nep-bec New Economics Papers
on Business Economics
Issue of 2007‒07‒07
38 papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Performance Pay and Wage Inequality By Thomas Lemieux; W. Bentley MacLeod; Daniel Parent
  2. Relative Performance Evaluation, Risk Aversion and Entry. By Jean-Daniel Guigou; Bruno Lovat; Gwenaël Piase
  3. Production Outsourcing, Organizational Governance and Firm’s Technological Performance: Evidence from Italy By Roberto Antonietti; Giulio Cainelli
  4. Incentive Pay Systems and the Management of Human Resources in France and Great Britain By Richard Belfield; Salima Benhamou; David Marsden
  5. Spin-offs and the Market for Ideas By Satyajit Chatterjee; Esteban Rossi-Hansberg
  6. Stock Market Valuation and Monopolistic Competition: a Dynamic Stochastic General Equilibrium Approach By Gabriel Talmain
  7. Managerial Ownership Dynamics and Firm Value By Rüdiger Fahlenbrach; René M. Stulz
  8. Offshoring: General Equilibrium Effects on Wages, Production and Trade By Richard E. Baldwin; Frédéric Robert-Nicoud
  9. Entrepreneurship, Wealth, Liquidity Constraints and Start-up Costs By Raquel Fonseca; Pierre-Carl Michaud; Thepthida Sopraseuth
  10. The Unbalanced Matching in a Director Market By Changmin Lee
  11. Determinants of Nonprofit Board Size and Composition The Case of Spanish Foundations By Andrés Alonso, Pablo de; Azofra Palenzuela, Valentín; Romero Merino, Mª Elena
  12. Entrepreneurship in the UK By David G. Blanchflower; Chris Shadforth
  13. Corporate governance, strategic diversification and performance of firms in Mexico By Ruiz-Porras, Antonio; Steinwascher, William
  14. Older workers motivation to continue to work: five meanings of age: A conceptual review By Kooij, Dorien; Lange, Annet de; Jansen, Paul
  15. Are Workers in the Cultural Industries Paid Differently? By Cecile Wetzels
  16. The Adoption and Diffusion of Organizational Innovation: Evidence for the U.S. Economy By Lisa M. Lynch
  17. Adjustment Costs, Inventories and Output By Leif Danziger
  18. The Age of Reason: Financial Decisions Over the Lifecycle By Sumit Agarwal; John C. Driscoll; Xavier Gabaix; David Laibson
  19. Wages Equal Productivity. Fact or Fiction? By Johannes Van Biesebroeck
  20. Measuring the Dynamics of Young and Small Businesses: Integrating the Employer and Nonemployer Universes By Steven J. Davis; John Haltiwanger; Ron S. Jarmin; C. J. Krizan; Javier Miranda; Alfred Nucci; Kristin Sandusky
  21. Imperfect Transmission of Tacit Knowledge and Other Barriers to Entrepreneurship By Vesa Kanniainen; Panu Poutvaara
  22. Corporate Real Estate and Competitive Strategy By Singer, Bas P.; Bossink, Bart A.G.; Van de Putte, J.M.
  23. Producer Services, Manufacturing Linkages, and Trade By Joseph Francois; Julia Woerz
  24. Information Networks and Worker Recruitment By Jordi Brandts; Arthur Schram; Klarita Gërxhani
  25. Productivity Effects of International Outsourcing: Evidence from Plant Level Data By Görg, Holger; Hanley, Aoife; Strobl, Eric
  26. Ownership structure, sharing of control and legal framework. International evidence By López de Foronda Pérez, Óscar; López-Iturriaga, Félix; Santamaría Mariscal, Marcos
  27. Liquidity and Trading Dynamics By Veronica Guerrieri; Guido Lorenzoni
  28. Industry Diversity and Its Impact on the Innovation Performance of Firms: An Empirical Analysis Based on Firm-level Panel Data By Martin Wörter
  29. Dynamics of Union Organizations: A Look at Gross Flows in the LORS Files By Thomas J. Holmes; Michael Walrath
  30. Diversification: Value-Creating or Value-Destroying Strategy? Evidence from Using Panel Data By Antonio Galván; Pindado, Julio; Torre, Chabela de la
  31. External technology sourcing: The effect of uncertainty on governance mode choice By Duysters, Geert; Vanhaverbeke, Wim; Vrande, Vareska van de
  32. Information Technology, Organisational Change and Productivity Growth: Evidence from UK Firms By Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel
  33. Can adjustment costs explain the variability and counter-cyclicality of the labour share at the firm and aggregate level? By Philip Vermeulen
  34. Long-Run Risks and Financial Markets By Ravi Bansal
  35. Offshoring in a Ricardian World By Andrés Rodríguez-Clare
  36. Business services and the changing structure of European economic growth By Kox, Henk L.M.; Rubalcaba, Luis
  37. The Labour Market Effects of Technology Shocks By Canova, Fabio; Lopez-Salido, Jose David; Michelacci, Claudio
  38. Holdup and repeated interaction: the case of complementary monopoly By Kaz Miyagiwa

  1. By: Thomas Lemieux (University of British Columbia and NBER); W. Bentley MacLeod (Columbia University and IZA); Daniel Parent (McGill University)
    Abstract: We document that an increasing fraction of jobs in the U.S. labor market explicitly pay workers for their performance using bonuses, commissions, or piece-rates. We find that compensation in performance-pay jobs is more closely tied to both observed (by the econometrician) and unobserved productive characteristics of workers. Moreover, the growing incidence of performance-pay can explain 24 percent of the growth in the variance of male wages between the late 1970s and the early 1990s, and accounts for nearly all of the top-end growth in wage dispersion (above the 80th percentile).
