nep-bec New Economics Papers
on Business Economics
Issue of 2006‒02‒12
twenty-one papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Competition, Innovation and Growth with Limited Commitment By Ramon Marimon; Vincenzo Quadrini
  2. A latent factor model for ordinal data to measure multivariate predictive ability of financial market movements By Philippe HUBER; Olivier SCAILLET; Maria-Pia VICTORIA-FESER
  3. Does the Quality of Industrial Relations Matter for the Macro Economy? A Cross-Country Analysis Using Strikes Data By John T. Addison; Paulino Teixeira
  4. The Impact of Short-Sale Constraints on Asset Allocation Strategies via the Backward Markov Chain Approximation Method By Carl Chiarella; Chih-Ying Hsiao
  5. The Duration of Union Membership: an Empirical Study By Andrea Vaona
  6. La veille stratégique intégrée: Connaissances, mimétisme, niveau d’aspiration By Luc Chaput
  7. Conflict and the Social Contract By Helmut Bester; Karl Wärneryd
  8. Capital Asset Pricing Model and Changes in Volatility By Andre Oliveira SANTOS
  9. Mergers under Asymmetric Information – Is there a Lemons Problem? By Thomas Borek; Stefan Buehler; Armin Schmutzler
  10. Globalization and General Worker Training By Hans Gersbach; Armin Schmutzler
  11. Foreign Investment, Supermarkets, and the Restructuring of Supply Chains: Evidence from Eastern European Dairy Sectors By Johan F.M. Swinnen; Liesbeth Dries; Nivelin Noeva; Etleva Germenjia
  12. Hierarchical Structure in Brazilian Industrial Firms: an Econometric Study By Luis Otávio Façanha; Marcelo Resende
  13. The effects of replacement schemes on car sales: the Spanish case By Omar Licandro; Antonio R. Sampayo
  14. Measuring Market Conduct in the Brazilian Cement Industry: a Dynamic Econometric Investigation By Rodrigo M. Zeidan; Marcelo Resende
  15. Evolution on the Shoulders of Giants: Entrepreneurship and Firm Survival in the German Laser Industry By Guido Buenstorf
  16. Performance related pay and labor productivity By Gielen,Anne C.; Kerkhofs,Marcel J.M.; Ours,Jan C. van
  17. Middle managers in a medium-sized firm: Their involvement in the internationalization strategy process By Mair, Johanna; Thurner, Claudia
  18. The Impact of Multinational Entry on Domestic Market Structure and R&D By Helmut Luetkepohl
  19. Organizational Downsizing and Innovation By Richtnér, Anders; Åhlström, Pär
  20. A Combined Approach for Segment-Specific Analysis of Market Basket Data By Yasemin Boztug; Thomas Reutterer
  21. Are There Waves in Merger Activity After All? By Dennis Gaertner; Daniel Halbheer

  1. By: Ramon Marimon; Vincenzo Quadrini
    Abstract: We study how barriers to business start-up affect the investment in knowledge capital when contracts are not enforceable. Barriers to business start-up lower the competition for knowledge capital and, in absence of commitment, reduce the incentive to accumulate knowledge. As a result, countries with large barriers experience lower income and growth. Our results are consistent with cross-country evidence showing that the cost of business start-up is negatively correlated with the level and growth of income.
    Keywords: Innovation, Knowledge Capital, Enforcement, Growth, Competition, Commitment, Recursive Contracts, Mobility
    JEL: O30 O31 O40 J24 E22 D23
    Date: 2005–12
  2. By: Philippe HUBER (University of Geneva, HEC and FAME); Olivier SCAILLET (University of Geneva, HEC and FAME); Maria-Pia VICTORIA-FESER (University of Geneva, HEC and FAME)
    Abstract: In this paper we develop a structural equation model with latent variables in an ordinal setting which allows us to test broker-dealer predictive ability of financial market movements. We use a multivariate logit model in a latent factor framework, develop a tractable estimator based on a Laplace approximation, and show its consistency and asymptotic normality. Monte Carlo experiments reveal that both the estimation method and the testing procedure perform well in small samples. An empirical illustration is given for mid-term forecasts simultaneously made by two broker-dealers for several countries.
    Keywords: structural equation model, latent variable, generalised linear model, factor analysis, multinomial logit, forecasts, LAMLE, canonical correlation
    JEL: C12 C13 C30 C51 C52 C53 G10
    Date: 2005–10
  3. By: John T. Addison (University of South Carolina, Universidade de Coimbra/GEMF and IZA Bonn); Paulino Teixeira (Universidade de Coimbra and GEMF)
    Abstract: Using international data, we investigate whether the quality of industrial relations matters for the macro economy. We measure industrial relations inversely by strikes – which proxy we cross-check with an industrial relations reputation indicator – and our macro performance outcome is the unemployment rate. Independent of the role of other institutions, good industrial relations do seem to matter: greater strike volume is associated with higher unemployment. Holding country effects constant, however, the sign of the variable is reversed. This fixed-effects result likely picks up a direct effect of strikes, namely, their tendency to rise when striking becomes more attractive to the union.
