nep-bec New Economics Papers
on Business Economics
Issue of 2007‒05‒19
thirty papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Workplace Organization and Innovation By Zoghi, Cindy; Mohr, Robert D.; Meyer, Peter B.
  2. Bargaining in Mergers and Termination Fees By Utz Weitzel; Stephanie Rosenkranz
  3. Financial Frictions, Investment and Tobin's q By Guido Lorenzoni; Karl Walentin
  4. Decentralized Organizational Learning: An Experimental Investigation By John Duffy; Andreas Blume; April Franco
  5. Learning mode of small business owners By A. WILLEM; H. VAN DEN BROECK
  6. Occupational Choice and the Quality of Entrepreneurs By Eren Inci
  7. Vertical Integration and Firm Boundaries : The Evidence By Lafontaine, Francine; Slade, Margaret
  8. Job disamenities, job satisfaction, quit intentions, and actual separations: putting the pieces together By Böckerman, Petri; Ilmakunnas, Pekka
  9. Distorted performance measurement and relational contracts By J”rg Budde
  10. Does Social and Environmental Reporting Nurture Trust and Stakeholder Engagement and Reduce Risk? By Solomon, Jill
  11. Industry Restructuring, Mergers, And Efficiency: Evidence From Electric Power By Kwoka, J.; Pollitt, M.
  12. Optimal Severance Pay in a Matching Model By Giulio Fella
  13. Optimal Group Incentives with Social Preferences and Self-Selection By Sabrina Teyssier
  14. Building Micro-foundations for the Routines, Capabilities, and Performance Links By Peter Abel; Teppo Felin; Nicolai Foss
  15. Values, norms, transactions and organizations By Américo M. S. Carvalho Mendes
  16. The Choice of Prices vs. Quantities under Uncertainty By Markus Reisinger; Ludwig Ressner
  17. Securities Fraud Class Actions and Corporate Governance: New Evidence on the Role of Merit By Christopher F. Baum; James G. Bohn; Atreya Chakraborty
  18. Expert Incentives: Cure versus Prevention By Kris de Jaegher
  19. Wage Differentials in the Presence of Unobserved Worker, Firm, and Match Heterogeneity By Simon D. Woodcock
  20. Cooperative production and efficiency By Carmen Bevia; Luis C. Corchon
  21. The Layoff Rat Race By Dan Bernhardt; Steeve Mongrain
  22. Financing Multi-stage projects under moral hazard and limited commitment By Josepa Miquel-Florensa
  23. When Do Firms Adjust Prices? Evidence from Micro Panel Data By Sarah M. Rupprecht
  24. Incentives for Partial Acquisitions and Real Market Concentration By Patricia Charléty; Marie-Cécile Fagart; Saïd Souam
  25. Renaissance of Entrepreneurship? Some remarks and empirical evidence for Germany By Boegenhold, Dieter; Fachinger, Uwe
  26. Occupational Diversification, Offshoring and Labor Market Volatility By Bardhan, Ashok; Tang, John
  27. Transaction Cost Economics: An Introduction By Williamson, Oliver E.
  28. Optimal Incentives in Dynamic Multiple Project Contracts By Josepa Miquel-Florensa
  29. The determinants and employment effects of international outsourcing: the case of Italy By Stefano Costa; Giovanni Ferri
  30. Ownership Structure and Analysts' Earnings Forecasts: UK Evidence By Taylor, Svetlana M.

  1. By: Zoghi, Cindy (U.S. Bureau of Labor Statistics); Mohr, Robert D. (University of New Hampshire); Meyer, Peter B. (U.S. Bureau of Labor Statistics)
    Abstract: This study uses data on Canadian establishments to test whether particular organizational structures are correlated with the likelihood of adopting process and product innovations, controlling for the endogeneity of the predictors. We find that establishments with decentralized decision-making, information-sharing programs, or incentive pay plans are significantly more likely to innovate than other establishments. Larger establishments and those with a high vacancy rate are also more likely to innovate. These findings are consistent with a model in which workers hold information about production inefficiencies or consumer demands that can lead to productive innovations and that workplace organization attributes facilitate the communication and implementation of those ideas.
