nep-bec New Economics Papers
on Business Economics
Issue of 2007‒06‒30
thirteen papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Corporate Governance and Collusive Behaviour By Buccirossi, Paolo; Spagnolo, Giancarlo
  2. Implicit Contracts, Wages and Wage Inequality over the Business Cycle By Pourpourides, Panayiotis M.
  3. Temporary Shocks and Offshoring: The Role of External Economies and Firm Heterogeneity By Devashish Mitra; Priya Ranjan
  4. Employment, Hours per Worker and the Business Cycle. By Emilio Fernandez-Corugedo
  5. Pre-empting Technology Competition Through Firm Acquisitions By Grimpe, Christoph; Hussinger, Katrin
  6. Born Local: Two Avenues to Internationalization By Zoltan J. Acs; Siri Terjesen
  7. Fringe firms: Are they better off in a heterogeneous market? By Susanne Wied-Nebbeling
  8. Do initial conditions persist between firms? : an analysis of firm-entry cohort effects and job losers using matched employer-employee data By Wachter, Till von; Bender, Stefan
  9. The Cyclicality of Real Wages and Wage Differentials: A Dynamic Factor Analysis By Otrok, Christopher; Pourpourides, Panayiotis M.
  10. Ownership Structure, Financial Constraints and Investment Decisions: Evidence from a Panel of Italian Firms By Crespi Francesco; Scellato Giuseppe
  11. Firm Growth : a Survey By Alex Coad
  12. Productivity and Trade Orientation in UK Manufacturing By Marian Rizov; Patrick Paul Walsh
  13. Norwegian Innovation and Industrial Structure: Insiders and Outsiders? By Tommy Clausen; Svein Olav Nås; Bart Verspagen

  1. By: Buccirossi, Paolo; Spagnolo, Giancarlo
    Abstract: This chapter examines the relationship between corporate governance and competition, particularly with regard to cartel formation, and discusses how corporate governance and firm agency problems affect optimal law enforcement against cartels, both in terms of sanctions and leniency policies. Many of the conclusions appear applicable, with minor changes, to non-antitrust forms of collusion, such as collusion between auditors and management, and more generally to corporate and organized crime.
    Keywords: Amnesty; Antitrust; Cartels; CEO compensation; Collusion; Corporate crime; Corporate fraud; Corporate governance; Corporate liability; Corruption; Deterrence; Employee liability; Fines; Immunity; Imprisonment; Indemnification; Judgement proofness; Leniency; Managerial incentives; Optimal sanctions; Rewards; Whistleblowers
    JEL: G30 K00 L20 L40
    Date: 2007–06
  2. By: Pourpourides, Panayiotis M.
    Abstract: Despite the success of Walrasian equilibrium models in explaining economic growth facts they fail to simultaneously account for the cyclical behavior of wages and the skill premium. In this paper I calibrate and solve a general equilibrium implicit contracts model where the workers are in fixed supply, homogeneous in preferences and the wage is the only insurance device available to them. I show that the Pareto optimal allocation is able to capture the weak contemporaneous correlation of wages and the skill premium with output while performing relatively well in matching other basic macroeconomic regularities. The key aspects of the model are the contracts and the capital utilization margin, and not the skill-complementarity of capital.
    Keywords: Implicit Contracts; Wages; Wage Inequality; Skill Premium; Business Cycles; Capital-Skill Complementarity
    JEL: E10 E20 E32 E37 J31 J41
    Date: 2007–06
  3. By: Devashish Mitra (Syracuse University, NBER and IZA); Priya Ranjan (University of California, Irvine)
    Abstract: We construct a model of offshoring with externalities and firm heterogeneity. Due to the presence of externalities, temporary shocks like the Y2K problem can have permanent effects, i.e., they can permanently raise the extent of offshoring in an industry. Also, the initial advantage of a country as a potential host for outsourcing activities can create a lock in effect, whereby late movers have a comparative disadvantage. Furthermore, the existence of firm heterogeneity along with externalities can help explain the dynamic process of offshoring, where the most productive firms offshore first and the others follow later. Finally, we work out some unexpected welfare implications which show that net industry profits can be lower in an outsourcing equilibrium than in a regime of no outsourcing. Consumer welfare rises, and under fairly plausible conditions this effect can offset the negative impact on profits.