    Keywords: performance pay, compensation, bonus pay, incentive pay, wage inequality
    JEL: J31 J33
    Date: 2007–06
  2. By: Jean-Daniel Guigou; Bruno Lovat; Gwenaël Piase
    Abstract: We study the relations between compensation schemes and risk aversion of managers in a strategic framework. We first show that the use of relative performance evaluation (RPE) in compensation contracts reduces the equilibrium profits of Cournot firms if managers are not too risk averse. Second, we introduce entry issues in our model. We then show that forbidding RPE can favour competition.
    Keywords: Executive Compensation, Relative Performance Evaluation, Moral Hazard, Market Structure.
    JEL: D43 D82 D86
    Date: 2007
  3. By: Roberto Antonietti (University of Bologna); Giulio Cainelli (University of Bari)
    Abstract: Aim of this paper is to study whether and how the firm’s decision to outsource production activities affects its technological performance. In particular, we look at how the alignment between the firm’s governance strategy and the underlying attributes of the transactions affects the capacity of the firm to introduce new products and processes. Using microeconomic data on a repeated cross-section of Italian manufacturing firms for the period 1998-2003, we develop a two-stage approach: first, we estimate the determinants of the firm’s organizational governance (production outsourcing); second, we incorporate a measure of governance misalignment into a technological performance relation. We find (i) that firms not aligned with the optimal organizational governance perform less well in terms of process innovation than more aligned competitors, but (ii) that misalignment has a positive effect on product innovation. However, this counterintuitive result is strongly characterized by non-linear effects that reverse the latter correlation for high values of governance misfit.
    Keywords: Production Outsourcing, Organizational Governance, Misalignment, Technological Performance, Non-Linearity
    JEL: L23 L24 L25 O31
    Date: 2007–05
  4. By: Richard Belfield; Salima Benhamou; David Marsden
    Abstract: Incentive pay systems have undergone major changes in recent decades. This paper investigates use of incentive pay systems in British and French private sector establishments in 2004, focusing onpayment-by-results, merit pay, and profit sharing, using British and French workplace surveys: WERSand Réponse. Despite the stereotypes of Britain as a deregulated economy and France as a more coordinated social-market economy, French firms make considerably greater use of incentive pay, andparticularly, merit pay. The paper explores the organisational and institutional determinants of this. It finds that personnel economics and management theories explain a significant share of the within country variation in use of incentive pay systems.
    Keywords: incentive systems, merit pay, profit-sharing, employer organisation
    JEL: J3 J5 M5 M52
    Date: 2007–05
  5. By: Satyajit Chatterjee; Esteban Rossi-Hansberg
    Abstract: We propose a theory of firm dynamics in which workers have ideas for new projects that can be sold in a market to existing firms or implemented in new firms: spin-offs. Workers have private information about the quality of their ideas. Because of an adverse selection problem, workers can sell their ideas to existing firms only at a price that is not contingent on their information. We show that the option to spin off in the future is valuable so only workers with very good ideas decide to spin off and set up a new firm. Since entrepreneurs of existing firms pay a price for the ideas sold in the market that implies zero expected profits for them, firms' project selection is independent of their size, which, under some assumptions, leads to scale-independent growth. The entry and growth process of firms in this economy leads to an invariant distribution that resembles the one in the US economy.
    JEL: E10 E23 L22 L23 L25 L26
    Date: 2007–06
  6. By: Gabriel Talmain
    Abstract: This paper extends a Real Business Cycle model to an economy in which monopolistic competitive firms’ technology is subject to idiosyncratic and common shocks. The value of future technology rents drive stock market valuation. We study how the arrival of new information about future technological developments affect each firm’s stream of future profit, the rate on return on physical capital, and the value of equity. We show that good news about future technology of a specific firm or industry will lift the price of shares of the specific firms, but that good news about future aggregate productivity will raise the discount rate, leaving the price of shares unchanged. On the other hand, good news about future aggregate profit margins will lift the price of shares.
