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on Business Economics |
| By: | Zur Shapira; Gary Dushnitsky |
| Abstract: | This paper investigates the effect of compensation of corporate personnel on their investment in new technologies. We focus on a specific corporate activity, namely corporate venture capital (CVC), describing minority equity investment by established-firms in entrepreneurial ventures. The setting offers an opportunity to compare corporate investors to investment experts, the independent venture capitalists (IVCs). On average, we observe a performance gap between corporate investors and their independent counterparts. Interestingly, the performance gap is sensitive to CVCs' compensation scheme: it is the largest when CVC personnel are awarded performance pay. Not only do we study the association between incentives and performance but we also document a direct relationship between incentives and the actions managers undertake. For example, we observe disparity between the number of participants in venture capital syndicates that involve a corporate investor, and those that consist solely of IVCs. The disparity shrinks substantially, however, for a subset of CVCs that compensate their personnel using performance pay. We find a parallel pattern when analyzing the relationship between compensation and another investment practice, staging of investment. To conclude, the paper investigates the three elements of the principal-agent framework, thus providing direct evidence that compensation schemes (incentives) shape investment practices (managerial action), and ultimately investors¡¦ outcome (performance). |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp589&r=bec |
| By: | Oscar Pavlov (School of Economics, University of Adelaide); Mark Weder (School of Economics, University of Adelaide) |
| Abstract: | The standard one-sector real business cycle model is unable to generate expectations-driven business cycles. The current paper shows that this conundrum can be solved by adding countercyclical markups and modest capital adjustment costs. |
| Keywords: | expectations-driven business cycles, markups |
| JEL: | E32 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:adl:wpaper:2011-28&r=bec |
| By: | Güth, Werner; Pull, Kerstin; Stadler, Manfred |
| Abstract: | We study strategic interfirm competition allowing for internal conflicts in each seller firm. Intrafirm conflicts are captured by a multi-agent framework with principals implementing a revenue sharing scheme. For a given number of agents, interfirm competition leads to a higher revenue share for the agents, higher equilibrium effort levels and higher agent utility, but lower profits for the firms. The winners from antitrust policy are thus not only the consumers but also the agents employed by the competing firms. -- |
| Keywords: | agency theory,strategic interfirm competition,revenue sharing |
| JEL: | C72 L22 M52 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuewef:14&r=bec |
| By: | Baldwin, John R.; Leung, Danny; Rispoli, Luke |
| Abstract: | This paper asks how the performance of self-employed unincorporated businesses affects the size of the gap in labour productivity between Canada and the United States. To do so, the business sector in each country is divided into unincorporated and corporate businesses, and estimates of labour productivity are generated for each sector. The productivity performance of the unincorporated sector relative to the corporate sector is much lower in Canada than in the United States. As a result, when the unincorporated sector is removed from the estimates for the business sector in each country and only the corporate sectors for the two countries are compared, the gap in the level of productivity between Canada and the United States is reduced. The unincorporated sector consists of both sole proprietorships and partnerships. This paper also investigates the impact of just sole proprietorships on the Canada-United States productivity gap. Sole proprietorships in the two countries more closely resemble one another than do partnerships, as U.S. partnerships are much larger than their Canadian counterparts. When sole proprietorships are removed from the business-sector estimates of each country (allowing a comparison of sole proprietorships to the rest of the business sector, which consists of partnerships and the corporate sector), the gap in labour productivity between Canada and the United States also declines but by only about half as much as when both sole proprietorships and partnerships are removed. The lower productivity of the unincorporated sector (both sole proprietorships and partnerships) accounted for almost the entire productivity gap between Canada and the United States in 1998. Since then, the productivity of the corporate sector in Canada has fallen relative to that of the corporate sector in the United States and the unincorporated sector no longer accounts for the entire gap. |
| Keywords: | Business performance and ownership, Economic accounts, Business ownership, Productivity accounts, Small and medium-sized businesses, Current conditions |
| Date: | 2011–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp5e:2011071e&r=bec |
| By: | Patrick Hürtgen |
| Abstract: | This paper explores the importance of shocks to consumer misperceptions, or "noise shocks", in a quantitative business cycle model. I embed imperfect information as in Lorenzoni (2009) into a new Keynesian model with price and wage rigidities. Agents learn about the components of labor productivity by only observing aggregate productivity and a noisy signal. Noise shocks lead to expectational errors about the true fundamentals triggering aggregate fluctuations. Estimating the model with Bayesian methods on US data shows that noise shocks contribute to 20 percent of consumption fluctuations at short horizons. Wage rigidity is pivotal for the importance of noise shocks. |
