nep-bec New Economics Papers
on Business Economics
Issue of 2006‒07‒02
twenty-two papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Disappearing Private Reputations in Long-Run Relationships By Martin W. Cripps; George J. Mailath; Larry Samuelson
  2. Hours Worked: Long-Run Trends By Jeremy Greenwood; Guillaume Vandenbroucke
  3. Lumpy Investment in Dynamic General Equilibrium By Ruediger Bachmann; Ricardo J. Caballero; Eduardo Engel
  4. Innovativity: A comparison across seven European countries By Mohnen, Pierre; Mairesse, Jacques; Dagenais, Marcel
  5. How Different Is the Cyclical Behavior of Home Production Across Countries? By M. Ayhan Kose; William Blankenau
  6. The Limited Influence of Unemployment on the Wage Bargain By Robert E. Hall; Paul R. Milgrom
  7. Probabilistic Business Failure Prediction in Discounted Cash Flow Bond and Equity Valuation By Skogsvik, Kenth
  8. Consumption Commitments and Employment Contracts By Andrew Postlewaite; Larry Samuelson; Dan Silverman
  9. Which Workers Gain Upon Adopting a Computer? By Cindy Zoghi; Sabrina Wulff Pabilonia
  10. Trust in International Organizations: An Empirical Investigation Focusing on the United Nations By Benno Torgler
  11. The theory of benchmarking and the measurement of industrial organization By Raa,Thijs ten
  12. Business groups, taxes and accruals management By Beuselinck,Christof; Deloof,Mark
  13. Firms merge in response to constraints By Boone,Jan
  14. Disciplining and Screening Top Executives By Silvia Dominguez Martinez; Otto H. Swank; Bauke Visser
  15. Dependent Interviewing: A Framework and Application to Current Research By Annette Jäckle
  16. Using stakeholder dialogue as a source for new ideas. A dynamic capability underlying sustainable innovation By Ayuso, Silvia; Rodriguez, Miguel A.; Ricart, Joan E.
  17. A Naturalistic Approach to the Theory of the Firm: The Role of Cooperation and Cultural Evolution By C. Cordes; P. J. Richerson; R. McElreath; P. Strimling
  18. Measures to Limit the Offshore Use of Currencies: Pros and Cons By Li Cui; Inci Ötker; Shogo Ishii
  19. Networks and Firm Location By José Pedro Pontes
  20. Essais sur la GOUVERNANCE By Jean-Paul Pollin
  21. Capital humain et processus de création d’entreprise : le cas des primo-créateurs wallons By Michele Cincera; Lydia Greunz; Jean-Luc Guyot; Olivier Lohest
  22. L’intervenant face aux objectifs de mission : entre tensions vécues et régulations tentées. By Michel Verstraeten

  1. By: Martin W. Cripps; George J. Mailath; Larry Samuelson
    Date: 2006–06–21
  2. By: Jeremy Greenwood (University of Rochester); Guillaume Vandenbroucke (University of Rochester)
    Abstract: For 200 years the average number of hours worked per worker declined, both in the market place and in the home. Technological progress is the engine of such transformation. Three mechanisms are stressed: (i) The rise in real wages and its corresponding wealth effect; (ii) The enhanced value of time off from work, due to the advent of time-using leisure goods; (iii) The reduced need for housework, due to the introduction of time-saving appliances. These mechanisms are incorporated into a model of household production. The notion of Edgeworth-Pareto complementarity/substitutability is key to the analysis. Numerical examples link theory and data.
    Keywords: Hours worked, leisure, housework, household production, Edgeworth-Pareto complementarity/substitutability, technological progress
    JEL: E24 J22 O11 O33
    Date: 2005–06
  3. By: Ruediger Bachmann (Yale University); Ricardo J. Caballero (MIT); Eduardo Engel (Cowles Foundation, Yale University)
    Abstract: Microeconomic lumpiness matters for macroeconomics. According to our DSGE model, it explains roughly 60% of the smoothing in the investment response to aggregate shocks. The remaining 40% is explained by general equilibrium forces. The central role played by micro frictions for aggregate dynamics results in important history dependence in business cycles. In particular, booms feed into themselves. The longer an expansion, the larger the response of investment to an additional positive shock. Conversely, a slowdown after a boom can lead to a long lasting investment slump, which is unresponsive to policy stimuli. Such dynamics are consistent with US investment patterns over the last decade. More broadly, over the 1960-2000 sample, the initial response of investment to a productivity shock with responses in the top quartile is 60% higher than the average response in the bottom quartile. Furthermore, the reduction in the relative importance of general equilibrium forces for aggregate investment dynamics also facilitates matching conventional RBC moments for consumption and employment.