    Keywords: Equity, Heterogeneous (non-representative) firms, Monopolistic Competition, Real Business Cycle (RBC), Stock Market
    JEL: E25 E32 G12
    Date: 2007–06
  7. By: Rüdiger Fahlenbrach; René M. Stulz
    Abstract: From 1988 to 2003, the average change in managerial ownership is significantly negative every year for American firms. The probability of large decreases in ownership is strongly increasing in contemporaneous and past stock returns but the probability of large increases in ownership through managerial purchases of shares is not. The relation between changes in Tobin's q and past and contemporaneous changes in ownership depends critically on controlling for past stock returns. When controlling for past stock returns, past large decreases in managerial ownership are unrelated to current changes in Tobin's q but there is some evidence that past large increases in managerial ownership are positively related to current changes in Tobin's q. Because managers sell shares when a firm's stock is performing well, large contemporaneous decreases in managerial ownership are associated with increases in Tobin's q. We argue that our evidence is mostly inconsistent with existing theories and propose a managerial discretion theory of ownership consistent with our evidence.
    JEL: G20 G32
    Date: 2007–06
  8. By: Richard E. Baldwin; Frédéric Robert-Nicoud
    Abstract: A simple model of offshoring is used to integrate the complex gallery of results that exist in thetheoretical offshoring/fragmentation literature. The paper depicts offshoring as 'shadowmigration' and shows that this allows straightforward derivation of the general equilibriumeffects on prices, wages, production and trade (necessary and sufficient conditions are provided).We show that offshoring requires modification of the four HO theorems, so econometricians whoignore offshoring might reject the HO theorem when a properly specified version held in the data.We also show that offshoring is an independent source of comparative advantage and can lead tointra-industry trade in a Walrasian setting.
    Keywords: Offshoring, Shadow migration, Inter-industry trade, Intra-industry trade, Tradetheorems
    JEL: F02 F12 L22 R11
    Date: 2007–05
  9. By: Raquel Fonseca (RAND); Pierre-Carl Michaud (RAND and IZA); Thepthida Sopraseuth (EPEE, University of Evry)
    Abstract: We study the effects of liquidity constraints and start-up costs on the relationship between wealth and the fraction of entrepreneurs in an economy. We develop a dynamic occupational choice model with endogenous wealth and entry into entrepreneurship. The model predicts that, with liquidity constraints, the probability of entering entrepreneurship is an increasing function of individual wealth while the introduction of start-up costs tends to flatten this relationship. The theoretical predictions can be tested on cross-sectional data with exogenous variation in liquidity constraints (e.g. access to credit) and business start-up costs. We use three highly comparable micro datasets (SHARE, ELSA and HRS) providing harmonized data on wealth and work status in 9 countries that characterized by very different levels of start-up costs and liquidity constraints. Our results support our theoretical predictions. While higher liquidity constraints yield a positive relationship with wealth profile for the fraction of workers in entrepreneurship, start-up costs weaken this relationship by depressing the marginal value of being an entrepreneur as a function of wealth. Countries with high start-up costs such as Italy, Spain and France have flatter wealth gradients.
    Keywords: entrepreneurship, wealth, liquidity constraints, start-up costs
    JEL: E20 D31 J62
    Date: 2007–06
  10. By: Changmin Lee (Indiana University Bloomington)
    Abstract: I construct an intertemporal searching model ("take it or leave it offer") in a frictional directorship market to explain the unbalanced matching between the director and the firm. In this model, potential candidates for outside directors and firms have heterogeneous (also, well ordered) quality levels. Also, both parties have strictly ordered preferences over the quality of counterpart from high levels to low levels. A candidate considers his quality ranking to compare the value of accepting a favorite offer at present to the value of waiting for successful matching with a better offer in the future. My model suggests that that highly qualified candidates would be likely to be matched with bad (not too bad) firms. The best candidate could go to the 150th ranked firm over 250 firms under the uniform distribution for the quality of the firm, and the 140th ranked firm under the extreme value distribution.
    Keywords: Corporate Governance, Board of Directors, Matching Model, Job Search
    JEL: G34 G38 J41 J44 J64
    Date: 2007–07
  11. By: Andrés Alonso, Pablo de; Azofra Palenzuela, Valentín (Departamento de Economía Financiera y Contabilidad, Facultad de Ciencias Económicas y Empresariales, Universidad de Valladolid); Romero Merino, Mª Elena (Departamento de Economía Financiera y Contabilidad, Facultad de Ciencias Económicas y Empresariales, Universidad de Valladolid)
    Abstract: Recently, many empirical studies have shed light on the determinants of boards of directors. Our aim in this paper goes far from the corporate setting. We explain how nonprofits boards are structured. As opposed to corporations’ goals, the objectives of nonprofits are non-lucrative. They can not disburse profits to their contributors, but the role played by their boards of trustees in monitoring and advising managers is analogous to that of boards of directors. Using a sample of Spanish foundations, we show that nonprofit board determinants, such as organizational complexity and financing structure, are mostly similar to those of corporate boards. Nonprofit age, however, illustrates the different nature of these organizations and their voluntary boards.
    Keywords: Nonprofit Governance, Board of Trustees, Foundations, Efficiency.
