nep-bec New Economics Papers
on Business Economics
Issue of 2005‒08‒13
25 papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Exogenous Oil Supply Shocks: How Big Are They and How Much do they Matter for the US Economy? By Kilian, Lutz
  2. Modeling bond yields in finance and macroeconomics By Francis X. Diebold; Monika Piazzesi; Glenn D. Rudebusch
  3. Bank Concentration and Fragility: Impact and Mechanics By Thorsten Beck; Asli Demirgüç-Kunt; Ross Levine
  4. Work and Leisure in the US and Europe: Why So Different? By Alesina, Alberto F; Glaeser, Edward L; Sacerdote, Bruce
  5. Consumption, Wealth, the Elasticity of Intertemporal Substitution and Long-Run Stock Market Returns By Favero, Carlo A
  6. Fairness and the Optimal Allocation of Ownership Rights By Ernst Fehr; Susanne Kremhelmer; Klaus Schmidt
  7. Lending Booms and Lending Standards By Dell'Ariccia, Giovanni; Marquez, Robert
  8. Services trade within Canada and the European Union. What do they have in common? By Arjan Lejour; J.W. de Paiva Verheijden
  9. El estudio de caso como metodología de investigación: teoría, mecanismos causales, validación By Enrique Yacuzzi
  10. Czech Managerial Compensations: Why Does It Pay Off to Climb the Corporate Ladder? By Teodora Paligorova
  11. Merger without Cost Advantages By Steffen Huck; Kai A. Konrad; Wieland Müller
  12. Direct to Consumer Advertising in Pharmaceutical Markets By Kurt R. Brekke; Michael Kuhn
  13. CEO-Firm Match and Principal-Agent Problem By Li, Fei; Ueda, Masako
  14. Financial Integration and Entrepreneurial Activity: Evidence from Foreign Bank Entry in Emerging Markets By Giannetti, Mariassunta; Ongena, Steven
  15. Coordination in Markets with Consumption Externalities: The Role of Advertising and Product Quality By Pastine, Tuvana; Pastine, Ivan
  16. What do we do in Post-industrial Society? The Nature of Work and Leisure Time in the 21st Century By Jonathan Gershuny
  17. Why Do Firms Become Widely Held? An Analysis of the ynamics of Corporate Ownership By Jean Helwege; Christo Pirinsky; René M. Stulz
  18. Mexican Entrepreneurship: A Comparison of Self-Employment in Mexico and the United States By Robert Fairlie; Christopher Woodruff
  19. Business Dynamics in Europe By Nicola Brandt
  20. Technological change: An analysis of the diffusion and implications of e-business technologies By Philipp Koellinger
  21. Customer Service--A Need for Survival By Deepak Kumar; Pradip Sinha
  22. Spirituality, Productivity and Effective Management :Transforming a Business By Deepak Kumar
  23. Testing for Team Spirit - An Experimental Study By Rupert Sausgruber
  24. R&D and Patenting Activity and the Propensity to Acquire in High Technology Industries By Panayotis Dessyllas; Alan Hughes
  25. “Body Size, Activity, Employment and Wages in Europe: A First Approach” By Jaume Garcia; Climent Quintana- Domeque

  1. By: Kilian, Lutz
    Abstract: Since the oil crises of the 1970s there has been strong interest in the question of how oil production shortfalls caused by wars and other exogenous political events in OPEC countries affect oil prices, US real GDP growth and US CPI inflation. This study focuses on the modern OPEC period since 1973. The results differ along a number of dimensions from the conventional wisdom. First, it is shown that under reasonable assumptions the timing, magnitude and even the sign of exogenous oil supply shocks may differ greatly from current state-of-the-art estimates. Second, the common view that the case for the exogeneity of at least the major oil price shocks is strong is supported by the data for the 1980/81 and 1990/91 oil price shocks, but not for other oil price shocks. Notably, statistical measures of the net oil price increase relative to the recent past do not represent the exogenous component of oil prices. In fact, only a small fraction of the observed oil price increases during crisis periods can be attributed to exogenous oil production disruptions. Third, compared to previous indirect estimates of the effects of exogenous supply disruptions on real GDP growth that treated major oil price increases as exogenous, the direct estimates obtained in this paper suggest a sharp drop after five quarters rather than an immediate and sustained reduction in economic growth for a year. They also suggest a spike in CPI inflation three quarters after the exogenous oil supply shock rather than a sustained increase in inflation, as is sometimes conjectured. Finally, the results of this paper put into perspective the importance of exogenous oil production shortfalls in the Middle East. It is shown that exogenous oil supply shocks made remarkably little difference overall for the evolution of US real GDP growth and CPI inflation since the 1970s, although they did matter for some historical episodes.
