|
on Business Economics |
| By: | Dalia Marin (University of Munich, Department of Economics, Ludwigstr. 28, 80539 Munich, Germany +49-89-2180-2446, dalia.marin@lrz.uni-muenchen.de); Thierry Verdier (Paris School of Economics, 48 Boulevard Jourdan 75014 Paris, France +331 43 13 63 08, verdier@pse.ens.fr) |
| Abstract: | This paper develops a theory which investigates how firms’ choice of corporate organization is affecting firm performance and the nature of competition in international markets. We develop a model in which firms’ organisational choices determine heterogeneity across firms in size and productivity in the same industry. We then incorporate these organisational choices in a Krugman cum Melitz and Ottaviano model of international trade. We show that the toughness of competition in a market depends on who - headquarters or middle managers - have power in firms. Furthermore, we propose two new margins of trade adjustments: the monitoring margin and the organizational margin. International trade may or may not lead to an increase in aggregate productivity of an industry depending on which of these margins dominate. Trade may trigger firms to opt for organizations which encourage the creation of new ideas and which are less well adapt to price and cost competition. |
| Keywords: | international trade with endogenous firm organizations and endogenous toughness of competition, firm heterogeneity, power struggle in the firm. |
| JEL: | F12 F14 L22 D23 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:207&r=bec |
| By: | Dewettinck, K.; van Ameijde, M. (Vlerick Leuven Gent Management School) |
| Abstract: | To improve their overall flexibility and efficiency, many organisations have replaced traditional hierarchical management structures with empowered (semi-autonomous or self-managing) work teams. Managers, once charged with directing and controlling work, are now asked to take on a new set of roles and responsibilities in order to lead these teams (Lawler, 1992). Arnold and colleagues (2000) identified five categories of empowering leadership behavior and constructed and validated a scale for measuring those behaviors. We build on their work by investigating how these behaviors relate to employee attitudes and behavioral intentions. We do so by developing a model in which psychological empowerment (Spreitzer, 1995, 1996; Thomas & Velthouse, 1990) mediates the relationship between empowering leadership behavior and employee job satisfaction and affective organizational commitment. We also modeled the relationship between these employee attitudes and intention to stay as a final outcome variable. Based on a sample of 381 service employees from four companies, we empirically tested this model using structural equation modeling in AMOS. Our results show that psychological empowerment is partially mediating the relationship between perceived empowering leadership behavior and employee job satisfaction and affective commitment. This indicates that perceived leadership behavior does relate toe employee attitudes through its impact on employee motivation. However, leadership behavior also shows to be directly related to employee attitudes, which in turn are strongly related to an employee's intention to stay working for the organisation. Implications for theory and managerial practice are discussed. |
| Date: | 2007–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:vlg:vlgwps:2007-21&r=bec |
| By: | Morten Bennedsen; Francisco Perez-Gonzalez; Daniel Wolfenzon |
| Abstract: | Estimating the value of top managerial talent is a central topic of research that has attracted widespread attention from academics and practitioners. Yet, studying the impact of managers on firm performance is difficult because of endogeneity and omitted variables concerns. In this paper, we test for the impact of managers on firm performance in two ways. First, we examine whether top executive deaths have an impact on firm performance, focusing on the manager and firm characteristics that are associated to large manager-death effects. Second, we test for the interaction between the personal and professional activities of managers by examining the effect of deaths of immediate family members (spouses, parents, children, etc) on firm performance. Our main findings are three. First, CEO deaths are strongly correlated with declines in firms operating profitability, asset growth and sales growth. Second, the death of board members does not seem to affect firm prospects, indicating that not all senior managers are equally important for firms’ outcomes. Third, CEOs’ immediate family deaths are significantly negatively correlated to firm performance. This last result suggests a strong link between the personal and business roles that top management plays, a connection that is present even in large firms. Overall, our findings demonstrate CEOs are extremely important for firms’ prospects. |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2006-21&r=bec |
| By: | Francis Kramarz; David Thesmar |
| Abstract: | This paper provides empirical evidence consistent with the facts that (1) social networks may strongly affect board composition and (2) social networks may be detrimental to corporate governance. Our empirical investigation relies on a large dataset on executives and outside directors of corporations listed on the Paris stock exchange over the 1992-2003 period. This data source is a matched employer employee dataset providing both detailed information on directors/CEOs and information on the firm employing them. We first find a very strong and robust correlation between the CEO’s network and that of his directors. Networks of former high ranking civil servants are the most active in shaping board composition. Our identification strategy takes into account (1) firm and directors’ fixed effects and (2) matching of firms and director along one observable and one unobservable characteristic. We then turn to real effects of such network activity. We find that firms where these networks are most active are less likely to change CEO when they underperform. This suggests that social networks in the board room impair corporate governance. |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2006-20&r=bec |