    Keywords: offshoring, outsourcing, Y2K, complementarity
    JEL: F12 F23 O19
    Date: 2007–05
  4. By: Emilio Fernandez-Corugedo
    Abstract: We examine the impact that technology shocks have in a trivariate VAR that includes productivity, hours worked per person and the employment ratio. These last two variables have trends that make them non-stationary. There are three results of interest. First, a technology shock reduces both hours and employment if those two variables are specified in first differences, with the response of employment being stronger than the response of hours. Second, a technology shock increases both hours and employment, when those two variables are specified in levels, although in this case the response of hours worked per person is stronger. Third, considering the possibility of changes in the trend growth rate of productivity reverses the results for the VARs with data in levels only. We also present a real business cycle model capable of replicating some of the results for hours and employment.
    Keywords: Business cycles, Employment, Hours worked, Technology shocks
    JEL: E32
    Date: 2007–01
  5. By: Grimpe, Christoph; Hussinger, Katrin
    Abstract: This paper investigates the motive of pre-empting technology competition through mergers and acquisitions (M&A). Exploiting the patent application procedure at the European Patent Office we introduce a new measure for the possibility to create entry barriers in technology markets. Our results show significant evidence that firms engage in horizontal M&A to pre-empt competition in technology markets.
    Keywords: pre-empting technology competition, mergers and acquisitions
    JEL: G34 L20 O34
    Date: 2007
  6. By: Zoltan J. Acs (School of Public Policy, George Mason University, Fairfax, Virginia, USA; Max Planck Institute of Economics, Jena, Germany); Siri Terjesen (Brisbane Graduate School of Business, Queensland University of Technology; Max Planck Institute of Economics, Jena, Germany)
    Abstract: Are firms born Global? Because knowledge spillovers that lead to new venture creation are geographically constrained we believe that firms are born local. It follows that the decision to create sustainable new ventures is independent from the decision to internationalize, even if that is the ultimate goal of the firm. We explore two avenues to internationalize new ventures, a direct path described in much of the extant literature and an intermediated one. New ventures face high entry barriers and intellectual property rights protection to internationalization, which are circumvented by intermediating activities using existing multinational enterprises as facilitators of internationalization. However, new ventures using the intermediated mode of internationalization face transaction costs and rent extraction from multinational enterprises. Therefore, sustainable new ventures face a strategic decision on how to internationalize.
    Keywords: International Entrepreneurship, Multinational Enterprises, Knowledge Spillovers, Intermediated Internationalization, International New Ventures, Foreign Direct Investment
    Date: 2007–06–25
  7. By: Susanne Wied-Nebbeling
    Abstract: This paper analyzes a market with three firms. One of them is the dominant firm and the two others are fringe firms. The formulation of demand allows a comparison between price competition with heterogeneous and homogeneous products. Because a parameterization is required to assure that market size is the same in both scenarios, no general conclusions can be drawn. But it can be shown that in large markets with relatively inelastic demand for the fringe firms’ products and a cost advantage of the dominant firm, the fringe firms are better off if they produce a heterogeneous product.
    Keywords: dominant firm, competitive fringe, price competition, heterogeneous products
    JEL: L11 L13
    Date: 2007–06–26
  8. By: Wachter, Till von; Bender, Stefan (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Influential studies have suggested that initial conditions can have persistent effects on workers' careers within firms. It is a longstanding question among economists whether such lasting wage differentials among firms and industries are due to persistent deviations of wages from workers' skills due to contracting and market frictions, or whether they arise from permanent differences among workers' skills. However, there is currently little representative evidence on firm-entry cohort effects and few explicit tests of alternative explanations. We use information on the universe of workers from a large German manufacturing sector from matched employer- employee records to show that firm-entry cohort effects are a pervasive phenomenon for the firms we study. The cohort effects we estimate are highly heterogeneous across firms and slowly fade over time. We also find that wage premiums on the past job are lost at job displacement, and that initial positive effects on wage levels at the new job fades over time. This suggests that at least part of firm-entry cohort effects arise from transitory rents, and that initial effects from previous wages fade as workers' search for better jobs." (author's abstract, IAB-Doku) ((en))