    Keywords: Counterfactual; Economic activity; Exogeneity; inflation; oil shock; Oil supply; war; weak instruments
    JEL: C32 E32
    Date: 2005–07
  2. By: Francis X. Diebold; Monika Piazzesi; Glenn D. Rudebusch
    Abstract: From a macroeconomic perspective, the short-term interest rate is a policy instrument under the direct control of the central bank. From a finance perspective, long rates are risk-adjusted averages of expected future short rates. Thus, as illustrated by much recent research, a joint macro-finance modeling strategy will provide the most comprehensive understanding of the term structure of interest rates. We discuss various questions that arise in this research, and we also present a new examination of the relationship between two prominent dynamic, latent factor models in this literature: the Nelson-Siegel and affine no-arbitrage term structure models.
    Keywords: Bonds ; Macroeconomics ; Finance ; Econometric models
    Date: 2005
  3. By: Thorsten Beck; Asli Demirgüç-Kunt; Ross Levine
    Abstract: Public policy debates and theoretical disputes motivate this paper’s examination of (i) the relationship between bank concentration and banking system fragility and (ii) the mechanisms underlying this relationship. We find no support for the view that concentration increases the fragility of banks. Rather, banking system concentration is associated with a lower probability that the country suffers a systemic banking crisis. In terms of policies, we find that (i) regulations and institutions that facilitate competition in banking are associated with less not more -- banking system fragility and (ii) including these policy indicators does not change the results on concentration. This suggests that concentration is a proxy for something else besides the competitive environment. Also, we do not find that official capital regulations, reserve requirements, or official prudential regulations lower crises probabilities. Finally, we present suggestive evidence that concentrated banking systems tend to have larger, better-diversified banks, which may help account for the positive link between concentration and stability.
    JEL: G21 G28 L16
    Date: 2005–08
  4. By: Alesina, Alberto F; Glaeser, Edward L; Sacerdote, Bruce
    Abstract: Americans average 25.1 working hours per person in working age per week, but the Germans average 18.6 hours. The average American works 46.2 weeks per year, while the French average 40 weeks per year. Why do western Europeans work so much less than Americans? Recent work argues that these differences result from higher European tax rates, but the vast empirical labour supply literature suggests that tax rates can explain only a small amount of the differences in hours between the US and Europe. Another popular view is that these differences are explained by long-standing European ‘culture’, but Europeans worked more than Americans as late as the 1960s. In this paper, we argue that European labour market regulations, advocated by unions in declining European industries who argued ‘work less, work all’ explain the bulk of the difference between the US and Europe. These policies do not seem to have increased employment, but they may have had a more society-wide influence on leisure patterns because of a social multiplier where the returns to leisure increase as more people are taking longer vacations.
    Keywords: europe; hours worked; labour unions; taxation
    JEL: E00 J30
    Date: 2005–07
  5. By: Favero, Carlo A
    Abstract: Consumption is striking back. Some recent evidence indicates that the well-known asset pricing puzzles generated by the difficulties of matching fluctuations in asset prices with high frequency fluctuations in consumption might be solved by considering consumption in the long-run. A first strand of the literature concentrates on multiperiod differences in log consumption, a second concentrates on the cointegrating relation for consumption. Interestingly, only the (multiperiod) Euler Equation for the consumer optimization problem is considered by the first strand of the literature, while the cointegration-based literature concentrates exclusively on the (linearized) intertemporal budget constraint. In this paper, we show that using the first order condition in the linearized budget constraint to derive an explicit long-run consumption function delivers an even more striking strike back.
    Keywords: cointegrating consumption function; elasticity of intertemporal substitution; long-run stock market returns
    JEL: E20 E44 G12
    Date: 2005–06
  6. By: Ernst Fehr; Susanne Kremhelmer; Klaus Schmidt
    Abstract: We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that subjects attain the most efficient ownership allocation despite starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players.