    Keywords: strike rate/volume, quality of labor relations, labor market institutions, unemployment
    JEL: E24 J52 J53 J64 J65
    Date: 2006–02
  4. By: Carl Chiarella (School of Finance and Economics, University of Technology, Sydney); Chih-Ying Hsiao (University of Bielefeld)
    Abstract: This paper considers an asset allocation strategy over a finite period under investment uncertainty and short-sale constraints as a continuous time stochastic control problem. Investment uncertainty is characterised by a stochastic interest rate and inflation risk. If there are no short-sale constraints, the optimal asset allocation strategy can be solved analytically. We consider several kinds of short-sale constraints and employ the backward Markov chain approximation method to explore the impact of short-sale constraints on asset allocation decisions. Our results show that the short-sale constraints do indeed have a significant impact on the asset allocation decisions.
    Date: 2005–11–01
  5. By: Andrea Vaona
    Abstract: Thanks to direct access to union databanks, this paper can answer two new questions in Industrial Relations: how long union membership lasts and what are the determinants of its duration. This also allows to conceptualize union membership as a much more dynamic phenomenon than in previous studies, where it was considered a static situation whose causes or e¤ects were to be investigated. Survival analysis applied to a sample of 48705 workers highlights that union membership duration is a positive, though declining, function of age. Furthermore, women, ..exi- ble.workers, foreign ones and those working in cities tend to show less attachment to union membership than the other workers.
    Date: 2006–02
  6. By: Luc Chaput (Département des sciences administratives, Université du Québec (Outaouais))
    Abstract: Le présent article présente un modèle intégré de veille stratégique, méthodologie de base en gestion de projet. Les étapes importantes sont : étalonnage, gestion des connaissances, isomorphisme, aspiration. Le modèle permet de mieux identifier les risques lors des innovations menant à l’application technologique.
    Keywords: veille stratégique; isomorphisme; aspiration; gestion des connaissances; gestion de projet; PMI; risque.
    JEL: M
    Date: 2006–02–05
  7. By: Helmut Bester (Department of Economics, Free University of Berlin, Boltzmannstr. 20, D-14195 Berlin, Germany.; Karl Wärneryd (Department of Economics, Stockholm School of Economics, Box 6501, S-113 83 Stockholm, Sweden.
    Abstract: We consider social contracts for resolving conflicts between two agents who are uncertain about each other's fighting potential. Applications include international conflict, litigation, and elections. Even though only a peaceful agreement avoids a loss of resources, if this loss is small enough, then any contract must assign a positive probability of conflict. We show how the likelihood of conflict outbreak depends on the distribution of power between the agents and their information about each other.
    Keywords: conflict, social contracts, asymmetric information
    JEL: C78 D72 D74 D82 H21 H23
    Date: 2006–02
  8. By: Andre Oliveira SANTOS (Graduate Institute of International Studies)
    Abstract: This article applies regime-switching models to assess the effects of different regimes of volatility in asset pricing. Different variance-covariance matrices for different regimes of volatility are introduced in the Capital Asset Pricing Model. They are scaled with respect to a conditional variance-covariance matrix that simply follows a GARCH process. The probabilities that U.S. financial markets were in a low, medium, or high regime of volatility from March 1958 to December 1995 are computed.
    Keywords: Creation-Date : 1998-09
  9. By: Thomas Borek (Department of Mathematics, Swiss Federal Institute of Technology Zurich); Stefan Buehler (Socioeconomic Institute, University of Zurich); Armin Schmutzler (Socioeconomic Institute, University of Zurich)
    Abstract: We analyze a Bayesian merger game under two-sided asymmetric information about firm types. We show that the standard prediction of the lemons market model–if any, only low-type firms are traded–is likely to be misleading: Merger returns, i.e. the difference between pre- and post-merger profits, are not necessarily higher for low-type firms. This has two implications. First, under very general conditions, equilibria exist where mergers take place, and there is no presumption that there is ineffciently low trade. Second, in these equilibria it is typically not the case that only low-type firms enter an agreement.
