nep-bec New Economics Papers
on Business Economics
Issue of 2007‒12‒15
twenty-two papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Voluntary Teaming and Effort By Claudia Keser; Claude Montmarquette
  2. Wage Distributions by Bargaining Regime: Linked Employer-Employee Data Evidence from Germany By Karsten Kohn; Alexander C. Lembcke
  3. Incentives in Competitive Search Equilibrium By Espen R. Moen; A Rosen
  4. Is the Long-Run Performance of Cross-Listed Firms Anomalous? By Cécile Carpentier; Jean-François L'Her; Jean-Marc Suret
  5. Early versus late effort in dynamic agencies with learning about productivity By Jens Robert Schöndube
  6. Innovation Capabilities: Technology Use, Productivity Growth and Business Performance: Evidence from Canadian Technology Surveys By Baldwin, John R.; Gellatly, Guy
  7. An empirical assessment of assortative matching in the labor market By Mendes, Rute; van den Berg, Gerard J; Lindeboom, Maarten
  8. Which Wage Dispersion Matters to Firms' Performance? By Lundborg, Per
  9. Business Cycle Synchronization and Insurance Mechanisms in the EU By António Afonso; Davide Furceri
  10. Measuring Organization Capital in Japan: An Empirical Assessment Using Firm-Level Data By YoungGak Kim; Tsutomu Miyagawa
  11. Relative Performance Evaluation, Agent Hold-Up and Firm Organization By Kvaløy, Ola; Olsen, Trond E.
  12. Trade Liberalization, Outsourcing, and Firm Productivity By Ralph Ossa
  13. When work becomes an addiction: An exploration of individual and organizational antecedents of workaholism and the impact on employee outcomes By Dewilde, T.; Dewettinck, K.; De Vos, A.
  14. Personal Experience: A Most Vicious and Limited Circle!? On the Role of Entrepreneurial Experience for Firm Survival By Metzger, Georg
  15. Cooperation in knowledge-intensive firms By Kvaløy, Ola; Olsen, Trond E.
  16. A small business leader's perception of corporate responsibility and business ethical concepts By Fassin, Y.; Van Rossem, A.; Buelens, M.
  17. The Evolution of Inequality in Productivity and Wages: Panel Data Evidence By Giulia Faggio; Kjell Salvanes; John Van Reenen
  18. Mentoring and Segregation: Female-Led Firms and Gender Wage Policies By Ana Rute Cardoso; Rudolf Winter-Ebmer
  19. Offshoring and Relative Labor Demand in Swedish Firms By Andersson, Linda; Karpaty, Patrik
  20. Competing for Ownership By Patrick Legros; Andrew F. Newman
  21. HARD AND SOFT LOCATIONAL FACTORS,INNOVATIVENESS AND FIRM PERFORMANCE - an empirical test of Porter’s diamond model at the micro-level By Eickelpasch, Alexander; Lejpras, Anna; Stephan, Andreas
  22. Interactions between Employment and Training Policies By Frank Oskamp; Dennis J. Snower

  1. By: Claudia Keser; Claude Montmarquette
    Abstract: In a series of experimental games, each of two players may choose between remuneration based on either private or team effort. Although at least one of the players has the subgame perfect equilibrium strategy to choose remuneration based on private effort, we frequently observe team remuneration chosen by both players. Team remuneration allows for high payoff for each player for cooperation, but at the same time provides individual incentives to take a free ride on the other player's effort. Due to significant cooperation we observe that in team remuneration participants make higher profits than in private remuneration. We also observe that, when participants are not given the option of private remuneration, they cooperate significantly less.
    Keywords: Team effort, voluntary collaboration, experimental economics
    JEL: C72 C90 H41 J33
    Date: 2007
  2. By: Karsten Kohn; Alexander C. Lembcke
    Abstract: Using linked employer-employee data from the German Structure of Earnings Survey 2001,this paper provides a comprehensive picture of the wage structure in three wage-settingregimes prevalent in the German system of industrial relations. We analyze wagedistributions for various labor market subgroups by means of kernel density estimation,variance decompositions, and individual and firm-level wage regressions. Unions' impactthrough collective and firm-level bargaining mainly works towards a higher wage level andreduced overall and residual wage dispersion. Yet observed effects are considerablyheterogeneous across different labor market groups. There is no clear evidence for wagefloors formed by collectively bargained low wage brackets which would operate as minimumwages for different groups of workers.
