyists, an attribute that can be assumed to affect innovators’ willingness to share innovations (positively), and (ii) responsive to “firm-recognition” as a motivating factor for undertaking innovation, which explains their decision to join the firm’s domain. In agreement with earlier studies we also find that innovative users are likely to be “lead users”, an attribute that we assume to affect the quality of user innovation. Whether or not a firm-established user community can be turned into an asset for the firm is to a great extent conditioned by the issues studied in this paper.
    Keywords: Innovation, User community, User Characteristics
    JEL: L21 L23 O31 O32
  13. By: Amal Sanyal; Kunal Sengupta
    Abstract: A decision maker is contemplating an action whose outcome is state dependent. She has a ‘prior’ over the states of the world and before choosing an action, she can consult an ‘expert’. We model the communication game between the decision maker and the expert as a ‘cheap-talk’ game. Expert quality however is heterogenous. Some can obtain informative signals while the others can not. Since an expert known to be informed earns a rent in the future, uninformed experts would like to disguise as informed.We show that such concern for future reputation imposes severe constraints on the possibility of beneficial communication. Decision makers who can benefit from such communication are characterized in terms of the relevant parameters which include the prior of the decision makers and the cost of mistaken decisions. Next we address the issue of delegation. The questions that we ask are which decision makers choose to delegate, and to whom they delegate. In situations involving public goods, we characterize the decision makers who will strictly prefer to delegate, and show that when delegation occurs, the delegate is necessarily more extreme than the original decision maker in terms of her prior.
    Keywords: Cheap-talk, delegation, reputation, median voter.
    JEL: D82 D72
    Date: 2005–01–10
  14. By: Andrew Sharpe
    Abstract: The objective of this paper is to document the evolution of the Canada-U.S. labour productivity gap and to offer an explanation of why Americans have been and continue to be, on average, more productive than Canadians. This focus on relative productivity levels is in contrast to the typical focus on the gap between productivity growth rates in Canada and the United States. The paper finds that Canada’s level of output per person employed was 81.0 per cent of the U.S. level in 2002. This was the lowest relative level since the late 1960s. The general conclusions on the size of the output per hour gap are that output per hour has always been below that in the United States, the productivity gap has increased in the 1990s, particularly since 1994, and the current gap is between 11 and 19 percentage points depending on the source of hours data used. Five main reasons are advanced for this, namely: the lower capital intensity of economic activity in Canada; an innovation gap in Canada relative to the United States; Canada’s relatively underdeveloped high-tech sector; less developed human capital in Canada in terms of proportionately fewer university graduates and scientists and engineers in research and development; and more limited economies of scale and scope in Canada.
    Keywords: Productivity, Canada, United States, Employment, Hours, Hours of Work, Capital, International Comparisons, Purchasing Power Parity, Labour Productivity Gap, Level Gap, Alternative Data Sources
    JEL: O51 J24 O47 C82
    Date: 2003–06

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