| Keywords: | Imperfect Information, Noise Shocks, Aggregate Fluctuations, Bayesian Estimation |
| JEL: | D83 E32 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse10_2011&r=bec |
| By: | Hirsch, Boris (University of Erlangen-Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg) |
| Abstract: | Building on the right-to-manage model of collective bargaining, this paper tries to infer union power from the observed results in wage setting. It derives a time-varying indicator of union strength and confronts it with annual data for Germany. The results show that union power was relatively stable in the 1990s but fell substantially (by almost one-third) from 1999 to 2007. Two-thirds of this fall in union power follow from the reduction in the labour share relative to the capital share whereas changes in the gap between the net wage and the income when unemployed account for the remaining third. |
| Keywords: | labour share, wage bargaining, trade union power, Germany |
| JEL: | J50 J51 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5875&r=bec |
| By: | Mitraille, Sébastien (Toulouse Business School); Moreaux, Michel (Toulouse School of Economics (IDEI and LERNA)) |
| Abstract: | Two-period Cournot competition between n identical firms producing at constant marginal cost and able to store before selling has pure strategy Nash- perfect equilibria, in which some firms store to exert endogenously a leader- ship over rivals. The number of firms storing balances market share gains, obtained by accumulating early the output, with losses in margin resulting from increased competition and higher operation costs. This number and the industry inventories are non monotonic in n. Concentration (HHI) and competition increase due to the strategic use of inventories. |
| JEL: | D43 L13 |
| Date: | 2011–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:24801&r=bec |
| By: | Berka, Martin; Devereux, Michael B.; Rudolph, Thomas |
| Abstract: | We study a newly released data set of scanner prices for food products in a large Swiss online supermarket. We find that average prices change about every two months, but when we exclude temporary sales, prices are extremely sticky, changing on average once every three years. Non-sale price behavior is broadly consistent with menu cost models of sticky prices. When we focus specifically on the behavior of sale prices, however, we find that the characteristics of price adjustment seems to be substantially at odds with standard theory. |
| Keywords: | online supermarket, price behavior, sticky price, |
| Date: | 2011–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwecf:1685&r=bec |
| By: | Parsons, Donald O. (George Washington University) |
| Abstract: | The potentially adverse labor market effects of severance pay mandates are a continuing source of policy concern. In a seminal study, Lazear (1990) found that contract avoidance of severance pay firing costs was theoretically simple – a bonding scheme would do – but that empirically the labor market distortions were large. Subsequent empirical work resolved the apparent paradox – firing cost effects are modest even without firm avoidance activities. To explore why that should be so, formal measures of severance-induced firing costs and hiring costs are derived. Firing costs are, it turns out, systematically less than benefit generosity alone would imply. Moreover their interrelationship with hiring costs, often employed in empirical studies as a substitute measure, is complex, with co-movements varying in sign and magnitude across policy parameters and the economic environment. Although the analysis assumes a fixed benefit mandate, the cost measures are easily extended to assess the impact of service-linked severance benefits on age-specific employment levels. The model permits design of a cohort-neutral severance mandate – which is not a flat rate structure. |
| Keywords: | severance pay, firing costs, hiring costs, layoff, employment, insurance, savings, moral hazard |
| JEL: | J65 J41 J33 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5876&r=bec |
| By: | Matthew J. Kotchen; Jon Jungbien Moon |
| Abstract: | This paper provides an empirical investigation of the hypothesis that companies engage in corporate social responsibility (CSR) in order to offset corporate social irresponsibility (CSI). We find general support for the causal relationship: when companies do more “harm,” they also do more “good.” The empirical analysis is based on an extensive 15-year panel dataset that covers nearly 3,000 publicly traded companies. In addition to the overall finding that more CSI results in more CSR, we find evidence of heterogeneity among industries, where the effect is stronger in industries where CSI tends to be the subject of greater public scrutiny. We also investigate the degree of substitutability between different categories of CSR and CSI. Within the categories of community relations, environment, and human rights—arguably among those dimensions of social responsibility that are most salient—there is a strong within-category relationship. In contrast, the within-category relationship for corporate governance is weak, but CSI related to corporate governance appears to increase CSR in most other categories. Thus, when CSI concerns arise about corporate governance, companies seemingly choose to offset with CSR in other dimensions, rather than reform governance itself. |
| JEL: | M0 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17254&r=bec |
| By: | Pravin Krishna; Jennifer P. Poole; Mine Zeynep Senses |