    Keywords: Ss model, RBC model, Time-varying impulse response function, Aggregate shocks, Sectoral shocks, Idiosyncratic shocks, Adjustment costs, History dependence, Moment matching
    JEL: E10 E22 E30 E32 E62
    Date: 2006–06
  4. By: Mohnen, Pierre (UNU-MERIT); Mairesse, Jacques (UNU-MERIT); Dagenais, Marcel (University of Montreal)
    Abstract: This paper proposes a framework to account for innovation similar to the usual accounting framework in production analysis and a measure of innovativity comparable to that of total factor productivity. This innovation accounting framework is illustrated using micro-aggregated firm data from the first Community Innovation Surveys (CIS1) for seven European countries: Belgium, Denmark, Ireland, Germany, the Netherlands, Norway and Italy for the year 1992. Based on the estimation of a generalized Tobit model and measuring innovation as the share of total sales due to improved or new products, it compares the propensity to innovate, and the innovation intensity conditional and unconditional on being innovative, across the seven countries and low- and high-tech manufacturing sectors. Even with relatively few explanatory variables our innovation framework already accounts for sizeable differences in country innovation intensity. It also shows that differences in innovativity across countries can be nonetheless very large.
    Keywords: Innovation, Research and development, comparison, self-selection, Europe
    JEL: C35 L60
    Date: 2006
  5. By: M. Ayhan Kose; William Blankenau
    Abstract: This paper studies stylized business cycle properties of household production in four industrialized countries (Canada, the United States, Germany, and Japan). We employ a dynamic small open economy business cycle model that incorporates a household production sector. We use the model to generate data on home output, hours worked in the home sector, and hours spent on leisure. We find that in each country, home output is more volatile than market output while home sector hours are about as volatile as those in the market sector. In each country, leisure is the least volatile series. Leisure hours and home hours are countercyclical in all countries, and home output is not highly correlated with market output. Home sector variables are generally less persistent than market variables, and cross-country correlations related to home production tend to be lower than those related to market production. These findings demonstrate that despite some well-known structural differences in labor markets, the cyclical features of home sector variables are similar across the countries we consider.
    Keywords: Business cycles , Canada , United States , Germany , Japan , Production , Labor markets , Economic models ,
    Date: 2006–02–28
  6. By: Robert E. Hall; Paul R. Milgrom
    Date: 2006–06–21
  7. By: Skogsvik, Kenth (Center for Financial Analysis and Managerial Economics in Accounting)
    Abstract: The purpose of the paper is to incorporate probabilistic business failure predictions in discounted cash flow (DCF) models for the valuation of company bonds and owners´ equity. The analysis shows that period-specific probabilities of business failure are instrumental to the assessment of expected values of cash flows in such models. Under somewhat restrictive conditions the failure risk can alternatively be accommodated through an adjustment of the discount rate, i.e. expected values of future cash flows conditioned on business survival can simply be discounted with such a discount rate. The result holds both in bond and equity DCF valuation modelling. In order for the accounting-based residual income valuation model to appropriately capture the failure risk, an additional accounting “failure loss recognition” principle as well as a novel term in the model specification have been identified.
    Keywords: Business failure prediction; DCF valuation; Bond valuation; Fundamental valuation; Residual income valuation
    Date: 2006–05–01
  8. By: Andrew Postlewaite; Larry Samuelson; Dan Silverman
    Date: 2006–06–21
  9. By: Cindy Zoghi (U.S. Bureau of Labor Statistics); Sabrina Wulff Pabilonia (U.S. Bureau of Labor Statistics)
    Abstract: Using the Canadian Workplace and Employee Survey and controlling for individual and establishment fixed effects, we find that within a year of adopting a computer, the average worker earns a 3.6 percent higher wage than a similar worker who did not adopt a computer. Returns are even larger for managers and professionals, highly educated workers, and those with significant prior computer experience. Employees who use computer applications that require high cognitive skills earn the highest returns.
    Keywords: Computer Use, Technology, Computer Applications
    JEL: J31 O30
    Date: 2006–06
  10. By: Benno Torgler
    Abstract: The literature on social capital has strongly increased in the last two decades, but, there still is a lack of substantial empirical evidence about the determinants of trust. Most studies have focused on social or generalized trust, while those investigating international trust or trust in international organizations are rare. This empirical study analyses a cross-section of individuals using micro-data of the World Values Survey wave III (1995-1997), covering 38 countries, to investigate trust in international organizations, specifically trust in the United Nations. The results suggest that not only socio-demographic and socio-economic factors have an impact on citizens’ trust in the UN, but also political factors. We also observe externalities. Political trust at the state level leads to a higher trust at the international level. On the other hand, if a state is perceived as dysfunctional, the level of trust declines.