    Keywords: Collective wage bargaining, wage structure, kernel density estimation, variancedecomposition, wage equations, German Structure of Earnings Survey
    JEL: J31 J51 J52
    Date: 2007–07
  3. By: Espen R. Moen; A Rosen
    Abstract: This paper analyses the interaction between internal agency problems within firms andexternal search frictions when workers have private information. We show that the allocationof resources is determined by a modified Hosios Rule. We then analyze the effect of changesin the macro economic variables on the wage contract and the unemployment rate. We findthat private information may increase the responsiveness of the unemployment rate tochanges in productivity. The incentive power of the wage contracts is positively related tohigh productivity, low unemployment benefits and high search frictions.
    Keywords: Private information, incentives, search, unemployment, wage rigidity
    JEL: E30 J30 J60
    Date: 2007–11
  4. By: Cécile Carpentier; Jean-François L'Her; Jean-Marc Suret
    Abstract: We re-examine previous evidence of long-run underperformance of newly cross-listed firms. These results cannot be reconciled with the numerous advantages provided by cross-listing or with the large number of new overseas listings recently observed. We analyze the whole population of Canadian firms that listed in the U.S. from 1990 to 2005, using several methodologies and indexes. Cross-delisting companies receive particular attention. Using robust methodologies, we do not observe any abnormal performance following cross-listing of Canadian firms. Our results indicate that the previous assumption of long-run underperformance can be traced to a combination of methodological choices, sample selection and survival biases. <P>Selon les études antérieures, le rendement à long terme des titres qui s’inscrivent aux États-Unis (qui s’interlistent) est anormalement faible. Nous réexaminons ces résultats, qu’il est difficile de concilier avec les avantages procurés par cette opération et qui ne permettent pas d’expliquer le grand nombre d’interlistages observé récemment. Nous étudions la population des sociétés ouvertes canadiennes qui se sont inscrites aux États-Unis entre 1990 et 2005, en utilisant différentes méthodologies et indices. Une attention particulière est également portée aux désincriptions. En utilisant des méthodologies robustes, nous n’observons aucune performance anormale suite à l’interlistage des sociétés canadiennes. Nos résultats indiquent que les résultats antérieurs de sous performance à long terme pourraient provenir d’une combinaison de choix méthodologique et de biais de sélection et de survie.
    Keywords: international cross-listing, abnormal performance, event-time methods, calendar-time methods, international asset pricing model, interlistage international, performance anormale, méthodes en temps évènementiel, méthodes en temps calendaire, modèle d’évaluation des actifs international
    JEL: F30 G14 G15
    Date: 2007–11–01
  5. By: Jens Robert Schöndube (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: In this paper we analyze a dynamic agency problem where contracting parties learn about the agent´s future productivity over time. We consider a two period model where both the agent and the principal observe the agent´s second period performance productivity at the end of the first period. This observation is assumed to be non verifiable information. We compare long-term contracts to short-term contracts with respect to their suitability to motivate effort in both periods. On the one hand short-term agreements allow for a better fine-tuning of second period incentives as they can be aligned to the observation of the agent´s second period performance productivity. On the other hand in short-term agreements the effect of early effort on future performance is ignored as contracts have to be sequentially optimal. Hence, the difference between long-term and short-term agreements is characterized by a trade-off between inducing effort in the first and in the second period. We analyze the determinants of this trade-off and demonstrate its implications for performance easurement and information system design (e.g. we compare accrual to cash-accounting).
    Date: 2007–12
  6. By: Baldwin, John R.; Gellatly, Guy
    Abstract: This paper summarizes the results of several research studies conducted by the Micro-economic Analysis Division of Statistics Canada that investigate the impact of advanced technology use on business performance. These studies combine establishment-level survey data on advanced technology practices with longitudinal data that measure changes in relative performance. Together, these studies provide strong evidence that technology strategies have considerable bearing on competitive outcomes after other correlates of plant performance are taken into account. Advanced communications technologies warrant special emphasis, as the use of these technologies has been shown to be closely associated with changes in relative productivity.
    Keywords: Science and technology, Business performance and ownership, Manufacturing,
    Date: 2007–12–05
  7. By: Mendes, Rute (Free University Amsterdam, Department of Economics); van den Berg, Gerard J (Free University Amsterdam, Department of Economics); Lindeboom, Maarten (Free University Amsterdam, Department of Economics)
    Abstract: In labor markets with worker and firm heterogeneity, the matching between firms and workers may be assortative, meaning that the most productive workers and firms team up. We investigate this with longitudinal population-wide matched employer-emplyee data from Portugal. Using dynamic panel data methods, we quantify a firm-specific productivity term for each firm, and we relate this to the skill distribution of workers in the firm. We find that there is positive assortative matching, in particular among long-lived firms. Using skill-specific estimates of an index of search frictions, we find that the results can only to a small extent be explained by heterogeneity of search frictions across worker skill groups.