    Keywords: Innovation, Decision-Making, Information-Sharing
    JEL: D23 D81 O32
  2. By: Utz Weitzel; Stephanie Rosenkranz
    Abstract: We model takeovers as a bargaining process and explain termination fees for, both, the target and the acquirer, subject to parties’ bargaining power and outside options. In equilibrium, termination fees are offered by firms with outside options in exchange for a greater share of merger synergies. Termination fees decrease in firms’ bargaining power, and increase in firms’ outside options. We find that a merger with the second highest bidder, including a termination fee, can lead to equally high premiums as a merger with the highest bidder, without a termination fee. This novel result directly contrasts the agency cost perspective, which argues that termination provisions may be used by managers to lock into acquirers that do not generate the highest shareholder value. Further, even in a merger with the highest bidder and in the absence of bidding related costs, a termination fee is not necessarily a deal protection device, but can be used to improve shareholder value. Our bargaining model offers an alternative to auction related explanations of termination fees, like cost compensation or seller commitment.
    Keywords: Mergers and Acquisitions, Bargaining, Outside Option, Termination Fees, Break-Up Fees, Lockups
    JEL: G34 C71 C78 D44 K22
    Date: 2007–03
  3. By: Guido Lorenzoni; Karl Walentin
    Abstract: We develop a model of investment with financial constraints and use it to investigate the relation between investment and Tobin's q. A firm is financed partly by insiders, who control its assets, and partly by outside investors. When their wealth is scarce, insiders earn a rate of return higher than the market rate of return, i.e., they receive a quasi-rent on invested capital. This rent is priced into the value of the firm, so Tobin's q is driven by two forces: changes in the value of invested capital, and changes in the value of the insiders' future rents per unit of capital. This weakens the correlation between q and investment, relative to the frictionless benchmark. We present a calibrated version of the model, which, due to this effect, generates realistic correlations between investment, q, and cash flow.
    JEL: E22 E30 E44 G30
    Date: 2007–05
  4. By: John Duffy; Andreas Blume; April Franco
    Abstract: We experimentally study decentralized organizational learning. Our objective is to understand how learning members of an organization cope with the confounding effects of the simultaneous learning of others. Rather than inferring or postulating some heuristic organizational learning behavior, we experimentally test the optimal learning predictions of a stylized, rational agent model of organizational learning due to Blume and Franco [2007]. This model provides sharp testable predictions as to how learning members of an organization might cope with the simultaneous learning of others as a function of fundamental variables that characterize an organization, e.g., the firm size and the discounting of future payoffs. While the problem of learning while others are learning is quite difficult, we find support for the comparative static predictions of the unique symmetric equilibrium of the model.
    Date: 2007–05
    Abstract: The aim of the paper is to explore the learning mode of small business owners, from a theoretical stance, and based on empirical evidence. We distinguish between the required learning mode, the actual learning mode and the supported learning mode. Data were collected using the focus group method in a very heterogeneous sample of Belgian small business owners. The results indicate several gaps between the required, actual and supported learning modes, of which many are due to unawareness of learning needs and lack of reflective learning among small business owners. The data also indicate among others that solutions to fill learning gaps proposed in the literature are not applicable to all owners, e.g. not all owners are able to learn through networks.
