nep-bec New Economics Papers
on Business Economics
Issue of 2007‒08‒08
fifty papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. A Comparative Analysis of Japanese, U.S., and Korean Firms on IT and Management By MOTOHASHI Kazuyuki
  2. Contracts to Communities: A Processual Model of Organizational Virtue By Heugens, P.P.M.A.R.; Kaptein, M.; Oosterhout, J. van
  3. Cash holdings, corporate governance and financial constraints By Edith Ginglinger; Khaoula Saddour
  4. Competition, Cooperation, and Corporate Culture By Michael Kosfeld; Ferdinand von Siemens
  5. Organizational Measures Taken against Workplace Bullying: The Case of Finnish Municipalities By Salin, Denise
  6. Going, Going, Gone. Innovation and Exit in Manufacturing Firms By Cefis, E.; Marsili, O.
  7. Performance Pay, Training and Labor Mobility By Anne C. Gielen
  8. Firms and Early Retirement: Offers That One Does Not Refuse By Lutz Bellmann; Florian Janik
  9. Does Globalization Create Superstars? By Hans Gersbach; Armin Schmutzler
  10. Manufacturing Sector: Structural Change and Workforce Skill By Murat Arik
  11. Workplace Industrial Relations in Britain, 1980-2004 By John Forth; Blanchflower, D., Bryson, A.
  12. Serial Entrepreneurship: Differentiating Direct from Latent Re-entrants By A. Miguel Amaral; Rui Baptista
  13. Entrepreneurial Backgrounds, Human Capital and Start-up Success By Rui Baptista; Murat Karaoez; Joana Mendonça
  14. Entrepreneurs' Gender and Financial Constraints : Evidence from International Data By Alexander Muravyev; Dorothea Schäfer; Oleksandr Talavera
  15. The Interaction between Financial Incentives and Task-specific Cognitive Capital: More Evidence in Support of Camerer and Hogarth (1999) By Ondrej Rydval
  16. Worker Absenteeism in Search Equilibrium By Per Engström; Bertil Holmlund
  17. Heterogeneity in Real Wage Cyclicality By Pedro S. Martins
  18. How Many U.S. Jobs Might Be Offshorable? By Alan S. Blinder
  19. The Impact of Teams on Output, Quality and Downtime: An Empirical Analysis Using Individual Panel Data By Derek C. Jones; Takao Kato
  20. The Reform of Corporate Governance in France By Panagiotopoulos, Miltiadis
  21. High in the Hierarchy: How Vertical Location and Judgments of Leaders' Power are Interrelated By Giessner, S.R.; Schubert, T.W.
  22. Export, foreign direct investment, and joint ventures: Learning the rival’s costs through propinquity By Anthony Creane; Kaz Miyagiwa
  23. The cyclicality of effective wages within employer-employee matches - evidence from German panel data By Silke Anger
  24. Preservation and Dissolution of the Target Firm's Embedded Ties in Acquisitions By Spedale, S.; Bosch, F.A.J. van den; Volberda, H.W.
  25. Performance-based Arrangements for Senior Civil Servants OECD and other Country Experiences By Anne Ketelaar; Nick Manning; Edouard Turkisch
  26. Job Changes at Older Ages: Effects on Wages, Benefits, and Other Job Attributes By Richard W. Johnson; Janette Kawachi; ;
  27. Match Effects By Simon D. Woodcock
  28. Trends in Worker Displacement Penalties in Japan: 1991-2005 By Michael Bognanno and Ryo Kambayashi
  29. The Effect of Globalization on Firm Profits: Do Owners’ Race/Ethnicity Matter? By Elizabeth Asiedu; James A. Freeman
  30. Promotion Tournaments and Individual Performance Pay By Anja Schöttner; Veikko Thiele
  31. The Challenge to Industrial Relations in Germany By Panagiotopoulos, Miltiadis
  32. Cournot competition among multiproduct firms:specialization through licensing By Luigi Filippini
  33. Overskilling, Job Insecurity and Career Mobility By Seamus McGuinness; Mark Wooden
  34. Extracting business cycle fluctuations: what do time series filters really do? By Arturo Estrella
  35. Business services and the changing structure of European economic growth By Henk Kox; Luis Rubalcaba
  36. Why Are Some Entrepreneurs More Innovative Than Others? By Koellinger, P.
  37. Risky Earnings, Taxation and Entrepreneurial Choice : A Microeconometric Model for Germany By Frank M. Fossen
  38. Interdependency in Performance By Kelii H. Haraguchi; Glen R. Waddell
  39. Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist? By Barry T. Hirsch
  40. Insights gained from conversations with labor market decision makers By Truman F. Bewley
  41. Allocation of Authority when a Person is not a Robot By Li, Jianpei; Wu, Yanhui
  42. Bilateral Information Sharing in Oligopoly By Sergio Currarini; Francesco Feri
  43. Female labor Force Participation in an Era of Organizational and Technological Change By Marina Adshade
  44. How do Rating Agencies Score in Predicting Firm Performance By Gunter Löffler; Peter N. Posch
  45. "Tit-For-Tat Equilibria in Discounted Repeated Games with Private Monitoring" By Masanao Aoki; Hiroshi Yoshikawa
  46. Spectral risk measures and portfolio selection By Alexandre Adam; Mohamed Houkari; Jean-Paul Laurent
  47. Working Hours Flexibility and Older Workers' Labor Supply By Anne C. Gielen
  48. On-the-job search and the cyclical dynamics of the labor market By Michael U. Krause; Thomas A. Lubik
  50. Employer-to-employer flows in the United States: estimates using linked employer-employee data By Melissa Bjelland; Bruce Fallick; John Haltiwanger; Erika McEntarfer

  1. By: MOTOHASHI Kazuyuki
    Abstract: In this paper, the contribution of information technology (IT) use to management performance is compared between Japanese, U.S., and Korean firms, based on an analysis using data from the "International Comparative Survey of Firms' IT Strategies" (RIETI). The results reveal that Japanese firms have received positive effects from "mission critical systems," which include routine business activities such as personnel management, accounting information systems, and ordering, whereas U.S. firms are effectively using "informational systems;" systems that perform intricate analyses of a firm's data, such as supporting management strategies or developing new customers. The results also show that Korean firms trail Japanese firms in deploying IT systems, with the exception of enterprise resource planning (ERP) systems. The section on the internal IT organization of the firm, which reveals the importance placed by firms on using IT as a tool to accomplish corporate strategy, indicates that U.S. firms place the highest importance, followed by Japanese firms, and finally by Korean firms. With regard to the relation with outsourcing firms of IT systems, U.S. firms are treating outsourcing firms as partners for consulting on technology trends whereas a large number of Japanese firms perceive them as a means of cost reduction.