    Keywords: International Organizations; United Nations; Trust Social Capital; International Perspective; Political Interest.
    JEL: Z13 D73 O19
    Date: 2006–06
  11. By: Raa,Thijs ten (Tilburg University, Center for Economic Research)
    Abstract: If more productive firms grow relatively fast, an industry performs better, even when no firm exhibits technical or efficiency change. In other words, the two well-known sources of productivity growth-technology and efficiency-can be augmented by a third one, namely the industrial organization effect. In this paper the efficiency of an industrial organization and its contribution to performance are measured by benchmarking all firms on the industry. More precisely, efficiency is measured by the proximity between a firm and the best practices. Aggregation of firm efficiencies is imperfect. The bias is used to measure the efficiency of the industrial organization. In benchmarking, change transmitted by a firm represents productivity growth and change transmitted by the best practices represents technical change. Although I use a nonparametric framework, which requires only input and output information, duality analysis reveals the Solow residual. In discrete time Malmquist indices capture the measurement of the industrial organization effect, efficiency changes, and technical change. The industrial organization of Japanese banking is analyzed.
    Keywords: Industrail organization;Efficiency;Aggregation;Productivity
    JEL: L10 D24 O47
    Date: 2006
  12. By: Beuselinck,Christof; Deloof,Mark (Tilburg University, Center for Economic Research)
    Abstract: This paper provides evidence that Belgian firms belonging to a business group have a lower effective tax rate (ETR) and face a less positive association between pre-tax income and ETRs than independent firms. These findings suggest that individual group members apply efficient tax planning techniques in order to minimize taxes at the group level. We hypothesize that group firms strategically adjust firm-level reported earnings levels in response to tax incentives. We find evidence consistent with this hypothesis, in that the intrinsic negative association between total accruals and operating cash flows is more (less) pronounced for group firms facing a positive (zero) marginal tax rate status, compared to independent firms. In addition, we find that a group firm s net tax-paying situation is more important in its discretionary accruals reporting decisions, compared to independent firms. Finally, we identify intra-group receivables as relevant tax-reducing accruals components. Results are robust to alternative model specifications, variable definitions and measures.
    Keywords: business groups;Effective tax rate;Marginal tax rate;Accruals - Cash Flow Association
    JEL: G32 H21 M41
    Date: 2006
  13. By: Boone,Jan (Tilburg University, Center for Economic Research)
    Abstract: Theoretical IO models of horizontal mergers and acquisitions make the critical assumption of efficiency gains. Without efficiency gains, these models predict either that mergers are not profitable or that mergers are welfare reducing. A problem here is the empirical observation that on average mergers do not create efficiency gains. We analyze mergers in a model where firms cannot equalize marginal costs and marginal revenues over all dimensions in their action space due to constraints. In this type of model mergers can still be profitable and welfare enhancing while they create a loss in efficiency. The merger allows a firm to relax constraints. Further, this set up is consistent with the following stylized facts on mergers and acquisitions: M&A's happen when new opportunities have opened up or industries have become more competitive (due to liberalization), they happen in waves, shareholders of the acquired firms gain while shareholders of the acquiring firms lose from the acquisition. Standard IO merger models do not explain these empirical observations.
    Keywords: Pro/anti-competitive mergers;efficiency defence;constraints;merger waves; deregulation
    JEL: G34 K21 L40
    Date: 2006
  14. By: Silvia Dominguez Martinez (Erasmus Universiteit Rotterdam); Otto H. Swank (Erasmus Universiteit Rotterdam); Bauke Visser (Erasmus Universiteit Rotterdam)
    Abstract: Boards of directors face the twin task of disciplining and screening executives. To perform these tasks directors do not have detailed information about executives' behaviour, and only infrequently have information about the success or failure of initiated strategies, reorganizations, mergers etc. We analyse the nature of (implicit) retention contracts boards use to discipline and screen executives. Consistent with empirical observation, we find that executives may become overly active to show their credentials; that the link between bad performance and dismissal is weak; and that boards occasionally dismiss competent executives.