    Keywords: Belgium, learning capability, learning mode, learning gaps, learning process, learning support, reflective learning, research paper, small business owners, focus groups
    Date: 2007–02
  6. By: Eren Inci (Boston College)
    Abstract: This paper focuses on the quality of entrepreneurs when individuals, who differ in terms of entrepreneurial ability and wealth, choose between entrepreneurship and wage-earning. A loan is required to become an entrepreneur. Four wealth classes form endogenously. Banks' inability to identify the ability of individuals leads them to offer pooling contracts to the poor and the lower-middle classes. Regardless of ability, all poor class individuals become workers and all lower-middle class individuals become entrepreneurs. Banks are able to offer separating contracts to the upper-middle and the rich classes. High-ability individuals in these wealth classes become entrepreneurs and their low-ability counterparts become workers. Equilibrium contracts may entail cross-subsidies within or between occupations. In some economies, a small success tax on entrepreneurs used to subsidize workers can increase the average quality of entrepreneurs and welfare by changing the thresholds of the wealth classes. In some others a reverse policy is required. Since the aggregate level of investment is fixed, the reason for these policies is not under- or overinvestment by entrepreneurs, as it often is in previous literature.
    Keywords: adverse selection; entrepreneurship; general equilibrium contract theory; moral hazard; occupational choice; success tax; wage subsidy
    JEL: D43 D82 H25 L26
    Date: 2007–05–02
  7. By: Lafontaine, Francine (Stephen M. Ross School of Business, University of Michigan); Slade, Margaret (Department of Economics,University of Warwick)
    Abstract: Understanding what determines firm boundaries and the choice between interacting in a firm or a market is not only the fundamental concern of the theory of the firm, but it is also one of the most important issues in economics. Data on value added, for example, reveal that in the US, transactions that occur in firms are roughly equal in value to those that occur in markets. The economics profession, however, has devoted much more attention to the workings of markets than to the study of firms, and even less attention to the interface between the two. Nevertheless, since Coase’s (1937) seminal paper on the subject, a rich set of theories has been developed that deal with firm boundaries in vertical or input/output structures. Furthermore, in the last 25 years, empirical evidence that can shed light on those theories has been accumulating.
    Keywords: Vertical integration ; firm boundaries ; vertical mergers ; firms versus markets
    JEL: L22 L24
    Date: 2007
  8. By: Böckerman, Petri; Ilmakunnas, Pekka
    Abstract: We analyze the potential role of adverse working conditions at the workplace in the determination of employees’ quit behavior. Our data contain both detailed information on perceived job disamenities, job satisfaction, and quit intentions from a cross-section survey and information on employees’ actual job switches from longitudinal register data that can be linked to the survey. Reduced-form models show that employees facing adverse working conditions tend to have greater intentions to switch jobs and search for new matches more frequently. Multivariate probit models point out that job dissatisfaction that arises in adverse working conditions is related to job search and this in turn is related to actual job switches.
    Keywords: working conditions; job satisfaction; on-the-job search; job separation; quits
    JEL: J64 J28
    Date: 2007–05–15
  9. By: J”rg Budde (J”rg Budde, Department of Economics, University of Bonn, Adenauerallee 24-42, D-53113 Bonn; phone: +49-228-739247,
    Abstract: This paper analyzes the use of alternative performance measures in an agency model in which contracting incorporates both formal and informal agreements. It is shown that under a proper use of verifiable and unverifiable performance measures, the two types of contracts are complements, regardless of the principal?s fallback position. The analysis therefore contrasts earlier results of the literature, and provides a rationale for the application of subjective performance information, as it is frequently incorporated in strategic performance measurement systems.