    Date: 2007–08
  2. By: Heugens, P.P.M.A.R.; Kaptein, M.; Oosterhout, J. van (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: In the face of systemic challenges to corporate legitimacy, scholars and managers alike have been rethinking traditional answers to the question: What does it take to be a good company? We approach this question in two novel ways. We offer a normative answer, grounded in virtue ethics, by introducing a threefold typology of organizational forms. The moral goodness of each form depends on the congruence between its purpose and virtues. But we also offer a positive answer in the form of a processual model which traces corporate goodness to its empirical antecedents and consequences. The model defies a view of organizations as innately good or evil, but rather portrays virtue as the sediment of a value infusion process. We predict that if managers succeed in establishing in their organizations the kind of virtues necessary to support collective moral agency, they can expect to reap gains like enhanced effectiveness and legitimacy. However, when they neglect their moral responsibilities, the result will likely be organizational demise.
    Keywords: Business ethics;Positive theorizing;Normative theorizing;Virtue ethics;Stakeholder theory;Corporate performance;Organizational goodness;
    Date: 2007–04–04
  3. By: Edith Ginglinger (DRM - Dauphine Recherches en Management - [CNRS : UMR7088] - [Université Paris Dauphine - Paris IX]); Khaoula Saddour (DRM - Dauphine Recherches en Management - [CNRS : UMR7088] - [Université Paris Dauphine - Paris IX])
    Abstract: We examine the relation between cash holdings, quality of governance and financial constraints. We find that firms with strong shareholder rights hold more cash, contrary to the predictions of agency theory. This result is partly due to the positive correlation that exists between governance quality measures and the degree of financial constraint faced by the firm. We show that governance quality has no impact on cash holdings by financially unconstrained firms. It does, however, have a positive impact on the cash holdings of certain financially constrained firms, particularly family firms. Anti-takeover provisions give these firms extra flexibility, enabling them to issue shares without the founding family losing control, and provide an alternative to high cash holdings.
    Keywords: cash holdings; financial constraints; governance
    Date: 2007–07–13
  4. By: Michael Kosfeld (University of Zurich and IZA); Ferdinand von Siemens (University of Munich)
    Abstract: Teamwork and cooperation between workers can be of substantial value to a firm, yet the level of worker cooperation often varies between individual firms. We show that these differences can be the result of labor market competition if workers have heterogeneous preferences and preferences are private information. In our model there are two types of workers: selfish workers who only respond to monetary incentives, and conditionally cooperative workers who might voluntarily provide team work if their co-workers do the same. We show that there is no pooling in equilibrium, and that workers self-select into firms that differ in their incentives as well as their resulting level of team work. Our model can explain why firms develop different corporate cultures in an ex-ante symmetric environment. Moreover, the results show that, contrary to first intuition, labor market competition does not destroy but may indeed foster within-firm cooperation.
    Keywords: competition, conditional cooperation, asymmetric information, self-selection, corporate culture
    JEL: D23 D82 L23 M54
    Date: 2007–07
  5. By: Salin, Denise (Swedish School of Economics and Business Administration)
    Abstract: Although workplace bullying and other inappropriate treatment in the workplace have received growing attention, especially in Northern Europe, in the past few decades, little research has so far been conducted about the prevention of and intervention in such phenomena. This paper provides a review of different organizational measures typically recommended for preventing and intervening in workplace bullying and other forms of inappropriate treatment in the workplace. These measures include anti-bullying policies, training and information, appropriate job designs, active monitoring, and early intervention. As for intervention, both informal and formal strategies are discussed. Furthermore, the paper reports findings from a study among Finnish municipalities on the extent to which these measures are actually used in Finland, a country that has fairly recently introduced anti-bullying legislation.
    Keywords: bullying; harassment; intervention; prevention
    Date: 2006–11–13
  6. By: Cefis, E.; Marsili, O. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This paper examines the effect of innovation on the risk of exit of a firm, distinguishing between different modes of exits. Innovation represents a resource and a capability that helps a firm to build competitive advantage and remain in the market. At the same time, the resources and capabilities of innovative firms make them an attractive target for the acquisition process of other firms, thereby increasing the likelihood of the exiting the market. We explore these effects empirically by linking data on innovation and exits for a large sample of manufacturing firms in the Netherlands. The results show that the effect of innovation on a firm's risk of exit differs according to the mode of exit and, in addition, it is shaped by the nature of the innovation. While a firm can lower its risk of failure by innovating in either products or processes, the introduction of a new product in the absence of innovation in the production process increases the risk of exit as a result of merger and acquisition.