| Abstract: | In this paper, we use a linked employer–employee database from Brazil to examine the impact of trade reform on the wages of workers employed at heterogeneous firms. Our analysis of data at the firm level confirms earlier findings of a differential positive effect of trade liberalization on average wages at exporting firms relative to non-exporting firms. However, the analysis of average firm-level wages is incomplete along several dimensions. First, it cannot fully account for the impact of a change in trade barriers on workforce composition, especially in terms of unobservable (time-invariant) worker characteristics (innate ability) and any additional productivity that results from employment in a specific firm (match-specific ability). Furthermore, the firm-level analysis is undertaken under the assumption that the assignment of workers to firms is random. This ignores the sorting of workers into firms and leads to a bias in estimates of the differential impact of trade on average wages at exporting firms relative to non-exporting firms. Using detailed information on worker and firm characteristics to control for compositional effects and firm-worker match-specific effects to account for the endogenous mobility of workers, we find an insignificant differential effect of trade openness on wages at exporting firms relative to domestic firms. Consistent with the models of Helpman, Itskhoki, and Redding (2010) and Davidson, Matusz, and Schevchenko (2008), we also find that the workforce composition post-liberalization improves systematically in exporting firms in terms of innate worker ability and in terms of the quality of the worker-firm matches. These findings underscore the importance of search frictions and labor market matching mechanisms in determining the effects of trade policy changes on wages. |
| JEL: | F16 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17256&r=bec |
| By: | Angels Pelegrín (Universitat de Barcelona & IEB); Catalina Bolancé (University of Barcelona & RFA-IREA) |
| Abstract: | This article investigates firm characteristics associated with the probability of relocating activities in a foreign country. Using manufacturing firms’ micro data for the 1999-2005 period, we find evidence that cost-cutting objectives are the main determinants for offshoring production. The analysis reveals that firms that are larger and have higher productivity, more research and development activity and greater human capital intensity are more likely to relocate activity abroad. Thus, ‘the best’ firms self-select to offshoring activities. We note the special prominence of foreign firms among those that engage in offshoring. Our results show that self-selection of ‘the best’ firms are much more significant in foreign firms. |
| Keywords: | Offshoring determinants, best firms, firm characteristics, foreign firms |
| JEL: | F21 F23 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2011/7/doc2011-16&r=bec |
| By: | Bah, El-hadj M.; Fang, Lei |
| Abstract: | We develop a general equilibrium model to assess the quantitative effects of the business environment, including regulation, crime, corruption, infrastructure and access to finance, on output and total factor productivity (TFP) for 30 Sub-Saharan African countries. The first four dimensions create inefficiencies at the firm level and are modeled as a tax on output. From the data, we find that on average firms in Africa lose a fifth of their sales due to those inefficiencies. On the other hand, poor access to credit affects the reallocation of resources across firms, capital formation and production scale. We find that the quantitative effects of these dimensions of the business environment are large, leading to decreases in output and TFP in the range of 40 to 77 percent and 18 to 44 percent respectively. Overall, they explain 67 percent of the variation in income per worker relative to the US. |
| Keywords: | Business environment, Investment Climate, African Development, Productivity, Credit Constraints |
| JEL: | O47 L23 O16 |
| Date: | 2011–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32517&r=bec |
| By: | Raff, Horst; Schmitt, Nicolas |
| Abstract: | We construct a model of trade with heterogeneous retailers to examine the effects of trade liberalization on retail market structure, imports and social welfare. We are especially interested in investigating the transmission of lower import prices into consumer prices and the effects of retail market regulation. The paper shows that changes in import prices may have large effects on consumer prices and import volumes when changes in retail market structure are taken into account, and that restrictions on retailing, as they occur in several countries, may significantly alter this transmission mechanism by reducing imports and raising consumer prices. -- |
| Keywords: | International trade,retailing,firm heterogeneity |
| JEL: | F12 L11 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cauewp:201105&r=bec |
| By: | Kyoji Fukao; Toshihiro Okubo |
| Abstract: | This paper analyzes the impact of firm networks on Japan's national border effect. We estimate gravity equations using data on Japan's international and interregional trade in four machinery industries (electrical, general, precision and transportation machinery). The machinery sector is the most important manufacturing sector for exports and outward foreign direct investment (FDI) in Japan. By taking into account international as well as interregional firm networks, we find that ownership relations usually enhance exports from parent firms to establishment. Consequently we can explain 15% (7%, 1% and 0.5%) of the decline in Japan's border effect from 1980 to 1995 in precision (transportation, general electrical) machinery sector by the increase of international networks. |