    Date: 2006–11
  10. By: Solomon, Jill (Cardiff Business School)
    Abstract: A number of theoretical lenses have been used to explain voluntary social and environmental reporting (SER) including legitimacy theory, stakeholder theory and political economy theory. Recent theoretical work in the SER area suggests that the risk society theory presents an appropriate alternative theoretical framework. According to the risk society theoretical framework, risks have evolved from manageable, identifiable, insurable risks into imperceivable, uninsurable, high consequence risks. Many high consequence risks relate directly to corporate behaviour in the social, ethical and environmental domain, such as global warming. The risk society framework is also characterised by a general decline in trust in institutions and organisations. This paper contributes to the SER literature by providing empirical evidence to support a risk society theory of voluntary SER. By engaging directly with 24 corporate social responsibility managers within UK listed companies, we show that risk is driving them to produce voluntary SER. The paper provides empirical evidence that SER is emerging as a mechanism for reducing risk and anxiety, through the nurturing of trust relationships between companies and their stakeholders. The interviews reveal that building and maintaining trust in shareholder and stakeholder relationships is a primary motivation for SER and that SER is a means of engaging in dialogue with the company's stakeholders. Companies are, from a risk society perspective, implementing SER as a risk management mechanism. We also find from the interviews that voluntary SER is motivated far more by its link with financial performance, through reputation enhancement, than by a genuine desire to enhance social justice.
    Keywords: Social and environmental reporting (SER); Risk society; Trust
    Date: 2006–01
  11. By: Kwoka, J.; Pollitt, M.
    Abstract: This paper analyses the performance impact of the merger wave which took place in the US electricity industry during the period 1994-2003. It does so by analyzing the impact on operating and total cost in electricity distribution. While there are past studies of efficiency and productivity effects, as well as of prices, profits, and other outcomes, this study differs in several ways. First, the database consists of many merging and non-merging firms, rather than only a few on which to base inferences. Second, all of these mergers arise in a single industry, greatly facilitating controlled comparison. Third, we have data on the several years of pre-merger and post-merger efficiency of the specific merging units, unlike virtually all past studies. And finally, we employ a powerful nonparametric technique - data envelopment analysis - to measure the efficiency of each operating unit. The results indicate that electricity mergers are not consistent with improved cost performance.
    Keywords: mergers, efficiency analysis, electricity distribution, data envelopment analysis.
    JEL: L25 L43 L94
    Date: 2007–05
  12. By: Giulio Fella
    Abstract: This paper uses an equilibrium matching framework to study jointly the optimal private provision of severance pay and the allocational and welfare consequences of government intervention in excess of private arrangements. Firms insure riskaverse workers by means of simple explicit employment contracts. Contracts can be renegotiated ex post by mutual consent. It is shown that the lower bound on the privately optimal severance payment equals the fall in lifetime wealth associated with job loss. Simulations show that, despite contract incompleteness, legislated dismissal costs largely in excess of such private optimum are effectively undone by renegotiation and have only a small allocational effect. Welfare falls. Yet, for deviations from laissez faire in line with those observed for most OECD countries, the welfare loss is small.
    Keywords: Severance Pay, Contracts, Renegotiation
    JEL: J23 J64 J65
    Date: 2007–03
  13. By: Sabrina Teyssier (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines])
    Abstract: In this paper, we analyze group incentives when a proportion of agents feel in- equity aversion as defined by Fehr and Schmidt (1999). We define a separating equilibrium that explains the co-existence of multiple payment schemes in firms. We show that a tournament provides strong incentives to agents who only care about their own payo¤ but that it is not efficient when agents are inequity averse. In fact, inequity averse agents are attracted by a revenue-sharing scheme in which the joint production is equally distributed, under the constraint that selfish agents have no incentive to join the revenue sharing organization. If the market is perfectly flexi- ble, this separating equilibrium induces a high effort level for both types of agents. Pareto gains are achieved by offering organizational choice to agents and the optimal contract is thus to propose both payment schemes to agents and to allow them to self-select into the different payment schemes.
    Keywords: Incentives ; performance pay ; revenue sharing ; self-selection ; social preferences ; tournament
    Date: 2007–05–07
  14. By: Peter Abel; Teppo Felin; Nicolai Foss
    Abstract: Micro-foundations have become an important emerging theme in strategic management. This paper addresses micro-foundations in two related ways. First, we argue that the kind of macro (or “collectivist”) explanation that is utilized in the capabilities view in strategic management - which implies a neglect of micro-foundations - is incomplete. There are no mechanisms that work solely on the macro-level, directly connecting routines and capabilities to firm-level outcomes. While routines and capabilities are useful shorthand for complicated patterns of individual action and interaction, ultimately they are best understood at the micro-level. Second, we provide a formal model that shows precisely why macro explanation is incomplete and which exemplifies how explicit micro-foundations may be built for notions of routines and capabilities and for how these impact firm performance.