    Keywords: Mergers and acquisitions;Firm exit;Innovation;Competing risks model;
    Date: 2007–03–21
  7. By: Anne C. Gielen (Tilburg University, CentER, Institute for Labor Studies (OSA) and IZA)
    Abstract: Market imperfections may cause firms and workers to under-invest in specific training. This paper shows that profit sharing may be a suitable instrument to enhance specific training investments, either by enhancing wage flexibility or by increasing the returns to training. As a result, profit sharing not only increases productivity by means of an effort effect, but also by increased training investments. Furthermore, the results suggest that older workers' employability can be improved if a profit-related remuneration is paid.
    Keywords: profit-related pay, training, labor productivity, labor mobility
    JEL: M52 M53 J24 J62
    Date: 2007–07
  8. By: Lutz Bellmann (Institute for Employment Research (IAB), University of Hannover and IZA); Florian Janik (Institute for Employment Research (IAB))
    Abstract: According to the Hutchens (1999) model, early retirement is not explained as a result of maximizing expected individual utility but rather as a demand-side phenomenon arising from a firm’s profit-maximizing behaviour. Firms enter into contracts with their employees that include clauses about early retirement. In response to demand or technological shocks, workers receive retirement offers from their employers which cannot be rejected by rational actors. Using the IAB Establishment Panel 2003-2006, the relationship between indicators of demand and technological shocks and the incidence and amount of early retirement is analysed. The results provide general support to the Hutchens model.
    Keywords: (involuntary) early retirement, labour demand, panel data
    JEL: J14 J21 J23 J26
    Date: 2007–07
  9. By: Hans Gersbach (CER-ETH - Center of Economic Research, ETH Zurich); Armin Schmutzler (Socioeconomic Institute, University of Zurich)
    Abstract: To examine the impact of globalization on managerial compensation, we consider a matching model where a number of firms compete both in the product market and in the managerial market. We show that globalization, i.e. the simultaneous integration of product markets and managerial pools, leads to an increase in the heterogeneity of managerial salaries. Typically, while the most able managers obtain a wage increase, less able managers are faced with a reduction in wages. Hence our model can explain the increasing heterogeneity of CEO compensation that has been observed in the last few decades.
    Keywords: Globalization, manager remuneration, superstars
    JEL: D43 F15 J31 L13
    Date: 2007–04
  10. By: Murat Arik
    Date: 2006–07
  11. By: John Forth; Blanchflower, D., Bryson, A.
    Abstract: There was a time before the first Workplace Industrial Relations Survey (WIRS80) in 1980 when what we knew of industrial relations was based primarily upon small scale surveys and case studies. WIRS80 marked a radical departure in the study of industrial relations for two reasons. First, following in the footsteps of a small number of survey forerunners, it sought to ‘map’ industrial relations in Britain with nationally-representative large-scale surveys of workplace managers, thus permitting investigation of the incidence of practices and changes over time. Second, it focused on industrial relations institutions and outcomes, linking them to the processes of industrial relations that had been the chief focus of studies up until that point. This paper reflects on some of what we have learned in the five surveys over the quarter century since 1980, focusing selectively on the demise of collective IR, pay determination, union wage effects, variable pay, the climate of employment relations and union effects on employment growth. [Also IZA Discussion Paper #2518]
    Date: 2007–03
  12. By: A. Miguel Amaral (IN+, Instituto Superior Tecnico, Technical University of Lisbon); Rui Baptista (IN+, Instituto Superior Tecnico, Technical University of Lisbon; Max Planck Institute of Economics)
    Abstract: This study is the first to examine the decision to re-enter business ownership by entrepreneurs who have exited their first business using a longitudinal matched employer-employee database. This kind of data allow us to distinguish between those serial entrepreneurs who re-enter business ownership immediately upon exiting their first business (direct serial), and those who do so after an interlude in paid employment, or non-employment (latent serial). Results highlight the importance of human capital in triggering serial entrepreneurship, but the kinds of experiences driving direct and latent serial entrepreneurs are different.
    Keywords: Serial entrepreneurship, Occupational choice, Entrepreneurial opportunity; Human capital, Longitudinal data.
    JEL: J24 L26 M13
    Date: 2007–07–31
  13. By: Rui Baptista (IN+, Instituto Superior Tecnico, Technical University of Lisbon; Max Planck Institute of Economics); Murat Karaoez (IN+, Instituto Superior Tecnico, Technical University of Lisbon; IIBF, Department of Economics, Sueleyman Demirel University, Isparta, Turkey); Joana Mendonça (IN+, Instituto Superior Tecnico, Technical University of Lisbon.)
    Abstract: We examine whether founders’ backgrounds influence new firm survival in the early years after start-up. We develop hypotheses linking founders' backgrounds to pre-entry capabilities associated with entrepreneurial human capital, highlighting the cases of spin-offs and habitual entrepreneurs. The subject of unemployment-driven entrepreneurship is also explored. We find that specific human capital more frequently found in spin-off founders plays a key role in enhancing survival chances, while more general forms of human capital may help inexperienced entrepreneurs overcome the barrier posed by the critical early years after start-up.
    Keywords: Founders' backgrounds, Human capital, Start-up Success, Pre-entry capabilities, Spin-offs, Habitual entrepreneurs
    JEL: D21 L10 M13
    Date: 2007–07–31
  14. By: Alexander Muravyev; Dorothea Schäfer; Oleksandr Talavera
    Abstract: This paper studies gender discrimination against entrepreneurs by financial institutions. Based on the Business Environment and Enterprise Performance Survey (BEEPS) that covers firms in several countries of Western Europe as well as in the transition countries of Eastern Europe, our analysis suggests that female-managed firms are less likely to obtain a bank loan compared with male-managed counterparts. In addition, there is some evidence that female entrepreneurs are charged higher interest rates when loan applications are approved. Disaggregation of the sample by country groups suggests that these results are driven by firms in the least financially developed countries of the region.