    Keywords: Positive assortative matching; matched employer-employee data; productivity; skill; unobserved heterogeneity; sorting; fixed effects
    JEL: D24 J21 J24 J63
    Date: 2007–11–30
  8. By: Lundborg, Per (Swedish Institute for Social Research, Stockholm University)
    Abstract: Research on wage dispersion and firm performance focuses on intra-firm and inter firm effects irrespective of workers’ profession. We extend the analysis by considering dispersion within professions, within and across firms and within professions economy-wide. We find that the intra-firm dispersion of wages, which research so far has focused on, has limited effects on productivity compared to the economy-wide wage dispersion within the professions. As Swedish firms have differentiated wages among employees during the last 10-15 years also the economy-wide dispersion within professions has increased thus contributing considerably to the strong performance of the Swedish economy in the late 1990's.
    Keywords: -
    Date: 2007–11–30
  9. By: António Afonso; Davide Furceri
    Abstract: In this paper we provide a positive exercise on past business-cycle correlations and risk sharing in the European Union, and on the ability of insurance mechanisms and fiscal policies to smooth income fluctuations. The results suggest in particular that while some of the new Member States have well synchronized business cycles, for some of the other countries, business cycles are not yet well synchronized with the euro area’s business cycle, and risk-sharing mechanisms may not provide enough insurance against shocks.
    Keywords: EU; Optimum Currency Areas; Business Cycle Synchronization; Insurance Mechanisms.
    JEL: E32 E42 F41 F42
    Date: 2007
  10. By: YoungGak Kim; Tsutomu Miyagawa
    Abstract: Globalization and the ICT revolution of the 1990s have forced many firms to reorganize in order tosurvive in a more competitive market. There are several approaches that can be used to assess themeasurement of organization capital since it is unobservable. Using an optimizing firm model andassuming that a firm holds multiple assets as suggested by Yang and Brynjolfsson (2001) andCummins (2005), we examined whether organization capital is accumulated with investment inseveral types of assets. In contrast to Cummins's (2005) results, we found that the accumulation oforganization capital is associated with investment in R&D assets and marketing assets. Using theseresults and following Basu, Fernald, Oulton, and Srinivasan (2003), we measured the contribution oforganization capital to the conventional TFP growth. The estimation results implied that the growth oforganization capital did not have significant effects on productivity growth.
    Keywords: adjustment cost of investment, intangible asset, organizational capital, Tobin’s q, totalfactor productivity.
    JEL: L21 L23 L25
    Date: 2007–08
  11. By: Kvaløy, Ola (Norwegian School of Hotel Management, Dept. of Business Administration, University of Stavanger); Olsen, Trond E. (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: We analyze a situation where common noise makes compensation based on relative performance evaluation (RPE) desirable, but where the agents' ability to hold-up values ex post obstruct the implementation of optimal RPE schemes. The principal can take actions to constrain the agents' hold-up power by limiting their outside options and by protecting property rights, but once these actions are costly, a trade-off between incentive provision and agent control appears. The model contributes to the theory of the firm. It indicates why firms, not agents, own assets, and why peer-dependent incentive systems are more common within than between firms.
    Keywords: Relational contracts; multiagent moral hazard; endogenous hold-up
    JEL: D23 J33 L14
    Date: 2007–11–30
  12. By: Ralph Ossa
    Abstract: Empirical evidence suggests that trade liberalization increases firm productivity. This paperoffers a novel explanation for this finding. I develop a simple general equilibrium model oftrade in which trade liberalization leads to outsourcing as firms focus on their corecompetencies in response to tougher competition. Since firms are the better at performingtasks the closer they are to their core competencies, this outsourcing increases firmproductivity. Moreover, I also investigate the links between various technological parametersand outsourcing. In particular, I analyze how technological progress, changes in fixed costs,and changes in internal governance costs affect firms' integration decisions.
    Keywords: Trade Liberalization, Outsourcing, Productivity
    JEL: F10 F12 L22 L25
    Date: 2007–07
  13. By: Dewilde, T.; Dewettinck, K.; De Vos, A. (Vlerick Leuven Gent Management School)
    Abstract: In this study, we propose and empirically test a model in which we explore the role of individual and organizational antecedents on reported levels of workaholism and we investigate the relationship between workaholism and some important employee outcome variables. Using data from a sample of 2759 full-time employed Belgian workers, our findings indicate that strongly engaged and ambitious employees (in terms of career progress) show higher levels of workaholism. Organizational work-life balance support shows to inhibit workaholism. Furthermore, we found workaholism to be important in explaining work-life conflict and employees’ commitment to flexibility and performance. Theoretical and managerial implications are discussed.