    Keywords: ownership rights, double moral hazard, fairness, reciprocity, incomplete contracts
    JEL: C70 C90 J30
    Date: 2005
  7. By: Dell'Ariccia, Giovanni; Marquez, Robert
    Abstract: This paper examines how the informational structure of loan markets interacts with banks’ strategic behaviour in determining lending standards, lending volumes, and the aggregate allocation of credit. In a setting where banks obtain private information about their clients’ creditworthiness, we show that banks may loosen lending standards when information asymmetries vis à vis other banks are low. In equilibrium this reduction in standards leads to a deterioration of banks’ portfolios, a reduction in their profits, and an aggregate credit expansion. Furthermore, we show that although these low standards may increase aggregate surplus, they also increase the risk of financial instability. We therefore provide an explanation for the sequence of financial liberalization, lending booms, and banking crises that have occurred in many emerging markets.
    Keywords: asymmetric information; banking competition; lending standards
    JEL: D82 G21
    Date: 2005–06
  8. By: Arjan Lejour; J.W. de Paiva Verheijden
    Abstract: This paper explains bilateral services trade using a gravity equation and compares the results with trade in goods. We analyse bilateral trade between the provinces of Canada and between the member states of the European Union. We conclude that the gravity equation explains the variability in services trade very well: market size of the exporting and importing regions and distance are the most important explanatory variables. On average, distance is a less hindrance for services trade than for goods trade. Differences in languages and the regulation of product markets hamper services and goods trade in Europe significantly. Trade in services is also hampered by regulation in the importing country, but this is not true for goods. Services trade within Canada is twice as high as within Europe measured as share of GDP. Tentative estimates suggest that intra-EU services trade could be much higher if the internal market would function like the Canadian services market.
    Keywords: trade in services; gravity equations; internal market EU; regulation;
    JEL: F15 F13 L8 L5
    Date: 2004–12
  9. By: Enrique Yacuzzi
    Abstract: Este trabajo presenta el método del caso como herramienta de investigación en las ciencias sociales. Desde el diseño hasta la presentación de sus resultados, el método está estrechamente vinculado con la teoría. Una teoría es una respuesta a una pregunta del tipo "por qué" o "cómo", y encierra generalmente un mecanismo causal. El caso permite indagar detalladamente en este mecanismo, con mayor profundidad que los estudios estadísticos. Su ámbito de aplicación está bien definido: estudia temas contemporáneos sobre los cuales el investigador no tiene control y responde a preguntas de tipo "cómo" y "por qué". Después de comparar el caso de investigación con el de enseñanza, el artículo realiza algunas consideraciones epistemológicas y explica la lógica - propia del estudio de casos - de la generalización hacia la teoría. También presenta la perspectiva convencional de la validación de los estudios empíricos, junto a una concepción heterodoxa de la validación. El trabajo es una invitación a aplicar el método del caso en la creación de teorías para la administración de empresas. Para facilitar esta tarea, incluye una serie de recomendaciones sobre cómo facilitar la construcción de teorías. Además, los apéndices presentan los pasos de un estudio, describen los tipos de diseño más usuales, y tratan el concepto de causalidad - central a la comprensión de los mecanismos explicativos incorporados en una teoría - desde distintas perspectivas.
    Keywords: Estudio de caso, metodología de investigación social, teoría, causalidad, validación.
    JEL: M19 B41 B49
    Date: 2005–08
  10. By: Teodora Paligorova
    Abstract: This paper uses matched employer-employee data for the Czech Republic to study the structure of managerial compensation. The evidence supports two key predictions from tournament theory. First, the managerial pay differential between organizational levels is non-decreasing as one goes up the corporate ladder. I document a particularly large increment of the pay differential at the top of a firm's hierarchy. Second, the winner's prize in the tournament increases with the number of competitors for the position of the top managers.
    Keywords: Czech Republic, tournament models, matched employer-employee data.
    JEL: J31 J41
    Date: 2005–06
  11. By: Steffen Huck; Kai A. Konrad; Wieland Müller
    Abstract: The seminal paper by Salant, Switzer and Reynolds (1983) showed that merger in a standard Cournot framework with linear demand and linear costs is not profitable unless a large majority of the firms are involved in the merger. However, many strategic aspects matter for firm competition such as the internal organization of the firm, the time structure of decision making, information aspects of competition, or the imbeddedness of firm competition in a strategic trade competition game between governments. This survey will reveal that the puzzle as in Salant, Switzer and Reynolds (1983) may be resolved without recurring to cost savings of merger. Firms interact with each other, with customers, suppliers, their owners, and with governments in many different ways, and inspection of these types of interaction reveals a multiplicity of reasons why merger can be profitable for the merging firms, even in Cournot markets with linear demand and cost.