    Date: 2006–12
  12. By: David G. Blanchflower (Dartmouth College, Bank of England, NBER, University of Stirling and IZA); Chris Shadforth (External Monetary Policy Committee Unit, Bank of England)
    Abstract: This paper examines the causes and consequences of changes in the incidence of entrepreneurship in the UK. Self-employment as a proportion of total employment is high by international standards in the United Kingdom, but the share has fluctuated over time. We examine the time series movements in self-employment, which are dominantly driven by financial liberalisation and changes in taxation rules, especially as they relate to the construction sector which is the dominant sector. We document that the median earnings of the self-employed is less than for employees. We show that in comparison with employees the self-employed are more likely to be male; immigrants; work in construction or financial activities; hold an apprenticeship; work in London; work long hours; have high levels of job satisfaction and happiness. Consistent with the existence of capital constraints on potential and actual entrepreneurs, the estimates imply that the probability of self-employment depends positively upon whether the individual ever received an inheritance or gift. Evidence is also found that rising house prices have increased the self-employment rate. There appears to be no evidence that changes in self-employment are correlated with changes in real GDP, nor national happiness.
    Keywords: self-employment
    JEL: L26 J23
    Date: 2007–05
  13. By: Ruiz-Porras, Antonio; Steinwascher, William
    Abstract: We study the empirical relationships among corporate governance, strategic diversification and financial performance in Mexico. The study uses data from 99 non-financial firms listed in the BMV (Mexican Stock Market) during 2004. The main relationships found are: Firms which property is concentrated use to focus on the domestic market. Family businesses diversify their productive activities and their sources of income. There are no trends, regarding strategies and performance, related to the separation between ownership and control. When independent committees exist in the board of directors, firms diversify on a mean-narrow-spectrum sense.
    Keywords: corporate governance; strategic diversification; performance; family ownership; boards of directors
    JEL: M21 G34 L20
    Date: 2007–07–03
  14. By: Kooij, Dorien (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Lange, Annet de; Jansen, Paul
    Abstract: Purpose: Little is known about the motivation for older workers to work and to remain active in the labor market. Research on age and motivation is limited and, moreover, conceptually diverse. In this study, we address age-related factors that influence the work motivation of older workers. More specifically, we examine how various conceptualizations of the age factor affect the direction and termination of the motivation to continue to work of older workers. Methodology: A literature review of age-related factors and motivation to continue to work. Findings: Results from 24 empirical and 9 conceptual studies indicate that most age-related factors can have a negative impact on the motivation to continue to work of older people. These findings suggest that age-related factors are important in understanding older workers’ motivation to continue to work and that further research is needed to more fully understand the underlying processes that govern how these age-related factors influence the motivation to continue to work. Research limitations / implications: Based on the aforementioned findings, we were able to formulate a research agenda for future research, namely: 1) a need for a meta-analysis on age and motivation to determine the actual effect sizes, 2) additional theoretical attention to the underlying age-related processes, 3) more psychometric studies examining the operationalization and measurement of the age- related variables, and 4) additional empirical research on age-related variables and motivation. Practical implications: Age-related factors identified in this study, such as declining health and career plateaus, should be addressed by HRM policies. HRM practices that could motivate older workers to continue to work include ergonomic adjustments and continuous career development. Originality / value of paper: Research on age and motivation is limited and conceptually diverse. This paper is one of the first studies to explore the relations between different conceptualizations of age and motivation.
    Keywords: Aging; Age-related factors; Motivation to continue to work; HRM
    Date: 2007
  15. By: Cecile Wetzels (FEE, University of Amsterdam and IZA)
    Abstract: This paper aims to explore wage differentials between employees in three sub-industries of the cultural industries compared with the main (1-digit level) industry to which they belong. We use data from the Wage Indicator Questionnaire 2001/2002, which includes information on 12,757 employees in the Netherlands. We find that workers in these particular subindustries of the cultural industries are paid differently compared with their respective main industries. Workers in entertainment and publishing and printing are less endowed with standard labour market characteristics. However, whereas workers in entertainment face negative price or evaluation-related effects, the opposite holds for workers in publishing and printing. Workers in IT are more endowed with standard labour market characteristics, but they receive lower rewards for their labour market characteristics.
    Keywords: decomposition, entertainment, IT-services, Netherlands, printing and publishing, wage differentials
    JEL: J24 J31 L82 O12
    Date: 2007–05
  16. By: Lisa M. Lynch (Tufts University, NBER and IZA)
    Abstract: Using a unique longitudinal representative survey of both manufacturing and nonmanufacturing businesses in the United States during the 1990’s, I examine the incidence and intensity of organizational innovation and the factors associated with investments in organizational innovation. Past profits tend to be positively associated with organizational innovation. Employers with a more external focus and broader networks to learn about best practices (as proxied by exports, benchmarking, and being part of a multi-establishment firm) are more likely to invest in organizational innovation. Investments in human capital, information technology, R&D, and physical capital appear to be complementary with investments in organizational innovation. In addition, non-unionized manufacturing plants are more likely to have invested more broadly and intensely in organizational innovation.
