nep-bec New Economics Papers
on Business Economics
Issue of 2005‒10‒29
sixteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Mediation in Situations of Conflict and Limited Commitment By Kay Mitusch; Roland Strausz
  2. Externalities and the Allocation of Decision Rights in the Theory of the Firm By Helmut Bester
  3. Workgroup Gender Diversity and Charismatic Leadership: Asymmetric Effects Among Men and Women By JUAN CARLOS PASTOR; MARGARITA MAYO
  4. Towards a Monthly Business Cycle Chronology for the Euro Area By Emanuel Mönch; Harald Uhlig
  5. Innovation, Appropriation and Entrepreneurial Strategy. By Stewart, Geoff
  6. Bank finance versus bond finance: what explains the differences between US and Europe? By Fiorella De Fiore; Harald Uhlig
  7. The Influence of Employee Communication on Strategic Business Alignment By Riel, C.B.M. van; Berens, G.; Dijkstra, M.
  8. General Model for Automated Diagnosis of Business Performance By Caron, E.; Daniels, H.A.M.
  9. Skill Shortages and Firms’ Employment Behaviour By Philip Stevens
  10. Information and Communication Technology (ICT) Adoption and Utilisation, Skill Constraints and Firm By John Forth; Geoff Mason
  11. Quantitative inference from qualitative business survey panel data: a microeconometric approach By James Mitchell; Martin Weale
  12. Working Time as an Investment? – The Effects of Unpaid Overtime on Wages, Promotions and Layoffs By Silke Anger
  13. Exporting vs. Outsourcing by MNC Subsidiaries: Which Determines FDI Spillovers? By Blyde, Juan; Kugler, Maurice; Stein, Ernesto
  14. Integrating Industrial Organization and International Business to Explain the Cross-National Domestic Airline Merger Phenomenon By Joseph A. Clougherty
  15. Buried in Paperwork: Excessive Reporting in Organizations By Roland Strausz
  16. Do Financial Bonuses to Employees Reduce their Absenteeism? Outcome of a Lottery By Wolter Hassink; Pierre Koning

  1. By: Kay Mitusch (Free University Berlin, Department of Economics, Boltzmannstr. 20, D-14195 Berlin, Germany); Roland Strausz (Free University Berlin, Department of Economics, Boltzmannstr. 20, D-14195 Berlin, Germany)
    Abstract: We study the reasons and conditions under which mediation is beneficial when a principal needs information from an agent to implement an action. Assuming a strong form of limited commitment, the principal may employ a mediator who gathers information and makes non-binding proposals. We show that a partial rev-elation of information is more effective through a mediator than through the agent himself. This implies that mediation is strictly helpful if and only if the likelihood of a conflict of interest is positive but not too high. The value of mediation depends non-monotonically on the degree of conflict. Our insights extend to general models of contracting with imperfect commitment.
    Keywords: Contracting, Non-Commitment, Revelation Principle
    JEL: D82
    Date: 2004–06
  2. By: Helmut Bester (Free University Berlin, Department of Economics, Boltzmannstr. 20, D-14195 Berlin, Germany)
    Abstract: This paper views authority as the right to undertake decisions that have external effects on other members of the organization. Because of contractual incompleteness, monetary incentives are insufficient to internalize these effects in the decision maker's objective. The optimal assignment of decision rights minimizes the resulting inefficiencies. We illustrate this in a principal–agent model where the principal retains the authority to select 'large' projects but delegates the decision right to the agent to implement 'small' projects. Extensions of the model discuss the role of effort incentives, asymmetric information and multistage decisions.
    Keywords: Authority, Control Rights, Decision Rights, Delegation, Externalities, Incomplete Contracts, Theory of the Firm
    JEL: D23 D82 L22
    Date: 2004–04
  3. By: JUAN CARLOS PASTOR (Instituto de Empresa); MARGARITA MAYO (Instituto de Empresa)
    Abstract: A laboratory study was conducted to examine how gender team diversity influences men and women´s charismatic relationships with an elected group leader. We examined individuals´ charismatic relationships with their leaders when working in groups varying in gender composition. Results supported the argument that gender diversity provides a context that facilitates the emergence of charismatic leadership. Furthermore, the effect of gender diversity on charismatic relationships is asymmetric, being more marked in the case of men than that of women. Our results question the similarity-attraction hypothesis and contribute to the incipient follower-centric approach to leadership.
    Keywords: Diversity, Leadership
    Date: 2005–10
  4. By: Emanuel Mönch; Harald Uhlig
    Abstract: This paper is an exercise in dating the Euro area business cycle on a monthly basis. Using a quite flexible interpolation routine, we construct several monthly series of Euro area real GDP, and then apply the Bry-Boschan (1971) procedure. To account for the asymmetry in growth regimes and duration across business cycle phases, we propose to extend this method with a combined amplitude/phase-length criterion ruling out expansionary phases that are short and flat. Applying the extended procedure to US and European data, we are able to replicate approximately the dating decisions of the NBER and the CEPR.