    Keywords: Routines; Capabilities; Micro-foundations; Production function
    JEL: L2 M1
    Date: 2007
  15. By: Américo M. S. Carvalho Mendes (Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto))
    Abstract: This paper may be considered an essay on metaeconomics, since it deals with the meaning of several concepts often left undefined, or very briefly defined in economic theories. These concepts are the following: value including the values of things and moral values, social norms or institutions, social power, goods and services, transactions and organizations (firms, and others). The paper starts by proposing a general concept of value, encompassing both the value of things and moral values. From this concept it proceeds to the definition of six different types of values of things and moral values and to the concept of value transformation process of things which includes all the operations dealt with in economic theory as well as many other human actions. The last part of the paper starts with the distinction between moral values and social norms (or institutions) and the roles of social power and human organization in connecting the domains of morality and social normativity. The paper proceeds by distinguishing different types of norms, including possession norms which are important for defining the concepts of goods and services and transaction processes.
    JEL: A13 Z13
    Date: 2007–05
  16. By: Markus Reisinger (Department of Economics, University of Munich, Kaulbachstr. 45, 80539 Munich, Germany,, phone: 00 49 89 2180 5645, fax: 00 49 89 2180 5650); Ludwig Ressner (Department of Economics, University of Munich, Kaulbachstr. 45, 80539 Munich, Bavarian Graduate Program in Economics, Germany,, phone: 00 49 89 2180 5644, fax: 00 49 89 2180 5650)
    Abstract: This paper analyzes a duopoly model with stochastic demand in which firms first choose their strategy variable and compete afterwards. Contrary to the existing literature, we show that firms do not always choose a quantity which is the variable that induces a smaller degree of competition. The reason is that demand uncertainty and the degree of substitutability have countervailing effects on variable choice. Higher uncertainty favors prices, while closer substitutability favors quantities. Moreover, for intermediate values firms choose different strategy variables in equilibrium.
    Keywords: competition, strategy variables, demand uncertainty
    JEL: D43 L13
    Date: 2007–05
  17. By: Christopher F. Baum (Boston College; DIW Berlin); James G. Bohn (UHY Advisors); Atreya Chakraborty (University of Massachusetts-Boston)
    Abstract: We examine the relationship between outcomes of securities fraud class action lawsuits and board turnover rates. Our results indicate that the outcome of a class action is a good indicator of the underlying, unobservable merit of the action. Consistent with the merit hypothesis, board turnover rates are higher in the period following the filing of a lawsuit that is ultimately settled than one that is dismissed. Turnover propensities are more sensitive to outcome for CEOs and for individuals named as defendants in the lawsuits. Turnover rates of both inside and outside directors are higher when external equity ownership is more concentrated.
    Keywords: Securities fraud class actions, board turnover, corporate governance
    JEL: G32 K22
    Date: 2007–04–28
  18. By: Kris de Jaegher
    Abstract: This paper distinguishes between two scenarios for the expert-client encounter. In the cure scenario, the client does not know whether a loss can be recovered. In the prevention scenario, the client faces a threat but does not know whether this threat is real enough to justify preventive action. The client wants to induce the expert both to give an accurate diagnosis and to put appropriate effort into cure or prevention. It is shown that in the cure scenario, a contingent fee solves both these incentive problems. In the prevention scenario, however, putting up with low effort makes it easier to get an accurate diagnosis, and the use of contingent fees should be limited. These results are interpreted as providing a rationale for observed exceptions to legal and ethical restrictions on the use of contingent fees. Indeed, such exceptions are often granted for cases that fit the cure scenario.