| By: | Azar, Ofer H. |
| Abstract: | The article examines the firm's choice of incentives when workers face additional incentives (“external incentives”) to those provided by the firm, such as building reputation that improves the workers' prospects with other employers, or satisfaction from working well. Surprisingly, the firm might find it optimal to increase the incentives it provides following an increase in external incentives. Even if the firm reduces its incentives, however, total incentives unambiguously increase, leading to higher effort and profits. This implies that firms should try to increase the external incentives that their workers face; I suggest several ways firms can do so. |
| Keywords: | Worker satisfaction; Personnel economics; External incentives; Worker reputation; Intrinsic motivation |
| JEL: | D21 L20 J30 M52 M20 |
| Date: | 2003 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4456&r=bec |
| By: | Christopher Armstrong; David Larcker; Che-Lin Su |
| Abstract: | Although stock options are commonly observed in chief executive officer (CEO) com- pensation contracts, there is theoretical controversy about whether stock options are part of the optimal contract. Using a sample of Fortune 500 companies, we solve an agency model calibrated to the company-specifc data and we find that stock options are almost always part of the optimal contract. This result is robust to alternative assumptions about the level of CEO risk-aversion and the disutility associated with their effort. In a supplementary analysis, we solve for the optimal contract when there are no restrictions on the contract space. We find that the optimal contract (which is characterized as a state-contingent payoff to the CEO) typically has option-like features over the most probable range of outcomes. |
| Keywords: | Stock Options, Incentives, Agency Model |
| JEL: | C61 D82 D86 J33 J41 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:nwu:cmsems:1447&r=bec |
| By: | Mishra, SK |
| Abstract: | The paper discusses how and why the theories of neo-classical economics are inadequate to provide a framework to human resource management and therefore must give way to dynamic gradual optimization procedure based on the principles of bounded rationality and satisficing behaviour in dealing with the problems of an adaptive complex system of business organization. It also widens the scope of human resource management to include crowd-sourcing. |
| Keywords: | Human resource management; bounded rationality; adaptive complex system; satisficing behaviour; dynamic gradual optimization; crowd-sourcing |
| JEL: | L20 J50 J20 |
| Date: | 2007–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4400&r=bec |
| By: | Masaharu Hanazaki; Qun Liu |
| Abstract: | This paper investigates the mechanisms that ?firms use to get state favors. We focus on a less well studied but common mechanism: business owners seeking election to top office. Using Thailand as a research setting, we fi?nd that business owners who rely on government concessions or are wealthier are more likely to run for top office. Once in power the market valuation of their ?firms increases dramatically. Surprisingly, the owners' political power does not change their fi?rms' fi?nancing strategies. Instead, we show that business owners in top office use their policy decision powers to implement regulations and public policies favorable to their fi?rms. Such policies hinder not only domestic competitors but also foreign investors. As a result, connected fi?rms are able to seize more market share. |
| Keywords: | Trade credit, Bank-firm relationship, Unlisted firms |
| JEL: | G32 E22 O53 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2006-12&r=bec |
| By: | Pramuan Bunkanwanicha; Yupana Wiwattanakantang |
| Abstract: | This paper investigates the mechanisms that ?firms use to get state favors. We focus on a less well studied but common mechanism: business owners seeking election to top office. Using Thailand as a research setting, we fi?nd that business owners who rely on government concessions or are wealthier are more likely to run for top office. Once in power the market valuation of their ?firms increases dramatically. Surprisingly, the owners' political power does not change their fi?rms' fi?nancing strategies. Instead, we show that business owners in top office use their policy decision powers to implement regulations and public policies favorable to their fi?rms. Such policies hinder not only domestic competitors but also foreign investors. As a result, connected fi?rms are able to seize more market share. |
| Keywords: | Trade credit, Bank-firm relationship, Unlisted firms |
| JEL: | G15 G34 G38 K23 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2006-10&r=bec |
| By: | Dalia Marin (University of Munich, Department of Economics, Ludwigstr. 28, 80539 Munich, Germany +49-89-2180-2446, dalia.marin@lrz.uni-muenchen.de); Verdier Thierry (Paris School of Economics, 48 Boulevard Jourdan 75014 Paris, France, +331-43 13-63-08, verdier@pse.ens.fr) |
| Abstract: | Recent theories of the multinational corporation introduce the property rights model of the firm and examine whether to integrate our outsource firm activities locally or to a foreign country. This paper focus instead on the internal organization of the multinational corporation by examining the power allocation between headquarters and subsidiaries. We provide a framework to analyse the interaction between the decision to serve the local market by exporting or FDI, market acces and the optimal mode of organization of the multinational corporation. We find that subsidiary managers are given most autonomy in their decision how to run the firm at intermediate levels of local competition. We then provide comparative statics for changes in fixed FDI entry costs and trade costs, information technology, the number of local competitors, and in the size of the local market. |
| Keywords: | foreign direct investment, power allocation in the firm, international trade and the organization of production |
| JEL: | D23 F1 F2 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:209&r=bec |