    Keywords: entrepreneurship, gender, financial constraints
    JEL: G21 J16 L26
    Date: 2007
  15. By: Ondrej Rydval (Max Planck Institute of Economics, Jena, Germany.)
    Abstract: This paper extends existing evidence on the interaction between financial incentives and cognitive capital. I focus on the impact of task-specific cognitive capital, the role of which is central to the capital-labor-production framework of Camerer and Hogarth (1999) and has long been studied in cognitive science and behavioral decision research. Using a task situated in an accounting setting, I show that both financial incentives and task-specific cognitive capital, and especially their interaction, matter for performance. In particular, the effect of task-specific cognitive capital on performance is stronger under performance-based financial incentives as compared to flat-rate incentives. The interaction effect arises because performance-based financial incentives lead to better performance only for individuals with more task-specific cognitive capital. I draw implications for compensation practices in experiments as well as work settings.
    Keywords: Financial incentives, Cognitive abilities, Experiments, Field experiments
    JEL: C81 C91 C93 D83
    Date: 2007–07–18
  16. By: Per Engström (Uppsala University); Bertil Holmlund (Uppsala University and IZA)
    Abstract: The paper presents a general equilibrium model of search unemployment that incorporates absence from work as a distinct labor force state. Absenteeism is driven by random shocks to the value of leisure that are private information to the workers. Firms maximize profits while recognizing that the compensation package may affect the queue of job applicants and the absence rate. The analysis provides results concerning the effects of social insurance benefits and other determinants of workers’ and firms’ behavior. The normative anlysis identifies externalities associated with firm-provided sick pay and examines the welfare implications of alternative policies.
    Keywords: absenteeism, search, unemployment, social insurance
    JEL: J21 J64 J65
    Date: 2007–07
  17. By: Pedro S. Martins (Queen Mary, University of London, CEG-IST Lisbon and IZA)
    Abstract: This paper presents evidence that real wage cyclicality can be a particularly heterogeneous parameter, depending on different worker characteristics and also on the specific stage of the business cycle. Using matched employer-employee panel data for Portugal covering the period 1986-2004, real wages are shown to be considerably more procyclical during recessions than during expansions, resulting in relatively moderate overall levels of cyclicality (about -0.6). However, most of the procyclicality during downturns is shown to be driven by the younger employees, as older workers appear to be insulated from the business cycle. Moreover, movers between firms typically display higher cyclicality than workers that stay in the same firm, regardless of whether the latter move or not between job levels. Most results also hold when considering basic wages instead of total wages, except that the procyclicality of movers during downturns is substantially higher.
    Keywords: matched employer-employee data, worker mobility, wage rigidity
    JEL: J31 E24 E32
    Date: 2007–07
  18. By: Alan S. Blinder (Princeton University)
    Abstract: Using detailed information on the nature of work done in over 800 BLS occupational codes, this paper ranks those occupations according to how easy/hard it is to offshore the work— either physically or electronically. Using that ranking, I estimate that somewhere between 22% and 29% of all U.S. jobs are or will be potentially offshorable within a decade or two. (I make no estimate of how many jobs will actually be offshored.) Since my rankings are subjective, two alternatives are presented—one is entirely objective, the other is an independent subjective ranking. It is found that there is little or no correlation between an occupation’s “offshorability” and the skill level of its workers (as measured either by educational attainment or wages). However, it appears that, controlling for education, the most highly offshorable occupations were already paying significantly lower wages in 2004.
    Date: 2007–03
  19. By: Derek C. Jones (Hamilton College, WDI and SKOPE); Takao Kato (Colgate University, Columbia Business School, Tokyo Center for Economic Research, Aarhus School of Business and IZA)
    Abstract: To investigate the size and the timing of the direct impact of participatory arrangements on business performance, we assemble and analyze extraordinary daily data - for rejection, production and downtime rates for all operators in a single plant during a 35 month period, more than 77,000 observations. Consistent with core hypotheses that employee involvement enhances productivity and quality through mechanisms including employees becoming better motivated, more informed and paying greater attention to product details, we find that membership in offline teams: (i) initially enhances individual productivity by about 3%; (ii) and lowers rejection rates by about 27%. We also find that: (iii) these improvements are dissipated, typically at 10 to 16% per 100 days in a team; (iv) while initially teams lead to more downtime, these costs diminish over time; (v) the performance-enhancing effects of team membership are generally greater and more long-lasting for team members who are solicited by management; and (vi) similar relationships exist for more educated team members. These findings square with diverse hypotheses concerning predicted gains from complementarities in organizational design, the benefits that flow from management solicitation and enhanced education, but are inconsistent with hypotheses based on Hawthorne effects.
    Keywords: teams, employee involvement, productivity, quality, econometric case study
    JEL: M54 J50 J41 D20
    Date: 2007–07
  20. By: Panagiotopoulos, Miltiadis
    Abstract: The publications about the transition of French corporate governance are controversial fluctuating between proposing the integration of socioeconomic qualities, to the fragmentation of different and persistent systems by the interdependence of their attributes, or the predominance of the qualities of a single network. I demonstrate a distinctive interdisciplinary perspective which emphasizes the strong affiliation of economics and political science with financial markets and workplace relationships in the course of organizational transformation.
    Keywords: Institutional Complementarities; Industrial Relations; Trade Unions; Corporate Governance
    JEL: L2 G3 J5
    Date: 2006
  21. By: Giessner, S.R.; Schubert, T.W. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Leadership implies power. We argue, from a social embodiment perspective, that thinking about power involves mental simulations of vertical location. Three studies tested whether judgments of leaders? power and information on a vertical location are interrelated. In Studies 1a-c, participants judged a leader's power after being presented with, among other information, an organization chart containing either a long or a short vertical line. A longer vertical line increased judged power. Study 2 showed that this effect persists when longer (vs. shorter) vertical lines are presented in an independent priming task and not in an organization chart, and that horizontal lines do not have the same effect. Finally, Studies 3a and 3b showed the reverse causal effect: Information about a leader?s power influenced participants? vertical positioning of a leader?s box in an organization chart and of a leader picture into a team picture. Implications for leadership communication are discussed.