    Keywords: organizational innovation, productivity, human capital, technological change
    JEL: D2 J24 M5 O3
    Date: 2007–05
  17. By: Leif Danziger
    Abstract: This paper analyzes the optimal adjustment strategy of an inventory-holding firm facing price- and quantity-adjustment costs in an inflationary environment. The model nests both the original menu-cost model that allows production to be costlessly adjusted, and the later model that includes price- and quantity-adjustment costs, but rules out inventory holdings. The firm’s optimal adjustment strategy may involve stockouts. At low inflation rates, output is inversely related to the inflation rate, and the length of time demand is satisfied decreases with the absolute value of the demand elasticity, the storage cost, and the real interest rate.
    Keywords: Menu costs; Quantity-adjustment costs; Inventories; Output; Inflation
    JEL: D21 D24 L23
    Date: 2007–06
  18. By: Sumit Agarwal; John C. Driscoll; Xavier Gabaix; David Laibson
    Abstract: The sophistication of financial decisions varies with age: middle-aged adults borrow at lower interest rates and pay fewer fees compared to both younger and older adults. We document this pattern in ten financial markets. The measured effects cannot be explained by observed risk characteristics. The sophistication of financial choices peaks around age 53 in our cross-sectional data. Our results are consistent with the hypothesis that financial sophistication rises and then falls with age, although the patterns that we observe represent a mix of age effects and cohort effects.
    JEL: D1 D8 G2 J14
    Date: 2007–06
  19. By: Johannes Van Biesebroeck
    Abstract: If labor markets operated entirely frictionless, productivity premiums associated with different worker characteristics would equal the wage premiums earned by workers possessing those characteristics. Using matched employer-employee data from the manufacturing sector of three sub-Saharan countries, we evaluate to what extent the two premiums differ for four characteristics that are clearly related to human capital: schooling, training, experience, and tenure. Equality holds strongly and even surprisingly well for firms in Zimbabwe (the most developed country in the sample), but not at all in Tanzania (the least developed country), while results in Kenya are intermediate. Where equality fails, the pattern is for general human capital characteristics (schooling, experience) to receive a wage return that exceeds the productivity return, while the reverse applies to more firm-specific human capital characteristics (training, tenure). Schooling tends to be over-rewarded, even though large productivity gains are consistently associated with formal employee training programs. Wages tend to rise with experience, while productivity gains are mostly associated with tenure. We demonstrate the remarkable robustness of the findings controlling, among other things, for sampling errors, nonlinear effects, and non-wage benefits. Localized labor markets and imperfect substitutability of different worker-types provide a partial explanations for the estimated gap between the wage and productivity premiums.
    Keywords: sub-Saharan Africa; production function; labor market; human capital; market efficiency
    JEL: J31 O12 L6
    Date: 2007–06–29
  20. By: Steven J. Davis; John Haltiwanger; Ron S. Jarmin; C. J. Krizan; Javier Miranda; Alfred Nucci; Kristin Sandusky
    Abstract: We develop a preliminary version of an Integrated Longitudinal Business Database (ILBD) that combines administrative records and survey data for all employer and nonemployer business units in the United States. Unlike other large-scale business databases, the ILBD tracks business transitions from nonemployer to employer status. This feature of the ILBD opens a new frontier for the study of business formation, early lifecycle dynamics and the precursors to job creation in the U.S. economy. There are 5.4 million nonfarm business firms with employees as of 2000 and another 15.5 million with no employees. Our analysis focuses on 40 industries that account for nearly half of nonemployers and 36 percent of nonemployer revenues. Within these industries, nonemployers account for 14 percent of business revenues. About 220,000 of the seven million nonemployers in our selected industries hire workers and migrate to the employer universe over a three-year horizon. These Migrants account for 20 percent of revenue among young employers (three years or less since first hire). Compared to other nonemployers, the revenue of Migrants grows very rapidly in the year prior to and the year of transition to employer status.
    JEL: C81 D21 L11
    Date: 2007–07
  21. By: Vesa Kanniainen (University of Helsinki); Panu Poutvaara (University of Helsinki and IZA)
    Abstract: This paper identifies several distortions which create barriers to entrepreneurship. First, in addition to the innate entry cost, there are entry costs caused by regulation. Second, union wage policies raise the opportunity cost of entrepreneurship. Third, inefficiencies in the transmission of tacit knowledge between generations of entrepreneurs can arise: with access to within-family ownership transfer, the outside market for entrepreneurship operates as a lemon’s market. This problem becomes relevant when the economic life of a business idea exceeds the active life of an entrepreneur.
