nep-bec New Economics Papers
on Business Economics
Issue of 2007‒02‒03
fifteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Corporate Social Responsibility and Managerial Entrenchment By Giovanni Cespa; Giacinta Cestone
  2. Aggregate Shocks or Aggregate Information? Costly Information and Business Cycle Comovement By Laura Veldkamp; Justin Wolfers
  3. Horizontal Merger Antitrust Enforcement: Some Historical Perspectives, Some Current Observations By Lawrence White
  4. A Model of Reciprocal Fairness: Application to the Labour Contract By Stéphane Mahuteau
  5. Knowing What Others Know: Coordination Motives in Information Acquisition By Laura Veldkamp; Christian Hellwig
  6. Growth and Welfare Effects of Stabilizing Innovation Cycles By Marta Aloi; Laurence Lasselle
  7. Fannie Mae, Freddie Mac, and Housing: Good Intentions Gone Awry By Lawrence White
  8. Are Sunk Costs A Barrier To Entry? By Luis M.B. Cabral; Thomas Ross
  9. The Value of Moderate Obsession: Insights from a New Model of Organizational Search By Gino Cattani; Alex Dorsch; Sidney G. Winter
  10. Different Weighting Methods in Business Tendency Survey Indicators in Swiss Manufacturing Industry By Richard Etter; Eva Köberl
  11. Firms’ Strategies for Knowledge and Technology Transfer with Public Research Organisations and Their Impact on Firms’ Performance : An Empirical Analysis Based on Firm-level Data By Spyros Arvanitis; Martin Woerter
  12. Innovation and Labour Productivity in the Swiss Manufacturing Sector: An Analysis Based on Firm Panel Data By Spyros Arvanitis
  13. The Residential Real Estate Brokerage Industry: What Would More Vigorous Competition Look Like? By Lawrence J. White
  14. The "Catching up" Process of Manufacturing in East Asia By Hiratsuka, Daisuke
  15. Productivity Growth in Service Industries – Has 'Baumol's Disease' Really Been Cured? By Jochen Hartwig

  1. By: Giovanni Cespa (University of Salerno, CSEF and CEPR); Giacinta Cestone (University of Salerno, CSEF and CEPR)
    Abstract: When stakeholder protection is left to the voluntary initiative of managers, relations with social activists may become an effective entrenchment strategy for inefficient CEOs. We thus argue that managerial turnover and firm value are increased when explicit stakeholder protection is introduced so as to deprive incumbent CEOs of activists’ support. This finding provides a rationale for the emergence of specialized institutions (social auditors and ethic indexes) that help firms commit to stakeholder protection even in case of managerial replacement. Our theory also explains a recent trend whereby social activist organizations and institutional shareholders are showing a growing support for each others’ agenda
    Keywords: Corporate Governance, Corporate Social Responsibility, Managerial Entrenchment, Social Activism, Stakeholders
    JEL: G34 G38
    Date: 2007–01–01
  2. By: Laura Veldkamp; Justin Wolfers
    Date: 2006
  3. By: Lawrence White
    Date: 2006
  4. By: Stéphane Mahuteau (Department of Economics, Macquarie University)
    Abstract: We investigate to what extent reciprocity, exhibited by employers and employees, lead to stable gift exchange practices in the labour contract, giving rise to non-compensating wage differentials among industries and firms. We use the concept of Sequential Reciprocity Equilibrium (Dufwenberg and Kirchsteiger 1998, 2004) to incorporate players’ preferences for reciprocity in their utility function. We show that successful gift exchange practices may arise if both players actually care for reciprocity. We test the predictions of the model using a matched employer-employee French dataset. Our results show that French employers and employees’ decisions are influenced by reciprocity concerns.
    Keywords: reciprocity, fairness, sequential game, cheap-talk, efficiency wages
    JEL: C72 J33 J41
    Date: 2006–11
  5. By: Laura Veldkamp; Christian Hellwig
    Date: 2006
  6. By: Marta Aloi; Laurence Lasselle
    Abstract: We consider a simple model of innovation where equilibrium cycles may arise and show that, whenever actual capital accumulation falls below its balanced growth path, subsidizing innovators by taxing consumers has stabilizing effects, promotes sustained growth and increases welfare. Further, if the steady state is unstable under laissez faire, the introduction of the subsidy can make the steady state stable. Such a policy has beneficial effects as it fosters output growth along the transitional adjustment path, and increases the welfare of current and future generations.
    Keywords: Growth, endogenous cycles, stabilization, innovation, subsidy, welfare.
    JEL: E62 H32 O41
    Date: 2007–01
  7. By: Lawrence White
    Date: 2006
  8. By: Luis M.B. Cabral; Thomas Ross
    Date: 2006
  9. By: Gino Cattani; Alex Dorsch; Sidney G. Winter
    Abstract: This study presents a new model of search on a “rugged landscape,” which employs modeling techniques from fractal geometry rather than the now-familiar NK modeling technique. In our simulations,firms search locally in a two-dimensional fitness landscape, choosing moves in a way that responds both to local payoff considerations and to a more global sense of opportunity represented by a firm-specific “preferred direction.” The latter concept provides a very simple device for introducing cognitive or motivational considerations into the formal account of search behavior, alongside payoff considerations. After describing the objectives and the structure of the model, we report a first experiment which explores how the ruggedness of the landscape affects the interplay of local payoff and cognitive considerations (preferred direction) in search. We show that an intermediate search strategy, combining the guidance of local search with a moderate level of non-local “obsession,” is distinctly advantageous in searching a rugged landscape. We also explore the effects of other considerations, including the objective validity of the preferred direction and the degree of dispersion of firm strategies. We conclude by noting available features of the model that are not exercised in this experiment. Given the inherent flexibility of the model, the range of questions that might potentially be explored is extremely large.