    Keywords: Leadership;Power;Person perception;Embodiment;Metaphor;
    Date: 2007–03–21
  22. By: Anthony Creane; Kaz Miyagiwa
    Abstract: We examine the role of cost uncertainty in a firm’s choice between exporting and foreign investment in oligopolistic industry. We consider both foreign direct investment and an international joint venture, and allow country-specific and firm-specific cost uncertainty. Unlike exporting, either form of foreign investment exposes home and foreign firms to common country-specific cost shocks, implying a better knowledge of each other’s country-specific shocks. Further, a joint venture allows the firms to learn each other’s firm-specific cost. A firm’s plant location decision depends on the interaction of these two effects, which depend on the type of competition and the substitutability of the firm’s products.
    Date: 2007–07
  23. By: Silke Anger (German Institute for Economic Research (DIW Berlin), German Socio-Economic Panel Study (SOEP), Königin-Luise-Str. 5, 14195 Berlin, Germany.)
    Abstract: Using individual based micro-data from the German Socio-Economic Panel Study (SOEP), I analyze the cyclicality of real wages for male workers within employer-employee matches over the period 1984–2004, and compare different wage measures: the standard hourly wage rate, hourly wage earnings including overtime and bonus payments, and the effective wage, which takes into account not only paid overtime, but also unpaid working hours. None of the hourly wage measures is shown to exhibit cyclicality except for the group of salaried workers with unpaid overtime. Their effective wages react strongly to changes in unemployment in a procyclical way. Despite acyclical wage rates, salaried workers without unpaid hours but with income from extra payments, such as bonuses, experienced procyclical earnings movements. Monthly earnings were also procyclical for hourly paid workers who received overtime payments. The procyclicality of earnings revealed for Germany is of comparable size with the one in the U.S. JEL Classification: E32, J31.
    Keywords: Wage cyclicality, effective wages, unpaid overtime, bonus payments, firm stayers.
    Date: 2007–07
  24. By: Spedale, S.; Bosch, F.A.J. van den; Volberda, H.W. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Our study builds on extant theory on embeddness to concentrate on the process of preservation and dissolution of the target firm?s embedded ties in acquisitions. We identify four critical areas - communication, idiosyncratic investments, inter-personal relations and, personnel turnover ? where managerial decisions taken during the acquisition process affect the components of the target firm?s embedded ties ? trust, joint problem-solving and exchange of fine-grained information. The preservation or dissolution of an embedded tie depends ultimately on two specific tie-contingencies, the balance of power between the target firm and the embedded relation and interpretive processes at the inter-face between the two. Our findings have implications for the study of the dissolution of market ties as they point to different roles played by social and institutional forces, power asymmetries and competition in the dynamics of embedded ones. Finally, we encourage theory development in acquisition studies by positing the importance of interpretive processes and, more broadly, relational elements that span the boundaries of the parent-target dyad.
    Keywords: Embedded ties;Acquisitions;Embedded tie dynamics;
    Date: 2006–12–11
  25. By: Anne Ketelaar; Nick Manning; Edouard Turkisch
    Abstract: How are performance-based arrangements at the individual level related to performance management arrangements at higher levels such as the agency or programme level? The report aims to provide practical lessons and insights into performance-based arrangements for senior civil servants, derived from country and practitioner experiences, into how to place senior staff within what might constitute an integrated performance regime. It is meant to be applicable to countries starting to work with such arrangements, as well as to countries wanting to improve their existing systems.
    Date: 2007–07
  26. By: Richard W. Johnson; Janette Kawachi (Urban Institute); ;
    Abstract: One potential way to manage the rapidly growing costs of supporting older Americans is to increase labor supply at older ages. However, questions persist about the quality of available jobs. This study examines older Americans’ employment opportunities by studying job changes at older ages. Using data from the Health and Retirement Study, it compares wages, benefits, and other job attributes on new and former jobs for adults ages 45 to 75 who changed employers between 1986 and 2004. Because older people who choose to work after retiring voluntarily from long-term jobs may face different employment prospects than displaced older workers, the analysis considers how employment changes vary by the reasons workers give for job separations. Most people who switched employers at older ages moved to jobs that differed substantially from their previous jobs. The vast majority of older job changers moved into different occupations and industries. They were more likely to be self-employed, work part-time, and keep flexible hours at their new jobs than their old jobs. The new jobs generally involved less stress, less physical effort, and fewer managerial responsibilities. More older job changers enjoyed their new jobs than their old jobs. However, most older workers experienced sharp hourly wage reductions when they switched employers. They were also less likely to receive pension coverage or health benefits after they moved to new jobs. Although the findings do not raise concerns about the quality of post-retirement jobs, they suggest that older displaced workers face special challenges in the labor market.
    Keywords: labor supply, older ages, increase, employment, opportunities, wages, benefits, employer change, job changers
    Date: 2007–02
  27. By: Simon D. Woodcock (Simon Fraser University)
    Abstract: We present an empirical model of earnings that controls for observable and unobservable characteristics of workers (person effects), unmeasured characteristics of their employers (firm effects), and unmeasured characteristics of worker-firm matches (match effects). The distinction between these components is important, because they have different implications for the persistence of individual earnings and the returns to employment mobility. We find that match effects, which have been ignored in previous work, are an important determinant of log earnings. They explain about 16 percent of observed variation, and much of the change in earnings when workers change employer. Specifications that omit match effects over-estimate the returns to experience by as much as 30 percent, attribute too much variation to person effects and little to firm effects, and underestimate the correlation between person and firm effects. Overall, our results suggest that some of the returns previously attributed to general human capital actually reflect the returns to sorting into higher-paying firms and better worker-firm matches.