    Keywords: barriers to entrepreneurship, tacit knowledge, occupational choice
    JEL: J24 H25
    Date: 2007–06
  22. By: Singer, Bas P. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Bossink, Bart A.G.; Van de Putte, J.M.
    Abstract: Purpose. The purpose of his paper is to investigate how organisations use a corporate real estate strategy to support their competitive strategy. It provides a theoretical and empirical overview and analysis of effective combinations of firms' real estate- and competitive strategies. Design/methodology/approach. The paper constructs a model that integrates three real estate strategies and three types of competitive strategies. Case studies in ten multinational firms in the Netherlands apply the model, and describe and analyse the combinations of the firms' real estate- and competitive strategies. Findings. A standardisation real estate strategy supports all three competitive strategies: lowest costs, differentiation, and focus. A value-based real estate strategy supports a competitive strategy of differentiation and differentiation-focus, and does not contribute to a competitive strategy of lowest costs, or lowest costs-focus. Finally, an incremental real estate strategy is ambiguous, and does not support any of the three competitive strategies. Originality/value – The paper constructs a literature-based model that combines real estate strategy and competitive strategy. It applies the model in a study of ten cases. Practitioners can use the model to analyse and reconsider the combination of their organisation's real estate strategy and competitive strategy. Academics can use the qualitative research results to design further research that qualifies and quantifies the relationship between various elements of real estate- and competitive strategy.
    Keywords: Corporate real estate; Real estate strategy; Corporate strategy; Competitive strategy
    Date: 2007
  23. By: Joseph Francois (Erasmus Universiteit Rotterdam, Joh. Kepler University (Linz), and CEPR (London)); Julia Woerz (The Vienna Institute for International Economic Studies (WIIW))
    Abstract: Working with a mix of panel data on goods and services trade for the OECD for 1994-2004, combined with social accounts data (i.e. data on intermediate linkages) for 78 countries benchmarked to the panel midpoint, we examine the role of services as inputs in manufacturing, with a particular focus on indirect exports of services through merchandise exports, and also on the related interaction between service sector openness and the overall pattern of manufacturing exports. From the cross-section, we also develop a set of stylized facts linking services to level of development and the density of intermediate linkages. We find significant and strong positive effects from increased business service openness (i.e. greater levels of imports) on industries like machinery, motor vehicles, chemicals and electric equipment, supporting the notion that off-shoring of business services may promote the competitiveness of the most skill and technology intensive industries in the OECD. Conversely, we find evidence of negative general equilibrium effects for sectors that are less service intensive.
    Keywords: producer services; linkages; manufacturing exports; service imports; multiplier effects
    JEL: F14 L8 O11
    Date: 2007–06–11
  24. By: Jordi Brandts; Arthur Schram; Klarita Gërxhani
    Abstract: This paper studies experimentally how the existence of social information networks affects the ways in which firms recruit new personnel. Through such networks firms learn about prospective employees' performance in previous jobs. Assuming individualistic preferences social networks are predicted not to affect overall labor market behavior, while with social preferences the prediction is that when bilaterally negotiated: (i) wages will be higher and (ii) that workers in jobs with incomplete contracts will respond with higher effort. Our experimental results are consistent with the social preferences view, both for the case of excess demand and excess supply of labor. In particular, the presence of information networks leads to more efficient allocations.
    Keywords: Labor Markets, Information Networks, Worker Recruitment, Indirect reciprocity, Experiments
    JEL: C90 J30 J40
    Date: 2007–06–15
  25. By: Görg, Holger; Hanley, Aoife; Strobl, Eric
    Abstract: We investigate the impact of international outsourcing on productivity using plant level data for Irish manufacturing. Specifically, we distinguish the effect of outsourcing of materials from services inputs. Moreover, we examine whether the impact on productivity is different for plants being more embedded in international markets through exporting or being part of a multinational. Our results show robust evidence for positive effects from outsourcing of services inputs for exporters, either domestic- or foreign-owned. By contrast, we find no statistically significant evidence of an impact of international outsourcing of services on productivity for firms not operating on the export market.
    Keywords: exporting; International outsourcing; multinational enterprises; productivity
    JEL: F14 F23 L23
    Date: 2007–06
  26. By: López de Foronda Pérez, Óscar (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos); López-Iturriaga, Félix; Santamaría Mariscal, Marcos (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos)
    Abstract: We analyze the relation between capital structure, ownership structure, and corporate value for a sample of 1,216 firms from 15 European countries. Our results stress two different conflicts of interest and show the differential role played by the mechanisms of corporate control depending on the legal and institutional environment. In common law countries, as a consequence of the relationships between managers and shareholders, capital structure and managerial ownership are the most effective mechanisms of control. In civil law countries, however, as a consequence of the conflicts between majority and minority shareholders, the ownership concentration and the sharing of control within the firm become crucial. In this scenario, the second reference shareholder plays a critical role in contesting the control of the dominant largest shareholder in order to reduce the extraction of private benefits and improve the firm’s performance
    Keywords: Law and finance approach, capital structure, ownership structure, corporate governance.