    JEL: D43 G34 L11 L13 L22 L41
    Date: 2005
  12. By: Kurt R. Brekke; Michael Kuhn
    Abstract: We study effects of direct-to-consumer advertising (DTCA) in the prescription drug market. There are two pharmaceutical firms providing horizontally differentiated (branded) drugs. Patients differ in their susceptibility to the drugs. If DTCA is allowed, this can be employed to induce (additional) patient visits. Physicians perfectly observe the patients' type (of illness), but rely on information to prescribe the correct drug. Drug information is conveyed by marketing (detailing), creating a captive and a selective segment of physicians. First, we show that detailing, DTCA and price (if not regulated) are complementary strategies for the firms. Thus, allowing DTCA induces more detailing and higher prices. Second, firms benefit from DTCA if detailing competition is not too fierce, which is true if investing in detailing is sufficiently costly. Otherwise, firms are better off with a ban on DTCA. Finally, DTCA tends to lower welfare if insurance is generous (low copayments) and/or price regulation is lenient. The desirability of DTCA also depends on whether or not the regulator is concerned with firms' profit.
    Keywords: marketing, pharmaceuticals, oligopoly
    JEL: I11 L13 L65 M37
    Date: 2005
  13. By: Li, Fei; Ueda, Masako
    Abstract: We study the implication of the standard principal-agent theory developed by Holmstrom and Milgrom (1987) on the endogenous matching of CEO and firm. We show that a CEO with low disutility of effort, low risk aversion, or both should manage a safer firm in the matching equilibrium, and that a CEO in a safer firm should receive a higher compensation than average. Nevertheless, these predictions are not supported by data; proxies for low disutility such as educational achievement and experience are either not related to firm risks or significantly related but in the direction opposite to that predicted by the theory. CEOs of safer firms are paid less than average, again contrary to the standard principal-agent theory.
    Keywords: Principal-Agent problem; sorting
    JEL: G39
    Date: 2005–07
  14. By: Giannetti, Mariassunta; Ongena, Steven
    Abstract: An extensive empirical literature has documented the positive growth effects of equity market liberalization. However, this line of research ignores the impact of financial integration on a category of firms crucial for economic development, i.e. the small entrepreneurial firms. This paper aims to fill this void. We employ a large panel containing almost 60,000 firm–year observations on listed and unlisted companies in Eastern European economies to assess the differential impact of foreign bank lending on firm growth and financing. Foreign lending stimulates growth in firm sales, assets, and leverage, but the effect is dampened for small firms. We also find that the most connected businesses benefit least from foreign bank entry. This finding suggests that foreign banks can help mitigate connected lending problems and improve capital allocation.
    Keywords: competition; emerging markets; foreign bank lending; lending relationships
    JEL: G21 L11 L14
    Date: 2005–07
  15. By: Pastine, Tuvana; Pastine, Ivan
    Abstract: This paper studies advertising in vertically differentiated product markets with positive consumption externalities. In markets with consumption externalities, the value of the product to the consumer depends on the purchasing decisions of other consumers. In such markets, we show that firms will engage in advertising competition in order to convince consumers of their popularity only as long as they produce goods of similar quality. The firm with the lower quality product will have a greater incentive to advertise. If it is not the brand to provide the greater consumption externality it will have very low market share due to its low intrinsic quality. Hence, in equilibrium, the lower quality product will often be more popular. This provides an additional explanation for the empirical observation that in some markets high quality is associated with lower levels of advertising.
    Keywords: advertising; consumption externalities; coordination; product quality
    JEL: L13 L15 M37
    Date: 2005–07
  16. By: Jonathan Gershuny (Institute for Social and Economic Research)
    Abstract: There are three meanings of “industrial”, the first two taking industry as a concrete noun, the third as an abstract: • “industries” as a general term for branches of economic activity or production • “industry” as a particular branch, manufacturing • “industry” as a description of an approach to the activity of work. And there are (at least) three ways in which we have now passed beyond the “industrial” phase of economic development: • The emergence of “value chains” as a new form of economic organisations: the disaggregation of industrial structure and the growing importance of human capital versus industrial capital. • Self-servicing versus service industries: understanding technical change by thinking of “systems of provision for wants”, which combine production, reproduction and consumption. • Developing Veblen’s leisure theory: industry is progressively replaced by exploit as a core characteristic of paid work. The arguments that follow rely (mostly, for the moment) on empirical evidence from time diary studies.