    Keywords: linked employer-employee data, earnings dispersion, person and firm effects, fixed effects, random effects, labor market sorting, human capital
    JEL: C23 J24
    Date: 2007–08
  28. By: Michael Bognanno and Ryo Kambayashi
    Abstract: We examine the period from 1991 to 2005 to document the effects of a changing Japanese labor market on trends in the cost of job change. During this period, job change penalties and the extent to which they were age-related grew. Evidence is also found of a diminishing specificity in human capital (in industry, occupation and firm size) for job changers in the Japanese labor market. As might be expected, older workers and workers leaving the largest firms suffered the largest wage losses from job change. Older workers were also harmed more by involuntary job separations. In percentage terms, young females have larger wage losses than young males but older females have smaller losses than older males. This pattern is masked in considering only the overall effect of gender on the cost of job change.
    Keywords: Displacement
    JEL: J31 J41 J63 J6
    Date: 2007–07
  29. By: Elizabeth Asiedu (Department of Economics, The University of Kansas); James A. Freeman (Department of Economics, Wheaton College)
    Date: 2007–07
  30. By: Anja Schöttner; Veikko Thiele
    Abstract: We analyze the optimal combination of promotion tournaments and individual performance pay in an employment relationship. An agent's effort is non-observable and he has private information about his suitability for promotion. We find that the principal does not provide individual incentives if it is sufficiently important to promote the most suitable candidate. Thus, we give a possible explanation for why individual performance schemes are less often observed in practice than predicted by theory. Furthermore, optimally trading off incentive and selection issues causes a form of the Peter Principle: The less suitable agent has an inefficiently high probability of promotion.
    Keywords: Promotion Tournaments, Piece Rates, Hidden Characteristics, Hidden Action
    JEL: D82 D86 M52
    Date: 2007–08
  31. By: Panagiotopoulos, Miltiadis
    Abstract: The academic literature is inconsistent about the evolvement of the German industrial relations network and varies between theories which emphasize its versatility or forecast its probable deterioration. I suggest that a less centralized version of industrial democracy, with works councilors supporting trade unionists, provides for an alternative against the liberal market economies, and will be a main ingredient in the process of European integration.
    Keywords: Institutional Complementarities; Industrial Relations; Trade Unions; Corporate Governance
    JEL: L2 G3 J5
    Date: 2004
  32. By: Luigi Filippini (DISCE, Università Cattolica)
    Abstract: In a duopoly where each firm produces substitute goods, we show that under process innovation, specialization is the equilibrium attained with cross-licensing. Each firm produces only the good for which it has an advantage. Patent pool extension confirms the results.
    Keywords: cross-licensing, patent pool, specialization, process innovation
    JEL: D45 O31
    Date: 2006–12
  33. By: Seamus McGuinness (MIAESR, University of Melbourne); Mark Wooden (MIAESR, University of Melbourne and IZA)
    Abstract: This paper uses longitudinal data from Australia to examine the extent to which overskilling - the extent to which work-related skills and abilities are utilized in current employment - is a transitory phenomenon. The results suggest that while overskilled workers are much more likely to want to quit their current job, they are also relatively unconfident of finding an improved job match. Furthermore, some of the greater mobility observed among overskilled workers is due to involuntary job separations, and even in instances where job separations are voluntary, the majority of moves do not result in improved skills matches.
    Keywords: overskilling, job insecurity, job mobility, HILDA Survey, Australia
    JEL: J62 J24
    Date: 2007–07
  34. By: Arturo Estrella
    Abstract: Various methods are available to extract the "business cycle component" of a given time series variable. These methods may be derived as solutions to frequency extraction or signal extraction problems and differ in both their handling of trends and noise and their assumptions about the ideal time-series properties of a business cycle component. The filters are frequently illustrated by application to white noise, but applications to other processes may have very different and possibly unintended effects. This paper examines several frequently used filters as they apply to a range of dynamic process specifications and derives some guidelines for the use of such techniques.
    Keywords: Business cycles ; Time-series analysis
    Date: 2007
  35. By: Henk Kox; Luis Rubalcaba
    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 expensive 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.<BR> 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 businessservices 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 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.<BR> Finally, the paper concludes by pinpointing some policy 'handles' that could be instrumental in boosting the future contibution of business services to overall European economic growth.
    JEL: E32 L2 L8 L16 O3 O4 O52
    Date: 2007–06
  36. By: Koellinger, P. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: The study provides theoretical insights and empirical evidence on the emergence of different types and degrees of entrepreneurial innovativeness. The results suggest that entrepreneurial innovativeness depends both on individual factors and on the environment in which the individual lives. In particular, high educational attainment and a high degree of self-confidence are significantly associated with entrepreneurial innovativeness at the individual level. Furthermore, entrepreneurs in highly developed countries are more likely to engage in innovative rather than purely imitative activities. The results also show that product, process, and variety innovations have at least to some extent different antecedents.
    Keywords: Entrepreneurship;Innovation;Business opportunities;
    Date: 2007–04–11
  37. By: Frank M. Fossen
    Abstract: Which role do individual income prospects play in the decision to be an entrepreneur rather than an employee? In a model of occupational choice, higher expected after-tax earnings attract people to self-employment, while more risky net earnings deter risk-averse individuals. In this paper I analyse the expected value and variance of income in self-employment and dependent employment empirically, accounting for selection. Based on this analysis, structural models of self-employment entry and exit under risk are estimated, which include a standard risk aversion parameter. The model predicts that the German income tax reduction of 2000 induced smaller exit rates out of self-employment for men and smaller entry rates for women.