| Keywords: | Gravity model, Border effect, Firm networks, Fragmentation |
| JEL: | F14 F17 F21 L14 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd11-197&r=bec |
| By: | Celik, Gorkem; Peters, Michael |
| Abstract: | We study an incomplete information game in which players are involved in a reciprocal relationship that allows them to coordinate their actions by contracting among themselves. We model this as a competing mechanism game in which players have the ability to write contracts. We characterize the set of outcome functions that can be supported as equilibrium in this enhanced game. We use our characterization to show that the set of supportable outcomes is bigger than the set of outcomes supported by a centralized mechanism designer who can offer mechanisms in which all players participate. The difference is that the contracting game makes it possible for players to convey partial information about their type at the time they offer contracts. |
| Date: | 2011–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ubc:pmicro:gorkem_celik-2011-19&r=bec |
| By: | Russell Thomson (Melbourne Institute of Applied Economic and Social Research, and Intellectual Property Research Institute of Australia (IPRIA), The University of Melbourne); Elizabeth Webster (Melbourne Institute of Applied Economic and Social Research, and Intellectual Property Research Institute of Australia (IPRIA), The University of Melbourne) |
| Abstract: | In this paper we consider why firms sometimes choose an external development path for their own inventions, despite the costs of contracting and the risks of opportunistic behaviour and expropriation. We model the probability that firms adopt an external development strategy using survey data from over 2700 Australian inventions. Our results indicate that firms pursue external development strategies in response to perceived project-level risk about the technical feasibility of the invention, especially when suported by confidence in the patent system. Our findings also confirm that small to medium size enterprises, highly leveraged large firms and firms with few co-specialized assets are more likely to pursue an external development strategy. |
| Keywords: | Outsourcing R&D, managing technological risk, licensing innovation |
| JEL: | O32 O33 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2011n19&r=bec |
| By: | Frosch, Katharina; Göbel, Christian; Zwick, Thomas |
| Abstract: | Adopting a dynamic perspective, this paper investigates age-related staffing patterns in German establishments and their effect on innovative performance. First, we investigate how establishments achieve the necessary workforce rejuvenation - from the inflow of younger or from outflows of older workers. In addition, we explore whether certain staffing patterns are more likely to appear under different economic regimes. In a second step, we analyse whether an establishment's innovative performance is related to the staffing patterns it experiences. The analysis of linked-employer-employee data shows that most of the 585 German establishments covered rejuvenate by inflows of younger workers. Half of the establishments also use the outflow of older workers. Furthermore, workforces are more likely to become more age-heterogeneous in growing establishments. Finally, we do not find evidence that a youth-centred human resource strategy (always) fosters innovation. -- |
| Keywords: | Workforce aging,staffing strategies,innovation |
| JEL: | M51 J24 O31 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11047&r=bec |
| By: | Rhodes, Andrew |
| Abstract: | We study the pricing behavior of a multiproduct monopolist, when consumers must pay a search cost to learn its prices. Equilibrium prices are high because rational consumers understand that visiting the store exposes them to a hold-up problem. However a firm with more products attracts more consumers with low valuations, and therefore charges lower prices. We also show that when the firm advertises the price of one product, it provides consumers with some indirect information about all of its other prices. The firm can therefore build a store-wide ‘low-price image’ by advertising just one product at a low price. |
| Keywords: | multiproduct search; advertising |
| JEL: | M3 M37 D83 |
| Date: | 2011–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32511&r=bec |
| By: | Hussinger, Katrin; Wastyn, Annelies |
| Abstract: | The not-invented-here (NIH) syndrome refers to internal resistance in a company against externally developed knowledge. In this paper, we argue that the occurrence of the NIH syndrome depends on the source of external knowledge and the success of the firm that aims at adapting external knowledge. In line with social identity theory, we hypothesize that internal resistance is most likely to occur if knowledge is acquired from similar organizations. This hypothesis is supported by our finding that the NIH syndrome occurs when knowledge is acquired from competitors but not if knowledge is acquired from suppliers, customers or universities. Further, we show that successful companies are most likely to experience the NIH syndrome (if knowledge is acquired from competitors). This is in line with our hypothesis that firm success increases the extent to which employees identify themselves with their company resulting in stronger in-group favoritism and a superior tendency to reject externally generated knowledge. -- |
| Keywords: | Not-invented-here syndrome,external knowledge sources,firm success,social identity theory,organizational identity |
| JEL: | O31 O32 O33 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11048&r=bec |