    Keywords: 21, family, leisure
    Date: 2005–06
  17. By: Jean Helwege; Christo Pirinsky; René M. Stulz
    Abstract: We consider IPO firms from 1970 to 2001 and examine the evolution of their insider ownership over time to understand better why and how U.S. firms that become widely held do so. In our sample, a majority of firms has insider ownership below 20% after ten years. We find that a firm's stock market performance and trading play an extremely important role in its insider ownership dynamics. Firms that experience large decreases in insider ownership and/or become widely held are firms with high valuations, good recent stock market performance, and liquid markets for their stocks. In contrast and surprisingly, variables suggested by agency theory have limited success in explaining the evolution of insider ownership.
    JEL: G30 G32 D0
    Date: 2005–08
  18. By: Robert Fairlie; Christopher Woodruff
    Abstract: Nearly a quarter of Mexico's workforce is self employed. But in the U.S. rates of self employment among Mexican Americans are only 6 percent, about half the rate among non-Latino whites. Using data from the Mexican and U.S. population census, we show that neither industrial composition nor differences in the age and education of Mexican born populations residing in Mexico and the U.S. accounts for the differences in the self employment rates in the two countries. Within the U.S., however, the data show self employment rates are much higher in ethnic enclaves. In PUMAS with a high percentage of residents of Latino origin, rates of self employment are comparable to rates among non-Latino whites. The data also indicate that the lack of English language ability and the lack of legal status among Mexican American immigrants helps account for their lower rates of self employment.
    JEL: F2 J2
    Date: 2005–08
  19. By: Nicola Brandt
    Abstract: <P>This study presents evidence on firm entry and exit, growth and survival derived with new data from Eurostat, covering nine European Union member countries. One contribution of the study is an analysis of the role of data quality for studies of firm demographics. Confronting results obtained with the Eurostat data with those of a previous OECD cross-country firm-level data project reveals that different size thresholds and difficulties in distinguishing genuine firm entry and exit from mergers & acquisitions, ownership changes or changes in legal form can have sizeable impacts on results. Cross-country differences in firm entry and exit rates are analysed with a special emphasis on detailed information and communication technology (ICT) related sectors, which has not been possible with previously available cross-country data. After controlling for some basic factors, such as countries’ industry composition, crosscountry differences in entry and exit rates in mature sectors turn out ...</P> <P>Dynamique des entreprises en Europe <P>Cette étude présente, à partir de nouvelles statistiques d’Eurostat qui couvrent neuf pays membres de l’Union européenne, des données sur l’entrée, la sortie, la croissance et la survie des entreprises. Elle comporte notamment une analyse de l’importance que revêt la qualité des données dans les études sur la démographie des entreprises. La confrontation des résultats obtenus à l’aide des données d’Eurostat avec ceux d’un projet précédent de l’OCDE sur des données internationales au niveau de l’entreprise révèle que les différences de seuils de taille ainsi que les difficultés liées à la distinction entre ce qui constitue véritablement des entrées ou sorties d’entreprises d’une part et les fusions et acquisitions d’autre part, les transferts de propriété et la modification de la forme juridique peuvent avoir des effets non négligeables sur les résultats. L’étude analyse les différences internationales en ce qui concerne les taux d’entrée et de sortie des entreprises, en faisant une ...</P>
    Keywords: entry, exit, survival, micro data, entrée, sortie, survie, microdonnées
    JEL: C81 G33 L11 M13
    Date: 2004–03–11
  20. By: Philipp Koellinger (DIW Berlin)
    Abstract: This is a monograph that presents both a comprehensive literature review and original research results on the diffusion and the implications of e-business technologies. The diffusion of e-business technologies among firms is regarded as part of the ongoing process of technological change and economic development. It is shown that increasing returns to adoption can arise if the technologies do not substitute each other in their functionalities, leading to an endogenous acceleration mechanism of technological development. Hence, the probability to adopt any e- business technology is hypothesized to be an increasing function of previously adopted, related technologies. Early mover advantages can exist until the early mover has exhausted all possibilities of the new technological paradigm that promise positive returns on investment. Thus, history matters for the technological development of a firm and adoption decision today affect the expected value of any other related technology in the future. The existence of the endogenous acceleration mechanism has important implications for the management of new technologies, the performance of enterprises, the development of market structures and entire economies. The theory is empirically tested and supported in four independent inquiries, using two different exceptionally large datasets and different econometric methods. The existence of a growing digital divide among companies is demonstrated for the period between 1994 and 2002. In addition, the adoption of new e-business technologies by firms creates opportunities to conduct innovation, either to reduce the costs for a given output, to create a new product or service, or to deliver products to customers in a way that is new to the enterprise. Hence, it is argued that the adoption of new technologies does have strategic relevance for firms. Empirical evidence is presented showing that e-business technologies are currently an important enabler of innovations. It is found that innovative firms are more likely to grow. Also, e-business related innovations are at the very least not inferior to traditional kinds of innovations in terms of simultaneous occurrence with superior financial performance of enterprises. The study takes an interdisciplinary approach by relating both to the economics and the management literature, with the objective to show complementarities between both research fields and to draw conclusions for both kinds of audiences.