    Keywords: Entrepreneurship, risk, returns to self-employment, taxation
    JEL: J23 H24 D81 C51
    Date: 2007
  38. By: Kelii H. Haraguchi (University of Oregon); Glen R. Waddell (University of Oregon and IZA)
    Abstract: We empirically model performance in the final round of a multiple-round tournament as a spatially autoregressive process, allowing us to sign and quantify the endogenous interactions between competitors. Doing so speaks to significant regularities in the data that suggest that a player’s own performance generally tends to improve with the improving performance of competitors. However, we also find significant asymmetries in the interdependency of player performance that suggest that social interactions, even those found in a fairly straightforward game, can be rather complex. For example, while the positive complementarity in performance is particularly strong between tied players, own performance suffers in response to improving performance of lagging, lower-ability competitors.
    Keywords: peer effects, tournament, spatial, best response
    JEL: J33 J4 C21
    Date: 2007–07
  39. By: Barry T. Hirsch (Trinity University and IZA)
    Abstract: During the 1930s and 1940s, collective bargaining emerged as the workplace governance norm in much of the U.S. industrial sector. Following its peak in the 1950s, union density in the U.S. private sector fell steadily, to only 7.4 percent in 2006. Governance shifted from a formalized union norm to one of constrained managerial discretion. In competitive and dynamic economic environments, a union tax on company earnings and slow response to economic shocks combine to produce poor performance by union companies. Two industries - automotives and airlines - are used to illustrate these points. If worker-based institutions are to flourish, they must add value and permit companies to perform at levels similar to those obtained under evolving nonunion governance norms.
    Keywords: labor unions, workplace governance, wages, wage premium, economic performance, membership, density, airlines, motor vehicles
    JEL: J5 J31 J2
    Date: 2007–07
  40. By: Truman F. Bewley (Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281, USA.)
    Abstract: I describe insights into wage dynamics and downward wage rigidity obtained from more than two hundred interviews with businesspeople, labor leaders, and various labor market intermediaries and made in the early 1990s in the Northeast of the United States. I explain the morale explanation for downward rigidity of the pay of existing employees and discuss what morale is, why businesspeople care about it, and why pay cuts damage it. I discuss the origin and nature of pay structures internal to an establishment, the relation between pay at different establishments, and why firms tend to lay off workers rather than cut pay. The findings of the study to be discussed are reported in detail in Truman Bewley, Why Wages Don’t Fall during a Recession. Cambridge, MA - Harvard University Press (1999). JEL Classification: E24, J31, J41.
    Keywords: Wage rigidity, wage determination.
    Date: 2007–07
  41. By: Li, Jianpei; Wu, Yanhui
    Abstract: We formalize a conception of authority, which is commonly defined as the right of controlling a person’s actions embedded in human assets in sociology. Due to the inalienable property of human assets, the contractible formal authority is hard to verify and enforce, while real authority usually diverges from formal authority. Inefficiency tends to arise when a task is not routine or can not be done by a robot. Using a framework of incomplete contract, we show that allocation of formal authority, as an instrument to mitigate the inefficiency, is determined by features of tasks and specificity of assets, and the relationship between the resources. Monitoring is then introduced to fine tune value of delegation.
    Keywords: Transaction of human assets; Real Authority; Formal Authority; Delegation; Monitor
    JEL: D23 J24 J41 L22
    Date: 2007–07
  42. By: Sergio Currarini; Francesco Feri
    Abstract: We study the problem of information sharing in oligopoly, when sharing decisions are taken before the realization of private signals. Using the general model developed by Raith (1996), we show that if firms are allowed to make bilateral exclusive sharing agreements, then some degree of information sharing is consistent with equilibrium, and is a constant feature of equilibrium when the number of firms is not too small. Our result is to be contrasted with the traditional conclusion that no information is shared in common values situations with strategic substitutes - such as Cournot competition with demand shocks - when firms can only make industry-wide sharing contracts (e.g., a trade association).
    Keywords: Information sharing, oligopoly, networks, Bayesian equilibrium
    JEL: D43 D82 D85 L13
    Date: 2007–07
  43. By: Marina Adshade (Dalhousie University)
    Abstract: This paper examines the endogenous interaction between the rise in female labor force participation and changes in both the method and mode of production that occurred during the early part of the 20th century. Within a dynamic general equilibrium framework, an exogenous expansion in the skill level of the population induces an organizational change at the firm level and a redirection of investment towards new technologies that complement the skills of the emerging workforce. In addition to allowing for a change in the method of production in a market with directed technical change, a framework is developed to explicitly examine the transitional dynamics as skilled workers become relatively abundant. The rise in the skill level explains the rise in female labor force participation, the increase in women's wages and the decline of the clerical wage relative to manufacturing.
    Keywords: female labor force participation, clerical work, organizational change, technological change
    JEL: O14 E23 N12
    Date: 2007–07
  44. By: Gunter Löffler; Peter N. Posch
    Abstract: We use dynamic panel analysis to examine whether credit rating agencies achieve what they claim to achieve, namely, look into the future when assigning their ratings. We find that Moody's ratings help predict individual financial ratios over a horizon of up to five years. Ratings also predict a multivariate credit score, again over five years. The contribution of ratings appears to be economically significant and robust for different specifications.
    Keywords: Credit Ratings, Predictive ability, Dynamic Panel Model.
    JEL: C33 G20 G33
    Date: 2007–08
  45. By: Masanao Aoki (Department of Economics, University of California, Los Angeles); Hiroshi Yoshikawa (Faculty of Economics, University of Tokyo)
    Abstract: Using a simple stochastic growth model, this paper demonstrates that the coefficient of variation of aggregate output or GDP does not necessarily go to zero even if the number of sectors or economic agents goes to infinity. This phenomenon known as non-self-averaging implies that even if the number of economic agents is large, dispersion can remain significant, and, therefore, that we can not legitimately focus on the means of aggregate variables. It, in turn, means that the standard microeconomic foundations based on the representative agent has little value for they are expected to provide us with dynamics of the means of aggregate variables. The paper also shows that non-self-averaging emerges in some representative urn models. It suggests that non-self-averaging is not pathological but quite generic. Thus, contrary to the main stream view, micro-founded macroeconomics such as a dynamic general equilibrium model does not provide solid micro foundations.