    Keywords: merger, asymmetric information, oligopoly, single crossing
    JEL: D43 D82 L13 L33
    Date: 2004–07
  10. By: Hans Gersbach (Alfred-Weber-Institute, University of Heidelberg); Armin Schmutzler (Socioeconomic Institute, University of Zurich)
    Abstract: We examine how globalization affects firms incentives to train workers. In our model, firms invest in productivity-enhancing worker training before Cournot competition takes place. When two separated product markets become integrated and are thus replaced with a market with greater demand and greater firm number, training by each firm increases provided the two countries are suffciently small. When barriers between large markets are eliminated, training is reduced. Similar results hold when firms in countries with different training systems face globalization of product markets. In particular, apprenticeship systems are threatened by a large-scale integration of product markets. Contrary to product market integration, labor market integration has no effect on training incentives.
    Keywords: general training, human capital, oligopoly, turnover
    JEL: D42 L22 L43 L92
    Date: 2004–03
  11. By: Johan F.M. Swinnen; Liesbeth Dries; Nivelin Noeva; Etleva Germenjia
    Abstract: The combination of transition and globalization since the early 1990s has caused dramatic changes in supply chains globally. This paper uses survey evidence from several Eastern European countries (Albania, Bulgaria, Poland, Slovakia, Romania and Russia) on how these forces affect the dairy sector. In many countries dairy farms are small family farms. Investments by foreign companies in processing and retailing and the opening to international markets have introduced higher standards, leading, in turn, to extensive contracting and vertical coordination in the dairy chain. In countries close to the EU the restructuring of the dairy chain was mostly driven by investments in dairy processing, while in countries further from the EU, and less advanced in transition, retail investments are playing a more important role in driving change throughout the dairy chain. There have been significant efficiency gains, and the vertical coordination had positive effects on farm investments and productivity, especially since the late 1990s. Evidence suggests that small dairy farms have generally benefited from the vertical coordination processes.
    Date: 2006
  12. By: Luis Otávio Façanha; Marcelo Resende
    Abstract: The paper investigates different implications of theoretical models for hierarchical structure. A sample of 6567 firms in the Brazilian manufacturing industry is considered and explanatory factors pertaining structural characteristics, network technology, technological innovations, managerial innovations and incentive mechanisms are investigated. Despite the broader availability of explanatory variables in some categories, one only detects important joint effects accruing from the group of network technology variables as had been previously obtained in the related literature. In contrast, however, one can detect a marginally significant joint effect of the newly considered group of incentive mechanisms variables. The evidence in terms of individual effects is largely consistent with the predicted effects from the theoretical literature on hierarchy.
    JEL: C25 L22
    Date: 2006
  13. By: Omar Licandro; Antonio R. Sampayo
    Abstract: This paper studies a model of car replacement designed to evaluate policies addressed to influence replacement decisions. An aggregate hazard function is computed from optimal replacement rules of heterogeneous consumers, which mimics the hump-shaped hazard function observed for the Spanish car market. The model is calibrated to evaluate quantitatively the Plan Prever, a replacement scheme introduced in Spain in 1997, finding that the positive effect of the subsidy is high in the short run but small in the long run for both sales and the average age of the stock.
    Keywords: scrapping, replacement schemes, heterogeneous consumers
    JEL: D12 H31
    Date: 2005
  14. By: Rodrigo M. Zeidan; Marcelo Resende
    Abstract: Indirect assessments of market conduct have become widespread in the New Empirical Industrial Organization-NEIO literature. Recently, Steen and Salvanes (1999) provided a flexible dynamic econometric formulation of the approach advanced by Bresnahan (1982) and Lau (1982). The present paper considers a similar approach as applied to regional cement markets in Brazil under more favorable data availability and it also attempts to address part of the critiques that usually emerge with respect to the NEIO literature. In particular, issues pertaining to structural stability and yet the control for the number of competing firms are addressed. The evidence clearly indicates non-negligible and distinct market power in the different regions and yet distinct conduct patterns in the short and long-run.
    JEL: L11 L13
    Date: 2005
  15. By: Guido Buenstorf
    Abstract: This paper studies 40 years of evolution in the German laser industry to test the generality of evolutionary patterns observed in the U.S. laser industry. Key characteristics found in the U.S. industry are also present in Germany. There is sustained entry into the industry, and neither a shakeout nor first-mover advantages of early entrants are observed. A survival analysis finds that, similar to the U.S. industry, laser firm spin-offs have been systematically more successful than academic startups. Differences in survival and determinants of the spin-off process are traced for alternative kinds of spin-offs, including firms started by serial entrepreneurs.
    Keywords: Industry life cycle, submarkets, entrepreneurship, spin-offs, integrating distributors
    JEL: L10 M13 O33
    Date: 2006–01
  16. By: Gielen,Anne C.; Kerkhofs,Marcel J.M.; Ours,Jan C. van (Tilburg University, Center for Economic Research)
    Abstract: This paper uses information from a panel of Dutch firms to investigate the labor productivity effects of performance related pay (PRP). We find that PRP increases labor productivity at the firm level with about 9%.