    Keywords: business cycle, European business cycle, Euro area, Bry-Boschan, NBER methodology
    JEL: B41 C22 C82 E32 E58
    Date: 2003–01
  5. By: Stewart, Geoff
    Abstract: Innovation, Appropriation and Entrepreneurial Strategy Geoff Stewart Economics Division School of Social Sciences University of Southampton Abstract We analyse the strategy of an entrepreneur seeking to earn a return on a new discovery when faced by an incumbent firm and pool of potential entrants. The entrepreneur may choose to purchase the incumbent without revealing the discovery, enter the market as a competitor, or approach the incumbent with a view to some form of cooperation. Among our findings is that it is the magnitude of the discovery and its susceptibility to appropriation, rather than entry costs, that are the main determinants of whether entry will occur. Also, whilst major discoveries will always be implemented, others might be withheld. JEL classification: D23; D43; L13; O31.
    Keywords: Entrepreneur; Property rights; Appropriability; Oligopoly.
    Date: 2004–02–19
  6. By: Fiorella De Fiore; Harald Uhlig
    Abstract: We present a dynamic general equilibrium model with agency costs, where heterogeneous firms choose among two alternative instruments of external finance-corporate bonds and bank loans. We characterize the financing choice of firms and the endogenous financial structure of the economy. The calibrated model is used to address questions such as: What explains differences in the financial structure of the US and the euro area? What are the implications of these differences for allocations? We find that a higher share of bank finance in the euro area relative to the US is due to lower availability of public information about firms' credit worthiness and to higher effciency of banks in acquiring this information. We also quantify the effect of differences in the financial structure on per-capita GDP.
    Keywords: Financial structure, agency costs, heterogeneity
    JEL: E20 E44 C68
    Date: 2005–08
  7. By: Riel, C.B.M. van; Berens, G.; Dijkstra, M. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Over the last years, it has become increasingly important for companies to create strategic business alignment (SBA), i.e., the degree to which employees understand, support, and are able to execute the companies? strategic initiatives. This study provides insights into the way companies can create SBA through employee communication. Specifically, we examined the influence of different dimensions of employee communication on employee attitudes toward their company?s strategic initiatives, and on employee behavior regarding the strategic initiatives. The results show that especially management communication, communication about strategic initiatives, and the communication climate within an organization are of vital importance to stimulate SBA.
    Keywords: Strategic alignment;Employee attitudes;Employee conduct;Strategy implementation;Organizational communication;
    Date: 2005–10–18
  8. By: Caron, E.; Daniels, H.A.M. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: In this paper, we describe an extension of the methodology for explanation generation in financial knowledge-based systems, offering the possibility to automatically generate explanations and diagnostics to support business decision tasks. The central goal is the identification of specific knowledge structures and reasoning methods required to construct computerized explanations from financial data and business models. A multi-step look-ahead algorithm is proposed that deals with so-called calling-out effects, which are a common phenomenon in financial data sets. The extended methodology was tested on a case-study conducted for Statistics Netherlands involving the comparison of financial figures of firms in the Dutch retail branch. The analyses are performed with a diagnostic software application which implements our theory of explanation. Comparison of results of the classic explanation methodology with the results of the extended methodology shows significant improvements in the analyses when cancelling-out effects are present in the data.
    Keywords: Decision support systems;Finance;Production statistics;Artificial intelligence;Explanation;
    Date: 2005–10–14
  9. By: Philip Stevens
    Abstract: This study investigates the effects of skill shortages on the dynamics of employment at the firm level for UK manufacturing between 1984-94. We find that shortages of skilled labour have a statistically significant effect on firms’ employment behaviour. It has a positive effect on firms’ adjustment costs leading to employment being more sluggish to respond when the labour market is tight, implying that employment adjustment will be more responsive in the downward direction.
    Date: 2004–05
  10. By: John Forth; Geoff Mason
    Abstract: In the context of the skill-biased technological revolution associated with Information and Communication Technologies (ICTs), firms with relatively high (low) proportions of skilled workers can be expected to have a comparative advantage (disadvantage) in minimising the costs both of ICT adoption and of learning how to make best use of ICTs. In this paper we make use of benchmarking survey data for UK enterprises between 1997-99, combined with post-survey financial data for the same enterprises, in order to assess the impact of ICT skill constraints on financial performance at firm level. The results provide clear evidence that ICT skill constraints have an indirect negative impact on firm performance as a result of the restrictions that such skill deficiencies place on ICT adoption and on the intensity of use of ICTs (once they have been installed). However, there is only weak evidence of skill constraints impinging directly on firm performance at given levels of ICT adoption and utilisation.