    Date: 2007–06
  27. By: Veronica Guerrieri; Guido Lorenzoni
    Abstract: How do financial frictions affect the response of an economy to aggregate shocks? In this paper, we address this question, focusing on liquidity constraints and uninsurable idiosyncratic risk. We consider a search model where agents use liquid assets to smooth individual income shocks. We show that the response of this economy to aggregate shocks depends on the rate of return on liquid assets. In economies where liquid assets pay a low return, agents hold smaller liquid reserves and the response of the economy tends to be larger. In this case, agents expect to be liquidity constrained and, due to a self-insurance motive, their consumption decisions are more sensitive to changes in expected income. On the other hand, in economies where liquid assets pay a large return, agents hold larger reserves and their consumption decisions are more insulated from income uncertainty. Therefore, aggregate shocks tend to have larger effects if liquid assets pay a lower rate of return.
    JEL: D83 E41 E44
    Date: 2007–06
  28. By: Martin Wörter (KOF Swiss Economic Institute, ETH Zurich)
    Abstract: This paper investigates empirically the impact of diversity on the innovation performance of a firm. We created a measure for diversity that mirrors differences in the resource base of firms within an industry and tested its impact on innovation in addition to more traditional factors like technology-push, demand-pull, and firm-size, based on panel data stemming from three representative cross sectional surveys carried out in the years 1996, 1999, and 2002 respectively. In fact, diversity has a significant positive impact on the innovation intensity of firms and thus supports more theoretical findings in this area. We also find empirical evidence for the technology push and the demand pull hypotheses as well as the importance of competition for innovation.
    Keywords: Diversity, Innovation Performance, Evolution of Industries, Jacobs Externalities, Panel data,
    JEL: O30
    Date: 2007–05
  29. By: Thomas J. Holmes; Michael Walrath
    Abstract: This paper examines the membership dynamics of union local organizations. The analysis links across time the reports labor organizations file as part of the Labor Organization Reporting System (LORS). Analogous to findings in the labor dynamics literature, we find substantial reallocation of membership across locals. While overall there is net decline, there is significant positive gross membership creation for some local organizations.
    JEL: J5
    Date: 2007–07
  30. By: Antonio Galván (Universidad Autónoma de Tamaulipas); Pindado, Julio (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca); Torre, Chabela de la (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca)
    Abstract: This paper provides evidence on how the diversification strategy impact on the firm value. Furthermore the paper studies the effect of the levels and types of diversification on the firm value. To achieve this aim, we propose a value model that incorporates the level and type of diversification. The estimation of the model by using the Generalized Method of Moments provides interesting results. Consistent with the value-destroying expectations, we find a reduction in the value of the diversified companies in the eurozone countries, however there is a non linear relationship between the diversification and value, giving rise to an optimal level of diversification. Moreover our results support that related diversification is more value-creating than non-related diversification. Additionally we test the effect of diversification of market valuation by focusing on the discount that diversified firms trade at, then a value destroying is achieved for the diversified companies in our sample, and we also have evidence on the hypothesis that relatedness moderates the value loss from diversification.
    Keywords: Corporate diversification, relatedness, firm value, excess value
    JEL: G32 G34
    Date: 2007–06
  31. By: Duysters, Geert (UNU-MERIT); Vanhaverbeke, Wim (Technical University Eindhoven); Vrande, Vareska van de (Technical University Eindhoven)
    Abstract: This study examines the effect of external and relational uncertainty on the governance choice for inter-organizational technology sourcing. We develop a number of hypotheses about the impact of environmental turbulence, technological newness, technological distance and prior cooperation on the choice between different governance modes. Data about external technology sourcing transactions in the pharmaceutical industry do not provide evidence for a continuum from less to more integrated sourcing modes. However, we find that the ranking depends on the type of uncertainty, indicating that firms tackle different types of uncertainty with different governance modes.
    Keywords: Open Innovation, Corporate Venture Capital, Mergers and Acquisitions
    JEL: O32 O31 G34 G24
    Date: 2007
  32. By: Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel
    Abstract: We examine the relationships between productivity growth, IT investment and organisational change(??) using UK firm data. Consistent with the small number of other micro studies we find (a) ITappears to have high returns in a growth accounting sense when ?? is omitted; when ?? is includedthe IT returns are greatly reduced, (b) IT and ?? interact in their effect on productivity growth, (c)non-IT investment and ?? do not interact in their effect on productivity growth. Some new findingsare (a) ? ? is affected by competition; (b) US-owned firms are much more likely to introduce ??relative to foreign owned firms who are more likely still relative to UK firms; (c) our predictedmeasured TFP growth slowdown for firms who are not doing ?O and/or are in the early stages of ITinvestment compare well with the macro numbers documenting a UK measured TFP growthslowdown.