    Keywords: Prevention, Cure, Expert Incentives, Principal-Agent Models
    JEL: D82 K1
    Date: 2007–01
  19. By: Simon D. Woodcock (Simon Fraser University)
    Abstract: We consider the problem of estimating and decomposing wage differentials in the presence of unobserved worker, firm, and match heterogeneity. Controlling for these unobservables corrects omitted variable bias in previous studies. It also allows us to measure the contribution of unmeasured characteristics of workers, firms, and worker-firm matches to observed wage differentials. An application to linked employer-employee data shows that decompositions of inter-industry earnings differentials and the male-female differential are misleading when unobserved heterogeneity is ignored.
    Keywords: wage differentials, unobserved heterogeneity, employer-employee data
    JEL: J31 C23
    Date: 2007–05
  20. By: Carmen Bevia; Luis C. Corchon
    Abstract: We characterize the sharing rule for which a contribution mechanism achieves efficiency in a cooperative production setting when agents are heterogeneous. The sharing rule bears no resemblance to those considered by the previous literature. We also show for a large class of sharing rules that if Nash equilibrium yields efficient allocations, the production function displays constant returns to scale, a case in which cooperation in production is useless.
    Date: 2007–04
  21. By: Dan Bernhardt (University of Illinois); Steeve Mongrain (Simon Fraser University)
    Abstract: We investigate how discretionary investments in general and specific human capital are affected by the possibility of layoffs. After investments are made, firms may have to lay off workers, and will do so in inverse order of the profit that each worker generates. Greater skill investments, especially in specific human capital contribute more to a firm's bottom line, so that workers who make those investments will be laid off last. We show that, as long as workers' bargaining positions are not too weak, to reduce layoff probabilities, workers invest in specific human capital. Indeed, workers over-invest in skill acquisition from a social perspective whenever their bargaining power is strong enough, even though they only receive a share of any investment. More generally, we characterize how equilibrium skill investments are affected by the distribution of worker abilities within firms, the probability that a firm downsizes, and the distribution of employment opportunities in the economy.
    Keywords: Human Capital; Layoffs; Unemployment; Specific Skills; Bargaining
    JEL: J41 J63 J65
    Date: 2007–05
  22. By: Josepa Miquel-Florensa (Department of Economics, York University)
    Abstract: We present the optimal contract for financing a project that has N stages to be completed sequentially when the principal can not commit to abandone the project before it is completed and the project to be completed is valued by the agent. In a dynamic moral hazard setting, we find that the optimal contract provides decreasing transfers for successive unsuccessful attempts in a given stage, and smaller transfers when the subsequent stages are reached. We find that the optimal sequence of transfers is greater the bigger is the exogenous probability of returning to a preceding stage and the greater the principal’s cost of stage verification is. When intermediate stages are valued by the agent, we find that smaller transfers are optimal.
    Keywords: Dynamic contracts, Moral Hazard, Foreign Aid, multi-stage projects
    JEL: D82 D86 F35 O12
    Date: 2007–05
  23. By: Sarah M. Rupprecht (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: This paper analyzes the price setting behavior of firms using data from a large panel of quarterly firm surveys from 1984 to 2006. These data allow to track changes in firms’ prices, their price expectations and several other firm-specific developments such as changes in costs for input products and capacity utilization rates. The analysis shows that state dependent pricing is clearly important and that variables measuring the current situation of the firm add a lot to the explanatory power of a price adjustment probability model, compared to purely time dependent features. Although the rate of inflation is a significant explanatory variable, the inclusion of macroeconomic variables adds only marginally to the explanatory power of the model with the firm specific variables. Furthermore, when taking into account sticky plan models by excluding possibly predetermined price changes, the importance of state dependent factors becomes even larger. The data also display features that suggest that sticky information plays a role for price setting.