    Keywords: Workaholism, structural equation modelling, antecedents and outcomes
    Date: 2007–11–26
  14. By: Metzger, Georg
    Abstract: The analysis in this paper gives attention to effects on firm survival which come from entrepreneurial experience. It is likely that different kinds of experience result in different firm developments and therefore in different types of firm exit. Particular emphasis is placed upon the effects of failure experience. The results provide evidence that both the kind of experience and the type of exit matter. Negative experience, namely the experience of failure, is found to heighten the risk of failing again. This finding indicates that business failures are largely not exceptions, but rather a sign of the entrepreneurs’ lack of ability.
    Keywords: Entrepreneurial Experience, Business Failure, Firm Survival
    JEL: G33 L25 L26 M13
    Date: 2007
  15. By: Kvaløy, Ola (Norwegian School of Hotel Management, Dept. of Business Administration, University of Stavanger); Olsen, Trond E. (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: The extent to which a knowledge-intensive firm should induce cooperation between its employees is analyzed in a model of relational contracting between a firm (principal) and its employees (two agents). The agents can cooperate by helping each other, i.e. provide effort that increases the performance of their peer without affecting their own performance. We extend the existing literature on agent-cooperation by analyzing the implications of incomplete contracts and agent hold-up. A main result is that if the agents' hold-up power is sufficiently high, then it is suboptimal for the principal to implement cooperation, even if helping effort is productive per se. This implies, contrary to many property rights models, that social surplus may suffer if the investing parties (here the agents) are residual claimants. The model also shows that long-term relationships facilitate cooperation even if the agents cannot monitor or punish each others effort choices.
    Keywords: Relational contracts; multiagent moral hazard; endogenous hold-up
    JEL: D23 J33 L14
    Date: 2007–11–30
  16. By: Fassin, Y.; Van Rossem, A.; Buelens, M. (Vlerick Leuven Gent Management School)
    Abstract: Recent academic articles point to an increased vagueness and overlapping of the concepts around business ethics and corporate responsibility. However, the perception of these notions in the entrepreneurial world can differ from the original academic definitions. This paper focuses on entrepreneurial cognition, a research stream which is increasingly being recognized as a perspective for understanding entrepreneurship related phenomena. Given the impact of the entrepreneur as owner of his venture, corporate responsibility and ethical issues can take a different breadth in SMEs. The entrepreneur has the possibility to shape the corporate culture and to enact values other than profit. This paper centers its attention on the cognitive study of a specific topic of management and entrepreneurship: the process of how CSR and business ethics related concepts are perceived or interpreted. For this research, the Repertory Grid Technique (RGT) is used, a method with limited applications in the business and society field. Our findings partially reject the confusion in terminology noticed in the academic literature. Entrepreneurs, pragmatically and rather clearly differentiate the various corporate responsibility and business ethics related concepts. These findings add to a better understanding of how entrepreneurs think and integrate corporate responsibility and ethical issues into their decision-making.
    Date: 2007–11–26
  17. By: Giulia Faggio; Kjell Salvanes; John Van Reenen
    Abstract: There has been a remarkable increase in wage inequality in the US, UK and many othercountries over the past three decades. A significant part of this appears to be withinobservable groups (such as age-gender-skill cells). A generally untested implication of manytheories rationalizing the growth of within-group inequality is that firm-level productivitydispersion should also have increased. Since the relevant data do not exist in the US we utilizea UK longitudinal panel dataset covering the manufacturing and non-manufacturing sectorssince the early 1980s. We find evidence that productivity inequality has increased. Existingstudies have underestimated this increased dispersion because they use data from themanufacturing sector which has been in rapid decline. Most of the increase in individual wageinequality has occurred because of an increase in inequality between firms (and withinindustries). Increased productivity dispersion appears to be linked with new technologies assuggested by models such as Caselli (1999) and is not primarily due to an increase intransitory shocks, greater sorting or entry/exit dynamics.