    Keywords: board of directors; turnover; retention contracts; selection; moral hazard; empire building
    JEL: G30 G34
    Date: 2006–06–19
  15. By: Annette Jäckle (Institute for Social and Economic Research)
    Keywords: cost, experiment, measurement error, questionnaire design
    Date: 2006–06
  16. By: Ayuso, Silvia (IESE Business School); Rodriguez, Miguel A. (IESE Business School); Ricart, Joan E. (IESE Business School)
    Abstract: This paper attempts to gain a deeper understanding of the firm's ability for integrating stakeholder insights into the process of organisational innovation within the context of sustainable development. Given the early stage of empirical research on the topic, we used an exploratory case study method of two Spanish companies that have successfully learned from stakeholder dialogue and have generated innovations that are both beneficial for the company and for sustainable development in general. The evidence from the two case studies suggests the existence of two simple capabilities - stakeholder dialogue and stakeholder knowledge integration - for generating innovations in accordance with stakeholder needs. Whereas stakeholder dialogue leverages organisational resources that promote two-way communication, transparency and appropriate feedback to stakeholders, stakeholder knowledge integration relies on non-hierarchical structures, flexibility and openness to change. The paper sheds some light on the under-researched issue of linking stakeholder dialogue and sustainable innovation, and contributes to opening the 'black box' of dynamic capabilities and advancing in the understanding of this fundamental organisational concept.
    Keywords: sustainable development; stakeholders; innovation; capabilities;
    Date: 2006–05–29
  17. By: C. Cordes; P. J. Richerson; R. McElreath; P. Strimling
    Abstract: One reason why firms exist, this paper argues, is because they are suitable organizations within which cooperative production systems based on human social predispositions can evolve. In addition, we show how an entrepreneur – given these predispositions – can shape human behavior within a firm. To illustrate these processes, we will present a model that depicts how the biased transmission of cultural contents via social learning processes within the firm influence employees’ behavior and the performance of the firm. These biases can be traced back to evolved social predispositions. Humans lived in tribal scale social systems based on significant amounts of intra- and even intergroup cooperation for tens if not a few hundred thousand years before the first complex societies arose. Firms rest upon the social psychology originally evolved for tribal life. We also relate our conclusions to empirical evidence on the performance and size of different kinds of organizations. Modern organizations have functions rather different from ancient tribes, leading to friction between our social predispositions and organization goals. Firms that manage to reduce this friction will tend to function better.
    Keywords: Theory of the Firm, Cultural Evolution, Entrepreneurship, Firm Performance, Cooperation
    JEL: L25 D21 M13 M14 C61
    Date: 2006–06
  18. By: Li Cui; Inci Ötker; Shogo Ishii
    Abstract: Several Asian emerging market economies have recently adopted measures to limit the offshore trading of their currencies. This paper provides a general overview of such measures and evaluates the experiences of selected countries that resorted to such measures. It concludes that the measures could be effective if they were comprehensive and effectively enforced, and were accompanied by consistent macroeconomic policies and structural reforms. Such measures, however, could adversely affect investor confidence, financial market development, and nonspeculative economic and financial activities, and impose administrative burden on all parties involved.
    Keywords: Offshore financial centers , Currencies , Exchange restrictions , Capital controls ,
  19. By: José Pedro Pontes
    Abstract: This paper models the decision of vertically-linked firms to build either partitioned or connected networks of supply of an intermediate good. In each case, the locations of upstream and downstream firms are correlated. Input specificity is related both to variable costs (transport costs of the input) and fixed costs (learning costs of the use of the input). When both are low, a connected network emerges and a partitioned pattern arises in the opposite case. In the boundary region, there are multiple equilibria, either asymmetric (mixed network) or symmetric.
    Keywords: Vertically-linked industries; Intermediate goods; Networks; Input flexibility.