    Keywords: Price setting behavior, time dependent pricing, state dependent pricing, sticky prices, sticky plans, sticky information
    JEL: E31 E32 E50
    Date: 2007–04
  24. By: Patricia Charléty (CEPN - Centre d'économie de l'Université de Paris Nord - [CNRS : UMR7115] - [Université Paris-Nord - Paris XIII]); Marie-Cécile Fagart (CEPN - Centre d'économie de l'Université de Paris Nord - [CNRS : UMR7115] - [Université Paris-Nord - Paris XIII]); Saïd Souam (CEPN - Centre d'économie de l'Université de Paris Nord - [CNRS : UMR7115] - [Université Paris-Nord - Paris XIII])
    Abstract: We analyze the incentives of a controlling shareholder of a firm to acquire, directly or indirectly through his firm, shares in a competitor. We charaterize the conditions under which these partial acquisitions as well as the equilibrium toehold and its nature: controlling or silent. We find that while this shareholder gains, the acquisition is detrimental to minority shareholders of his firm, or of the target, or even of both. We show that the incentives are enhanced if the dominant shareholder initially holds silent stakes in rivals while controlling interests may discourage them. Moreover, we find that partial acquisitions always lead to a decrease in the joint profit of the two firms involved, and an increase in competitor's profits as the market becomes less competitive.
    Keywords: horizontal partial acquisitions ; real market concentration ; dominant shareholder ; minority shareholders ; silent interests.
    Date: 2007–05–05
  25. By: Boegenhold, Dieter; Fachinger, Uwe
    Abstract: The paper deals with margins of entrepreneurship where small business owners are almost working on their own having no or just a few employees and where one can find also people working with low returns and having firms without stability or prosperous dynamics. However, even the area of entrepreneurship at the margins seems to be a wide field. It highlights not only the broad margins of entrepreneurship but also the fluent boarders between entrepreneurship and the informal sector on the one side and the system of the labour market on the other. New firms – even those which are very successful at a later point of career – are almost created in an experimental period of testing market and product ideas in which business founders are still employed or registered as unemployed people. The practical starting-point of an entrepreneurial existence falls into a fluent continuum of different activities being closely connected to spheres of dependent work as employees or periods of seeking a new job during unemployment. With growing solo self-employment a new social phenomenon in the structure of the labour market and the division of occupations has emerged in which different social developments are overlapping each other. The question for the landscape of solo self-employment and related driving forces of their emergence is of crucial research interest: Must they be regarded primarily as a result of pushes by labour market deficiencies or are they a response to new life-styles and working demands which act as pulling factors into self-employment? In other words, does solo self-employment serve as a valve of a pressing labour market or must it be regarded more positively as a new option of the classic division of labour by which an increasing number of people find new self-reliant and also stable jobs? The idea of the paper is to discuss this particular issue of margins of entrepreneurship not only within the conventional scope of entrepreneurship discussion but within an integrated framework which combines entrepreneurship analysis with labour market research and studies on social stratification and social mobility. The paper will not come about with definite last answers but hopes to contribute to that debate by presenting better information.
    Keywords: Self-employment; entrepreneurship; labour market; empirical analysis
    JEL: J23
    Date: 2007–02
  26. By: Bardhan, Ashok; Tang, John
    Abstract: Are occupations that are well diversified across sectors less volatile, and less susceptible to external shocks? Most external shocks (e.g. manufacturing offshoring, oil shocks) impact the labor market along sectoral lines, i.e. they impact product and output markets; consequently, they affect employment in various occupations. Some shocks, however, like services offshoring, affect horizontals or occupations. We find that an occupation spread across many industrial sectors is less volatile in terms of numbers employed and the average wage. A dummy variable for offshoreable occupations does not affect the results; however, geographically clustered occupations seem more “at-risk,” after accounting for sectoral diversification.