    Date: 2007–06–20
  9. By: Otrok, Christopher; Pourpourides, Panayiotis M.
    Abstract: Using longitudinal microdata we implement a Bayesian dynamic latent factor model to analyze the cyclical properties of real wages. Contrary to previous econometric models our model does not impose an a priori structure on the relationship of wages with the business cycle. The factors and the parameters are sampled from posterior distributions using Markov Chain Monte Carlo methods. We show that the comovement of real wages can be related to a common factor that exhibits a negative correlation with the growth rate of real GDP. Our findings indicate that the common factor explains only 14% of wage variation which cannot justify claims of a strong systematic relationship between wages and the business cycle. The latter suggests that wage dynamics are more consistent with models of labor contracting. We also confirm findings of previous studies in which skilled and unskilled wages exhibit the same degree of cyclical variation. Finally, we find that neither gender nor race contribute substantially in wage variation.
    Keywords: Wages; Wage Differentials; Business Cycles; Bayesian Analysis
    JEL: C11 C13 C22 C23 C81 C82 J31
    Date: 2007–06
  10. By: Crespi Francesco; Scellato Giuseppe
    Date: 2007–03
  11. By: Alex Coad (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I], LEM - Laboratory of Economics and Management - [Sant'Anna School of Advanced Studies])
    Abstract: We survey the phenomenon of the growth of firms drawing on literature from economics, management and sociology. We begin with a review of empirical "stylised facts" before discussing theoretical contributions. Firm growth is characterized by a predominant stochastic element, making it difficult to predict. Indeed, previous empirical research into the determinants of firm growth has had a limited success. We also observe that theoretical propositions concerning the growth of firms are often amiss. We conclude that progress in this area requires solid empirical work, perhaps making use of novel statistical techniques.
    Keywords: Firm growth, size distribution, growth rates distribution, Gibrat's law, theory of the firm, diversification, "stages of growth" models.
    Date: 2007–06–19
  12. By: Marian Rizov (Middlesex University Business School and Trinity College Dublin); Patrick Paul Walsh (Trinity College Dublin and IZA)
    Abstract: Within a structural model we explicitly allow for the trade orientation of companies to estimate productivity dynamics within 4-digit UK manufacturing industries. We use the FAME data on UK companies over the period 1994-2003. Following Ackerberg et al. (2005) we adjust the algorithm in Olley and Pakes (1996) by augmenting investment and exit decisions to allow for exogenous demand shocks by trade orientation, assuming that labour and capital are state variables, and productivity follows a first-order Markov process. We extend the framework further by allowing exporting to be an additional control variable that is driven by lagged productivity as in Melitz (2003), leading productivity to follow a second-order Markov process. We find that over the period of introduction of the Euro improvements in aggregate productivity were driven by exporters - mainly by market share reallocations away from inefficient and towards efficient export companies. Aggregate productivity also benefited from improvements in productivity of non-exporters but was driven by improvements within companies rather than by market share reallocations. In a period of sustained real exchange rate appreciation both export cleansing and competitive pressure on non-exporters seem to have contributed to improvements of productivity in the UK manufacturing.
    Keywords: productivity dynamics, structural model, trade orientation, manufacturing companies, UK
    JEL: F14 D24
    Date: 2007–05
  13. By: Tommy Clausen (Centre for Technology, Innovation and Culture, University of Oslo); Svein Olav Nås (Norwegian Institute for Studies in Research and Education - Centre for Innovation Research); Bart Verspagen (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: We examine the hypothesis that the Norwegian innovation system is locked-in to a specialization pattern of scale dependent, resource intensive industries, in which innovation depends mainly on the in-house activities of (a few) large firms. To this extent, we employ a sectoral empirical analysis using data on industrial dynamics and innovation in the Norwegian economy. Our results indicate that although the Norwegian economy has parts that are resourceand scale dependent, and also sectors in which the market structure is inert and concentrated, these characteristics are not systematically related to the level and nature of innovation activities. Our results indicate that innovation in Norway takes place in two main regimes: a highintensive and a low-intensive regime. This is not correlated systematically with industrial dynamics.
    Date: 2007–06

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