    Keywords: information technology, productivity growth, organisational change
    JEL: D24 E22 L22
    Date: 2007–03
  33. By: Philip Vermeulen (DG-Resarch, European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany;.)
    Abstract: This paper shows that adjustment costs modelled as firing costs of moderate size go a long way in explaining the variability and counter- cyclicality of the labour share at the firm and aggregate level. Firing costs cause firms to fire less in recessions and hire less in booms causing wage costs to fluctuate less cyclically than output, thus inducing variability and countercyclicality in the labour share. The paper develops a dynamic labour demand model with firing costs. The model is then calibrated using moments derived from 1634 French manufacturing firms and aggregate French manufacturing data. The calibrated model is able to closely match the variability and counter-cyclicality of the labour share at the firm level while it also generates a countercyclical aggregate labour share with a variability 60 % of that in French aggregate manufacturing. JEL Classification: D21, E25.
    Keywords: Labour share, labor adjustment costs, firing costs, real business cycles.
    Date: 2007–06
  34. By: Ravi Bansal
    Abstract: The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price fluctuations. In addition, the model can empirically account for the cross-sectional differences in asset returns. Hence, the long-run risks model provides a coherent and systematic framework for analyzing financial markets.
    JEL: E0 E44 G0 G1 G12
    Date: 2007–06
  35. By: Andrés Rodríguez-Clare
    Abstract: Falling costs of coordination and communication have allowed firms in rich countries to fragment their production process and offshore an increasing share of the value chain to low-wage countries. Popular discussions about the aggregate impact of this phenomenon on rich countries have stressed either a (positive) productivity effect associated with increased gains from trade, or a (negative) terms of trade effect linked with the vanishing effect of distance on wages. This paper proposes a Ricardian model where both of these effects are present and analyzes the effects of increased fragmentation and offshoring in the short run and in the long run (when technology levels are endogenous). The short-run analysis shows that when fragmentation is sufficiently high, further increases in fragmentation lead to a deterioration (improvement) in the real wage in the rich (poor) country. But the long-run analysis reveals that these effects may be reversed as countries adjust their research efforts in response to increased offshoring. In particular, the rich country always gains from increased fragmentation in the long run, whereas poor countries see their static gains partially eroded by a decline in their research efforts.
    JEL: F10 F15
    Date: 2007–06
  36. By: Kox, Henk L.M.; Rubalcaba, Luis
    Abstract: A pervasive trend that characterised the past two decades of European economic growth is that the share in the economy of commercial services, and particularly business services, grows monotonically, and this mainly to the expense of the manufacturing sector. The structural shift reflects a changing and increasingly complex social division of labour between economic sectors. The fabric of inter-industry relations is being woven in a new way due to the growing specialisation in knowledge services, the exploitation of scale economies for human capital, lowered costs of outsourcing in-house services, and the growing encapsulation of manufacturing products in a ‘service jacket’. Business services, which inter alia includes the software industry and other knowledge-intensive business services (KIBS), play a key role in many of these processes. We argue that in recent decades business services contributed heavily to European economic growth, in terms of employment, productivity and innovation. A direct growth contribution stems from the business-services sector’s own remarkably fast growth, while an indirect growth contribution was caused by the positive knowledge and productivity spill-overs from business services to other industries. The spill-overs come in three forms: from original innovations, from speeding up knowledge diffusion, and from the reduction of human capital indivisibilities at firm level. The external supply of knowledge and skill inputs exploits positive external scale economies and reduces the role of internal (firm-level) scale (dis)economies associated with these inputs. The relatively low productivity growth that characterises some business-services sectors may be a drag on the sector's direct contribution to overall economic growth. The paper argues that there is no reason to expect a “Baumol disease” effect as long as the productivity and growth spill-overs from KIBS to other economic sectors are large enough. Finally, the paper pinpoints some policy 'handles' that could be instrumental in boosting the future contribution of business services to overall European economic growth.
    Keywords: economic growth; human capital; specialisation; business services; Europe
    JEL: L8 O52 O4 O3
    Date: 2007–07
  37. By: Canova, Fabio; Lopez-Salido, Jose David; Michelacci, Claudio
    Abstract: We analyze the effects of neutral and investment-specific technology shocks on hours worked and unemployment. We characterize the response of unemployment in terms of job separation and job finding rates. We find that job separation rates mainly account for the impact response of unemployment while job finding rates for movements along its adjustment path. Neutral shocks increase unemployment and explain a substantial portion of unemployment and output volatility; investment-specific shocks expand employment and hours worked and mostly contribute to hours worked volatility. We show that this evidence is consistent with the view that neutral technological progress prompts Schumpeterian creative destruction, while investment specific technological progress has standard neoclassical features.
    Keywords: creative destruction; Search frictions; technological progress
    JEL: E00 J60 O33
    Date: 2007–06
  38. By: Kaz Miyagiwa
    Abstract: Suppose consumers buy complementary goods sequentially from several monopolists. If prices cannot be contracted on, there may be no sale in a one-shot game due to the holdup problem. Dynamic interaction of agents attenuates the problem. In equilibrium, the first and the last monopolist capture the entire monopoly profit while the other monopolists break even. Vertical integrations that exclude the last monopolist neither lower the price nor increase social welfare. On the other hand, partial integrations that include the last monopoly can reduce the combined profit and hence may never occur despite the welfare-improving potential.
    Date: 2007–02

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