    Keywords: wage inequality, productivity dispersion, technology
    JEL: D24 J24 J31 O31
    Date: 2007–08
  18. By: Ana Rute Cardoso (Institute for the Study of Labor (IZA)); Rudolf Winter-Ebmer (Department of Economics, Johannes Kepler University Linz, Austria)
    Abstract: We explore the impact of mentoring of females and gender segregation on wages using a large longitudinal data set for Portugal. Female managers can protect and mentor female employees by paying them higher wages than male-led firms would do. We find that females can enjoy higher wages in female-led firms, the opposite being true for males. In both cases is a higher share of females reducing the wage level. These results are compatible with a theory where job promotion is an important factor of wage increases: if more females are to be mentored, less promotion slots are available for males, but also the expected chance of a female to be promoted is lower.
    Keywords: female entrepreneurs; wages; gender gap; matched employer-employee data
    JEL: M52 D21 J31 J16
    Date: 2007–12
  19. By: Andersson, Linda (Department of Business, Economics, Statistics and Informatics); Karpaty, Patrik (Department of Business, Economics, Statistics and Informatics)
    Abstract: The objective of this paper is to analyze relative employment effects in Sweden due to offshoring. In contrast to most previous studies in this field, our analysis is based on firm level data. More specifically the dataset contains Swedish manufacturing firms, 1997-2002. In addition we have access to actual firm level import data on intermediate goods and services, respectively. The results show that the relative demand for high skilled labor is positively affected by service offshoring and offshoring of goods to Asia, but negatively affected by offshoring to high income countries. The relative demand for medium skilled labor is negatively affected by offshoring of goods to Eastern Europe, but positively affected by offshoring to high income countries. In contrast to expectations, the results show that the relative demand for low skilled labor is positively affected by offshoring of goods to Eastern Europe. However, these results are related to very small elasticities, which in turn translates into a small number of jobs affected.
    Keywords: Offchoring; firm level; data relative employment; translog cost function
    JEL: F14 F23 L23
    Date: 2007–10–29
  20. By: Patrick Legros; Andrew F. Newman
    Abstract: We develop a tractable model of the allocation of ownership and control in firms in competitive markets that permits study of how the scarcity of assets in the market translates into control allocations inside the organization. The model identifies a price-like mechanism whereby local liquidity or productivity shocks propagate and lead to widespread organizational restructuring. Firms will be more integrated when the terms of trade are more favorable to the short side of the market, when liquidity is unequally distributed among existing firms and following a uniform increase in productivity. Shocks to the first two moments of the liquidity distribution have multiplier effects on the corresponding moments of the distribution of ownership.
    Date: 2007–05
  21. By: Eickelpasch, Alexander (DIW Berlin); Lejpras, Anna (European University Viadrina Frankfurt/Oder); Stephan, Andreas (JIBS and CESIS)
    Abstract: This paper investigates predictions of Porter’s Diamond model regarding the impact of locational factors on innovativeness and performance at the firm level. We formulate a structural equation model based on the relationships between locational conditions, e.g., transportation infrastructure, proximity to universities and research institutes, qualified labour, on the one hand, and innovativeness measured by new product or process development, number of patents, and firm performance in terms of market growth or profit assessment, on the other hand. Based on a sample of about 2,100 East German firms, we apply the partial least squares path modelling approach to test the proposed relationships. We find that particularly cooperation intensity at the local level spurs the innovativeness of firms; whereas in contrast to Porter’s predictions, our results indicate that strong local competition and a locally focused market appear to impede the innovativeness and performance of firms.
    Keywords: Hard and Soft Locational Factors; Innovativeness; Firm Performance; East German Firms; Structural Equation Modelling; Partial Least Squares Approach
    JEL: L25 O31 R30
    Date: 2007–12–11
  22. By: Frank Oskamp; Dennis J. Snower
    Abstract: This paper examines the interactions between employment and training policies. Their effectiveness in stimulating income may be interdependent for various important reasons. For example, the more employment policies stimulate the employment rate, the greater the length of time over which workers use the human capital generated by training policies. Moreover, the greater the government expenditures on employment and training subsidies, the higher the taxes required to finance these expenditures and these higher taxes reduce aggregate income. On account of such effects, employment and training policies may be complementary or substitutable with respect to aggregate income. To analyze these interactions, we construct a simple, dynamic model of hiring decisions, derived from microfoundations. The model is calibrated with German data. Surprisingly, the simulation shows that, for reasonable parameter values, the complementarities are weak or absent. The analysis provides a methodology for examining policy interactions which may be useful well beyond the bounds of employment and training policies.
    Keywords: complementarities; hiring subsidies; training subsidies; vocational training; employment; unemployment
    JEL: J21 J23 J24 J64 J68
    Date: 2007–12

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