    Keywords: Rugged Landscapes; Local Search; Cognition; Obsession; Fractal Geometry
    Date: 2007–01–24
  10. By: Richard Etter (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH)); Eva Köberl (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: In business cycle analysis the development of inventories still plays a crucial role. The strong movements over time have a large effect particularly on the growth rate of GDP. Quantitative data on inventories are generally of rather low quality. As a complement to quantitative statistics, business tendency surveys (BTS) offer actual data on stocks of different categories and on order books (often called negative inventories) to estimate actual values. However, the qualitative data do not show up in the empirical analysis. One reason could be that the aggregation process in BTS of these two items is often not adequate. Three alternative weighting methods were applied at firm level: no weighting, weighting with the number of employees, weighting with the number of employees plus the ratio of order books/stock to sales. These were compared with the current weighting method which includes stratification and branch weights by value added. The four indicators for each of the BTS questions had a statistically different variance, mean or distribution in most cases. The comparison of these four versions of weighting with the reference series – growth rate of order books and of stocks of finished products – produced quite different results. For the growth rate of order books, the best fit was with the non-weighted responses of the firms to the question on changes of order books. The match with the growth rate of stocks of finished products was generally lower. The best fit was again with the non-weighted responses on the change question on stocks of finished products.
    Keywords: weighting, stocks of finished products, order books, business tendency surveys
    JEL: C42
    Date: 2006–10
  11. By: Spyros Arvanitis (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH)); Martin Woerter (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: Based on a representative firm sample for Switzerland we empirically investigated strategic approaches for knowledge and technology transfer (KTT) activities between business firms and public research organisations. Based on cluster analysis of 19 different forms for KTT, three types of KTT strategies were identified, each of them correspond with a specific combination of some of the 19 different forms for KTT activities. It was found that they are determined mainly by variables related (a) to the absorptive capacity of a firm and (b) to the degree of appropriability of the returns of innovation, indicating that the followed strategy reflects the resource base of a firm. Further, it was shown that a firm’s obstacle profile with respect to KTT activities is related to the applied strategy. Firms with more intensive contacts emphasise risk-related factors and financial restrictions, while firms with less intensive contacts emphasise a mismatch between firm and university requirements with respect to KTT. Furthermore and most importantly, it was found that strategy matters for the impact of KTT on the innovation performance of a firm. In fact, KTT strategies related to the core R&D activities of a firm showed a greater impact compared to strategies related to ‘softer’ forms of transfer activities, e.g. informal contacts or education related contacts.
    Keywords: R&D strategies, knowledge and technology transfer, innovation activities, R&D activities
    JEL: O30
    Date: 2006–08
  12. By: Spyros Arvanitis (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: This paper investigates (a) the determinants of innovation performance and (b) the impact of innovation performance on labour productivity of Swiss manufacturing firms in the period 1994-2002. The data used in this study come from the KOF panel database and were collected in 1996, 1999 and 2002 respectively based on a questionnaire quite similar to that used in the Community Innovation Surveys (CIS). The use of a wide spectrum of indicators helps to test the robustness of the specification of the innovation equation as well as the robustness of the impact of innovation on economic performance. We find a clear-cut positive effect of innovation on labour productivity.
    Keywords: innovation, labour productivity, R&D expenditures
    JEL: O30
    Date: 2006–09
  13. By: Lawrence J. White
    Date: 2006
  14. By: Hiratsuka, Daisuke
    Abstract: This paper examines the "catching up" process of manufacturing in East Asia within the framework of North and South location. Results of this study indicate that latecomers of the ASEAN Four and China have advanced the "catching up" process. At the same time, second-runners of the Asian NIES have more extensively increased their "catching up" with Japan. Most "catching up" was realized in a very short period in the 1990s, and the advancement of the "catching up" process has moved into various industries from nondurable products to light machinery products. However, it has not yet advanced in heavy machinery such as in the industrial machinery and machine tool industries.
    Keywords: Manufacuturing industries, Industrial policy, ASEAN (Association of Southeast Asian Nations), East Asia, Southeast Asia
    Date: 2007–01
  15. By: Jochen Hartwig (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: Since the mid-nineties, U.S. labor productivity outgrows its European counterpart by a wide margin. Several recent studies have found that this result is brought about by relatively few service industries, where productivity growth has accelerated in the U.S., but not so in Europe. Based on this finding, TRIPLETT/BOSWORTH (2003) have asserted that ‘Baumol’s Disease’, according to which imbalances in productivity growth between a ‘progressive’ (manufacturing) and a ‘nonprogressive’ (service) sector of the economy lead to constant expenditure shifts into the latter, ‘has been cured’ – at least in the U.S. The present paper challenges this statement, showing that there is only one genuine service industry with a lasting increase in productivity, namely wholesale and retail trade. Labor productivity in the U.S. retail industry has grown fast due to a recent proliferation of Wal-Mart-type ‘big box’ stores that would be practically impossible in Europe because of stricter zoning plans. Since this ‘Wal-Mart effect’ is likely to taper off sooner or later, it is more accurate to say that ‘Baumol’s Disease’ has been protracted than to say that it has been cured.
    Keywords: Productivity, services sector, Baumol’s Disease, statistical artifacts
    JEL: C82 L80 L81 O41 O47 O57
    Date: 2006–11

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