    Keywords: Technological change, innovation, diffusion, adoption, multiple related technologies, e-business, ICT, firm performance, endogenous acceleration, competitive advantage
    JEL: O3 L0 C1
    Date: 2005–07–29
  21. By: Deepak Kumar (ICFAI University Press , Hyderabad,India); Pradip Sinha (ICFAI University Press,Hyderabad,India)
    Abstract: Customers are the ones who make or break a firm. It has become of utmost importance for today’s organizations to understand the true value of customers.
    Keywords: Customer Service
    JEL: O P
    Date: 2005–08–05
  22. By: Deepak Kumar (ICFAI University Press , Hyderabad,India)
    Abstract: If one wants to be competitive in this 21st Century, one should have the attitude to change and transform according to environment. Acquiring the right attitude to transform oneself, will result in increasing one’s productivity at the workplace.
    Keywords: Spirituality, Productivity and Effective Management
    JEL: O P
    Date: 2005–08–05
  23. By: Rupert Sausgruber (University of Innsbruck)
    Abstract: It is often suggested that team spirit counteracts free-riding. Testing for team spirit with field data is difficult, however, due to an inherent identification problem. In this paper test for team spirit experimentally. In a team work task we vary subjects' information about relative team performance while we leave unchanged the structure of explicit incentives. We find that subjects contribute more to their team's project when teams observe each others' performance. We attribute this result to the enhancement of team spirit caused by asymmetric peer effects between observing teams.
    Keywords: team spirit, peer effects, organization of work, public goods experiments
    JEL: C92 H41 J2
    Date: 2005–08–02
  24. By: Panayotis Dessyllas (Said Business School, University of Oxford); Alan Hughes (Centre for Business Research, University of Cambridge)
    Abstract: In this paper we investigate the incidence of high technology acquisitions using a large international sample of acquisitions by public high technology firms. Controlling for firms’ financial characteristics, we examine the impact of the following innovation- related factors on the propensity to acquire: R&D-intensity as a proxy for R&D inputs; the citation-weighted patent-intensity as a proxy for R&D output; the stock of citation-weighted patents as a proxy for the accumulated stock of knowledge generated by past R&D efforts. The following conclusions can be drawn with respect to the characteristics of acquirers of non-public targets – mainly private firms and former subsidiaries. First, we find support for the view that the propensity to acquire new knowledge-related assets through acquisitions is driven by declining returns from the exploitation of a firm’s existing knowledge base. Second, we find evidence in favour of the make-or-buy theory that acquisitions are a substitute for in-house R&D activity. Third, our results are in accordance with the theoretical argument that a large stock of accumulated knowledge enhances a firm’s ability to absorb external knowledge through acquisitions. These results suggest that smaller acquisitions can be seen as part of an innovation strategy by acquiring firms with relatively low levels of internal R&D which seek to offset low R&D productivity by exploring a range of potential innovation trajectories in new and smaller business units. Interestingly, we find that these interpretations cannot be made for acquirers of the larger public companies.
    Keywords: Mergers and acquisitions, acquisition likelihood, R&D, patents
    JEL: G34 O30 L20
    Date: 2005–07–27
  25. By: Jaume Garcia (Universitat Pompeu Fabra); Climent Quintana- Domeque (Princeton University)
    Abstract: In this article we present the first empirical analysis on the associations between body size, activity, employment and wages for several European countries. The main advantage of the present work with respect to the previous literature is offered by the comparability of the data and its large geographical coverage. According to our results, for Spanish women, being obese is associated with both a 9% lower probability of being employed and wage, while for Swedish and Danish, obesity is associated with a 12% lower probability of being employed and a 10% lower wage respectively. In Belgium, obesity is associated with a 16% lower probability of being employed for men. These robust estimates are strongly informative and may be used as a simple statistical rule of thumb to decide the countries in which lab and field experiments should be run.
    Keywords: BMI; Employment; Physical Discrimination; Obesity; Wages.
    JEL: J
    Date: 2005–08–06

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