    JEL: R30 L13
  20. By: Jean-Paul Pollin (LEO - Laboratoire d'économie d'Orleans - [CNRS : UMR6221] - [Université d'Orléans])
    Abstract: -
    Keywords: Gouvernance bancaire ; gouvernance d'entreprise ; droit de propriété
    Date: 2006–06–26
  21. By: Michele Cincera (DULBEA-CERT, Université libre de Bruxelles, Brussels, and CEPR); Lydia Greunz (Collaborateur scientifique FNRS, DULBEA-CERT, Université libre de Bruxelles, Brussels); Jean-Luc Guyot (IWEPS, Institut wallon de l'évaluation, de la prospective et de la statistique); Olivier Lohest (IWEPS, Institut wallon de l'évaluation, de la prospective et de la statistique)
    Abstract: Ce working paper tente d’identifier, dans le cadre d’une démarche exploratoire et en articulation avec un cadre théorique original, les liens entre la trajectoire socio-professionnelle et le capital humain, défini sur la base des qualifications et de l’expérience professionnelle, d’un ensemble d’individus qui ont (ré)orienté cette trajectoire dans le sens d’un passage à l’entrepreneuriat. Cet ensemble est constitué de primo-créateurs, c’est-à-dire de personnes sans aucune expérience de création d’entreprise antérieure. La thèse défendue par les auteurs est celle d’une articulation forte, au niveau individuel, entre capital humain, tel qu’il peut être appréhendé par le niveau de qualification et l’expérience professionnelle, et dynamique entrepreneuriale. Dans cette optique, trois pistes sont envisagées : - celle des particularités du profil des primo-créateurs, principalement au niveau de ce capital, l’hypothèse étant que ces individus se différencient des non créateurs sur le plan des qualifications ; - celle d’une relation entre sphères d’expérience professionnelle et sphère entrepreneuriale, l’hypothèse étant que le contenu du projet entrepreneurial n’est pas étranger à l’expérience antérieure du créateur ; - celle d’une influence du niveau de qualification et de l’expérience du créateur sur la temporalité du processus de création. Pour ce faire, les données issues de deux larges enquêtes socio-économiques sont analysées en recourant aux outils de la statistique et de l’économétrie.
    Keywords: primo-créateurs d’entreprise, capital humain, expérience professionnelle, caractéristiques personnelles, durée du processus de création
    JEL: J23 J24 M13
    Date: 2006–06
  22. By: Michel Verstraeten (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.)
    Abstract: Lorsqu’on s’intéresse aux récits de missions de conseil, on constate que les objectifs de mission qui sont proposés à l’intervenant suscitent souvent chez lui des questions délicates : faut-il poursuivre ce travail avec lequel je ne me sens pas en accord ? ; dans quelle voie faut-il s'engager face à une incompatibilité entre les souhaits du commanditaire et les objectifs contractualisés ? ; faut-il aller jusqu'au bout de la réalisation des objectifs contractualisés alors que le commanditaire semble s'en désintéresser ? ; etc. La pratique du conseil montre que l’orientation de la mission, le choix d’une perspective d’action, est réellement problématique. Cet article se propose de modéliser ces difficultés telles que perçues par les intervenants. Plus précisément, il s’agit de comprendre : -quelle est l'origine de la difficulté d'orientation perçue par l’intervenant. De quelle nature sont les facteurs déclencheurs de ces difficultés ? Qui sont les protagonistes de cette situation ? La question de l’acceptabilité d’une mission de conseil est ainsi posée.-quelle est l'issue de cette difficulté perçue. Quels ont été les facteurs déterminants dans le choix ou l'imposition de cette issue ? Quelles sont les réactions possibles de l’intervenant face à une perspective d’action qu’il juge inacceptable ? Une modélisation a été élaborée à partir de cas présentés dans la littérature sur le conseil et à partir d’interviews de quarante-trois intervenants. La composition de l'échantillon a été faite de manière à proposer une diversité selon les variables suivantes : -la taille du bureau de conseil (de deux personnes à plusieurs centaines) ; -le niveau d'expérience de l’intervenant (de l’intervenant junior au responsable ou co-responsable du bureau de conseil) ;-le caractère national ou international de la structure du bureau de conseil. On constate qu’en pratique, les intervenants sont souvent confrontés à des perspectives d’actions multiples qui peuvent s’opposer : -les objectifs formels de la mission (c’est-à-dire les objectifs contractualisés) ;-les objectifs portés par le commanditaire de la mission ;-des objectifs portés par des acteurs qui n’ont pas une autorité directe sur la mission mais qui peuvent, aux yeux de l’intervenant, légitimement influencer son orientation. Ces diverses perspectives d’action peuvent revêtir un caractère plus ou moins acceptable aux yeux de l’intervenant en fonction de trois éléments : ses représentations de la situation, ses intérêts en jeu et les valeurs qui sous-tendent son activité. Ces trois éléments, que je désigne sous le vocable de « système RIV », vont générer des tensions vis-à-vis de certaines perspectives d’action et expliquer les réactions de l’intervenant face à ces tensions. Quatre types de réactions sont mis en évidence : l’absorption de la tension, la négociation de nouveaux objectifs, la simulation et l’abandon de la mission. Le cas particuliers des intervenants issus du monde de la recherche est ensuite analysé et nous verrons que la situation d’un centre de recherche n’est pas éloignée de celle d’un cabinet de conseil plus « classique ». L’article conclut sur quelques pistes d’actions proposées à l’intervenant qui veut s’inscrire dans une démarche de RSE.
    Keywords: consultant, intervenant.
    JEL: M14
    Date: 2006–06

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