| By: | Dag Rønningen (Statistics Norway) |
| Abstract: | Recent decades have been characterized by rapid technological change. In the same period, early withdrawal from the labor market has increased markedly. One particular question concerns the effects of technological change and organizational change on the labor market participation of workers of different ages. The question posed in this paper is whether technological change and organizational change are biased against age, thereby causing a shift in demand from older to younger workers. We estimate the effects of organizational change and technological change on wage bill shares for five age groups. By using panel data, we control for unobserved firm fixed effects. The results indicate that organizational change raises the wage bill share for workers in their forties but lowers the share for workers in their fifties. The wage bill shares of the youngest and oldest workers are hardly affected by organizational change and technological change. Separate estimates for men and women yield qualitatively similar results. In regressions for different educational levels, wage bill shares are positively affected by organizational change for highly educated individuals in their thirties. Technological change increases the wage bill share of highly educated workers in their sixties. For workers with intermediate and lower levels of education, the results are similar to those obtained from the whole sample. |
| Keywords: | technological change; organizational change; age-biased labor demand |
| JEL: | J23 J31 O33 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:512&r=bec |
| By: | Arnaud Degorre; Bénédicte Reynaud |
| Abstract: | Using an exhaustive database with labour, accounting and financial market information on French firms (1994-2000), the authors analyse the causes and the consequences of a workforce reduction in 1996 - the year chosen as reference - on firms' performance in a long term perspective. One important contribution to the topic consists in comparing the estimates of publicly-listed and non-listed companies. As far as we know, the comparative method had not be used before. A logistic model shows that in both groups, headcount reduction occurs in less-productive and financially distressed firms, resorting to downsizing as a defensive response to an adverse economic shock. However, the former anticipates better than the latter the decision to eliminate jobs. An econometric model that captures the initial characteristics of the firms, suggests the major performance indicators are significantly improved only for non-listed companies. Yet, there is no net gain on the full period studied. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2007-20&r=bec |
| By: | Tarek Coury; Yi Wen |
| Abstract: | We investigate the global dynamics of RBC models with production externalities. We confirm that purely local analysis does not tell the full story. With externalities smaller than required for local indeterminacy, local analysis shows the steady state to be a saddle, implying a unique equilibrium. But global analysis reveals the steady state is surrounded by stable deterministic cycles. Our analysis suggests that indeterminacy is more robust than previously realized, and the results strengthen the view that caution should be exercised when linearized versions of this class of RBC models are used in applied work. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2007-029&r=bec |
| By: | Wolfgang Lechthaler; Dennis J. Snower |
| Abstract: | We analyze the interaction among important institutional variables in the labor market (firing costs, minimum wages and unemployment benefits) in determining firm-provided training. We find that the institutional interactions - specifically, their degree of complementarity and substitutability - depends on employees' abilities. On this account, the institutional interactions influence skills inequality. We derive how the influence of one of the institutional variables above is affected by other institutional variables with respect to inequality skills arising from firm-provided training. We derive several striking results, such as: (a) the minimum wage and unemployment benefits generate increasing skills inequality whereas firing costs generate diminishing skills inequality; (b) unemployment benefits and firing costs are complements in their effects on skills disequalization, (c) firing costs and the minimum wage are complements in their effects on skills equalization, and (d) unemployment benefits and the minimum wage are substitution in their effects on skills inequality. |
| Keywords: | Firm Training, Skills Inequality, Institutions |
| JEL: | H32 J24 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1372&r=bec |
| By: | Jianpei Li |
| Abstract: | This paper analyzes the efficiency of team production when agents exhibit other regarding preferences. It is shown that full efficiency can be sustained as an equilibrium through a budget-balancing mechanism that punishes some randomly chosen agents if output falls short of efficient level but distributes the output equally otherwise, provided that the agents are sufficiently inequity averse. |
| Keywords: | moral hazard, team production, inequity aversion |
| JEL: | C7 D7 D63 L2 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:210&r=bec |
| By: | Marco Alderighi (University of Valle d'Aosta, Italy.); Claudio A. Piga (Dept of Economics, Loughborough University) |
| Abstract: | We study when a monopolistically-competitive firm may optimally choose to limit the size of its market. This may be the case when the cost of serving the market with geographically dispersed customers is increasing in size. We also investigate the incentives faced by a firm to limit the reach of its market, when it adopts different pricing schemes. We show that under certain assumptions the derived equilibria are constrained socially optimal. |
| Keywords: | Monopolistic competition; Transport costs; Endogenous fixed costs; Overlapping market areas |
| JEL: | D21 D43 F12 L13 R12 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2007_21&r=bec |