    Keywords: offshoring; external shocks; labor market volatility; occupations; diversification; geographic clusters
    JEL: J2 J6 F2
    Date: 2006–10–01
  27. By: Williamson, Oliver E.
    Abstract: This overview of transaction cost economics is organized around the “Carnegie Triple” – be disciplined; be interdisciplinary; have an active mind. The first of these urges those who would open up the black box of economic organization to do so in a modest, slow, molecular, definitive way, with the object of deriving refutable implications and submitting these to empirical testing. The second recommends that the student of economic organization be prepared to cross disciplinary boundaries if and as this is needed to preserve veridical contact with the phenomena. The injunction have an active mind is implemented by being curious and asking the question “What is going on here?” The paper concludes with a discussion of operationalization.
    JEL: D2 D73 D86 L2
    Date: 2007
  28. By: Josepa Miquel-Florensa (Department of Economics, York University)
    Abstract: We design a multiple project-funding contract that provides optimal incentives to recipients, in a setting where externalities exist among the multiple projects and where donors and recipients may differ in their valuation of the projects. To do so, we study optimal incentive payments in a dynamic principal-agent framework with focus on two-project contracts. The principal cannot observe the agent’s investment, but only completed projects. We consider principals that cannot commit to contract termination before completion of the projects; we assume that the contract does not end until both projects are accomplished. We derive the optimal contract for each possible combination of principal-agentproject characteristics to find that projects should be undertaken simultaneously when value externalities among them are large, i.e. when completing both projects gives the recipient significantly more utility than the sum of the projects’ independent values. The principal’s utility maximizing strategy, when technical externalities among projects are important, is a sequential contract that starts with the project that generates the externality. We find that differences in project valuation between agents and recipients may, in some cases, lead to inefficient contracts, when in other situations the ability of the principal to choose the timing of the project competition may be a safety clause for him.
    Keywords: Dynamic Contracts, Multitask, Foreign Aid
    JEL: D82 O12 O19 F35
    Date: 2007–05
  29. By: Stefano Costa (ISAE - Rome.); Giovanni Ferri (University of Bari.)
    Abstract: Using a new firm-level database, we address micro determinants and employment consequences of international production outsourcing (INPOU). Regarding the former, we confirm that INPOU in Italy mostly counters emerging economies. threats to traditional manufactured goods: INPOU disproportionately targets developing countries and intensifies in sectors with stiffest Chinese competition. Concerning employment consequences, we concur with previous literature that INPOU firms. domestic employment performances are no worse than at matching no-INPOU firms. However, given Italy.s industrial structure (small-sized networked enterprises), INPOU might negatively affect subcontracting firms. Our evidence that employment performances worsen in the productive segments with strongest INPOU supports our conjecture.
    Keywords: international outsourcing, multinational firms
    JEL: F23 D21
    Date: 2007–04
  30. By: Taylor, Svetlana M. (Cardiff Business School)
    Abstract: This study investigates the association between the ownership structure of a firm and the accuracy of individual one-year-ahead earnings forecasts made by UK analysts. The relationship is explored in the presence of individual analyst and firm-specific characteristics using a research-tailored dataset comprising 11,659 individual analysts' forecasts made over the period, 1996 to 2001. To address the multidimensional variation in the dependent variables employed in the study (i.e., a forecast made by analyst i for firm j in year t) and the unique nature of the research question (i.e., the combined use of firm and analyst-specific characteristics), we use an analyst-firm fixed effects estimator. We are not aware of any UK studies in the field that investigate the role of ownership structure of a firm in determining the accuracy of analysts' forecasts. Furthermore, to the best of our knowledge, use of the analyst-firm fixed effect estimator in this context is also novel. The results of the study suggest that insider ownership is associated with forecast accuracy in a non-linear way. Moreover, although analysts are more optimistic for firms with a higher institutional ownership, institutional shareholders seem to be ineffective at addressing the agency disclosure problem. As a result, forecasts made for high institutional ownership firms are less accurate.
    Keywords: Analysts' forecasts; ownership structure
    JEL: G1 G3
    Date: 2007–02

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