    Keywords: performance related pay; labour productivity
    JEL: C41 H55 J64 J65
    Date: 2006
  17. By: Mair, Johanna (IESE Business School); Thurner, Claudia (IESE Business School)
    Abstract: While prior research has emphasized middle managers' important role in the strategy process and the benefits of their involvement, little is known about their role in the strategy process in medium-sized firms and, specifically, their participation in the internationalization strategy process (ISP). Our analysis of interviews conducted with the complete layer of middle managers at a medium-sized firm is intended to shed light on these issues by examining the extent and effect of middle managers' involvement in the formulation phase of the ISP. The medium-sized Italian firm chosen for our sample was going through a period of radical change as it expanded its international activities beyond its cultural boundaries. We found that not all the firm's middle managers perceived themselves to be involved in formulating the internationalization strategy. The perception of involvement was dependent on ownership of the outcome of internationalization. Middle managers with revenue accountability perceived themselves to be involved in strategy formulation. Furthermore, this perception of increased involvement was tightly linked to a more opportunity-oriented attitude toward internationalization. We suggest that medium-sized firms can actively manage middle managers' attitudes and behavior toward internationalization by managing perceptions.
    Keywords: Middle managers; internationalization strategy; small and medium-sized companies;
    Date: 2005–11–21
  18. By: Helmut Luetkepohl
    Abstract: Structural vector autoregressive (VAR) models are in frequent use for impulse response analysis. If cointegrated variables are involved, the corresponding vector error correction models offer a convenient framework for imposing structural long-run and short-run restrictions. Occasionally it is desirable to impose over-identifying restrictions in this context. Some related problems are pointed out. They result from the fact that the over-identifying restrictions have to be in the admissible parameter space which is not always obvious. Conditions are given that can help in avoiding the problems.
    Keywords: Cointegration, vector autoregressive process, vector error correction model, impulse responses
    JEL: C32
    Date: 2005
  19. By: Richtnér, Anders (Dept. of Business Administration, Stockholm School of Economics); Åhlström, Pär (Chalmers University of Technology)
    Abstract: Companies implementing a downsizing strategy aiming at increasing cost efficiency and operational effectiveness may face the fact that their innovative ability is hampered. In this paper, we develop a model of the mechanisms through which organizational downsizing affects innovation. We use existing theory to develop propositions regarding the details of how and why organizational downsizing affects innovation. Our model contains three components: a) the organization’s stock of knowledge, b) the individual’s creativity, and c) the knowledge creation process. These are three components which previous research on innovation management has suggested strongly affects innovation. Downsizing is also likely to affect all three components in various ways. Overall, we can expect downsizing to have a negative effect on innovation, but there are aspects of the knowledge creation process which may be positively affected by downsizing.
    Keywords: Innovation; Knowledge; Knowledge creation; Organizational downsizing
    Date: 2006–01–13
  20. By: Yasemin Boztug; Thomas Reutterer
    Abstract: There are two main research traditions for analyzing market basket data that exist more or less independently from each other, namely exploratory and explanatory model types. Exploratory approaches are restricted to the task of discovering cross-category interrelationships and provide marketing managers with only very limited recommendations regarding decision making. The latter type of models mainly focus on estimating the effects of category-level marketing mix variables on purchase incidences assuming cross-category dependencies. We propose a procedure that combines these two modeling approaches in a novel two-stage procedure for analyzing cross-category effects based on shopping basket data: In a data compression step we first derive a set of market basket prototypes and generate segments of households with internally more distinctive (complementary) cross-category interdependencies. Utilizing the information on categories that are most responsible for prototype construction, segment-specific multivariate logistic models are estimated in a second step. Based on the data-driven way of basket construction, we can show significant differences in cross- effects and related price elasticities both across segments and compared to the global (segment-unspecific) model.
    Keywords: Marketing, Choice Models, Market Basket Analysis, Cross-Category Effects, Segmentation
    JEL: C31 C33 C35 C63 M31
    Date: 2006–01
  21. By: Dennis Gaertner (Socioeconomic Institute, University of Zurich); Daniel Halbheer (Socioeconomic Institute, University of Zurich)
    Abstract: This paper investigates the merger wave hypothesis for the US and the UK employing a Markov regime switching model. Using quarterly data covering the last thirty years, for the US, we identify the beginning of a merger wave in the mid 1990s but not the much-discussed 1980s merger wave. We argue that the latter finding can be ascribed to the refined methods of inference offered by the Gibbs sampling approach. As opposed to the US, mergers in the UK exhibit multiple waves, with activity surging in the early 1970s and the late 1980s.
    Keywords: mergerwaves, Markov Regime Switching Regression Model, Gibbs Sampling
    JEL: G34 C32 C11 C15
    Date: 2004–09

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