    Date: 2004–05
  11. By: James Mitchell; Martin Weale
    Abstract: Business survey data are used widely as they offer timely information about the state of the economy. This paper addresses the problem of how best to infer a quantitative signal about economic growth from qualitative business survey data. A method drawing on the forecast combination literature is derived for producing quantitative best linear unbiased inference from qualitative panel survey data. This involves aggregating firm-level quantified estimates according to their reliability. We illustrate how the approach can be used to derive early estimates of official output growth data in the UK in an application to the panel of firm-level responses from the CBI's Industrial Trends Survey.
    Date: 2005–09
  12. By: Silke Anger
    Abstract: Whereas the number of paid overtime hours declined over the last decade, a different trend can be observed for unpaid overtime work in Germany. We look at the future consequences for overtime workers, and therefore investigate the investment character of working time. We examine whether unpaid extra hours induce a higher likelihood of promotion and pay rise, and whether they reduce the risk of losing the job. Using longitudinal micro data from the GSOEP for the years 1991 to 2002 we find significant positive effects of unpaid overtime work on future payoffs, but also a positive impact on the probability of job loss. Therefore, we find only partial evidence for the investment character of unpaid overtime.
    Keywords: overtime, unpaid work, promotion, wage growth, layoff
    JEL: J2 J3 J4
    Date: 2005–06
  13. By: Blyde, Juan; Kugler, Maurice; Stein, Ernesto
    Abstract: Export orientation of multinational corporations (MNCs) has seldom been incorporated in the analysis of spillovers from foreign direct investment (FDI). Also, until recently empirical research dealt mainly with intra-industry spillovers from FDI with restrictive treatment of inter-industry effects. Yet, to the extent that local producers are not in the competitive fringe of MNCs, both spillovers from export oriented subsidiaries and inter-industry spillovers may be more likely. First, when MNCs use the host country as export platform, domestic firms are by and large not competitors to subsidiaries. Then, there would be no incentives to restrict technical information flows. Our results using panel data from Venezuelan manufacturing point to FDI spillovers, mainly between but also within industries, from export-oriented MNCs to large domestic firms. Second, MNCs that outsource have an incentive to transfer technical knowledge to local upstream suppliers. When we allow for spillovers to take place across sectors, we find evidence that backward linkages are a channel of technology diffusion from export-oriented MNCs to domestic manufacturers. Furthermore, small and medium plants do not experience productivity gains ensuing FDI while large domestic producers experience higher productivity growth, suggesting the importance of differences in absorptive capacity.
    Keywords: Export platform; Local outsourcing; FDI Spillovers; Absorptive capacity; Generic knowhow. JEL Classification: O41, F43, F21, F23, C52.
    Date: 2004–09–01
  14. By: Joseph A. Clougherty (Wissenschaftszentrum Berlin (WZB), Research Unit: MP-CIC Reichpietschufer 50, D-10785 Berlin, Germany)
    Abstract: The domestic airline merger phenomenon of the late 1980s and early 1990s sparked a great deal of Industrial Organization literature; yet, that literature neglected non-US merger activity and the potential for international competitive incentives. Using an International Business perspective to complement a primarily Industrial Organization analysis, I argue that factoring international competitive gains helps explain the domestic airline merger phenomenon. A Cournot model of airline competition illustrates the international incentives behind integrating domestic with international routes and behind acquiring domestic competitors. Further, comprehensive panel data tests also support large domestic networks and actual mergers improving the international competitiveness of airlines.
    Keywords: airline-mergers, imperfect-competition, international-determinants
    Date: 2004–07
  15. By: Roland Strausz (Free University Berlin, Department of Economics, Boltzmannstr. 20, D-14195 Berlin, Germany)
    Abstract: This paper offers an explanation why a principal may demand too much paperwork from a subordinate: Due to limited liability and moral hazard a principal is unable to appropriate all rents. Internal paperwork allows a more accurate monitoring of the agent and enables the principal to appropriate a larger part of the agent's rent. In her decision the principal disregards the agent's cost increase of more internal paperwork. Consequently, the requested amount of internal paperwork may be too high from both the agent's personal point of view and the organization as a whole.
    JEL: D23 D82
    Date: 2004–10
  16. By: Wolter Hassink; Pierre Koning
    Abstract: This paper investigates the effectiveness of a monthly lottery in reducing sick leave among workers in a manufacturing firm. Conditions of participation are not having reported sick in the previous three months and not having won the lottery earlier. It turns out that the lottery results in a decrease in the rate of sick leave of 1.6 percentage point. From the perspective of the firm, the lottery is found to be highly beneficial ­ that is, the benefits associated with the decrease in the sick leave rate exceed the costs of the lottery. Workers seem to be primarily driven by the first upcoming lottery. After winning the lottery, winners resume their previous (rate of) absence.
    Keywords: absenteeism, sick leave, incentives, lottery
    JEL: J22 J32 M52
    Date: 2005–06

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