    Date: 2007–04
  46. By: Alexandre Adam (SAF - EA2429 - Laboratoire de Science Actuarielle et Financière - [Université Claude Bernard - Lyon I]); Mohamed Houkari (SAF - EA2429 - Laboratoire de Science Actuarielle et Financière - [Université Claude Bernard - Lyon I]); Jean-Paul Laurent (SAF - EA2429 - Laboratoire de Science Actuarielle et Financière - [Université Claude Bernard - Lyon I])
    Abstract: This paper deals with risk measurement and portfolio optimization under risk constraints. Firstly we give an overview of risk assessment from the viewpoint of risk theory, focusing on moment-based, distortion and spectral risk measures. We subsequently apply these ideas to an asset management framework using a database of hedge funds returns chosen for their non- Gaussian features. We deal with the problem of portfolio optimization under risk constraints and lead a comparative analysis of efficient portfolios. We show some robustness of optimal portfolios with respect to the choice of risk measure. Unsurprisingly, risk measures that emphasize large losses lead to slightly more diversified portfolios. However, risk measures that account primarily for worst case scenarios overweight funds with smaller tails which mitigates the relevance of diversification.
    Keywords: portfolio selection; expected shortfall; distortion risk measures; spectral risk measures; hedge funds
    Date: 2007–07–26
  47. By: Anne C. Gielen (Tilburg University, CentER, Institute for Labor Studies (OSA) and IZA)
    Abstract: This paper studies the presence of hours constraints on the UK labor market and its effect on older workers labor supply, both at the extensive and the intensive margin. Using panel data for the period 1991-2004, the results from a competing risks model show that over-employed male workers can freely reduce working hours with their current employer before retiring completely. However, some over-employed women are observed to leave the labor market early due to hours constraints. Despite the fact that more flexibility in hours may increase labor market participation of older women, this paper presents some explorative results which illustrate that increasing working hours flexibility does not seem to increase older workers total labor supply as has often been suggested.
    Keywords: labor supply, hours constraint, mobility, retirement
    JEL: J22 J26 J63
    Date: 2007–07
  48. By: Michael U. Krause (Economic Research Center, Deutsche Bundesbank, Wilhelm-Epstein-Str. 14, D-60431 Frankfurt, Germany.); Thomas A. Lubik (Federal Reserve Bank of Richmond, 701 East Byrd Street, Richmond, VA 23261, USA.)
    Abstract: We show how on-the-job search and the propagation of shocks to the economy are intricately linked. Rising search by employed workers in a boom amplifies the incentives of firms to post vacancies. In turn, more vacancies increases job search. By keeping job creation costs low for firms, on-the-job search greatly amplifies shocks. In our baseline calibration, this allows the model to generate fluctuations of unemployment, vacancies, and labor productivity whose magnitudes are close to the data, and leads output to be highly autocorrelated. JEL Classification: E24, E32, J64.
    Keywords: Search and matching, job-to-job mobility, worker flows Beveridge curve, business cycle, propagation.
    Date: 2007–07
  49. By: Antonio Mínguez Vera (Universidad Politécnica de Cartagena); Kevin Campbell (University of Stirling)
    Abstract: Many studies have examined the impact of various characteristics of the board of directors on firm value. However, little attention has been paid to the impact of female board membership on firm value, with the exception of a number of U.S. studies. The aim of this paper is to investigate this issue in a specific context - the Spanish market. We find that the stock market reacts positively to the announcement of a female board appointment, using a non-parametric test, though the result is inconclusive when a parametric test is used. We also find an insignificant relationship between the presence and percentage of women on the board, and firm value, and we find that the opposite causal relationship is also insignificant. Muchos estudios han investigado el impacto de varias características del consejo de administración en el valor de la empresa. Sin embargo, se ha prestado poca atención a influencia de la mujer como miembro del consejo en dicho valor, salvo en algunos estudios estadounidenses. El objetivo de este trabajo es investigar esta relación en el contexto español. Los resultados muestran que el mercado reacciona positivamente al anuncio del nombramiento de una mujer como consejera, utilizando un test no paramétrico, aunque los resultados son no significativos cuando el test usado es paramétrico. También se muestra un efecto no significativo, tanto de la presencia como del porcentaje de mujeres en el consejo, sobre el valor de la compañía, y viceversa.
    Keywords: género, consejo de administración, valor de la empresa, endogeneidad women, board of directors, firm value, endogeneity
    JEL: G30 G34 G38
    Date: 2007–07
  50. By: Melissa Bjelland; Bruce Fallick; John Haltiwanger; Erika McEntarfer
    Abstract: We use administrative data linking workers and firms to study employer-to-employer flows. After discussing how to identify such flows in quarterly data, we investigate their basic empirical patterns. We find that the pace of employer-to-employer flows is high, representing about 4 percent of employment and 30 percent of separations each quarter. The pace of employer-to-employer flows is highly procyclical, and varies systematically across worker, job and employer characteristics. Our findings regarding job tenure and earnings dynamics suggest that for those workers moving directly to new jobs, the new jobs are generally better jobs; however, this pattern is highly procyclical. There are rich patterns in terms of origin and destination of industries. We find somewhat surprisingly that more than half of the workers making employer-to-employer transitions switch even broadly-defined industries (NAICS super-sectors).
    Date: 2007

This nep-bec issue is ©2007 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.